99 Trilllllllllion?!
Chris,
It amazes me how clueless people are about our economy. And I mean smart people. I work in the semiconductor industry and there are some very smart engineers and scientists that I work with. However, everyone sees the current situation as "It’s going to recover." When I point out the situation with high unemployment, a debt based economy which needs growth each quarter to be healthy, government overspending, China buying the US debt, more mortgage problems starting this summer, (not to mention social security/baby boomers, food shortages around the world, peak oil, etc, etc.), all I get is, "It’s going to recover…but slower than the last downturn." I can’t even get anyone to admit that we are going into a recession. And, often I get a funny look (or comments) like I don’t understand how our economic system works. I just don’t understand why smart people don’t see what’s happening? Are they too afraid to consider the ramifications? Is an economic crash something that they’ve been told can’t happen so they don’t even consider it? It’s frustrating to not be able to have an intelligent conversation with intelligent people.
><>Larry
I’m still trying to get my mind wrapped around the concept of Trillions…
http://www.dotpenn.com/index.php/U.S/Congress-To-Debate-What-Comes-After-Trillion.html
What is a trillion? This might help you get your mind around it:
A million seconds ago was 12 days ago.
A billion seconds ago it was 1977.
A trillion seconds ago we still had 20,000 years to go before the ice age ended. It ended 11,000 years ago so about 31,000 years ago in total.
Or this: Light travels around the earth about 8.5 times per second. It takes 8.3 minutes to travel from the sun to the earth. It takes light 62 days to travel a trillion miles.
Yeap, that’s a whole lotta bread.
Try this one out for size http://mises.org/story/3469
"As long as a lot of people die before collecting any benefits, or die without collecting many benefits, the system is financially sound. In 1950, the worker-to-beneficiary ratio was 16.5-to-1. With people living longer, the worker to beneficiary ratio has fallen to 3.1-to-1 and within 20 years it’s expected to drop to 2.1-to-1. Due to this falling ratio, over the years the feds have raised tax rates and now must consider further adjustments".
I wonder if that ratio is under 3 to 1.
It amazes me how clueless people are about our economy. And I mean smart people.
Larry,
I’ve thought a lot about this. I work at a large well-known university, with some really smart people around. But they have no clue about this stuff, whatsoever. Two years before the recent financial problems started, I was trying to warn my department to prepare. I volunteered to start a committee to make a "plan B" for when things turned south. Nobody paid attention. Even now, people think this is a minor blip. Or, they think that Obama’s election will fix all. Or they believe that the tooth fairy will leave $1M under their pillow one night…
I’ve ceased wondering about it. I have come to the conclusion that Americans are simply far too sheltered, which has prompted a very deep rooted case of "linear thinking". They think that because America has done so well in the past 40 years, that we will "obviously" continue to do so. Since they haven’t experienced any economic shocks themselves in recent memory, they conclude that they won’t in the near future. It is a sad human trait, but very few people (even so-called intelligent ones) seem to be able to learn from others’ experiences, or from history.
They need to read the report by Rogoff that shows countries defaulting on debt (either outright default, or rampant inflation) is an extremely frequent occurrence.
The good news from that report is, that while we can all be afraid of what is going to happen as this economy crashes, we can know that we will join countless other peoples all across the globe and all across history who have experienced similar episodes. And maybe, just maybe, the living generations will learn something from that and not repeat those mistakes in their lifetimes (unfortunately, future generations probably will).
Morgan
This entire people reaction to the "economy" ‘thing’ has me totally perplexed and subsequently it has caused me to give it a lot of consideration in an attempt to better understand why this is.
I have found it is a great way to politely and abruptly get out of a conversation. (I’m pretty introverted).
4 words: "Gonna be a depression." Worked great at the local garden center this past weekend, I’d still be there talking if not for that. If I had yelled FIRE he wouldn’t have ran off so fast.
Chris I think posted the 6 stages of grief. Denial, anger acceptance etc. I think that has a lot to do with it.
