Recession Imminent

[hugolp]

Most of today's economy model is studying the scarcity, it uses lot's of assumptions in a scarcity dominated society, but we already passed that stage long time ago. Keynes discovered that over supply is dangerous, he tried to increase the demand to match the increased productivity. But why not reduce the supply? Because in a credit based economy, you have to increase future income (thus increase supply) to payback the loan and interest, everyone is driven by profit/earnings/loan interests, this makes everyone works like a slave

The theory of oversupply is completely false. Its flawed because its based on the study of aggregates which hide what its really going on in the economy. There never has been in the economy a general excess of supply. What has happened is that there has been an oversupply of certain products (f.e. houses) and an undersupply of others. What do you think would have happened if all the resources, including human labour, that was dedicated to build houses everywhere would have been dedicated to produce something people actually wanted?

Its not oversupply, I dont understand how people can look around with so many poor people and conclude that we produce too much. Its a problem of not producing what people really wants.

[johnyj]

Most of today's economy model is studying the scarcity, it uses lot's of assumptions in a scarcity dominated society, but we already passed that stage long time ago. Keynes discovered that over supply is dangerous, he tried to increase the demand to match the increased productivity. But why not reduce the supply? Because in a credit based economy, you have to increase future income (thus increase supply) to payback the loan and interest, everyone is driven by profit/earnings/loan interests, this makes everyone works like a slave

The theory of oversupply is completely false. Its flawed because its based on the study of aggregates which hide what its really going on in the economy. There never has been in the economy a general excess of supply. What has happened is that there has been an oversupply of certain products (f.e. houses) and an undersupply of others. What do you think would have happened if all the resources, including human labour, that was dedicated to build houses everywhere would have been dedicated to produce something people actually wanted?

Its not oversupply, I dont understand how people can look around with so many poor people and conclude that we produce too much. Its a problem of not producing what people really wants.

I'm not saying the product/service are oversupplied, it is the productivity is enough high but the demand is not evenly distributed

Robots can produce one yacht for each people in the world, but not everyone can afford it, simply because they do not have income since robots got their job. And a common sense is that if you do not have high productivity, then you do not have enough product to exchange for what you want.

I start to think this has something to do with the ownership of the productivity, those who owned robot get very high productivity, while those who don't get this ownership will have low productivity thus have to live a low standard life

[johnyj]

It's not that there are no jobs, it's that there are more advanced jobs and fewer blue collar jobs. Unemployment rate for those with college education is actually pretty low, at 4.5% (personally, I don't know anyone of my friends in MD who lost a job, and know of two who quit theirs to find better ones)

http://www4.icmarc.org/for-individuals/market-view/chart-of-the-week/cotw-20110617usunemploymentbyeducationallevel.html

Even during the Great Depression, despite a HUGE unemployment rate, businesses were scrambling to find good employees and having trouble finding any. Machines replacing jobs just leaves more people with a lot more time to do more advanced and more creative things that require more brains and less muscle. So, machines replaced your cashier/assembly/low-skill job? Get some special job training or a degree.

Not all people are born equal, only small amount of people will become highly skilled workers. Given a random example of 10,000 people, there will always be 100 of them much clever than others due to optimum growth of their brain when they are still in the belly of their mother

You can observe this very clearly in the IT industry: Almost every one can go to school and get a computer science degree, but only a few of them will really understand how a computer works and make their own computer system (like Gates/Jobs/Linus) etc... some of the other guys understand part of the whole picture, thus become an expert in a specific area, and many many other guys only understand the general knowledge, it's these many many other guys could not find a job

[Rassah]

Not all people are born equal, only small amount of people will become highly skilled workers. Given a random example of 10,000 people, there will always be 100 of them much clever than others due to optimum growth of their brain when they are still in the belly of their mother

You can observe this very clearly in the IT industry: Almost every one can go to school and get a computer science degree, but only a few of them will really understand how a computer works and make their own computer system (like Gates/Jobs/Linus) etc... some of the other guys understand part of the whole picture, thus become an expert in a specific area, and many many other guys only understand the general knowledge, it's these many many other guys could not find a job

I'm not saying that you have to be a technical/scientific/financial genius. How may people know math and are literate now compared to 100 years ago? How may people are working comparatively easier jobs now as retail clerks, using their math and reading skills, than 100 years ago, when most manufacturing jobs only required that you follow the same basic repetitive steps? Sure, we'll always have some people that either refuse to, or can't, learn or grasp anything complex, and we'll likely always need them to do things like janitorial, security, or even retail/fast food work, but you'd have to at least agree that most people out there can at least take a few college level classes to get SOME slightly advanced skills? Even high school level education is useful for things like data entry, transcribing/proofreading, basic accounting, etc (things machines can't yet do). Those jobs that require eyes, brains, and someone on location will likely never go away.

