MCCAIN'S TOP ECONOMIC ADVISOR -- "USA A NATION OF WHINERS"

[JohnLockesGhost]

I'm with you here. I'm sure consumer confidence does affect our economy because consumers by and large drive our economy. However, I tend to think that lack of confidence is the result of real pressures and concerns, not the result of some perceived notion of our collective softness and/or whining, neither of which can be accurately measured.

This is where we've fallen off the wagon. Consumption isn't the driving force behind the economy. It isn't the engine, it's the caboose.

The engine is under-consuption, savings and investment, which leads to capital formation leading to greater worker productivity and greater wealth. Greater wealth will then allow us to consume more.

We have our entire economic calculus backwards.

[headexplode]

It's funny that everyone is putting so many words into this guys mouth. Anyone notice that the article had exactly 4 words longer than 2 letters in quotations.

4.

From that, people are reading into that he said the economic slowdown is ALL just mental, its all our fault, and he's ignoring everything else.

From 4 words, they got all that.

"The Times said Gramm said he expects a McCain administration would inherit an economy “weighed down above all by the conviction of many Americans that economic conditions are the worst in two or three decades and that America is in decline.”

The Times quoted him as saying: “You've heard of mental depression; this is a mental recession. … We have sort of become a nation of whiners. …

He may not think it is all our fault, but he thinks we're at fault above all other explanations.

Now, I grant the possibility that his quotes are taken out of context. Happens all the time.

I also grant the notion that lack of confidence does negatively affect our economy. But I think there is good cause for that lack of confidence, and it stems not from our proclivity to whine but by real, measurable issues.

[PleaseBlitz]

This is where we've fallen off the wagon. Consumption isn't the driving force behind the economy. It isn't the engine, it's the caboose.

The engine is under-consuption, savings and investment, which leads to capital formation leading to greater worker productivity and greater wealth. Greater wealth will then allow us to consume more.

We have our entire economic calculus backwards.

So if we under-consume then we'll be able to consume more? Not following, but i can bet where you got that from.

[GibbsFactor]

I'm with you here. I'm sure consumer confidence does affect our economy because consumers by and large drive our economy. However, I tend to think that lack of confidence is the result of real pressures and concerns, not the result of some perceived notion of our collective softness and/or whining, neither of which can be accurately measured.

I look at it like this. Consumer confidence is down because they can't pay for gas, food is going up, times are tight. All of the sudden, all of those that don't pay a lot of attention to this stuff are asking what's going on. To me, poor consumer confidence is the same as "bracing". And why do you brace? To avoid or soften real impacts.

[JimboDaMan]

It's exactly that. In the Great Malaise Speech Carter gave he described it as a "crisis of confidence." It's a disease of the spirit so goes the mantra. We've heard it all before. It's wrong no matter what the date.

No, its not wrong. Wasn't when Carter said it, isn't now with the McCain people saying a variation of it.

What's wrong is who is doing the talking. There may be quite a bit of truth to these statements. But when they come from the guys charged with fixing things, they come out like excuses and blaming the victim. These guys are elected to fix the problems. Telling us we are the problem is not fixing. In McCain's case he hasn't been elected yet, and won't be if he keeps talking like that.

[GibbsFactor]

So if we under-consume then we'll be able to consume more? Not following, but i can bet where you got that from.

How can you invest and spread your money if you don't have any money because of you spent it all on 3 68 inch flat screens?

[DarrellsMyHero28]

I dont see where "a mental recession" implies that its ALL in our head, so yes, i disagree.

But home foreclosures and high gas prices and the price of groceries...they're not really in our head.

There are a million other factors that are unrelated to consumer confidence that have contributed.

I would say calling this a 'mental recession' is incorrect, and it makes him seem out of touch.

[PleaseBlitz]

"The Times said Gramm said he expects a McCain administration would inherit an economy “weighed down above all by the conviction of many Americans that economic conditions are the worst in two or three decades and that America is in decline.”

The Times quoted him as saying: “You've heard of mental depression; this is a mental recession. … We have sort of become a nation of whiners. …

He may not think it is all our fault, but he thinks we're at fault above all other explanations.

Now, I grant the possibility that his quotes are taken out of context. Happens all the time.

I also grant the notion that lack of confidence does negatively affect our economy. But I think there is good cause for that lack of confidence, and it stems not from our proclivity to whine but by real, measurable issues.

Yes, taken out of context. Yes, it happens all the time. Doesnt make it right.

I agree with all of that. But in the end, confidence has a huge impact.

[headexplode]

I look at it like this. Consumer confidence is down because they can't pay for gas, food is going up, times are tight. All of the sudden, all of those that don't pay a lot of attention to this stuff are asking what's going on. To me, poor consumer confidence is the same as "bracing". And why do you brace? To avoid or soften real impacts.

