As Economy Turns, Washington Looks Better | Hacker News Reader

As Economy Turns, Washington Looks Better

nytimes.com

19 pointsdomodomo23 comments

This is one of the fastest media turnarounds I've seen in a recession.

IIRC, the 2001 recession didn't end in the media until later 2004 and early 2005, with the sales of Flickr and Del.icio.us and the development of FaceBook and YouTube. I remember that I didn't even look for sumer internships in 2003 because I figured the market was so bad nobody would hire a mere intern, and about half the companies I approached in 2004 said "We liked your resume, but we're not hiring now." In 07 (after this had all ended), I talked with a fellow computer programmer at a fencing class, and found out he was making half what I was because he had graduated into the sluggish job market of 04 instead of the growth market of 05.

In the 91 recession, I recall the media being very subdued and depressed right up until Netscape's IPO in 95.

I don't remember the 79-82 recession, but to hear my parents tell it, there was a widespread belief that America had permanently lost its technological edge, and things would never get better. This perception didn't change until around 1984, and even through my childhood in the 80s, I remember recurrent fears that we'd lost our economic supremacy to the Japanese.

The only recession I can think of where people started proclaiming "We've turned the corner; happy days are here again" a mere year after it started was the Great Depression. If you read http://newsfrom1930.blogspot.com/, it sounds almost exactly like something you could read in the newspapers today.

That alone makes me suspicious of this recovery. The point of a recession is so you stop doing what you're doing and find new uses for your labor and capital; that hasn't happened so far. In all the recessions above, that's what brought the country out of it: new markets opened up and absorbed all the workers that were laid off by the old ones. I haven't seen that yet (though there are some interesting developments in mobile and in the revival of hardware hacking); mostly we've seen government attempts to paper over the inefficiencies in old industries with taxpayer dollars.

well, in the great depression and the recessions you mentioned the government did not give out billions and then went on to print money like there is no tomorrow. I would be more worried about inflation now than really a depression. I just can not see how a depression can occur. The whole problem was that banks lost billions! The economy was fine, what was not was the banks and the banks now are sort of getting fine, so I say on with the champaign.

* Bank books are happy fiction * Banks are delaying foreclosing on houses so they can keep showing it as a profit * The Fed is pumping billions into their operations * Option ARMs resetting, as mentioned elsewhere * Available credit is shrinking * People are spending to shrink their debt, hence an increase in the savings rate, and a decrease in spending on goods and services * Government numbers are lies.

Think for a moment. Where does the government money, what is keeping this charade going, coming from? They are borrowing it, printing it, doing just about anything they can. What they are intent on doing is kicking the can down the road to the next administration. "The government will have to borrow nearly 50 cents for every dollar it spends this year..." We have a massive debt which we are going to have to eventually reckon with. Gradually, the government will have to pay more and more to borrow, as well as borrow more and more to pay off the interest and have enough to sustain the banking system. Is that a vicious cycle, or what?

Pop the champagne cork, but watch out for the falling house of cards. The reason depressions represent opportunity is that the herd does not see it coming. Its your choice whether to believe nutcases like me!

The whole thing is laughable. Very little bad debt was defaulted--most of it is hidden on the fed's balance sheet or by mark-to-magic accounting. Banks are letting people live mortgage-free to avoid booking a loss. The CRE, Prime, option ARM, and ARM problems are just getting started. And then there's this:

http://www2.standardandpoors.com/spf/xls/index/SP500EPSEST.X...

H-50: A PE ratio of 116. This quarter is 118 so far. (!!!) Anything over 20 has been traditionally considered bearish. What do the people in-the-know think about this?

http://www.zerohedge.com/article/las-weeks-insiders-transact...

Couple comments on those metrics:

1.) The value of a stock's supposed to reflect its earnings over all future time, not just current earnings. That's why stocks don't instantly fall to 0 when a company has a bad quarter. Earnings are at a low point now; a P/E of 118 implies that investors think they will get better soon. Whether they're right remains to be seen.

2.) Insider selling itself doesn't mean much. Many directors and executives receive a large portion of their compensation in stock; they're always selling, because that's how they get cash to spend. I'm curious how it stacks up to pre-crisis ratios though.

This is one of the fastest media turnarounds I've seen in a recession.

That's probably because the stock market has gained around 40% in the past 5 months. I'm not sure about the other recessions, but I'd wager that this bounce in the equities market is pretty unprecedented.

Mind you, I'm not defending the media response. I'm conjecturing as to it's cause.

The bounce in early 1930 was from a low of 195 to a high of 267, then stabilizing at 240 before falling off a cliff and hitting 42 in 1932. That was a bounce of around 35%.

The bounce from Sept 11, 2001 to early 2002 was from 8000 to 10500, about 25%, before dropping back down to 7500 6 months later.

The Dow recovered from 800 to 1000 in 1980, a gain of 25%, before dropping back to 800 in 1982.

The Dow recovered from 600 in January 1975 to 1000 in January 1976, a gain of 66%, before falling back down to 750 by 1978 (and still being there in 1982).

same old story...people manage to keep advancing despite the yoke of heavy taxation, government takes credit for every inch plowed.

..is 40%+ taxation not considered heavy? I consider it pretty heavy. taxation is especially harmful to the primary source of economic growth: new small businesses. the tax burden of hiring new employees is so strong (and so risky due to litigation resulting from contract dispute) you'd think the government liked unemployment.

You're probably being voted down because you provide little evidence for your claims. It is practically impossible to "logically deduce" the result of certain elements of the economy because it is dependent on so many variables.

