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post #1 of 15 (permalink) Old 04-01-2008, 06:08 PM Thread Starter
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Interesting article on the current economic situation

Take it for what its worth. I think its quite interesting, and theres some good points. There are also clickable links for references. Thoughts??

http://johnrlott.tripod.com/op-eds/F...yth033108.html

The 'Recession' Is a Media Myth

By John R. Lott, Jr.

During the 2000 election, with Bill Clinton as president, the economy was viewed through rose-colored glasses. According to polls, voters didn’t realize that the country was in a recession. Although the economy started shrinking in July 2000, most Americans through the entire year thought that the economy was fine.

But over the last half-year, the media and politicians have said we were in a recession even while the economy was still growing.

Gas prices are going up. The economy is slowing. Talk of recession is seemingly everywhere. While the majority of people rate their personal finances positively, consumer confidence in the economy has plunged to a 16 year low, well below what it was during the last year of the Clinton administration when we were in a recession.

A Nexis search on news stories during the three-month period from July 2000 through September 2000 using the keywords “economy recession US” produces 1,388. By contrast, the same search over just the last month finds 3,166. Or, even more telling, take the three months from July through September last year, when the GDP was growing at a phenomenal 4.9 percent. The same type of Google search shows 2,475 news stories.

Over 78 percent more negative news stories discussed a recession when the economy under a Republican was soaring than occurred under a Democrat when the economy was shrinking.

A little perspective on the economy would be helpful. The average unemployment rate during President Clinton was 5.2 percent. The average under President George W. Bush is just slightly below 5.2. The current unemployment rate is 4.8 percent, almost an entire half a percentage point lower than these averages.

The average inflation rate under Clinton was 2.6 percent, under Bush it is 2.7 percent. Indeed, one has to go back to the Kennedy administration to find a lower average rate. True the inflation rate over the last year has gone up to 4 percent, but that is still lower than the average inflation rate under all the presidents from Nixon through Bush’s father.

Gas prices are indeed up 33 percent over the last year, but to get an average of 4 percent means that lots of other prices must have stayed the same or gone down. On other fronts, seasonally adjusted civilian employment is 650,000 people greater than it was a year ago. Personal income grew at a strong half of one percent in just February.

Despite all that, this last week, Barack Obama claimed “As most experts know, our economy is in a recession.” Hillary Clinton made similar claims last fall. Yet, as any economist knows, a recession is two consecutive quarters of negative growth, and we haven’t even had one single quarter of negative growth reported. The economy slowed down significantly during the end of last year, but that was after a sizzling annual GDP growth rate of 4.9 percent in the third quarter.

Housing has obviously been a big drag on the economy, but many other sectors of the economy, such as exports, have been doing well, some extremely well. For example, aerospace exports increased by over 13 percent last year.

The media’s focus on the negative side of everything surely helps explain people’s pessimism. In a recent interview Fox’s Neil Cavuto claimed this bias “is all part of the media’s plan to get a Democrat in the White House.”

Indeed, research has indicated that media bias is real. Kevin Hassett and I looked at 12,620 newspaper and wire service headlines from 1985 through 2004 for stories on the release of official government releasing numbers on the unemployment rate, number of people employed, gross domestic product (GDP), retail sales, and durable goods.

Even after accounting for how well the economy was doing (e.g., what the unemployment rate was and whether it was going up or down), there was still a big difference in how positive or negative the headlines were. Democratic presidents got about 15 percentage points more positive headlines than Republicans for the same economic news.

Yet, the hysteria created by this coverage can have another cost. It creates pressure for government to “do something,” even if that rush to do something actually ends up hurting the economy. For example, Obama promises this last week “to amend our bankruptcy laws so families aren't forced to stick to the terms of a home loan” will only further drive down the value of mortgage backed securities, making any unstable financial institutions that hold them even more likely to fail. In the long term, who is going to want to loan money when the contract can be rewritten at a later date?

