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"Economy Firing On All Cylinders"..What?!
Old 11-10-2018, 09:06 AM   #1
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"Economy Firing On All Cylinders"..What?!

Everywhere I look I see articles and talking heads suggest the U.S. economy is full speed ahead and doing great. But, at the same time, suggesting that even the most modest of interest rate increases by the Federal Reserve could derail the markets and economy.

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.

So, what the heck am I missing? Shouldn't we all be saving and paying down debt instead of continually deficit spending? Aren't the few savers left getting screwed by these artificially low interest rates? Isn't a "healthy" economy one that balances saving and investment and can thrive in a normal interest rate environment?

Sure, some of our fund/etf investments have done great over the past few years; but, when I look at the data I feel like I'm playing a casino game where I have to get out before the bubble bursts instead of investing in something with a solid foundation.

I'd love to hear insight from those that are feeling the same way or those that can provide a different perspective?
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Old 11-10-2018, 09:12 AM   #2
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^^^^^^ Greed perhaps? Think of the sources.
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Old 11-10-2018, 09:16 AM   #3
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Yes. We’re running up the debt with incredible deficits while the economy is doing well. What happens when the economy isn’t doing well?

Other than pay off debts and have a couple weeks of water and beans saved up, I don’t know what to do. I don’t think saving cash is wise because the solution may be inflation. Stocks and bonds may default. And the government confiscated gold during the Great Depression, so hoarding bullion doesn’t seem a sure thing. Cryptos are new and have never been tested during a depression.

So I guess diversify, buy durable goods you enjoy and can use, and do your best to enjoy the good times. They will not likely last forever.
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Old 11-10-2018, 09:19 AM   #4
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This time it's different.
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Old 11-10-2018, 09:21 AM   #5
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Interest rates were pushed down because it took a long time for the economy to pull out of the Great Recession and we had a few bouts with (near) deflation. Now the Fed is normalizing - that’s a gradual process.

But sure, we experienced asset inflation instead (partying markets), while the economy finally moved into higher gear more recently. So the Fed is taking away the punch bowl. This is a major headwind for investors.

As far as racking up debt - well, funny how the deficit hawks always disappear whenever their party is in power.....
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Old 11-10-2018, 09:23 AM   #6
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I feel the same - it's all smoke and mirrors. I have no insight. Just angst...
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Old 11-10-2018, 09:24 AM   #7
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Recessions are never nice, and I expect the next recession, whenever it happens, will be a MAJOR shock to a lot of people who are barely managing with their current debt load.
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Old 11-10-2018, 09:29 AM   #8
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I completely agree.

I brought these points up a couple months ago, and again just a few days ago. Both times I was basically attacked.

I've decided I'm better off keeping my views to myself and not sharing when it comes to this line of discussion.
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Old 11-10-2018, 09:30 AM   #9
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Between 1992-2000 interest rates were ~5.24% and we managed to balance the budget, and life was pretty good in general.

The fuss the talking "Financial" heads and others are making about them IMHO is unwarranted and based on personal reasons for wanting them unnecessarily low.
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Old 11-10-2018, 09:32 AM   #10
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Originally Posted by DEC-1982 View Post
Recessions are never nice, and I expect the next recession, whenever it happens, will be a MAJOR shock to a lot of people who are barely managing with their current debt load.
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.
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Old 11-10-2018, 09:33 AM   #11
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As far as racking up debt - well, funny how the deficit hawks always disappear whenever their party is in power.....
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.
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Old 11-10-2018, 09:35 AM   #12
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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.
The trick is avoiding them from an investment perspective..... Where is that "Dirty Market Timer"?
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Old 11-10-2018, 09:38 AM   #13
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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.
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Old 11-10-2018, 09:39 AM   #14
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Iím wondering when those hawks will come back and actually act like theyíre serious.
Iím telling you they wonít. Somehow magically other priorities manage to override whenever itís their turn. My conclusion - they are just loudmouths and wonít walk the talk.
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Old 11-10-2018, 09:42 AM   #15
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Recessions are never nice, and I expect the next recession, whenever it happens, will be a MAJOR shock to a lot of people who are barely managing with their current debt load.
Recessions happen. There are always folks burned by them. That’s just the way it is. If 2008 didn’t wake them up about market risks or risks of carrying large debt loads, then I’m sorry - no sympathy!
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Old 11-10-2018, 09:54 AM   #16
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First, "the economy" is NOT the same as the income/financial welfare of American citizens. I start with that principle.

Most Americans received little benefit from the tax cut - certainly NOT the "$4,000 per average family" that Trump announced.

Have most Americans received a pay raise? I see statistics that say "wages are rising" - and I know some increases in minimum wage have kicked in, but I ask around, and most Americans that I talk to have not received any noticeable wage increase. Have some of you asked relatives and the like? What do they tell you?

My 401k, not riskily invested, is flat to below for the year. So I don't feel the "economic growth" either.

Some recent stories have pointed out that little of the "economic growth" has gone into investment. Apparently most have gone back into the pockets of the richest.
https://www.forbes.com/sites/teresag.../#4574766826bb

So what does it mean to say "the economy is firing on all cylinders"?
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Old 11-10-2018, 09:57 AM   #17
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Iím telling you they wonít. Somehow magically other priorities manage to override whenever itís their turn. My conclusion - they are just loudmouths and wonít walk the talk.
It's not even the Gubimt types who just want to step over inconvenient things. They know what to do but are not free to do it. And some are indeed ideologically prevented

The Money Centers,Big Business, The Rich, whatever you want to call them. They won't allow it. They want everything and they want it for free.

We here, as expressed somewhere above, like to think we benefit from high debt, low interest rates, what it has done to the stock market etc etc. We, even the highest rollers here, are pikers in the scheme of things.

The Money Nodes do not want to pay taxes, they do not want to have to bend to comply for reasons of economics, or debt. That's the government's problem and The People's problem. Profits are bigger with low taxes. Get the money somewhere else. That's all they're in it for. And because money usually outranks votes and even prudence and common sense, they get to call the policy shots.

njhowie is right. This is my only input here. Just wanted it on record
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Old 11-10-2018, 09:59 AM   #18
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The problem is not interest rates or taxes. It's spending, pure and simple.

Keeping interest rates low is just another way to continue the War on Savers that has been going on for nearly a decade. Let's at least get the 5 year T-bill up to a point where after taxes and inflation, a person can earn 2% in real terms. We are still far from that.

Our Economy is a giant Feedback Loop. Helping one part (people with money to invest) does little good unless the other parts (the low and middle income people) have money to buy the goods and services that the investors can provide. The opposite is also unwise (see Venezuela for a good example) .
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Old 11-10-2018, 10:04 AM   #19
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This thread is hilarious. Thanks.
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Old 11-10-2018, 10:06 AM   #20
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Most Americans received little benefit from the tax cut
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.
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