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Obamanomics in Action, Part Two
galadrion
From today's press releases: New Obama plans: 'spend our way out' of downturn.

Does this bother anyone else the way it bothers me? What would this mean applied on a personal, rather than federal, level? "Our household budget is really kinda strained this month, honey, so we need to replace the water heater and the window panes and reshingle the roof." Uh, what? Has this man never had to balance a budget?

I don't see this downturn ending for quite some time. Not unless we default and remonetize - the national equivalent of going bankrupt and walking on debt. And even then, the effects are going to last a long time.

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It won't stop the downturn completely, but...

It CAN save a few businesses from going bankrupt, sending more people's lives into chaos and generally making the situation worse.

We used an 'incentive package' here in Norway where the Public Roads Administration got a couple hundred million Dollars worth of extra funds. And that they had to spend fast. That meant jumping on and getting one all the small projects along the roads(a bus stop here, speed bumps another place, maybe a small roundabout... ) Lots of small projects. Stuff that the big contractors(with good economy) wouldn't compete too seriously about, but which has managed to keep most of the smalltimers afloat.

So, done right, it can work...

Of course, with American banks and big business being incredibly hamhanded and mismanaged... Who knows...

One of your problems is the way american houses is financed.
Would you believe that 23Million home loans in America(about 10%) are on more than what the house is worth?

Still?

Sure, some of those ended up that way because the property value fell because of the recession... But as infalted property values and insane lending was the main cause of the recession...
And the fact that people who can't pay the motgages can just up and leave, then never have to worry about it again is incredibly stupid in my eyes. This gives people an all too easy way out of their responsibility.
(Here, if a house is reposessed by the bank and sold, if the sale didn't cover the debt, you still owe the bank the remainder. And if you run away from it, you can't run far enough. And no bank will touch you until it's paid down. )


I heard that the senators opposing Obamas enironmental plan comes from states relying on coal mining or the auto industry.
(I won't comment on the coal mining)
What exactly are the auto makers worried about?

That they'll have to suffer stricter pollution rules than the cometition?
(Incidentally, you have to look far and very wide to find auto makers with more polluting cars... )

Of course, I should probably not comment as I live in a country that is expected to be out of recession by midsummer.

You'll just have to hope that American banks haven't invested too much in Dubai, as that seems to be the next cloud castle to topple...
('Lets use all our oil money and at the same time borrow heavily to build a lot of luxury hotels, offices and apartments, and possibly a few man-made islands, too, so that we can attract tourists later when the oil runs out'... And how are the tourists going to get there if the oil runs out? )

You live in a nation with substantial oil exports, a very small population, etcetera. The advantages that Norway has in terms of climbing out of recession are intrinsic and are no reflection on policy.

It is inappropriate to compare European nations to the US as a whole, they are more correctly compared to US states.

Actually, most of the income from oil goes straight into a fund, set off for future expenses, like pensions. (We're talking about one of the top 10 investment funds in the world. The US treasury BEGGED us NOT to pull out of American banks a few months before it all went to H! You don't want to know how much we lost on being nice... )

Our tax rates are from 33% and up to about 50% for normal people.
(Depending on income. We can subtract 28% of the interest on loans, though. )

Living here is expensive...
My 65square meter apartment cost me about $250.000
My car(Citroën Berlingo 5seater), which is considered 'cheap' would cost around $35.000 today, new. (I've never owned a new car... )
My monthly bus-pass costs me about $150 - $180(depending on exchange rates. 1050NOK if anyone wonders)

What 'saved' us is that we don't have a very badly managed and highly uneconomic auto industry, and of course, banks that didn't loan buckets of money to customers who had no chance ever to pay it back.
That, and that we were all told to NOT 'panic hoard' money, but if possible, spend as normal.
(This has saved a lot of the smaller businesses. Some have gone under, but most of those would have faltered sooner or later, anyway)

First of all, I repeat, Norway has a population half that on New York City. It is inappropriate to compare European nations to the US, it is only appropriate to compare Norway to Alaska. The comparison stems from the similar population to land ratios, combined with the relative natural resources to population ratios The economy of Alaska is doing fine through this downturn too.