But, in truth, I’d equate this to the poor souls who didn’t leave the Twin Towers. Watching that event [airliners flying into buildings] was stranger than fiction, but what was even stranger was they didn’t get the heck out.
I stood there, in awe watching and wondering why. It was maddening.
I look at the S&P and the DJIA as if they are the Twin Towers of today.
To me the gloom: I look at unemployment, housing, zombie banks, zombie insurance companies, real estate (residential and commercial) sub-prime, prime, alt a and ninja’s, wave 2, manufacturing, global in scope, debt, obligations (hidden off balance sheet), Enronesque GDP, faltering tax revenues - and everything else are to me akin to the two planes on top of the S&P and the DJIA.
And anyone inside the not evacuating…
Anyway, I started looking up why people stayed inside at work.
The authorities told them to, that it would be okay. When I saw the black sheep who owned the security company it made a lot of sense. Like his brother, another genius. Apples don’t fall far from trees. I relate all this to the experiment in the movie the corporation, where authority is basically substituted for any and all common sense. More voltage, fine, a torturing amount of voltage? well okay, a lethal dose voltage, well yah said so, so here we go.
There was one ex-Vietnam security guy who lead a now defunct investment house of workers out, cursing at the insanity of the decision and defying and condemning it on the radio as he did so - he died, they lived.
Don’t panic: The psychology of emergency mass evacuation (PPT)
Important! The biggest predictor of survival is time taken to recognize the emergency and move! The "panic model" suggests that the crowd:
- Is less intelligent than the lone individual
- Will be driven by simple emotions
- Responds with irrational behavior
- Is a source of ‘contagion’
Which brings me to the heart of the matter. Blogs vs. where people get their information and the ability for people to take some time and think for themselves.
When I first started tuning into blogs I was chastised by friends and family for listening to loons.
Sorry, but watching Maria whats her name on CNBC or Cramer and then seeing Chris on YouTube, the blog or PBS it is pretty clear to me in 2 seconds who is the brainiac and who knows about economics.
Maria? or Chris!
To me that is like listening to Marvin or the grunt who came back in once piece from Vietnam.
Just my 2 cents.
Thank you memorrison,
Clearly I need to go to the SS web site and read the various rules to know the best scenarios for a given situation. Of course, if anything is still there when I am 62, the rules will probably be different!
Davos this is priceless4 words: "Gonna be a depression." Worked great at the local garden center this past weekend, I'd still be there talking if not for that. If I had yelled FIRE he wouldn't have ran off so fast.I see it as a good thing since it buys us more time.
Thanks iDoctor! I agree, we can be a good bit away from "that door" when everyone realizes that TSHTF.
Take care
I fail to understand why Social Security is called an Entitlement Program and people gleefully say it should be gutted or abolished. That is insanity. WE HAVE PAID ALL OUR LIVES FOR THIS "ENTITLEMENT PROGRAM". Do you call your life insurance an "entitlement program"? Is your annuity an "entitlement program"? Just because it’s a government program does not mean it’s a free program. We contribute all of our working lives to it to the tune of thousands of dollars and we deserve to get full Social Security benefits when we retire. As promised. As a self-employed business owner, I contribute 15% every single month to it. FIFTEEN PERCENT. You bet I want my "entitlement". After all, I’ve earned every penny of it!
[quote=QuantumEconoBiology]
It amazes me how clueless people are about our economy. And I mean smart people.
Larry,
I’ve thought a lot about this. I work at a large well-known university, with some really smart people around. But they have no clue about this stuff, whatsoever. Two years before the recent financial problems started, I was trying to warn my department to prepare. I volunteered to start a committee to make a "plan B" for when things turned south. Nobody paid attention. Even now, people think this is a minor blip. Or, they think that Obama’s election will fix all. Or they believe that the tooth fairy will leave $1M under their pillow one night…
I’ve ceased wondering about it. I have come to the conclusion that Americans are simply far too sheltered, which has prompted a very deep rooted case of "linear thinking". They think that because America has done so well in the past 40 years, that we will "obviously" continue to do so. Since they haven’t experienced any economic shocks themselves in recent memory, they conclude that they won’t in the near future. It is a sad human trait, but very few people (even so-called intelligent ones) seem to be able to learn from others’ experiences, or from history.
