F*ckedEconomy?

July 31, 2001 10:30 AM

F*ckedEconomy? Cuts in interest rates don't seem to be helping. Layoffs persist (and not just tech/dotcoms). The market bounces, but can it sustain itself? Some say the market will rebound in the 2nd quarter of next year, but these are the same people who saw an uptick coming this fall. Are we headed towards a recession, again? Lucent even had to sell their golf course.
posted by owillis (12 comments total)

Well, consumer spending went up a whopping 0.4 percent, and income was up too. Of course, I don't have enough of a background in economics to understand what all of this really means. Could anyone provide a link to a basic tutorial on this type of thing? (Or a book - we have a great public library.)
posted by binkin at 10:39 AM on July 31, 2001

Here is an excellent introduction to the principles of economics written in a clear, concise style.
posted by boaz at 10:52 AM on July 31, 2001

Another good intro is New Ideas from Dead Economists. The title is a bit of a misnomer; some of the economists discussed aren't actually dead.
posted by kindall at 11:44 AM on July 31, 2001

Now from my limited knowledge I cant understand how the economy could just suddenly stall like it has. I know it over-accelerated during the stock market frenzy, but instead of a cool off its almost a deep freeze.
posted by owillis at 1:31 PM on July 31, 2001

So why are rents still so f*cking high?
posted by preguicoso at 2:17 PM on July 31, 2001

Well, the shift from "free money" to "no money" from VCs has some effect, and the investments of well-established companies have taken a hit, but the real place to look is the supply chain for technology. Most of the big guns have been making massive one-time writeoffs in their quarterlies, because they've been stacking up inventory: and in tech, inventory becomes obsolete and unsaleable very very quickly.

As I've said here a few times, corporate buyers top-loaded their budgets in 1999 to ensure that they were prepared for Y2K. We're still in the "nuclear winter" aftermath of that burst, but semiconductor manufacturers used the boom of '99 as the basis for production targets in the years to come: more often that not, because it's bad for the share price to forecast a drop-off in demand. There's also an element of consumer saturation in many important markets: the mobile phone and PC equivalent of Douglas Adams' "shoe event horizon".

There's still a disconnect in the markets, because of the way that daytraders (and increasingly, mutual funds) play the SOX, even though its component corporations (Micron, AMD, et al) are as ridiculously overvalued and unprofitable as the dot-coms at the height of the boom. Along with the collapsing profits of Ericsson, Nokia, Motorola, you're even seeing hardware manufacturers such as ARM shifting resources to consultancy, suggesting that no-one's buying.
posted by holgate at 2:29 PM on July 31, 2001

It seems to me that although consumer spending is chugging along nicely, CEOs of corporations have suckled too long at the teat of the Dow. Now that the market is adjusting to real levels, they realize that their bonus packages and stock options are contingent on boosting the stock price by any means necessary. Thus, massive layoffs and other bait-and-switch techniques to convince investors that yes, they're done with all this new economy pablum and are focused on real profit and investments. So Lucent sells its golf course and workers get fired and they cry that the sky is falling and blame "the economy" so that their asses are covered.

Meanwhile, they're still pulling down multimillion dollar salaries.

Bollocks, I say.
posted by solistrato at 2:48 PM on July 31, 2001

One thing to remember about the stock market: it's a big psychological casino with little underlying rational thought. Why? Neither possible increases in dividends, nor possible company buybacks of stock explain stock movements. So, just pray that everyone continues to feel fairly good. Otherwise, it's toilet time for the market.
posted by ParisParamus at 2:59 PM on July 31, 2001

Yep, another patented Hal Incandenza Thread Stopper (H.I.T.S.). Thanks, but please- no applause, I'm too modest...
posted by hincandenza at 12:23 AM on August 1, 2001

"Cuts in interest rates don't seem to be helping. "

The latest hearing with Mr. Greenspan (the I hate minimum wage and Social Security guy) explained this curiousity for me. The guys who make long term loans are looking at the federal government and knowing that we are going back into deficit spending budgets (thus borrowing and thus increasing the demand for loans and thus keeping the interest rates up) and so the effect of the rate cuts are negated.

What to do? Remember that not only is the tax money ours but so is the federal debt. Which is better for the economy, paying off the debt or giving tax breaks to the wealthy? Recent history suggests that paying off federal debt is a GOOD THING in the minds of the moneychangers. The recent "tax cut" reminds me of the bumper stickers on large RVs that say "I'm spending my kid's inheritance."

News Flash: The Treasury says today that they will have to BORROW about $50 billion this fiscal quarter to pay the bills. Can we say "Thank you Dubya"?

Which is a greater burden on Americans, taxes or deficit spending? No job = lowest possible tax rate
posted by nofundy at 7:30 AM on August 1, 2001

The guys who make long term loans are looking at the federal government and knowing that we are going back into deficit spending budgets and so the effect of the rate cuts are negated.

No, sales have been flat for a year and appear to continue to be flat for the next several months. With most companies in the manufacturing sector already overstocked with inventory, there's little need to borrow more capital until there's a noticable increase in demand that would require the capital infusion of borrowing.

Which is better for the economy, paying off the debt or giving tax breaks to the wealthy?

The argument that the tax breaks only went to the wealthy is beyond stale. In any event, both tax breaks and paying off the debt are good for the economy - which is better depends on the details.

Recent history suggests that paying off federal debt is a GOOD THING in the minds of the moneychangers.

And you somehow have access to 'the minds of the moneychangers'? There's hundreds more economic factors at play in addition to the rate of debt reduction.

News Flash: The Treasury says today that they will have to BORROW about $50 billion this fiscal quarter to pay the bills.

News Flash: The Treasury takes out short term loans all the time. They borrowed in 9 of the last 19 quarters. You statistic isn't particularly noteworthy.

Which is a greater burden on Americans, taxes or deficit spending?

Taxes, definitely.
posted by ljromanoff at 11:16 PM on August 1, 2001