Our Economy May Be in a Death Spiral

[keep_it_real]

With the bottom dropping out of the consumer market -- responsible for two-thirds of the American economy -- businesses across the board are feeling a major crunch. Electronic giant Circuit City filed for bankruptcy this week, a move that came on the heels of bad news from Neiman Marcus, Starbucks, Gap, Best Buy and Nordstrom that, as the Washington Post reported, "show consumer spending contracting and retail revenue shrinking." On Friday, Sun Microsystems announced that it would slash 6,000 jobs; DHL killed off its U.S. business entirely this week, sending 10,000 people to the unemployment lines, including 7,000 in the tiny town of Wilmington, Ohio (out of a population of 12,000).

As profits drop, businesses are expected to lay off even more workers, which will mean even less consumer spending. Firms are pulling back across the board. The deflation in real estate values, which began in residential, is now spreading into the commercial market. Commercial real estate sales are expected to fall by half from last year's levels. Already this year, $15 billion worth of planned commercial real estate projects have been canceled. The Washington Post reported that "growing layoffs and falling profits mean companies are giving up office space at rapid rates. Nationwide, more than 19 million square feet of space -- enough to fill more than 300 football fields -- has been emptied by office users this year, the most since the months after the Sept. 11, 2001, attacks."

http://www.alternet.org/workplace/106993/our_economy_may_be_in_a_death_spiral_--_will_washington_stop_the_bleeding/

[gristy]

1. Oh, please.

Yes, we are in a recession. Yes, many have lost their job and may not be able to find another one for a while. But a death spiral? I think not.

[Warpy]

3. We're in a death spiral if the demand side of the equation

remains unaddressed. With no faith in the future, demand for goods and services declines to bare subsistence. With no demand for consumer goods, employment to create them goes down as does employment transporting and selling them. Even less demand results and the vicious circle is completed.

No, we're not there yet, but we can get there pretty quickly and cross the line from a deep recession to a depression.

[lxlxlxl]

7. Don't be dismissive. It's a death spiral for millions of people.

First, you would not say that to one of those people that lost their DHL job.

Second, it is very much a death spiral to the people that were either completely poor or the people that were struggling with the one or two jobs they have.

Yes, the norm in this country's discourse is to look at the poor as though they deserve it, but do you understand really what these figures mean for not only this countrys poor, but also the developing countries of the world?

We are looking at millions and millions of people suffering from starvation because of this economic downturn in poor countries. How do you think relief aid happens when there is no money for lines of credit for ships?

You can look at corporate balance sheets, customer confidence numbers, any indicator, and its easy to get lost in them, but economics is about providing survival to people -- when economics fail people die. It's serious.

[rvablue]

15. And the really bad part of the DHL layoffs is that

the majority of them were all concentrated in a small city in Pennsylvania.

That means that all of the service industries in that city will face devastating consequences too because all of those workers will not be able to spend....more layoffs....

[Hawkowl]

10. Au contraire!

We certainly are in a death spiral right now. And the Bush administration is simply accelerating it and tying the hands of Obama's future administration. The Fed is about to render itself powerless in using monetary policy because the discount rate is rapidly reaching zero! Once interest rates are 0.0% how can you stimulate buying on credit any further? The Fed can't. Strike one.

The second major tool to stimulate the economy and stave off a great depression is Keynesian fiscal policy, i.e; the government borrowing money and investing it in public works type projects. This tool is rapidly being eliminated as Bush/Paulson are engaging in one last orgy of crony capitalism by throwing ONE FUCKING TRILLION DOLLARS at their favorite rich friends while doing nothing, NOTHING, to solve the actual underlying problems of the "credit crisis". The U.S. govt. ability to issue T-bills is not infinite and it looks like the credit line may actually run out before Obama gets into office. The congress is responsible for this one. Strike two.

We may not even need a strike three. Economists hold the consensus that this recession will certainly be worse than Reagan's (the worst since the Great Depression), but probably not as bad as the Great Depression.

So I guess, it depends on what your definition of "death" is? As in Death spiral? My personal definition is 2 years (eight quarters of negative GDP growth) plus 15% unemployment. I give the economy a 75% chance of reaching these benchmarks. Very few Americans alive today will have experienced economic hardships anything close to these levels.

[gristy]

11. I don't disagree with what you say other than the use of the term "death spiral"

Death spiral is hyperbole and detracts from reasoned reporting and discussion.

[jwirr]

14. How does this situation square off with the USSR and the Argentina

economic crash? How did they recover? Will it work for us? How are they doing now?

