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Discussion Starter · #1 ·
<a href="http://firedoglake.com/2008/03/08/how-this-economy-is-going-to-play-out/" target="_blank"><span style="text-decoration:underline;">How this economy is going to play out,</span></a> by Ian Welsh. Excerpt:<br><br><i>The old, oil based, suburban sprawl economy based on forever rising house prices, on easy credit, on subdivision after subdivision--on running up credit cards and on leverage piled on leverage piled on arbitrage, is in the middle of cracking up, spectacularly. While there will be a short term reduction in the price of oil, in the long term oil is still going up and the America of the sprawl economy; the economic geography of America, looks entirely different at $4/gallon gasoline than it does at $2/gallon gasoline. Huge swathes of exurbia and suburbia become simply economically unviable. Zombie Burbs.</i><br><br>
An interesting read to me, as someone not well versed at global economics. It's worrisome to contemplate, but right now moving to the city and finding a community and lifestyle that supports public transportation seems desirable. Or a higher paying salary.
 

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I believe this. Even without rising gas prices, there's been a push (at least among younger people) to avoid suburbs. I think this is both a "cities are cooler" thing as well as the notion that suburban sprawl is just terrible.
 

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Have you guys read Jane Jacobs?<br>
I highly highly suggest her very prolific work on urban planning, urban placement and urban sprawl.<br>
She was one of the the pioneers of notion to use urban planning to solve economic problems.
 

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my dad and i just want to build a french fry car. its perfect. all the fast food places are already by gas stations. you can just gas up at the mc d's.<br>
we've worked it all out..... <img alt="biggrin.gif" src="http://files.kickrunners.com/smilies/biggrin.gif">
 

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I've read the full article now.<br>
His predictions are far too gloomy. He is predicting that a depression is possible? It's not. A recession- fine- but that's still quite a ways off, and the recession isn't going to be too terrible.<br><br>
Why exactly not?<br>
Contractions in the market are not only common- they are healthy. Cull the chafe from the wheat. Supernormal profit models are unsustainable in free market (or near free market) economies- such as the markets that Developed Western nations enjoy. That means that an episode where supernormal profits are achievable (ei: Sub prime mortgage) will correct.<br><br>
This in fact has a relatively insular impact. It impacts only construction financing by IB and VC manufacturing of construction goods and materials and construction administration. The fact that manufacturing in other industries- such as tech, biotech, consumables, non-consumables, etc... is not contracting, is still able to snag financing and still is floating some pretty nice profits means that that industry is doing pretty good and that's a benchmark for the rest of the industries (What industry or function doesn't rely on things being manufactured in one form or another?).<br><br>
Retail as well as corporate banking institutions' PE is still pretty steady.<br>
Unemployment hasn't crept up that much.<br><br>
Index trackers are bouncing a bit because the construction slow down has spooked a lot of investors but a correction of 5-7% is hardly something to get worried about. It's a mild correction and while we're not heading into a bull market- the bear isn't going to implode the American economy.
 

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I smell an MPA around here...
 

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stop sniffing yourself.
 

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granted, I know nothing about, well, anything... but I was reading the recession is likely going to be a bit worse than normal with market forces because we artificially propped the economy for so long, and the blowback for that is going to be a bitch. (Uh, okay, so I might be restating in my own words. <img alt="biggrin.gif" src="http://files.kickrunners.com/smilies/biggrin.gif"> )<br><br><br>
But, if the suburbs are going to desert, am I going to be able to get a cheap house soon? I somehow don't see that happening around here... Atlanta has terrible sprawl, but that has led to little pockets of economic strength and industry in what is considered the suburbs, and minisuburbs just from that... with a lot of points of economic radiance to fuel them.
 

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This intrigues. Do you recall how the author says we propped the economy up for so long?<br><br>
Granted we adopted full Friedmanian monetary policy at the Fed level in about mid-late 80's, and of course the current account balance has been in deficit for the past decade and a half (<img alt="icon_salut.gif" src="http://files.kickrunners.com/smilies/icon_salut.gif"> Thanks Greenspan- you're a peach!), but are these considerred <i>props</i>? Or is the Fed policy just an adoption of a newly tested and proven theory of sound macro economic management, and the Current Account Deficit just an illustration of management trends and globalization?<br><br>
Food for thought- Any other economics peeps want to weigh in? OakD- consider yourself tagged. Oachie- Put your MBA to use, man. Heater- you're up, dude. Notey- if you're around- I know you've got insight. Share it! Diab- You've been reading the Economist. What has it told you?
 

