$1 USD, that's like $1 CAD?

[Andrew]

During recession, encourage people to spend. Maybe they need to spend because gov is going to inflate money supply making $ worthless. During good times people will spend instead of save because they all have jobs.

This recession has lots to do with debt. US Government hasn't had trade or budget surplus ever (okay budget once with Clinton, but it was more of a balanced budget), with massive deficits. Americans spend more than they actually make. Banks gave out debt to everyone to buy houses (and everything else). House prices inflated wayyyyy above historical real price average. Bubble burst. People realized the debt they took on houses was too much. People default. Banks find people defaulting, and they have to default because they overextended themselves.

Is there a time when government or consumers actually save? They obviously havn't saved any money since the last minor recession in 2002. Or maybe they dumped their savings in the stock market, which lost 40% in a year, making the saving basically pointless (DOW is worse than it was 10 years ago, or maybe it is just a correction in the market because everything was inflated too much).

Ok, let's have people buy less stuff.

I'd actually prefer people to buy stuff that is needed. Not stuff that is not needed. I'm not saying people should stop buying everything. But what good was the tax rebate cheques when people used it to buy flatscreens, or the fill the vehicle with gas for a month? The government borrowed money from China, and then consumers went and bought stuff from China. Seemed kinda reckless of gov and consumer. Referencing flatscreens, it was more of a joke that is what everyone would spend it on, but I'm sure many people did buy electronics not made in USA (really no long term benefit).

Erm, the usual danger in a recession is deflation, not inflation.

So what do you think about the government causing inflation? If the government goes and doubles the money supply how is that good for the economy? I'm not sure how causing massive inflation to try and avoid deflation is in best interests. Maybe the government increases money supply and there is a delay in nominal price increases (so that real prices remain the same).

So lets say that housing had a bubble (yes it did, houses were priced twice of what they should be) and other stuff was inflated above long term averages (oil). So once the bubble pops the government should step in and attempt to maintain the bubble by causing massive inflation? Why not let the bubble burst and allow prices/wages return to natural levels?

PS, I'm just learning the basics of Marx now.

Also I'm hearing that interest rates on credit cards are increasing. Even for people with perfect history. Guess they want to make more money. And apparently if you cancel your credit card or basically do anything with credit cards (get too many, check credit rating, ask for credit), you get bad credit rating? Screw them.

Bank of Canada cut interest rates to 1%

Lowest interest rate ever for them.

Maybe the problem with the US gov is that they denied that there was a bubble, and that there was an impending recession? They said everything would be fine. Then when that didn't happen and their attempts at softening the recession blow stopped, now they pull a full reverse in policy which could make things even worse?

Also, maybe anyone applying for a credit card (or any massive debt) should be forced to take personal finance courses, or hire a personal finance manager? Although I guess that would put financial institutions out of business.

EDIT:

Also the Canadian government just introduced tax free savings account. Up to $5000 contribution each year. Only really good for short term saving though (RRSP better for long term retirement). Interesting that the gov is encouraging saving.

[chatfsh]

3. keep wages up - hmm, they havn't forced wages to be a certain rate, but I'm sure they've done things to prevent them from falling. Propping up wages means that less people will be able to be employed. Better to have lower wages and more people employed to produce more stuff which would lead to lower prices (more efficient).

I agree that cutting back on wages is more beneficial to the economy to a certain degree.

Ex.  You have 4 employees in your firm each earning $100k/yr.  The executives decide that expenses must be cut by 50%.  Which would be better for the economy?

A. Layoff two of the employees while the other two keep earning $100k/yr

B. Cut back on each of their salaries so that each of them now earns only $50k/yr?

Obviously, the answer is B.  All four employees could still afford a modest home, groceries, clothing and entertainment for their families.  Granted, their standard of living will be diminished, but they would be nowhere near the poverty line or require government assistance.  This scenario would also be better for business owners as they would prefer that 4 customers come in to buy four loaves of bread, milk, butter and eggs, than only 2 customers who

[Andrew]

Canadian Government will run $34B deficit for coming year, $30B next year

In October Harper promised on live television there would be no deficits. 3 months later it's flashbacks to the Mulroney administration of the 1980s.

