US doomed to move from one bubble to another

[Homeslice]

Without a Plan, U.S. "Doomed to Move from Asset Bubble to Asset Bubble," Rajan Says

Posted Oct 26, 2010 01:52pm EDT by Aaron Task in Recession, Banking, Politics

In the aftermath of the 2008 crisis, trillions of dollars have been spent helping the financial system get back on its feet. Those efforts helped stabilize the global economy and "short-term we are in recovery mode," says Raghuram Rajan of the University of Chicago's Booth School of Business.

But the recovery is occurring with the official unemployment rate still at 9.6%. "We have people who don't have the skills necessary in the global economy," Rajan says. "We need to think about how to get them those skills; otherwise we're doomed to move from asset bubble to asset bubble, from excessive stimulus to excessive stimulus. We're in danger of doing that again in response to high unemployment."

Like many others at The Economist's Buttonwood Gathering, where the accompanying video was taped, Rajan believes we have "reached the limits" of monetary policy. The Fed "shouldn't throw a Hail Mary pass and hope someone catches it. It could land in the wrong place."

Rajan, a former chief economist at the IMF and author of Fault Lines, admits "there are no easy, off the shelf" solutions to the problem of under-skilled workers, but says the government should focus on skill building, retraining and improving our infrastructure.

"Where we can provide stimulus that alleviates deep pain, we should do that," he says. "Where we can build a bridge to the future -- create skills, infrastructure - we should do that too. But you have to do it right. There are lots of bad ways to spend money. Spending for the sake of spending is not good. You need to have a plan."

Similarly, Rajan says the U.S. needs to come up with a credible medium-term plan to tackle its huge deficit problem, including unfunded liabilities like Social Security and Medicaid. "We need to have a path which brings that under control," he says. "It's very important to tell the bond market and the public what that path is."

[LeeNetworX]

Similarly, Rajan says the U.S. needs to come up with a credible medium-term plan to tackle its huge deficit problem, including unfunded liabilities like Social Security and Medicaid. "We need to have a path which brings that under control," he says. "It's very important to tell the bond market and the public what that path is."



Well, no shit. Why don't you enlighten us, Mr. Rajan, and share with us your brilliant ideas to get out of this mess.

The article says nothing we don't already know.

[KSGregman]

Well, no shit. Why don't you enlighten us, Mr. Rajan, and share with us your brilliant ideas to get out of this mess.

The article says nothing we don't already know.

I don't disagree with you about the article telling us nothing that we don't already know.....but....I honestly don't believe most Americans are capable of even HEARING, much less living with, the solution to the mess that we are in.

At the end of the day it's going to take big changes to both how much the Government spends....and how much the Government earns....to dig out of this hole.

Want to enjoy the current level of "give aways" you are receiving from the public teet? OK...well, that is going to require that taxes go up to pay for it as we can no longer afford to support the "give aways" on credit.

What's that? NO to higher taxes? OK....well, which "give aways" are you willing to live without then? No support for cuts in spending either, eh?

Well....I guess we can all just sit here pointing fingers at each while China, India, Brazil and all the other up and comers (and our creditors, by the way) laugh at us....all the way to the bank.

[z06boy]

What's that? NO to higher taxes? OK....well, which "give aways" are you willing to live without then?


Cut out a lot of the foreign aide we give and cut back on welfare for starters...especially for people that can't afford day to day life without it and keep popping out babies. I'm also for cutting out some of these BS research projects that I see/hear about and no I don't have a list in front of me so don't ask which ones. :lol:

[goof2]

I'd like to know what kind of skills Rajan believes those Americans out of work lack that are "necessary in the global economy". Out of those who are currently unemployed plenty of them are either skilled labor or educated. The problem as I see it right now isn't an unskilled workforce, it is a dearth of jobs that require those skills.

I disagree with him about the problems caused by asset bubbles. They do create financial difficulties for people and they do cause smaller recessions but they happen all the time and aren't like what we are currently going through. I would argue the current recession has been more severe because the asset bubble was financed by a credit bubble.

[pauldun170]

Wow....that article said absolutely nothing.

Rajan says absolutely nothing in this article.

I'm guessing that this is a filler article and that Rajan initial interview\comments were deemed boring by the editor so they whittled it down to the bare minimum.

[Particle Man]

also known as the "AssHAT" bubble....

[Homeslice]

I am sorry that this article did not pass muster here.

[pauldun170]

I am sorry that this article did not pass muster here.

:lol:
Its goofs fault.

[goof2]

:lol:
Its goofs fault.

Rajan says I don't have the skills necessary in the global internet.:td:

[Captain Morgan]

We've all become a society of "must have now, must buy with credit things we can't really afford, etc." This entire country, including our government, needs to change it's thought process, start trimming down expenses and start getting out of debt. But we all know that won't happen.