The sovereign wealth fund does more than just cover future pensions, for openers, it covers *present* pensions. It also covers much of the welfare state that allows in this particular instance this recession not to be deep or protracted. It goes into the operation of companies domestically that are recession-proof due to their status as sovereign wealth fund owned. It allows the nation itself to purchase undervalued assets for future resale without an act of congress. I suspect that you will find that when you truly need the money, it isn't there, because the fund will be used for ideological purposes and not financial ones between now and then, but hey, that's just because it has happened every time in history this sort of thing has been tried.

It does help that your banks stayed out of the messes, but that is far from the entirety of the reason. For another example, are you aware that the fraction of government income that the Norwegian government derives from the bottom 10% of earners is substantially higher than the US? Or that the fraction from the top earners is substantially less? Are you aware that in total, the Norwegian government spends less than half the total expenditures per$gdp compared to the US?

This has Norway at 20% of gdp. It also has the US at the incorrect 15%, so if you have a better source on norway, I am listening.
http://www.nationmaster.com/graph/gov_gen_gov_fin_con_exp_cur_us_pergdp-expenditure-current-us-per-gdp

here's a better source for us total government expenditures.
http://www.usgovernmentspending.com/downchart_gs.php?year=1950_2010&view=1&expand=&units=p&fy=fy10&chart=F0-total&bar=0&stack=1&size=m&title=&state=US&color=c&local=c

Well over 40% including state and local governments.

Given that the US government is spending over 40% of the GDP, I think that assumption that the tax burden in Norway is higher than that in the US is misplaced. What is higher is the single source obvious tax burden. From what I can see, the Norwegian government is relatively honest.

Really, the auto sector in the US had little to nothing to do with the downturn, what DID have to do with it was the socialistic lending policies enforced on the banks by the CRA and the FSMA. Additionally, the government controlled Fannie and Freddie were highly responsible.

In short, talk to me again 5 years after Norway has become an oil importing nation, which should be in roughly 2025. We'll see how things fare there then. In the meantime, it is not a reasonable comparison to any other nation. It is a circumstantial outlier for reasons having nothing to do with sound policy. Same goes for Sweden and Denmark being part of the currency union with Norway. Same goes for Iceland, for a similar reason set. The appropriate comparison is between Europe as a whole and the US as a whole. I think you'll find that Europe is not in the main substantially better off.

Lets see...

5 years after we become an oil importer, there's not that much oil available on the market...
Thankfully, we're not as reliant on oil as some countries.
(Maybe we've found a way to exploit the humoungus amounts of coal hidden under the seabed in the north atlantic, which is estimated to - energy wise - hundreds or maybe a thousand times the size of the North atlantic oil and gas fields... Work is in progress...)
Luckily, we also have a lot of hydro power, the first saltwater powerplant went online earlier this year, windmills are shooting up, and the geeks in our think-tanks believe they can triple the efficiency of solar panels.
Now, if I lived in a country that is already a de-facto importer of oil, THEN I'd be worried...

The car industry.
No, I didn't mean that the American auto makers were to blame.
But... Thanks to heir ineptness the last couple of decades, they're in reality bankrupt all of them, and the only reason that the downturn in the market hasn't already killed them off is that the US government realised that this would cause an already bad situation to end up even worse. (all those workers entering an already strained market? Ouch... )

People 'hoarding' money(not keeping it in circulation) will slow down the economy, and make the recession last longer.
Also, I don't know what kind of bankruptcy insurance your banks have?
Norwegian banks are covered by a special fund, with a limit of 2Million NOK, about $300 - 350.000 per customer.
This means we have very little of the 'panic withdrawals' you have in America, and which can topple smaller banks.

Currency union?
The 'scandinavian monetary union?'

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Excuse me while I laugh...

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That union was disbanded after the outbreak of WWI. Nearly a century ago!
The only thing that's left is similar naming conventions.
Sure we can pay with Norwegian Kroner in Sweden(at least it's no problem when shopping near the border) but that's just because the shopkeepers keep track of exchange rates.
(If we pay using ATM cards that's all handled automatically, though)

Note; What allowed the american banks to fuck up so spectacularly is that 'someone' removed restrictions and legislation that was put in place after the 'big one' in the 20s...