In less than 5 years he will probably destroy the debt we have paid down over the past 15 years.

[Sneakgab]

''I agree that cutting back on wages is more beneficial to the economy to a certain degree.

Ex.  You have 4 employees in your firm each earning $100k/yr.  The executives decide that expenses must be cut by 50%.  Which would be better for the economy?

A.   Layoff two of the employees while the other two keep earning $100k/yr

B.   Cut back on each of their salaries so that each of them now earns only $50k/yr?

Obviously, the answer is B''

Obviously, giving less money for more work is always the solution isn't it. :P

According to Andrew cutting back on social security is good as well...

Funny how the solutions required to keep great capitalism running always seem to equate to reducing living standards. (well, not sure how true that is about the proposals for ''solutions'' actually, maybe I'll get back about that)

Now, you might point out... reducing 4 workers pay instead of firing 2 is better for living standards overall because money is worth more the less you have of it (well, not how you would put it, most likely but whatever).

However, that is beside the point, I never said one of those solutions is better than the other. Both reduce living standards. Just pointing that out in advance before people start going on about the humanitarianism of their ''solution''.

About the groceries. The thing is that in the case of people receiving high pay, they would either use the remaining money or they would save it (good according to Andrew's earlier post [not that I agree of course]. In any case they COULD save it if they wanted to at least). Of course, if the salaries are high enough they could be using them in the seemingly inferior (for the economy) fashion of buying super luxuries. In such a case I suppose it would be better to lower wages (instead of firing) if they are doing that instead of saving.

But when it comes to those receiving little pay, sure they would spend on groceries when their pay is cut in half, but since they are receiving so little they would already generally be spending it all without the cut. So the spending would be the same in both case.

Of course, Hwi already seems to realize that though. (that it is more applicable with higher salaries).

The difference is the whole living standard money distribution thing.

As for closing business's... I see the idea is to pay the workers less on average over a time span. That reduces production/service/whatever VS the alternative of simply reducing pay and keeping the same amount of employees. On the other hand, it also reduces the time these men work, basically giving them a break.

Like this, they can be paid half as much for working half as much. More nice compared to the alternative of simply paying them less. But less production done.

So the options given by Hwi seem to be cutting pay or cutting work time, pay and production.

Well, if there weren't a recession and all that then the ''break'' option would seem better if production needed to be reduced or if there was wasted production. But in a recession...

Anyway, how about this idea... reduce CEO pay.. OH NOES SOCIALISM!

You will find that reducing CEO pay is actually not the most radical move ever heard of. As a matter of fact, while I once thought that all CEO's were paid like US CEOs after doing a little (very little :P) research I now see that actually most CEOs are paid MUCH MUCH less.

This may have created some ''misunderstanding'' btw me and Tatar on some matters actually, which I guess would be my fault.

You see, compensation for all that stress, work, ability, e.t.c is fine when it's reasonable. Take the perhaps even freindly CEO's of Japan. I have heard that the average CEO is paid only 10 to 15 times the average worker's pay.

Now, that might actually be justifiable, somebody might actually be able to DESERVE to be paid 10 to 15 times a worker's pay. It is within the imagining and possibility.... it is conceivable....

UNLIKE, the pay of you're usual American CEO.

This idea might be foreign to some, but running a business is not infinite justification for pay.

Any way, the diversion of pay would probably stimulate the economy better. First of all, less firing would need to be done. If, after reducing CEO pay, you opted to decrease the wages of the workers in order to employ more, you would have more money to do so.

Second of all, the money would be used to spur necessary industries instead of near useless super luxury (where the CEOs would spend the majority of their cash) industries.

Japan seems to be proof that you don't need to pay CEO's absurd amounts to provide necessary incentives.

Also, we keep hearing that workers are going to have take some pain because of the recession. Well, how about the CEO's take some of that pain? I have heard of at least 1 case where that is happening in Japan, and wouldn't be surprised to find it to be the norm.

Of course, reducing American CEO pay to only a few millions per a year would hardly seem to be ''painful''. Having to take an airways plane (first class) instead of a private jet (maybe)... oh the humanity (sarcasm/).

So, how's that for an expense cutting iniative. Reducing CEO pay seemed like a much bigger,reasonable and more obvious possibility.