The news media has generated a lot of fear. Ben Stein has a point when he says “The actual economic conditions are not that bad. I think if we have a recession, if we have a serious recession a great deal will lie at the media’s feet.” Hopefully a little perspective will enter the picture before even more harm is done.

* John Lott is the author of Freedomnomics and a senior research scientist at the University of Maryland.

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post #2 of 15 (permalink) Old 04-01-2008, 06:15 PM
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There is alot of blah blah blah in the article.

For instance the reason unemployment is low is because of GOVERNMENT hiring. Private industry has lost a ton of jobs in the past year.

I'll get back to his numbers either later tonight or tomorrow. But any article that uses the headline number for any economic stat is doing the reader a disservice.

For example, somewhere I on this site I posted up the retail numbers since 2003. Looked really good until you realized clothes, electronics and big ticket items have actually declined during this period but food and energy have exponentially gone up.

Look past the headline number. The headline numbers are what the lemmings follow until its too late.

On top of that, the average citizen in the US can tell this U of M researcher he is full of shit.

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post #3 of 15 (permalink) Old 04-01-2008, 06:52 PM
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I believe a lot of it. Magically, in November, all will be well. 4.1% unemployment in Texas, is no joke. DFW is faring pretty well right now. I've said all along, that it's not near as bad as all the doomsayers want us to think it is. I am about to sell every house I have on the ground, and they are NOT cheap homes. I ain't giving them away, either. I go by what's in my pocketbook and bank account...the rest is just hearsay, as far as I'm concerned.

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post #4 of 15 (permalink) Old 04-01-2008, 07:01 PM Thread Starter
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I've always said the media controls the people, well at least the ones who believe anything. They can spin anything and make heaven seem like hell. I mean just look at the stock market. Something happens on the news, and they stretch the fuck out of it, and BOOM the market drops. Its amazing that this isnt illegal, for someone could fabricate a story and do some inside trading and well yeah..

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post #5 of 15 (permalink) Old 04-01-2008, 07:53 PM
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Quote:
Originally Posted by 1BAD06
I've always said the media controls the people, well at least the ones who believe anything. They can spin anything and make heaven seem like hell. I mean just look at the stock market. Something happens on the news, and they stretch the fuck out of it, and BOOM the market drops. Its amazing that this isnt illegal, for someone could fabricate a story and do some inside trading and well yeah..
...and don't think that doesn't happen, either.

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post #6 of 15 (permalink) Old 04-01-2008, 07:58 PM
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Quote:
Originally Posted by Vertnut
I believe a lot of it. Magically, in November, all will be well. 4.1% unemployment in Texas, is no joke. DFW is faring pretty well right now. I've said all along, that it's not near as bad as all the doomsayers want us to think it is. I am about to sell every house I have on the ground, and they are NOT cheap homes. I ain't giving them away, either. I go by what's in my pocketbook and bank account...the rest is just hearsay, as far as I'm concerned.
Vert, the upper end housing isn't hurting but that isn't what the majority buys.

It is as bad... for the average joe in America.

Give me one economic indicator to work with and I'll delve underneath the surface.

As a side note, it is now cheaper to fly to Houston on SW as it is to drive the Tahoe.

Lets look at north Texas. One of the strongest cities, Plano, is projecting a $100 million short fall over the next 3-5 years. Where do you think they are getting their money from? That's right the same residents who will see their food bill increase 10-12% this year. America is built on consumerism and the consumer is running out of money.

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Last edited by 01WhiteCobra; 04-01-2008 at 08:13 PM.
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post #7 of 15 (permalink) Old 04-01-2008, 08:08 PM
 
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Quote:
Originally Posted by Vertnut
I believe a lot of it. Magically, in November, all will be well. 4.1% unemployment in Texas, is no joke. DFW is faring pretty well right now. I've said all along, that it's not near as bad as all the doomsayers want us to think it is. I am about to sell every house I have on the ground, and they are NOT cheap homes. I ain't giving them away, either. I go by what's in my pocketbook and bank account...the rest is just hearsay, as far as I'm concerned.
Just curious. What's your average sales price and a/c footage?
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post #8 of 15 (permalink) Old 04-01-2008, 08:29 PM
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Quote:
Originally Posted by 01WhiteCobra
Vert, the upper end housing isn't hurting but that isn't what the majority buys.