As far as the currency union is concerned, I stand corrected.

As far as the US bank bankruptcy....

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Excuse me while I laugh (you ponts).
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The US banks are covered by the FDIC, to the tune of 250,000 dollars per account. There is no "panic withdrawal" in the US, not since the great depression almost a century ago.

The "someone" that removed the restrictions you are talking about was william Jefferson Clinton. It was part of the "Financial Services Modernization Act of 1999, (Pub.L. 106-102, 113 Stat. 1338, enacted November 12, 1999)" (from wiki). In addition to stripping out the regulatory safeguards, it also mandated to a greater degree that the US banks function as wealth redistributive agencies through the CRA (http://en.wikipedia.org/wiki/Community_Reinvestment_Act). Always a good idea to mandate that your banks give loans to those that cannot pay them back, that always ends well.


The US auto makers are dead because of unions and government interference, nothing to do with "bad management". They were actually rather well run considering the handicaps they operate under. Many like to accuse them of ineptitude because they made SUVs, but those were what the public desired and the manufacturers mad a freaking fortune on them. They were able to make them relatively well and at a profit because the other companies didn't have the sense to compete for the market that existed.

As far as oil is concerned...
http://www.iags.org/n0524043.htm
You are likely to be an oil importer before 2015, deepwater fields decline fast and hard once they peak as mexico is finding out. "seabed coal" is a nonstarter without dramatic technical improvements, and even then the eroei is going to be for shit for decades if ever. Windmills are fun, but you will need to rebuild all your hydro plants to accomodate the fluctuations in demand profile. You ARE as addicted to oil as most other nations, you just are better at deluding yourselves on that score than most.
http://www.nationmaster.com/graph/ene_oil_con_percap-energy-oil-consumption-per-capita

Solar cells... Efficiency is not the important variable, cost per installed watt is. The standard PV cell is 10% efficient, and provides energy at roughly 30 cents per kwh. There already exist PV cells that provide 40% efficiency, they are however, brutally expensive, so they mainly use them on satellites. Now, presuming that you meant that the PV cells will come down to 1/3 of the cost per kwh, that would STILL give a cost of .10/kwh, or 5 times the cost of coal, nuclear, or hydro generated electricity. Look for no savior from that source during your lifetime.

And once again, I remind you that it is not appropriate to compare Norway to the US, it is appropriate to compare Norway to Alaska.

Would you believe that 23Million home loans in America(about 10%) are on more than what the house is worth?

As a matter of fact, I would - Kestrelcat currently works for a major bank in their home mortgage collections department, so I do follow the financial end of things.

And the fact that people who can't pay the motgages can just up and leave, then never have to worry about it again is incredibly stupid in my eyes.

Heh. It would be in mine, as well, except in most cases, it's not as worry-free as most of the people doing that think. Most states which allow such walking away (debt forgiveness states) have an interesting little clause to that provision: the forgiven debt counts as income for tax purposes. It's a bit of a nasty sting for the sort of people who would happily stiff a creditor, since you never get away from the IRS.

Since my name has been invoked.....

Since my name has been invoked I'll chime in on this thread.....

Yes, yes people are upside down on their houses. A larger number of people are owe more than their homes are worth. It's awful for the clients, the banks, the investors. It's pretty much awful for everyone involved.

As Galadrion said walking on one's debt is not worry-free as most consumers think. There are lots of ways creditors can an' will pursue what they are owed. People are better off working with the companies they owe.

Instead of all the fixes Obama has tried he should let things take their natural course. As it is he's just making this economic depression worse.

K

It depends on what the money is being spent on. If it is being spent on things that will stimulate job creation and bolster the economy, then it is a good thing.

Remember, Intel continues to spend money on R&D and increasing capacity during a recession, because we'll be in a stronger position when the recession ends.

Individually, it would be comparable to spending money on getting educated for a new career path when you're unemployed.

Now, whether the U.S. is spending money in the right places is very subjective.


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