"Economy Firing On All Cylinders"..What?!

[scrabbler1]

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Originally Posted by cooch96 I’m wondering when those hawks will come back and actually act like they’re serious. It’s been a full two decades since the president worked with congress, everyone abided and upheld the pay/go system, and we had budget surpluses. It will take a new movement or a real calamity to change things.

THIS. And what Audreyh1 wrote in her many posts here.

[Pellice]

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Originally Posted by Gumby Agreed, but millions of them probably think they did. In February 2018, the withholding schedules were revamped to reflect the lower rates, so most people got a little boost in their paycheck. I had already calculated the effect of losing our SALT deduction and knew that it would be a wash against the reduction in rates (i.e - our federal income tax will be almost the same), so I artificially jacked our withholding back up. Millions did not or could not make that calculation, and this coming April the chickens will come home to roost when they all will need to write a hefty check to the IRS.

I wonder. If you only see $10 additional in your biweekly paycheck, while at the same time hearing about the "wonderful economy" and "$4,000 back" I think you can pretty quickly see that you yourself are getting next to nothing from "the economy firing on all cylinders." And, with the median income around $59,000, many Americans were not paying enough in taxes to even justify itemizing. The loss of SALT hit a higher income group than the majority of Americans. That next higher tier will notice it, for sure.

[MarieIG]

I am NOT good with math, but DH and I take zero deductions, and I immediately jacked up my (and DH's) withholdings. I also write checks to the IRS; and NYS 4X a year. We loose a lot in SALT deductions, but shouldn't get hit with the AMT this year.

Now, our County, which has some of the highest property taxes in the Country, just re-assessed.

I have seen some improvement in job availability in my field, even for those who are mature. (It took a long time to improve after the Recession.)

[misanman]

I've been hearing more about Modern Monetary Theory lately.

https://en.wikipedia.org/wiki/Modern_Monetary_Theory

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The key assertion of MMT is that sovereign governments that are the sole supplier of national currency can issue currency of any denomination, and in physical or non-physical forms. Consequently, these governments have an unlimited financial ability to pay for the things they wish to purchase and to fulfill promised future payments.

I heard a segment on NPR a while back that discussed it. I understand there were MMT advocates involved with the Sanders campaign in 2016 but I don't have details.

For MMT to work, I believe that we'd have to completely revise the methods of taxation.

[GrayHare]

Before the Federal Reserve was created the US economy repeatedly swung rapidly between boom and bust cycles. Inflationary times quickly switched to deflationary ones, and vice versa. The Fed buffers that by influencing interest rates. The Fed has also generally kept the economy in inflation mode for the past century. That seems like a recipe for a big deflationary period Some Day. As for when the Century of Inflation music stops is anyone's guess.

[target2019]

How many "cylinders" does the economy have?
- Employment
- Interest rate
- GDP
- Debt

What other measurable indicators would you add to the list?

[cooch96]

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Originally Posted by target2019 How many "cylinders" does the economy have? - Employment - Interest rate - GDP - Debt What other measurable indicators would you add to the list?

-infrastructure
-manufacturing
-agriculture
-money velocity
-et cetera

[VFK57]

"Economy is booming" - sure all mass media confirms it but our National Debt continue to grow even faster, what most reasonable people cannot connect with the "booming economy". The higher interest rates what most of savers want and longed for years, will bite bigger and bigger chunk of our budget. Surely it is not the sustainable growth if we continue to massively borrow without paying the Debt off by huge inflation or going to default at some point.

[JDARNELL]

I think we will just inflate our way out if the National Debt. We are still on of the best of the worst economies.

[audreyh1]

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Originally Posted by VFK57 "Economy is booming" - sure all mass media confirms it but our National Debt continue to grow even faster, what most reasonable people cannot connect with the "booming economy". The higher interest rates what most of savers want and longed for years, will bite bigger and bigger chunk of our budget. Surely it is not the sustainable growth if we continue to massively borrow without paying the Debt off by huge inflation or going to default at some point.

Theoretically, a booming economy should mean an increase in tax revenues.

It’s possible that the increasing tax revenues (in spite of being significantly lowered recently) could help lower the national debt, and I know some folks are convinced this will happen, but call me skeptical....

[Pellice]

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Originally Posted by cooch96 -infrastructure -manufacturing -agriculture -money velocity -et cetera

But "amount of income increases for the majority of citizens" - in some formulation or other - does not count as a cylinder. Even though inflation does. As a thought experiment, what would it mean if it were to count? It can't be more difficult to measure than inflation.

[travelover]

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Originally Posted by Chuckanut ........ the War on Savers......... .

