GDP Roars Ahead at 8.2% in 3rd Quarter 2003

[Yavin4]

Here's the link:
http://news.yahoo.com/news?tmpl=story2&cid=668&u=/ap/20031223/ap_on_bi_go_ec_fi/economy_5&printer=1

Is it true? Is this real? Yes it is, and here's the reason why:

Go to this link:

http://www.federalreserve.gov/fomc/fundsrate.htm

Scroll down the page and see the Fed's interest rate policy since 1990. You can clearly see that Greenspan has kept rate abnormally low for this Bush.

You should have 8% growth with 1% interest rates!!!!!

[Frodo]

1. "Ding Ding Ding!!! Give that man a kewpie doll"

People here assume that if the economy is getting better (and it HAS BEEN for some time now) that it must mean the shrub is doing something right. And therefore, if you don't buy into the theory that things are actually getting worse, you MUST be a Bush supporter.

The problem is that the economy can get better (or worse) independent of Presidential policies. AND you have to take into account the long-term (deficit) costs of such incredible stimulus. Yes, tax cuts and massive spending increases HAVE contributed to the growth we are seeing, BUT AT WHAT PRICE? And monetary policy is at least as important in this case as fiscal policy (as you point out).

Now, I'll disagee on one point. 8% is not something you "expect" or "should have" given the current conditions. Keep in mind that Japan's Fed basically lowered rates to 0 and they still didn't get any growth. At 1%, you are actually PAYING banks to borrow your money since inflation is higher than 1%.

8% is roaring growth... but JUST FOR ONE QUARTER. If things settle in around 4-5% for the next year it can be laid at the feet of massive deficit spending and loose monetary policy on the part of the fed and we SHOULD be able to say "is that ALL we get for bursting the deficit?"

Where we will run into a problem is that our party hasn't gotten on board the "reality train" yet. We've got too many people yelling that the economy sucks and is getting worse. Things will look far better than that at election time and we'll look ridiculous. Or they keep chanting "where are the jobs!?!?!?" while ignoring a continual drop in unemployment over the last five months. At this rate, we're going to have a lower unemployment rate than Clinton ran on after HIS first term and we will have given him the issue since we're the ones defining THAT as success instead of saying what you're basically saying here:

Is this all???

For that price???

Where's the BEEF!?!?!?!?

[Yavin4]

3. Here's The Economic Argument That Dems Should Be Using

Yes, the economy is showing signs of a recovery, but a recovery based on what? Bush came in with a $250 billion surplus, and he's now running a $450 billion deficit. That means that he spent well over $700 billion in three years. Couple that with historically low interest rates and what you've got is an entire economy based almost solely on debt.

IOW, if you max out 10 credit cards each with a $5,000 limit, you too could say that your economy grew at $50,000.

[area51]

5. If you really believe

that the economy is getting better, and that the slightly lowered official unemployment rate really means that unemployment is dropping, why don't you put your money where your mouth is and quit your job right now and try to get another job @ the same rate of $ and w/the same bennies. You wouldn't be able to & you know it. The unemployed know that this economy isn't getting better, no matter what Pollyannas/ivory tower conservatives want to think. Meanwhile, I'll be taking over your job after you quit so I can have an income.

[Frodo]

7. Your unemploymnet number has a very small "sample size"

We obviously need to continue to tell your story (and it would help if, when you get interviewed, you say something like "I'm a lifeling Republican and I was inclined to support Bush, but he's done such a bad job with unemployment...etc." but that may be asking too much of you). But "I'm unemployed, so the pResident is doing an awful job with jobs" isn't particularly convincing. The "official" unemploymnet rate is still a "poll" of about 60,000 people, so it can't completely reflect the entire economy... but to reduce that sample size to just you? Will the economy be ok once YOU get a job?

And thanks anyway, but I've already changed jobs once this year and don't want to do it again. You can't have the old one because it doesn't exist anymore.

[0rganism]

8. The reason "unemployment" rates are dropping....

...is people are dropping off the unemployment rolls due to being out of work for so long. That's another reason congress nixed extension of benefits: it gets the numbers down.

You want to see the real job numbers?

http://www.epinet.org/content.cfm/webfeatures_econindicators_jobspict
http://www.epinet.org/briefingpapers/146/epi_bp146.pdf
(updated last week, it's current)

We're 2.4 million jobs short of where we were back in 2001, and 7 million jobs short of where we need to be to keep up with labor pool growth. Offsetting this with 300k low-wage part-time jobs in 2 quarters isn't growth, it's stagnation.

Employment is VERY MUCH an issue for 2004.

[rapier]

2. notes

It took 13 rate cuts and the discount rate at 1% for a long time before the third quarters 8.2% ANNUALized rate occured. While there probably is a causal relationship between the high GDP growth rate last quarter and the low Fed set rates the lag has been so profound that one might logically conclude that the events were coincident.

The Greenaman would have followed the same low rate policy for any president. He has no choice. His boss isn't the president, it is the banks, officially, and the entire worlds financial markets in reality.

It's low rates to foster ever growing credit creation or death. There are no other options. If the world economy, particularly Asia's, meaning essentially China's, continue with strong growth then maybe just maybe he might be able to start nudging rates up sometime next year. Or maybe the 'markets', such as they are now, will raise rates for him. They have already actually on the long end. That has been nipped in the bud however, for awhile. If the markets raise rates strongly soon then we are looking at the death option again.

[Yavin4]

4. I Respectfully Disagree

The Greenaman would have followed the same low rate policy for any president. He has no choice. His boss isn't the president, it is the banks, officially, and the entire worlds financial markets in reality.

Go back and look at that chart. He has never pushed rates down that far for any president until now. There's no precedent for that. The economy of the last three years is very similar to the economy in 1992 and 1993 when Clinton took over. Yet, Greenspan didn't lower rates below 3%. Even after Clinton enacted a strong deficit reduction plan, Greenspan didn't lower rates beneath 3%, yet the deficit was in decline.

Today, we have a deficit that's out of control. We have a stock market that's over 10,000, and jobs are coming back. So, I ask you, why are rates still being held this low? You cannot argue that the economy is improving on one hand, and then argue that rates should be kept at historically low levels on the other hand.

[rapier]

6. notes

The unprecedented nature of the cuts is themselves evidence of the non partisan nature of the Feds actions. Why prop up the silly Bush II? No, the low interest rate policy is in response to something that is deeply inbedded into the system. That would be an absolute need to keep credit growing at an ever faster rate.

This is a complex arguement and hardly conventional but to view this as a strictly partisan issue is to put on blinders to the wider world. Saying that I admit that politics and economics are one and the same, at the very deepest level. Now that the balance of wealth in the US has shifted back strongly to the top, and that shift has been caused by developements in finance led by the Fed it is the needs of the financial system to which Greenman is responding.

The partisanship isn't Democrat vs Repubican or left vs right. It is those who hold financial assets and have seen them inflate strongly and want to keep them inflating agaist......., well against virtually nobody. The endlessly accelerating credit mania is the fuel for the financial asset inflation. If financial assets don't inflate they deflate. That is because most values now are based upon credit insturments and accounting practices which didn't exist a generation ago and to an amazing extent that credit is being used to pay off old debt. Ever lower rates are the grease which keeps the system moving smoothly.

The 'recover' this cycle is so weird because the system is now so weird. It is unprecedented. Those who borrow and those whose income and assets are based upon finance and financial asset inflation (corporate owners and isiders) are doing great. Meanwhile the economy on Main St. limps along as real profit from traditional bussiness lags.