It is as bad... for the average joe in America.

Give me one economic indicator to work with and I'll delve underneath the surface.

As a side note, it is now cheaper to fly to Houston on SW as it is to drive the Tahoe.

Lets look at north Texas. One of the strongest cities, Plano, is projecting a $100 million short fall over the next 3-5 years. Where do you think they are getting their money from? That's right the same residents that will see their food bill increase 10-12% this year. America is built on consumerism and the consumer is running out of money.
Most forclosures in Plano, or elsewhere, were brought on by the greed of banks and mortgage companies, along with the desire of the government to make sure that EVERYONE gets to live in a house. It's such a vicious circle they have created. Through grants, "equal housing" statutes, and ARM's (mainly from greed), they have brought this on themselves. Along with Plano, look at Austin, or Rockwall, or Forney. Plano is not the pillar it once was, alot of it being caused by over-building, especially "tract" homes. They contributed greatly to Plano's growth. Anyway...I'm babbling. No one complained while housing prices shot through roof, and folks were taking out 2nd mortgages on their inflated values so they could go buy their ZO6's and M5's...I guess it's just time to pay the piper.

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post #9 of 15 (permalink) Old 04-01-2008, 08:33 PM
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Quote:
Originally Posted by Vertnut
Most forclosures in Plano, or elsewhere, were brought on by the greed of banks and mortgage companies, along with the desire of the government to make sure that EVERYONE gets to live in a house. It's such a vicious circle they have created. Through grants, "equal housing" statutes, and ARM's (mainly from greed), they have brought this on themselves. Along with Plano, look at Austin, or Rockwall, or Forney. Plano is not the pillar it once was, alot of it being caused by over-building, especially "tract" homes. They contributed greatly to Plano's growth. Anyway...I'm babbling. No one complained while housing prices shot through roof, and folks were taking out 2nd mortgages on their inflated values so they could go buy their ZO6's and M5's...I guess it's just time to pay the piper.
Vert, I'm not talking about foreclosures. I'm talking about a city that is showing over 30MM in shortfall per year for the next 3-5 years. The money is coming from their residents (or they decide to cutback and make Plano south Dallas.)

Texas has done well over the past two years but that doesn't hold true for the rest of the country.

An old adage for econo-geeks is.. as California goes so does the rest of the country. Texas may be fine now but if the rest of the country tanks Texas will follow.

Who works for Dell? How many people are they anticipating laying off this quarter? 5-6000?

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post #10 of 15 (permalink) Old 04-01-2008, 08:42 PM
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Quote:
Originally Posted by 01WhiteCobra
Vert, I'm not talking about foreclosures. I'm talking about a city that is showing over 30MM in shortfall per year for the next 3-5 years. The money is coming from their residents (or they decide to cutback and make Plano south Dallas.)

Texas has done well over the past two years but that doesn't hold true for the rest of the country.

An old adage for econo-geeks is.. as California goes so does the rest of the country. Texas may be fine now but if the rest of the country tanks Texas will follow.

Who works for Dell? How many people are they anticipating laying off this quarter? 5-6000?
I don't disagree, but the problem IS California! Do you know how many folks I see from Florida, Nevada and California? They're coming to Texas and paying CASH for our homes! My neighbor right across the street from me, bought a VERY nice place for $365k and paid CASH! The guy is 50 years old, and retired when he moved here from the proceeds off of the house he sold. We are allowing California to dictate what the markets around the country are doing, and there's no reason for it. Shacks are bringing upwards of $250 ft. in bad area's of LA, for crissakes. There is a reason that the DFW metroplex is growing faster than anywhere else in this country...affordable housing and 4.1% unemployment.