The low interest rates have pushed up stock prices, so savers that invested in stocks don't feel "warred" upon.

[USGrant1962]

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Originally Posted by audreyh1 Theoretically, a booming economy should mean an increase in tax revenues. It’s possible that the increasing tax revenues (in spite of being significantly lowered recently) could help lower the national debt, and I know some folks are convinced this will happen, but call me skeptical....

Federal receipts have been UP every year since the 2008 recession. Sometimes more than inflation and sometimes less.

In nominal terms 2018 receipts were $816B higher than 2008, and outlays were $1,191B higher.

[audreyh1]

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Originally Posted by travelover The low interest rates have pushed up stock prices, so savers that invested in stocks don't feel "warred" upon.

I totally agree. The effect, somewhat deliberate, was to push investors into riskier assets.

Now, it probably went way farther than desired, as IMO we had a huge inflation of riskier assets accompanied by cheap company stock buybacks. And with interest rates rising I seriously expect some deflation in these same riskier assets.

But I also don’t believe savers using traditional savings accounts, CDs, and treasuries are ever “owed” some minimal interest rate.

[audreyh1]

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Originally Posted by USGrant1962 Federal receipts have been UP every year since the 2008 recession. Sometimes more than inflation and sometimes less. In nominal terms 2018 receipts were $816B higher than 2008, and outlays were $1,191B higher.

My comment about the recent lowering of Federal receipts was from the lowered 10 year revenue projections due to the recent tax cut legislation including 2018. Treasury issuance has been increasing due to the growing budget deficit.

[marko]

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Originally Posted by COcheesehead They always shake out the weak, whether it be businesses or individuals. Recessions are like a power wash. Gets you back down to a good base.

I'm not a 'what could go wrong?' type but I keep getting a sense of negativity in this and other threads that I'm not sure is warranted.

I also can't buy into the 'this time is different' mentality. From my limited view, the economy is on sound footing, companies are making money and profits, people are working and spending money; there doesn't seem to be any boogeyman in the shadows...at least not at this point.

Recessions come and go. I view them as unpleasant but healthy.

Like COcheese's power wash analogy, I've always likened a recession to someone who overate and over drank at a party, got sick, threw up and after a day in bed gets back to normal.

[target2019]

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Originally Posted by target2019 How many "cylinders" does the economy have? - Employment - Interest rate - GDP - Debt What other measurable indicators would you add to the list?

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Originally Posted by cooch96 -infrastructure -manufacturing -agriculture -money velocity -et cetera

For manufacturing, okay with PMI?
https://www.advisorperspectives.com/...ion-in-october

I'm not even a little bit familiar with agriculture or money velocity. How to measure those?

[ShokWaveRider]

It would be interesting to know what exactly constitutes a good economy. There are many publications on this and all have different, sometimes biased perspectives.

I think the main measurement is Employment and Jobs, then CPI, Exports vs imports,Debt and of course there may be a lot of others, but Jobs is really the most important. So we have low unemployment therefore the economy is generally good. CPI and Debt are dampeners but jobs are key.

I personally think that the stock market is a poor measurement, and one that gets way more stock (Pun intended) that it deserves. Why? Because for the most part it is based on emotion and/or automation (Algorithms). OK yes if a company is doing well, it's stock price will be bought up, but it can easily go down if traders want to take profits just because they feel like it. If there is a disaster or something abroad that causes the SM to crash, the overall economy still could remain very good if the majority is employed.

Not sure why I am rambling on about this, but I generally think too much is put into the health of the stock market. Also interest rates could be high, and unemployment could be very low, the economy would still remain good.

[Amethyst]

Clever analogy

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Originally Posted by Spock It's running on all cylinders, but its on an engine stand with the battery sitting on the bench, fuel being fed through a funnel, and no load applied. 10 years of near zero interest rates isn't a recovery, its life support.

[joeea]

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Originally Posted by cb7010 Given the immense debt that been accrued across pretty much every sector (governments, corporations, student loan, auto, home, credit card, etc..); I tend to agree that this entire booming economy is based on low interest rates and debt and can't possibly be sustainable.

Low interest rates help, but aren't the only reason the economy is in good shape.

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So, what the heck am I missing? Shouldn't we all be saving and paying down debt instead of continually deficit spending?

It's not clear what you mean by "we all" here.

If you mean each of us individually, I can't speak for you, but I manage my personal debt quite nicely, than you. Other than a mortgage, I have no debt.

If instead you mean the country as a whole, I think the thing you seem to be missing is politics.

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Isn't a "healthy" economy one that balances saving and investment and can thrive in a normal interest rate environment?

You appear to be assuming that the current economy couldn't thrive in a "normal interest rate environment". I disagree.