Consider, for example, the resistance in a wire. One might logically argue that because the power dissipated instantaneously in a resistor is equal to I^2 * R, that a decrease in resistance R leads to lower power (and heat) dissipation. Of course, that would be wrong, as that same resistor relates current to resistance by V=IR. Now, one can see that by decreasing the resistance by a factor of x (R/x), one also increases the current by a factor of x (xI, at a constant voltage). Thus, when the original problem is solved again, P=(xI)^2 * (R/x), so the power dissipation is actually increased by a factor of x.

The economy works in the same way. To argue that taxes cause a decrease in first order capital may be true and may be a logical conclusion. However, logically deducing broad statements about the economy through that is a logical fallacy. The solution to this is data, not more reasoning. Remember, the variables you forget never appear in your equations.

I thought my claim was pretty conservative. All my experience with small businesses (2 just in my immediate family, friends with lots more) is that dealing with the administrative as well as straight up monetary demands of taxes actively prevents them from hiring as many people as they'd like to. it seems like common sense that if you wanted to encourage employment you'd have like a 3 month moratorium on new payroll taxes when getting new employees up and productive. considering that you're taking someone OFF unemployment and turning them into an active taxpayer...seems like a completely unadulterated win-win for the government...so why is there zero incentive?

I'm sorry but you've just done the exact same thing again. You've essentially said that the entire US tax structure is bad, while only providing anecdotal evidence for your claims.

You claim that common sense will produce certain economic results, however in most fields claims of "common sense" would be laughed away. Anyone who argued that we can know both the exact position and velocity of any particle would probably be regarded as having common sense less than 100 years ago. Unfortunately, common sense is not proof of any measurable claim.

In addition, you continue to ignore variables in favor of the ones you care about. Specifically, you argue that the savings would positively benefit very specific segments of funding and revenue for certain small businesses. Meanwhile, you completely ignore the effect that the taxes have on other variables, like infrastructure development. This is the same fallacy of Power that I proposed before.

I can't name a scenario in which decreased tax revenue for the government is a bad thing. the claim that government spending is better than private rests on the idea that the money in aggregate can be directed more efficiently. the support for this is...nothing. I tend to think extraordinary claims require extraordinary proof. so if you make an extraordinary claim: I need to take your money for your own good, you need extraordinary proof.

the burden of proof does not rest with me, my position is that in the absence of strong evidence you should leave people alone.

We're not done by a long shot. The next wave of mortgage resets -- option ARMs -- comes through late this year and next.

http://www.businessweek.com/lifestyle/content/apr2009/bw2009...

information that is already known is always already taken into account by the futures/stock market.

It is amazing to me that anyone still believes this after the last two years!

But I suppose that a little irrational optimism is good thing in tough times...

And perhaps "Cash For Clunkers" will get credit?

But seriously, it seems like "success" in economic terms these day means "postponing the day of reckoning till your successor is in office" and failure means the opposite. By that token Greenspan succeeded but Bush II failed.

by "these day" I assume you mean for at least the last 30 or 40 years?

A common story... (copied from http://www.wickedlocal.com/milford/news/lifestyle/columnists... )

A CEO was being honored at his retirement party. The toastmaster, his successor, called on him for parting remarks and advice. After delivering farewell comments, the outgoing CEO handed his successor two envelopes marked #1 and #2.

He said, "Place these envelopes in the top drawer of your desk. When you make your first big mistake, open the #1 envelope and follow the instructions. When you make your second big mistake, open the #2 envelope and likewise follow those instructions."

The new CEO was young, handsome and an accomplished public speaker. He and his family were featured in business magazines and were invited to speak throughout the business world at home and abroad. For the first few months, things seemed to go along smoothly in spite of the CEO's frequent criticisms of the company's founders, business practices and employee performances. The new CEO seemed to relish pointing out the company's mistakes and perceived weaknesses. One day, the new CEO committed a huge gaffe that headlined business newsletters and newspapers nationwide! He remembered the two envelopes given to him by his predecessor.

He rushed to his desk, seized the #1 envelope, tore it open and read it. The message was printed in bold black letters. "Blame your predecessor." Immediately, he convened a series of press conferences, blamed his predecessor and things seemed to calm down for a few months.

About three months later, he made another gaffe of greater significance than the first one. Before meeting with the board of directors, he opened his desk drawer and read the #2 letter. It stated, in bold, black letters, "Prepare two envelopes!"

by "these day" I assume you mean for at least the last 30 or 40 years?

I suppose so. But, despite the great difficulty in proving this scientifically and the great risks of this being a mere effect of nostalgia, I strongly believe that the intervals of attention are getting shorter.

I"m sure the attention intervals are getting shorter. Mainstream media is painful to watch. I only picked the period 30-40 years as I'm 40 years old and it seems our political system has been "passing the buck" through my life.

This is article is interesting, and could in the end be correct in its rosy assessment and its allocation of the credit.

However, I find it interesting that this article does not say a word about inflation, the creation of currency, or the increasing national debt and the intermediate to long term affects those will have.

It ain't over till the fat lady sings.

The economy is basically a chaotic system that is impossible to predict. It's kind of like the weather: More than a few days out you just don't know since there are so many variables and feedback loops.

Uh, that the housing bubble would end was absolutely predictable. It wasn't a matter of butterflies in the Himalaya perturbing the system. When the housing would was hard to predict.

That poor policies result in problems is not unpredictable and so it's quite predictable that this "recovery" will end in grief. When it will end is a different matter but your analogy with the weather is misplaced

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