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post #11 of 15 (permalink) Old 04-01-2008, 08:50 PM
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Quote:
Originally Posted by Vertnut
I don't disagree, but the problem IS California! Do you know how many folks I see from Florida, Nevada and California? They're coming to Texas and paying CASH for our homes! My neighbor right across the street from me, bought a VERY nice place for $365k and paid CASH! The guy is 50 years old, and retired when he moved here from the proceeds off of the house he sold. We are allowing California to dictate what the markets around the country are doing, and there's no reason for it. Shacks are bringing upwards of $250 ft. in bad area's of LA, for crissakes. There is a reason that the DFW metroplex is growing faster than anywhere else in this country...affordable housing and 4.1% unemployment.
For now, vert. Unfortunately, Dallas can't carry the rest of the country.

I'm fond of the saying "it is what it is." I don't make the markets I just try to figure out which direction they are moving in. Now, I didn't say predict where they are going... I'm just a trend following moron.

I don't disagree with you but what I'm saying is D/FW is but a piss in the bucket compared to the national economy. When you have the government bailing out one of the largest investment firms in the country (Bear Stearns) we have a serious problem.

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post #12 of 15 (permalink) Old 04-01-2008, 09:36 PM
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Quote:
Originally Posted by 01WhiteCobra
For now, vert. Unfortunately, Dallas can't carry the rest of the country.

I'm fond of the saying "it is what it is." I don't make the markets I just try to figure out which direction they are moving in. Now, I didn't say predict where they are going... I'm just a trend following moron.

I don't disagree with you but what I'm saying is D/FW is but a piss in the bucket compared to the national economy. When you have the government bailing out one of the largest investment firms in the country (Bear Stearns) we have a serious problem.
What I see are the spiraling prices working to reduce spending and to reduce people's confidence. And many people are tapped out and cannot spend anyway. Put this together with the reports i've begun to see about layoffs again (dell etc) and IMO we are about to see a slow spiral down. I look for more layoff stories in the near future. When the layoffs start the game is over.
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post #13 of 15 (permalink) Old 04-01-2008, 09:42 PM
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Quote:
Originally Posted by 01WhiteCobra
For now, vert. Unfortunately, Dallas can't carry the rest of the country.

I'm fond of the saying "it is what it is." I don't make the markets I just try to figure out which direction they are moving in. Now, I didn't say predict where they are going... I'm just a trend following moron.

I don't disagree with you but what I'm saying is D/FW is but a piss in the bucket compared to the national economy. When you have the government bailing out one of the largest investment firms in the country (Bear Stearns) we have a serious problem.
I guess I'll just ride this pony as far as it takes me, then find another. I'm not ready to throw the towel in yet...

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post #14 of 15 (permalink) Old 04-01-2008, 09:51 PM
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Quote:
Originally Posted by Vertnut
I guess I'll just ride this pony as far as it takes me, then find another. I'm not ready to throw the towel in yet...
Absolutely without a doubt.

When we talk 500K homes in Cali we are talking starter homes. High end we are talking well over 1MM and those aren't hurting. Orange County is still under 2% vacancy and they are still getting 100+ bidders per coastal home. One triplex on the coast, I know, have 100+ bidders and went for over 3.3MM.

The "shack" next to it, when I was out there a couple of weeks ago, had a "price reduced" sticker on the sign and a 3.2MM price tag.

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post #15 of 15 (permalink) Old 04-01-2008, 10:17 PM
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Originally Posted by 01WhiteCobra
Absolutely without a doubt.

When we talk 500K homes in Cali we are talking starter homes. High end we are talking well over 1MM and those aren't hurting. Orange County is still under 2% vacancy and they are still getting 100+ bidders per coastal home. One triplex on the coast, I know, have 100+ bidders and went for over 3.3MM.

The "shack" next to it, when I was out there a couple of weeks ago, had a "price reduced" sticker on the sign and a 3.2MM price tag.
For reference, the home my neighbor bought across the street from me for $365k, is bringing around $1.6 mil in California with comparable amenities.

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