Did we trade a real economy for a fake?

Been thinking about how things have been going here in America regarding economics, the economy and the stock market.

GDP growth has been steadily declining



We can see that the overall trend has been downward since the 40's, but right around the 90's we see a significant downturn. At the same time, our stock market took a huge turn at the same time.



When I look at this, I get the impression that we've taken a solid economy built on businesses, products, manufacturing and replaced it with imagined value (aka the stock market). This is the result of NAFTA and similar trade deals. Companies are worth more, profits are soaring, but our economy at home is tangibly suffering.

I think that this is bad, long term, for our country.

What this allows is for large corporations with multi-national capabilities to outsource production and increase profits. Businesses that focus around the market (investments, retirement, banking, etc.) will flourish. Sounds good, right? IT does sound good, and constant headlines about DOW ROCKETS TO NEW HIGH make great propaganda.

The problem is, these same trade deals create massive barriers to entry for would-be competitors. The American dream of opening up shop and making something out of it is waning. This is why these same giant corporations basically help write these trade deals (and regulations, mind you). They're climbing the ladder and then kicking it over before anyone else can climb up. You simply can't compete with Chinese made crap, unless you're catering to a niche market for expensive American-made products.

Giant corporations would rather endure the cost of a new regulation than deal with actual market competition. The government is happy to comply, as it ensures them monetary support.

This isn't capitalism, it is crony-capitalism.

As more and more trade deals pass, we will start to have a larger class of permanently-unemployed people. There is no way to avoid it, the jobs are going overseas. Labor participation rate is at a low point and continues to sink. This means that our currently-bloated entitlement programs are going to explode with growth. More and more people will have no choice but to rely on government to get by. We're already seeing it with the huge expansion of the food stamp program. More is sure to come.

It will lead to 2 distinct classes, ruling and dependent. Again, bad for the long-term health of our nation. When we have the majority of our economy based on what really amounts to nothing, we will see more crashes and realize less of a recovery from them each time. Is a digital economy preferable to a tangible one?

Think about it.

Edit: I concede that it is very possible that the GDP would have continued to fall regardless of trade deals, but it certainly does not appear that they are helping.

I believe today stock market is as good as the nikei...back in the 90's when it was completely artificial.

Originally Posted by Black///M

I believe today stock market is as good as the nikei...back in the 90's when it was completely artificial.

I suppose it's only as good as people's belief in it.

I'll address a few things when I'm at a computer, but, what's your proposed solution?

Originally Posted by evolved

I'll address a few things when I'm at a computer, but, what's your proposed solution?

I don't necessarily have one, just pointing out what I see as a possible problem over the long term.

Originally Posted by evolved

I'll address a few things when I'm at a computer, but, what's your proposed solution?

Interested

Originally Posted by Act of God

I don't necessarily have one, just pointing out what I see as a possible problem over the long term.

Well, that's no fun.

Originally Posted by Act of God

When I look at this, I get the impression that we've taken a solid economy built on businesses, products, manufacturing and replaced it with imagined value (aka the stock market). This is the result of NAFTA and similar trade deals. Companies are worth more, profits are soaring, but our economy at home is tangibly suffering.

Explain this. I don't know what you mean by replacing our solid economy with an imagined and it being the result of NAFTA. The stock market has been around for a very long time and has always played a significant role in our economy. Remember the Great Depression?

I think that this is bad, long term, for our country.

What this allows is for large corporations with multi-national capabilities to outsource production and increase profits. Businesses that focus around the market (investments, retirement, banking, etc.) will flourish. Sounds good, right? IT does sound good, and constant headlines about DOW ROCKETS TO NEW HIGH make great

Of course we allow outsourcing. Americans love cheap goods. Companies need cheap goods. Cheap good are produced overseas. These jobs would not be outsourced if Americans were competitive in that particular industry (textiles for example). Being a consumer based economy means we need policies/practices that benefit the consumer. One result of high consumption is a boost in share prices. A business remains healthy through consumption of its good and services.

Blocking outsourcing/protectionism does not benefit the consumer. It supports a smaller segment of the economy at the cost of the consumer.

Originally Posted by Act of God

Edit: I concede that it is very possible that the GDP would have continued to fall regardless of trade deals, but it certainly does not appear that they are helping.

It sounds like you're confusing GDP growth with GDP.

GDP fell from 2008 to 2009. That's the only year since forever that there's been a fall in GDP.

Annual GDP growth fluctuates based on a gazillion factors, but it is and almost always has been positive.

Yes, referring to growth. Sorry.

Originally Posted by Act of God

Yes, referring to growth. Sorry.

So what should growth be, and how do you know it should be that?

Originally Posted by Xcelratr

So what should growth be, and how do you know it should be that?

Better.

I lay the cause primarily at the foot of New-Liberal, trickle down economics and the resultant financialization of our economy.

Originally Posted by Act of God

Better.

Make America's economy great again!

Originally Posted by Act of God

Been thinking about how things have been going here in America regarding economics, the economy and the stock market.

GDP growth has been steadily declining



We can see that the overall trend has been downward since the 40's, but right around the 90's we see a significant downturn. At the same time, our stock market took a huge turn at the same time.

This is not uncommon. As an economy matures it is natural for GDP growth to slow down. That doesn't necessarily mean it's a bad thing.