That's the way I see it. Obviously, consumer confidence can also be affected by the media, particularly in a campaign season where competing interests are trying to pin all our economic woes on a person or a party. Still, there is a reason people lack confidence, and that has to do with the fact that the prices of everyday essential items is rising and their wages are not keeping up with it, and so they spend less frivolously.

[JohnLockesGhost]

The entire system is based upon faith belief and confidence. Just pull out a $20 bill. Guess what? That piece of paper isnt worth $20 unless you have faith and confidence in the institution that says it's worth $20.

The $20 bill in my pocket isn't worth something because of my faith in it, it's worth something because all citizens and businesses in the United States MUST accept it due to legal tender laws. So it's worth something because it's backed by the force of the United States government, not some belief I have that it's worth something.

Further, I dont understand how you can say that confidence in the economy doesnt itself effect the economy. If someone thinks their job is in jeopardy, then they are going to spend less. That ripples throughout the entire economy because when person A spends less, then person B EARNS less, so person B spends less, and so on and so forth.

The ripple effect is probably greater if he doesn't spend his money. That money is put in the bank, increasing the amount of loanable funds the bank has. More loanable funds means more money put into the economy for a business to start up, rent a new space, and hire new workers.

The worker you describe is behaving perfectly rationally and he's helping the economy.

[PleaseBlitz]

How can you invest and spread your money if you don't have any money because of you spent it all on 3 68 inch flat screens?

My money goes to the people that designed the TV, and the people that sold it to me, and the guys in the factory that built it, and the guy that drove the truck to the store, etc etc etc.

If i put my money into a savings account, where does it go? How does it fuel the economy?

[DjTj]

One of my pet peeves about economic discussion is how much weight is given to psychological factors like "confidence" and whatnot. Economic behavior is driven by real factors like prices and other incentives, not faith, belief and confidence. It's not like if we somehow all just perked up and just started believing that the economy is really healthy, all of a sudden the Dow Jones would shoot up 300 points.

It's just ludricrous.

That's not ludicrous at all. If we all believed the economy was really healthy, of course the Dow Jones would shoot up 300 points. How do you think the tech bubble happened? The housing bubble? People believed that the internet and the housing market were worth way more than their actual value, and it inflated markets for years. We're currently seeing some of the same thing in the oil futures market.

Now these things tend to crash eventually when the underlying fundamentals aren't solid, but that doesn't mean that the psychology had no effect. In the long-term, real factors like price and efficiency will dominate, but in the short-term, faith, belief and confidence can have a very large effect.

If psychology didn't have any effect on the economy, then salespeople would all be out of jobs.

[JohnLockesGhost]

So if we under-consume then we'll be able to consume more? Not following, but i can bet where you got that from.

Sure, it's a process called economic growth. Growth comes from savings not spending.

I got it from my Greg Mankiw, Macroeconomics textbook.

[headexplode]

Yes, taken out of context. Yes, it happens all the time. Doesnt make it right.

I agree with all of that. But in the end, confidence has a huge impact.

I agree that confidence has an impact, but I disagree that a national epidemic of whininess is the cause of the lack of confidence. Just eight years ago confidence was at an all-time high. What has happened in the last eight years that has caused us to be so much more whiny now than we were then? Or are we just, as GibbsFactor put it, bracing for possible hard times?

[PleaseBlitz]

The ripple effect is probably greater if he doesn't spend his money. That money is put in the bank, increasing the amount of loanable funds the bank has. More loanable funds means more money put into the economy for a business to start up, rent a new space, and hire new workers.

The worker you describe is behaving perfectly rationally and he's helping the economy.

So a business is better served by taking out a loan at the bank than by making profit selling their goods?

In the one post, you said people should save more. In this post you are advocating they take out debt. :whoknows:

[PleaseBlitz]

I agree that confidence has an impact, but I disagree that a national epidemic of whininess is the cause of the lack of confidence. Just eight years ago confidence was at an all-time high. What has happened in the last eight years that has caused us to be so much more whiny now than we were then? Or are we just, as GibbsFactor put it, bracing for possible hard times?

Lots of REAL factors have happened. Im not saying this is ALL about consumer confidence, im saying it plays a large role.

So is Phil Graham, except a dubious media outlet cut and pasted his comments to rile people up.......and did a good job of it.

[sacase]

He's right, people whine and cry about every little thing and cause.

[JohnLockesGhost]

So a business is better served by taking out a loan at the bank than by making profit selling their goods?

In the one post, you said people should save more. In this post you are advocating they take out debt. :whoknows:

Most businesses need start up capital. Once the initial investment is made and the business is run efficiently and profitably, the debt would be repaid with interest.