And yeah, I heard something about some CEOs having to give up bonuses when accepting bailouts. I also heard that the terms were changed in congress before passing the decision making it null and useless leading to very few CEOs actually doing this.

I also heard that they are actually being paid more than ever now.

In any case, what people should have in mind should be more than not giving them their bonuses. I'm speaking about MAJOR pay cuts. Bringing them at least to Japanese levels. What, they'll resign then?

Big freaking deal. Most of these fools helped ''manage ''their companies into oblivion (heh, kind of a line taken from elsewhere used because it was funny :D).

I'm sure CEO candidates could be found somewhere with comparable or better (comparable might not be a good thing) skill who would be working for the much reduces wages (that are still pretty damn big).

The only argument against reducing CEO pay that I can see is that these CEOs will invest it well. Not too likely. Besides, doesn't the money come from the owner. Wouldn't he be a reasonable investor (though often the owners of big companies are very obviously just lucky b!tches)

Of course, none of this is to say that reducing CEO pay will necessarily be sufficient by itself. However, it would seem like a decent relatively sure fire start.

[SandChigger]

Where do you work again?

[Andrew]

Can anyone guess where the bailout money that Bank of America recently got went to?

75% Of Latest Bank Of America Bailout Used To Pay Merrill Lynch Bonuses

[chatfsh]

If this is true, it is another HUGE reason why the U.S. government never should have interfered with these asinine bailouts.  Failed businesses should be allowed to fail without any government intervention.

In a capitalist society, the role of government in business should be analogous to the role of referees/umpires on the playing fields.  The government should possess erudite knowledge concerning the rules and regulations of the game.  They should be vigilant observers so that they may intervene swiftly with penalties and fines if any of the players commits a foul, infraction, or in any other way flouts the rules.    When a player competes so poorly that he can no longer perform on the field, the referees/umpires don

[Andrew]

Another wierd thing most Canadians are wondering...

Why are gas prices going up?

Price of oil per barrel has stayed at $40, yet gas prices increased 14% in a month. We were paying 70 cents per litre, and now at 80 cents per litre. Actually other parts of Canada are paying 90 cents per litre. People are wondering wtf is going on.

And the electric utility wants to increase rates by 10%. They are coming up with every excuse possible to raise electric rates even though oil is now the same as it was 10 years ago, yet electric rates are double what they were back then.

Of course our electric utility has a monopoly, and controlled by a corporation that requires 10% profits each year. Fortis Inc, so it is no surprise there.

EDIT:

A History Lesson With Merrill Deal

Better article about BoA bailout, and how it is a big scam by the people at top to get rich.

EDIT:

Remember back in early 2008 Freddie Mac said they were doing fine, then when banks collapsed they said they needed $15 billion bailout?

Now they want another $30-35 billion bailout.

Freddie Mac says it will ask for about $30B to $35B from Treasury to cover 4Q losses

Funny how average american is afraid of socialism, such as public healthcare for every citizen, and other benefits paid for by taxes, but when big corporations need billions because they screwed up, Americans do nothing to stop it, and they get no benefit from it.

[Khan]

Where do you work again?

Wherever it is I'm guessing he gets paid by the word.

[SandChigger]

Wherever it is I'm guessing he gets paid by the word.

My thoughts exactly. ;)

[Andrew]

Obama Officials Tell Citibank To Ditch Plans For $50 Million Private Jet

But the Execs need private jets!!

This will adversely affect private jet manufacturers. They will need to be bailed out.

[chatfsh]

Can anyone guess where the bailout money that Bank of America recently got went to?

75% Of Latest Bank Of America Bailout Used To Pay Merrill Lynch Bonuses

Oh ho, but guess who

[Andrew]

$4 billion in bonuses to keep top management?

Why not hire 40,000 people at $100,000 salary each instead?

I'm sure they would be more productive than say 1,000 top managers.

I always find it funny when a CEO decides. "We should cut 10% of workforce! and then pay ourselves big bonuses for thinking of such a great idea!"

I love this chart.

[Anathema]

A bit old, but still a worthwile read...

(that is my favourite news source, by the way)

[SandRider]

not to be trollish, or snarky, but a legitimate question:

what's the average age of posters in this thread ?