GDP growth since the last recession has been slow, but on the flip side, we're also in an expansionary environment that's lasted longer than prior ones. A typical recovery period goes on for about 5 years averaging 3%-ish GDP growth per yera....we're into our 7th year now with GDP growth averaging 2%-ish. On top of that, compared to our developed partners around the world, we're doing pretty well.

Originally Posted by Act of God

When I look at this, I get the impression that we've taken a solid economy built on businesses, products, manufacturing and replaced it with imagined value (aka the stock market). This is the result of NAFTA and similar trade deals. Companies are worth more, profits are soaring, but our economy at home is tangibly suffering.

I think that this is bad, long term, for our country.

What this allows is for large corporations with multi-national capabilities to outsource production and increase profits. Businesses that focus around the market (investments, retirement, banking, etc.) will flourish. Sounds good, right? IT does sound good, and constant headlines about DOW ROCKETS TO NEW HIGH make great propaganda.

The problem is, these same trade deals create massive barriers to entry for would-be competitors. The American dream of opening up shop and making something out of it is waning. This is why these same giant corporations basically help write these trade deals (and regulations, mind you). They're climbing the ladder and then kicking it over before anyone else can climb up. You simply can't compete with Chinese made crap, unless you're catering to a niche market for expensive American-made products.

Giant corporations would rather endure the cost of a new regulation than deal with actual market competition. The government is happy to comply, as it ensures them monetary support.

This isn't capitalism, it is crony-capitalism.

It's troubling, to me, that you think of the stock market value as "imagined" as that's fairly inaccurate. In addition, to say that manufacturing jobs went away primarily because of NAFTA is also inaccurate. Technology/automation is arguably the biggest reason why a big chunk of manufacturing jobs are gone, and not coming back. So, when I hear people pound the podium and tell the rust belt that they'll get their jobs back from 20 years ago, it's basically pandering.

Also....a bit more on NAFTA, because it's easy to whip out the NAFTA BAD mentality, and then promise people their manufacturing jobs are coming back (hint: they're not). On balance, from a financial and economic standpoint, NAFTA has been a good thing for us. Even conservative sources like Heritage will echo that same thought.

Industrial production has been increasing every since NAFTA was enacted, and workers earn more now than they did back then. Sure, there's fewer of them, but automation and improvements in efficiency are the biggest driver of that.

Originally Posted by Act of God

As more and more trade deals pass, we will start to have a larger class of permanently-unemployed people. There is no way to avoid it, the jobs are going overseas. Labor participation rate is at a low point and continues to sink. This means that our currently-bloated entitlement programs are going to explode with growth. More and more people will have no choice but to rely on government to get by. We're already seeing it with the huge expansion of the food stamp program. More is sure to come.

It will lead to 2 distinct classes, ruling and dependent. Again, bad for the long-term health of our nation. When we have the majority of our economy based on what really amounts to nothing, we will see more crashes and realize less of a recovery from them each time. Is a digital economy preferable to a tangible one?

Think about it.

Edit: I concede that it is very possible that the GDP would have continued to fall regardless of trade deals, but it certainly does not appear that they are helping.

Let's not bring up the tired LFPR argument again. The single, biggest driver of the drop in the LFPR is demographics, and the decline started nearly 16 years ago, and will continue as we move through the fat curve of the baby bomers. Are there economic reasons that are driving some of it? Of course, but it is not the major reason why we've seen a drop in the LFPR. Not by a long shot.

I never took you for a Berniebro, by the way

Actually, the drop in labor force participation is not people retiring, as many assume. I already posted those statistics here in another thread.

I don't think we can put the genie back in the bottle as far as jobs go, unfortunately. They aren't coming back. It's the same way with entitlements, you only get one chance and we blew it.

I do believe that the market is imaginary. It's smoke and mirrors, just look at the housing crash. It's a game, not an economy.

Bernie bro? Come on now! Haha, I just prefer actual capitalism to crony business.

Also, not really fair to talk about historic economies as ours was, is, unique.

Originally Posted by evolved

I never took you for a Berniebro, by the way

Mike

Originally Posted by Act of God

Actually, the drop in labor force participation is not people retiring, as many assume. I already posted those statistics here in another thread.

Yes, yes it is.

https://www.chicagofed.org/publicati...2012/march-296

I've posted this, and had this conversation in multiple threads over the past few years. There are other factors outside of demographics, without a doubt, but demographics are the single, largest reason. Other factors include economic reasons, shrinking public sector jobs, disability litigation, etc., etc.

Originally Posted by Act of God

I don't think we can put the genie back in the bottle as far as jobs go, unfortunately. They aren't coming back. It's the same way with entitlements, you only get one chance and we blew it.

I do believe that the market is imaginary. It's smoke and mirrors, just look at the housing crash. It's a game, not an economy.

Bernie bro? Come on now! Haha, I just prefer actual capitalism to crony business.

We didn't blow anything. Most manufacturing jobs that were lost in the past 20 years were lost because of technological advancement. It took 5 guys to look at and tighten a bolt in the 90's, and now it takes 1 guy managing a line of robots to do it.

You can think the stock market is imaginary all you want, but that doesn't make it so.

Originally Posted by Act of God

Also, not really fair to talk about historic economies as ours was, is, unique.

Disagree. We follow the same growth cycle as any other economy. We are the most developed economy in the world, and did so in a narrow amount of time. That is unique. But, that doesn't mean that we have no means to compare ourselves.

Also to the Bernie point, he may have pointed out a real problem but I certainly don't agree with his solution. This is all caused by government and big business rigging the system, give me an actual free market and we'll soar ever higher