They need to read the report by Rogoff that shows countries defaulting on debt (either outright default, or rampant inflation) is an extremely frequent occurrence.
The good news from that report is, that while we can all be afraid of what is going to happen as this economy crashes, we can know that we will join countless other peoples all across the globe and all across history who have experienced similar episodes. And maybe, just maybe, the living generations will learn something from that and not repeat those mistakes in their lifetimes (unfortunately, future generations probably will).
Morgan[/quote]
Morgan,
Let me welcome you as a new poster and also compliment you on your very astute observations. It is obvious that intelligence and common sense are not always compatible in some people.
You are seeing in action the old, but very true, comment, "Those who cannot remember the past are condemned to repeat it," - George Santayana (George Santayana - Wikipedia)
http://angrybear.blogspot.com/2009/05/northwest-plan-for-social-security.html
We have an extensive list of posts on Soc Sec. CBO stats differ from SSA stats in method and timeframes. The notion that as a dedicated program SS is in trouble, with or without the trust fund, is not accurate. Do the numbers.
As I suggested in Post #5, I heard an NPR report this AM stating that claims for Social Security Disability Benefits and SSI disability payments are up 20%. hastening the day when payments going out will equal and exceed tax revenues coming in.
Interesting work but I have a number of issues with the approach and therefore conclusions. While I think you’ve got something that could elicit some interesting policy discussions I find it far too narrow of an analysis to be useful in addressing the big picture.
- Why are you spending so much time only figuring SS in isolation? Over here we consider the entire entitlement program suite in the context of the overall government fiscal situation. Add back in the Medicare/caid and government employee pensions and then let's see how things turn out. It seems that "fixing SS" with a few tweaks and twiggles is possibly as useful as bailing out the ocean if it turns out the other entitlement programs are going to sink the ship. Then let's factor in the total liabilities of the government, as though we are talking about a single entity, not one consisting of a an isolated thing called SS and a bunch of other disconnected stuff, and look at these on a cash flow basis. I hate to say it, but a $1.50/week per worker isn't going to cut it.
- It seems that your plan assumes that there such a thing as a SS "trust fund". There is not. There are only intragovernmental holdings which, as we all know, are an impossibility and meaningless to the issue of solvency because they have no net value to the government. Strip these spurious funds out and then examine the whole mess on the basis of cash flow and it tips into the negative in just a few more years. At that point SS goes cash flow negative and is merely another drain in a very leaky tub of government expenditures and even an infinite number of "trust fund" IOUs will not make a whit of difference. When that happens SS competes with every other government program for cash. How will that shortfall be met? That's right, with additional borrowing/printing which will serve to make fixed SS outlays diminish in value as the dollar erodes which is, in our world, a form of default on the part of the government because it forcibly removes value from a promised cash flow. While the government may be able to technically meet its obligations, the resulting inflation will make the outcome as unfavorable to pensioners as an outright default.
While it is true that the SS trust funds are really accounting gimmicks, the nature of the obligations is quite different from most government programs. The trust funds are set up to fund social contracts not different in kind from private insurance contracts. Even thought the payroll taxes are mandatory, there is an understanding that we will be "entitled" to the benefits prescribed by the program when we fulfill our parts of the bargain, i.e., pay the premiums (payroll taxes) and reach a certain age or become disabled. I would expect an insurance company to pay up if I meet my part of the bargain, why would I expect less of a government insurance program?
OTOH, for most other gov’t spending, they simply take my money and spend it on whatever they decide is in the public interest, no matter how little the public actually wants or needs the programs. To me the Social Security insurance programs should have a higher priority than almost any other government spending, simply because they involve actual contracts with individuals that frequently mean the difference between those individuals remaining financially solvent in old age or disability, and becoming some other type of burden on society. And, it is also true that the Social Security programs, particularly OASDI, require relatively small and predictable fixes to keep the income ahead of the outgo for at least the intermediate term future.