(for the record, I'm 61)

[Andrew]

not to be trollish, or snarky, but a legitimate question:

what's the average age of posters in this thread ?

(for the record, I'm 61)

25

I hope you got had most of your investments out of the stock market before it tanked!

[Khan]

21 I guess mid twenties would be the average.

[Andrew]

Bailed Out Bank of America Sponsors Super Bowl Fun Fest

YEEEEEHAAAAAAWWWWWWWW!!!!!!!!!!

More responsible spending. And why not, it's not like they have to worry about anything when the government pays all the bills.

The event – known as the NFL Experience – was 850,000 square feet of sports games and interactive entertainment attractions for football fans and was blanketed in Bank of America logos and marketing calls to sign up for football-themed banking products.

$10 million for a party!? I'd definitely put all my money into a bank that cares more about publicity than return on investment...

Would it be fair to say that banks nowadays have little to do with banking and more to do with non banking revenues/expenses? Similar to pro sports now having nothing to do with sports and all about profits? I remember back in late 70's early 1980s there was no advertising on the ice surfaces or boards. Now they are all plastered with ads and it is easy to get distracted by the ads and your basically not watching a sport, you are watching advertisements.

EDIT:

As late as 1976, the richest 1 percent of the country took home about 9 percent of the total national income. By 2006, they were pocketing more than 20 percent.

[Andrew]

DOW Jones back at 8300 (+3%). Looks like the 7900-8000 bottom held once again. I think this is the 4th time it went that low but then rebounded back.

Anyone think it will go lower (for more than a month, say 7000)? Anyone think in 5 years we will be back at 12,000?

EDIT:

Canada lost 129,000 jobs in January: StatsCan

That is a lot for a single month. National unemployment is at 7.2%

Why 'Stimulus' Will Mean Inflation

Of course it will mean inflation. World economy inflated largely over the past decade, and now it deflated to more realistic values, and all the governments are printing money to cause inflation because they think we need to have larger number.

Stupid made up example:

House in 1995 cost $200,000

Same House in 2005 cost $400,000

People have to get larger loans to purchase these massively inflated houses that they probably can not afford.

Bubble bursts in 2008, and people stop paying their inflated mortgage since the house is worth say $300,000 instead of the 400k they bought it for. So the government steps in and starts spending money because they want prices for everything to increase because this deflation (in my opinion correction) is "bad".

Maybe if people bought houses to live in and not treated them as financial investments that they can flip in less than 10 years, we wouldn't be in this situation. I think all those tv shows about flipping houses encouraged bad practices.

[Dante]

not to be trollish, or snarky, but a legitimate question:

what's the average age of posters in this thread ?

(for the record, I'm 61)

21 here, I think the average is about 25. If that was in reaction to Hwi's rather nihilistic statement, she's in her 40's but probably picked that up from me. I'm such a bad influence.

[Andrew]

IMF Says Advanced Economies Already in Depression

2009 is going to a really fun year to watch... from your cardboard box.

[chatfsh]

That

[Edric O]

Further, if the government really wants to stimulate the economy, reduce our income tax rate.  If I could take home more of my pay instead of giving it to the government, I

[chatfsh]

But in order for the government to spend more it must raise the funds to do so.  This is typically achieved in one of three ways (if not in combination):

 

Raising taxes - further burdening the taxpayers

Borrow - increase already skyrocketing debt

Print more money

[Edric O]

What's the difference between reduced revenues (tax cuts) and increased expenses (more government spending)? They're exactly the same thing from the budget's point of view. Raising one less dollar in taxes is the same as spending one more dollar. You pointed out 3 possible problems with increased spending, but there are 3 directly equivalent problems with tax cuts. Where are you going to get the money to replace what you've lost as a result of tax cuts? Three ways you could do it are:

1. Cutting spending (equivalent to raising taxes in that it reduces aggregate consumption)

2. Borrow

3. Print more money

Your fourth solution, trimming the fat out of the federal budget, would work equally well regardless of whether you're trimming the fat in order to save up money for tax cuts or in order to save up money for new public spending.

The bottom line is, government spending stimulates the economy better than tax cuts; and both methods have unwanted side effects, but those side effects are exactly the same regardless of which method you use. So government spending is better overall.