[PleaseBlitz]

Sure, it's a process called economic growth. Growth comes from savings not spending.

I got it from my Greg Mankiw, Macroeconomics textbook.

I dont agree with that either.

Im reading Mankiw's blog now. Its good stuff, but i dont see anything that hints at him agreeing with that statement.

[PleaseBlitz]

Most businesses need start up capital. Once the initial investment is made and the business is run efficiently and profitably, the debt would be repaid with interest.

By who?

[JohnLockesGhost]

That's not ludicrous at all. If we all believed the economy was really healthy, of course the Dow Jones would shoot up 300 points. How do you think the tech bubble happened? The housing bubble? People believed that the internet and the housing market were worth way more than their actual value, and it inflated markets for years. We're currently seeing some of the same thing in the oil futures market.

You're right. I should have said something like, if we all just smile and clap our hands the average unemplyment rate for the next decade will be 1% lower.

[Henry]

A nation of whiners? It would seem the Washington Post agrees, at least with respect to the baby boomers:

Baby Boomers Got the Blues

Viewing Life Through Morose-Colored Glasses

By Monica Hesse

Washington Post Staff Writer

Thursday, July 10, 2008; Page C01

The baby boomers -- that prominent group of middle-agers whose massive numbers invite never-ending dissection and speculation -- have once again spoken. What they have said is, "Waaaaaahhh."

This is according to a social and demographic trends survey released recently by the Pew Research Center. The survey measured the pessimism, dissatisfaction and general curmudgeonliness of 2,413 adults in various generations.

The results validate any member of the Greatest Generation who ever looked at his or her offspring and sadly thought, "soft." Simply put, boomers are a bunch of . . . whiners.

Click on the link for the full article

That article deserves it's own thread. The last line is particularly brilliant:

They see their pessimism as a tonic that will wake up the world, then they just end up drunk on disappointment.

[DjTj]

Sure, it's a process called economic growth. Growth comes from savings not spending.

I got it from my Greg Mankiw, Macroeconomics textbook.

You guys will be arguing in circles if you're going to argue savings vs. spending. Obviously we need both, and it's not a matter of one or the other.

Savings is good because it puts money in the hands of banks who can provide more loans, discriminating between good business plans and bad business plans to identify the ones that will be most profitable. But too much money in the hands of banks can be bad, because they will start giving out loans to questionable borrowers, which has just happened in the housing crisis.

Spending is good because it allows consumers to discriminate between good products and bad products, helping the best businesses to survive. But too much spending can be bad because people will buy things they don't really need at prices they shouldn't be paying, which has just happened in the housing crisis with over-inflated home prices.

It's not really an either/or proposition. Good investment is good. Bad investment is bad. Good spending is good. Bad spending is bad. Confidence good. Whining bad. Any questions?

[PleaseBlitz]

It's not really an either/or proposition. Good investment is good. Bad investment is bad. Good spending is good. Bad spending is bad. Confidence good. Whining bad. Any questions?

Im sorry Tj, this is ES. It has to be one or the other, 100%. No middle ground, no compromise. I award you no points, may God have mercy on your soul.

[JohnLockesGhost]

I dont agree with that either.

Im reading Mankiw's blog now. Its good stuff, but i dont see anything that hints at him agreeing with that statement.

Ok, I have my textbook out now.

Page 12: Priciple #8: A country's Standard of Living Depends on Its Ability to Produce goods and services. (notice it doesn't say "consume goods and services.")

Page 132-135: Productivity: Its role and determinants, why Productivity is so important, how productivity is determined

Although productivity is uniquely important in determining Robinson Crusoe's standard of living, many factors dtermine Crusoe's productivity. Crusoe will be better at catching fish, for instance, if he has more fishing poles, if he has been trained in the best fishing techniques, if his island has a plentiful fish supply, and if he invents a better fishing lure. Each of these determinants of Crusoe's productivity. We can call [them] physical capital, human capital, natural resources, and technological knowledge.

Page 137: The Importance of Saving and Investment

Because capital is a produced factor of production, a society can change the amount of capital it has. If today the economy produces a large quantity of new capital goods, then tomorrow it will have a larger stock of capital and be able to produce more of all types of goods and services.

One of the Ten Principles of Economics is that people face tradeoffs. This principle is especially important when considering the accumulation of capital. Because resources are scarce, devoting more reources to producing capital requires devoting fewer resources to producing goods and services for current consumption. That is, for society to invest more in capital, it must consume less and save more of its current income. The growth that arises from capital accumulation is not a free lunch: It requires that society sacrifice consumption of goods and services in the present in order to enjoy higher consumption in the future.