[nadinbrzezinski]

17. If we go into a deflationary stage, you will eat those words

[acmavm]

20. An economy is dead if it doesn't manufacture something to SELL. All of

our 'goods' are manufactured in foreign countries except for automobiles. That's our last industry. And when it dies, there is nothing.

So, we're in a recession? Jeeze, I'm so glad I can quit worrying now.

[blue_onyx]

24. A death spiral seems possible to me

But being from Michigan my perspective been might be a little different than those from people who live in other areas of the country. It's been getting worse and worse here for at least 7 years and it feels like it's never going to end. So it does feel like a death spiral.

[ayeshahaqqiqa]

2. If it means the rise of a new, saner economy,

one based on helping everyone, securing the social safety net and making our industries more green, it would be worth it.

[Blue Meany]

4. Agreed, but it may be a much less complex economy

with a focus on industries essential for survival--food, energy, housing, and transportation--for which many workers, perhaps most, have no training.

[ayeshahaqqiqa]

9. And this is why we must retrain ourselves

Don't know about you, but I have worked in two very different careers, and had to retrain myself to achieve my second career. So I know it can happen. Besides, the key is also in developing cooperative communities where knowledge and goods and services are shared.

[99th_Monkey]

5. If Congress had given every US household $2,300, instead of giving Paulson $700 Billion

I think everyone (except the stupid have-mores that gambled on shoddy securities) would be MUCH better off,
as would the economy as a whole.

[TwixVoy]

8. Oh please

As if handing out checks will fix the primary root of these problems. It's a band aid the same as the previous stimulus checks. They make things LOOK pretty for a little while, but then the situation ends up being worse shortly after. You can keep writing checks and repeat the cycle only so many times.

The fact is the solution to all of this is going to require massive changes that no one wants to accept.

[99th_Monkey]

21. Hey, I'm ALL FOR "massive changes" ... as in a FDR>BHO "Newer Deal", nationalizing banks/AIG

along with Big Three US auto mfg.ers ... Use bailout infusions of capital to leverage
conversion to worker-owned cooperatives to "outsource-proof" all jobs retained and new
jobs created with Federal Dollars.

Is that "massive" enough for you?

[SoCalDem]

12. The American consumer's biggest problem is D E B T !!

"Giving" banks money, and leaving the citizens still owing massive debt they cannot pay is a lose lose.. People will no longer qualify for MORE debt, and they cannot afford the debt they already have, so they maybe should have "given" the money to the "people" , in the form of "debt reduction"..

That might have freed up capital for consumer spending..and helped the banks, by having debt owed to them, paid..

If you loan a friend $2k, and they can't afford to repay you, would you loan them another $2k?..and if they were given $2k, to repay you, would you be unhappy? Would they?.. Everyone wins in that scenario.. you get repaid, they get out from under the debt..

[99th_Monkey]

22. nice. let's do it. ~nt~

[nadinbrzezinski]

18. that bribe didn't work twice, so how exactly was it going to work three times?

By the way... there are many ways to get out of this... WPA comes to mind... and boy we need it

[earth mom]

19. And the bastards on Wall Street didn't need the BILLIONS no TRILLIONS they stole

from all of us either. Not when they are using it as bonuses and dividends to shareholders and in all sorts of other questionable ways.

No Fucking Way!

Or are you still pushing that bullshit because you still can't admit you are wrong? :eyes:

[nadinbrzezinski]

25. How many times do I have to tell you that the bailout

has way too much in common with VERY EARLY NEW DEAL legislation

Those who are trapped in ideology don't get it

Thankfully THOSE IN CHARGE are quite more pragmatic than YOU

[99th_Monkey]

23. I'm all for the WPA approach. Any strategy that pumps money back into local communities

to create public wealth ... as well as create new jobs, is A-OK with me. :-)

[nadinbrzezinski]

26. that is the aproach they will take, way too many trial balloons on that

just don't expect this to happen until this lame duck congress and president are out

the Republicans are way against it

[Edweird]

6. Has "the economy is a death spiral" become the new "attack on Iran coming"?

Much hand wringing about highly unlikely events....

[crimsonblue]

13. not death spiral, but a deflationary spiral.

Deflation is becoming the biggest economic concern now. Not even commodities can hedge against falling prices. Deflation is bad, very very bad. It's been the catalyst of our worst Economic Crises.

[FKA MNChimpH8R]

16. No economy based on the mindless consumption of optional and

unnecessary goods can survive over the long term. Stability and sustainability result from the ongoing purchases of things which are necessary parts of life. The creation of artificial wants and the extension of endless credit to pay for their satisfaction is one of the principal things that has brought our economy to the brink of catastrophe.

No one needs a Hummer, or a cel phone that can record movies, or 99% of the garbage that is advertised in the mass media.