[Homeslice]

Rajan says I don't have the skills necessary in the global internet.:td:

You might have skills, but the jobs are going overseas. To me it seems like this country is devolving into a bi-polar economy where on the one side you have a bunch of top managers, CEOs, traders, or investors making 7 figures, and everyone else works at a restaurant or retail store. With barely anyone else able to make an honest living. Because let's face it, if you don't actually need to be here in the US to do your job, like a nurse or cop or something like that, then it's going to be offshored if there's a cost advantage.

And this will continue, until the American standard of living declines to match that of the countries we offshore jobs to. Meanwhile, the richest 1% of America (including movie stars, athletes, and the people who own/lead the companies that are offshoring jobs) will take a bigger and bigger share of the wealth away from the middle & lower classes.

[goof2]

You might have skills, but the jobs are going overseas. To me it seems like this country is devolving into a bi-polar economy where on the one side you have a bunch of top managers, CEOs, traders, or investors making 7 figures, and everyone else works at a restaurant or retail store. With barely anyone else able to make an honest living. Because let's face it, if you don't actually need to be here in the US to do your job, like a nurse or cop or something like that, then it's going to be offshored if there's a cost advantage.

And this will continue, until the American standard of living declines to match that of the countries we offshore jobs to. Meanwhile, the richest 1% of America (including movie stars, athletes, and the people who own/lead the companies that are offshoring jobs) will take a bigger and bigger share of the wealth away from the middle & lower classes.

That was a joke, and apparently not a very good one.:shrug:

I understand what you are saying and it is a concept that seems to be pretty popular, but I just don't see it around me. Practically everyone I know is in that middle. The people I know who are at the bottom of that middle chose a career that is well known for lower pay, teaching. I suspect the same holds true for your circle of friends. I'm guessing the majority of the membership here at TWF is made up of that middle. It is hard for me to believe the whole "the middle class is disappearing" thing when I am constantly surrounded by the opposite.

[Homeslice]

That was a joke, and apparently not a very good one.:shrug:

I understand what you are saying and it is a concept that seems to be pretty popular, but I just don't see it around me. Practically everyone I know is in that middle. The people I know who are at the bottom of that middle chose a career that is well known for lower pay, teaching. I suspect the same holds true for your circle of friends. I'm guessing the majority of the membership here at TWF is made up of that middle. It is hard for me to believe the whole "the middle class is disappearing" thing when I am constantly surrounded by the opposite.

I didn't say the middle was disappearing, I just said that the rich are taking a bigger and bigger share of the country's net worth. Why, because of wage pressure on the working masses. Wage pressure driven by illegal immigrants, green card engineers imported here to work for less, and of course all the offshored jobs.

[goof2]

I didn't say the middle was disappearing, I just said that the rich are taking a bigger and bigger share of the country's net worth. Why, because of wage pressure on the working masses. Wage pressure driven by illegal immigrants, green card engineers imported here to work for less, and of course all the offshored jobs.

Your statements everyone except the rich working in restaurants or retail, barely anyone else able to make an honest living, and our standard of living declining to match offshoring countries all led me to the conclusion that you believe the middle is disappearing. Stating that it seems we are evolving in to a bi-polar economy relies on the idea that there will be no middle.

Call it what you will but either way what you describe is a popular idea, but not one I have seen occurring very often. Most of the jobs I have seen shipped overseas aren't ones requiring a skilled middle class. While some of these jobs do pay middle to upper-middle class wages, the pay is typically out of sync with the skills required for the job.

Probably the best example I'm aware of is auto manufacturing. How much skill does it really take to repetitively bolt a couple pieces to cars passing by a station on an assembly line? My guess is not much. Do manufacturers have to pay an average loaded hourly rate of somewhere around $70 to find people capable of doing that work? Again, I would guess not. That being the case, the manufacturers are going to start looking to places where they can pay someone at a rate more commensurate to the skill required for the job. Jobs that pay a lot while requiring little in the way of skill are pretty uncommon though so the losses should be restricted.:shrug:

[Homeslice]

I hear you on manufacturing jobs being overpaid....... but I was talking about jobs like engineers, accountants, programmers, etc. Those have been moving overseas for quite some time. Hell, the day may come when your doctor is in India, and just does a video-conference instead of seeing you in person.

[KSGregman]

We've all become a society of "must have now, must buy with credit things we can't really afford, etc." This entire country, including our government, needs to change it's thought process, start trimming down expenses and start getting out of debt. But we all know that won't happen.


All true...and even when people DO try to do the sensible thing, that is, not spend money the country doesn't have, people STILL bitch....just saying...

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