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Discussion Starter · #10 ·
HP- I see your point that "gloomy" and "depression" are drastic forecasts, but do you really think that we are simply in a correction? Is there a larger problem?
 

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There are corrections- then there are sharp corrections.<br>
Then there are Bear Markets.<br>
The US economy is staring down the throat of a bear market now- but it doesn't sell papers or get hits on your website or sell books if you take the reasonable and rational approach that 'The sky is not falling. We are not all fucked. The Demise of the great American empire is not nigh. 7-10% unemployment is unfortunate- but no where near the 30-40% we saw in the depression. FDI's are still relatively strong- so the economy can be somewhat bouyed by influx from EU and BRIC.'
 

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HP- I don't know the oil industry real well, but I'd suggest the US prices have been below market for a long time at least when compared to the price in other countries. Isn't anything that's been imported to the US ridiculously low? I mean if you go to Iceland where food, in general, is imported it's 1/2 your paycheck to feed your family. I tend to wonder if the price of anything in the US is a "true" price.<br><br>
I find it sad that Americans are losing their homes and you go to the mall and can't find a parking spot. The government can't fix mentality. Sixteen year olds don't need underwear at $15 a pair.
 

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Fox- Hmmm... I don't know anything about the Oil industry, other than it's not a simple matter of production that reacts to supply and demand. I know that the taps get turned based on cartel collusion by thugs who would otherwise not have the power they do over something so vital. I also understand that other sources are being explored in Russia, Canada, and offshore, but the middle east is by far the largest supplier.<br><br>
Now- as far as food and consumables goes-<br>
Most Developed nations have roughly on par purchase power of parity with foods. Iceland is an anomaly I'd imagine because it's difficult to produce its own food (other than yak meat and fish), so it all has to get imported- and imported via ship and airplane- when weather permits, stored, clearing of customs, redeployed nationally etc... all of which adds to the price of the final apple or chicken breast or bag of sugar, all of which gets carried by the consumer. Other developed nations likely have reciprocal agri produce agreements to lower the costs- export beef, import eggplants- everyone wins.<br><br>
The demand for Ice from Iceland isn't too huge though- so it's agri produce import costs are entirely burdened by the Icelandic consumers.<br><br>
As far as the 15 year old fashion plates go- that's a societal problem. Not something the government can fix or legislate. <img alt="smile.gif" src="http://files.kickrunners.com/smilies/smile.gif">
 

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The global economy and ultimately pricing on oil and other valuable commodities are being driven up by higher demand from the quickly developing manufacturing structures of the Far East.<br><br>
and changes in our living habits and locations will not change that shift in the macro economic situation. More likely it will continue to stimulate substitutions in fossil fuel use and conservation.<br><br>
Here is an example: I commute 120 miles/day for work as well as travel throughout the local region to support manufacturing sites. Mrs oache travels 20 miles/day. My average annual salary increase has covered the increase costs of my commute. To balance this increase costs, I can telecommute once/week which I consider a fantastic fringe benefit. Meanwhile, the convenience of living in an established and commutable (public transport) burb of chicago has great benefits but considerably more expense than living in a rural location between our two jobs. We've come to the conclusion that we will not stay in our beautiful home and neighborhood upon retirement because the taxes and cost of living are way too high. But, unlike the pasture towns that were building like mad and now have a glut of unsellable houses, are house is still appreciating and continue to be a viable investment for our future.<br><br>
what is my point? It is a cost/benefit analysis for everyone with quality of life factoring into a huge part of the equation. I like my job and where I live so the cost of commuting is just part of the equation but not even close to being the tipping point for me to make a change. That won't change when gas hits $4/gallon this summer either.<br><br>
oh and it's no secret to anyone that works in global industries that the real opportunity for business expansion (at least in manufacturing and integrated services) are in developing markets like china and south america. We've known that for 15 years and the business models are set up to capture that money. Selling products to the chinese will fund my retirement. Where I live has nothing to do with supporting that market.
 

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oh and one more item that refutes the author's premise that we are doomed economically.<br><br>
Demographics......who has the largest glut of the money? The boomers and they are getting ready to start retiring in mass. Where are they going to live? Somewhere warm and tax cheap is a start. Low maintenance is another. Good health care is a must. They'll have more affect on shifting population than the global economy will.
 
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