[johnyj]

I'm not saying that you have to be a technical/scientific/financial genius. How may people know math and are literate now compared to 100 years ago? How may people are working comparatively easier jobs now as retail clerks, using their math and reading skills, than 100 years ago, when most manufacturing jobs only required that you follow the same basic repetitive steps? Sure, we'll always have some people that either refuse to, or can't, learn or grasp anything complex, and we'll likely always need them to do things like janitorial, security, or even retail/fast food work, but you'd have to at least agree that most people out there can at least take a few college level classes to get SOME slightly advanced skills? Even high school level education is useful for things like data entry, transcribing/proofreading, basic accounting, etc (things machines can't yet do). Those jobs that require eyes, brains, and someone on location will likely never go away.

Currently, many unemployeed are those young people just graduated from colleges.

I think "continous learning" even worsen the picture: Those who are in the job expand their automation technology to a higher and higher level through continous learning. Since they are learning all the time during their whole career, this just means no new employee can catch up with their speed and the knowledge gap between them will be larger and larger

[cypherdoc]

I'm not saying that you have to be a technical/scientific/financial genius. How may people know math and are literate now compared to 100 years ago? How may people are working comparatively easier jobs now as retail clerks, using their math and reading skills, than 100 years ago, when most manufacturing jobs only required that you follow the same basic repetitive steps? Sure, we'll always have some people that either refuse to, or can't, learn or grasp anything complex, and we'll likely always need them to do things like janitorial, security, or even retail/fast food work, but you'd have to at least agree that most people out there can at least take a few college level classes to get SOME slightly advanced skills? Even high school level education is useful for things like data entry, transcribing/proofreading, basic accounting, etc (things machines can't yet do). Those jobs that require eyes, brains, and someone on location will likely never go away.

Currently, many unemployeed are those young people just graduated from colleges.

I think "continous learning" even worsen the picture: Those who are in the job expand their automation technology to a higher and higher level through continous learning. Since they are learning all the time during their whole career, this just means no new employee can catch up with their speed and the knowledge gap between them will be larger and larger

the main problem i see with your arguments is that i believe inflation contributes not only to technology advances but also population growth.  low interest rates and easy loans grossly distort economics and create bubbles.  its well known that population growth increases in good times and i can argue this is a distortion as well. 

we've now hit the debt ceiling IMO.  we can't take on more growth and there needs to be a vetting of the bad loans.  this will cause the system to go into reverse and then what happens to the population if this is prolonged enough?  it has to go down. 

its a race btwn tech developments that can sustain the population vs. the ensuing downturn thats just now beginning.

[netrin]

What has happened is that thanks to the machines we work less hours, in better working conditions (the machies do the harsh work) and we enjoy a better standard of living. So please lets stop the crazyness, we need more automatition so we have to work less hours and have an even better standard of living.

Yes, reduce working hour is actually a very good way to solve this problem, and it is very scaleable!

Let's say from tomorrow, all the people who have the job should only work 4.5 days a week, at the same time their salary reduced by 10%. What happens then? All the companies will have to use those saved 10% salary payment to hire 10% more workers to keep the productivity up, then the jobless problem solved right away!

While I agree, with our technologically advanced society, we should be working less and enjoying our lives more. Not out of necessity, but pleasure!

To your credit, the German government when studying the implications of expanding the work week noted that people were in fact much more productive in the first hour than the last hour. So it would seem that cutting hours would have a productive benefit, if they could be made up for by fresh yet unemployed workers. It must also be noted that despite official limits, Germans tend to work five extra hours anyway. I would assume similar numbers apply to workers the world over.

It is still a fallacy to believe that reduced hours with a proportionally increased work force is a productivity wash, particularly in a recession. Consider that drops in employment already lag behind production. One must assume that the least productive workers were laid off first. A reduced work week would cut the most productive workers to the benefit of the least productive and to the detriment of total productivity.

The difference per worker in unskilled labour is very little, so your idea might work in factories. However, this would be a terrible policy in highly skilled labour where worker productivity differs by orders of magnitude, which many software developers here must have observed first hand.

[Rassah]

Currently, many unemployeed are those young people just graduated from colleges.

If that were true, that statistic I linked to earlier would've been 4.5%. Sure, jobs are harder to find, but young college graduates are the ones eventually finding them.

I think "continous learning" even worsen the picture: Those who are in the job expand their automation technology to a higher and higher level through continous learning. Since they are learning all the time during their whole career, this just means no new employee can catch up with their speed and the knowledge gap between them will be larger and larger

Anything I learned about DOS, Windows 3.1, or Windows 95; anything I learned about Pascal, C++, and Java in the 90's; Anything I learned about IDE, Serial Ports, ISA, and old memory/processor types: It's ass sh*t now. Continuous learning just means you're current with current technology and knowledge. Anyone who is new and starts learning the same things I am currently learning is really on the same footing as me. The only advantage I have is that maybe I have a bit more experience "learning"

[Rassah]

the main problem i see with your arguments is that i believe inflation contributes not only to technology advances but also population growth.  low interest rates and easy loans grossly distort economics and create bubbles.  its well known that population growth increases in good times and i can argue this is a distortion as well. 

we've now hit the debt ceiling IMO.  we can't take on more growth and there needs to be a vetting of the bad loans.  this will cause the system to go into reverse and then what happens to the population if this is prolonged enough?  it has to go down. 

its a race btwn tech developments that can sustain the population vs. the ensuing downturn thats just now beginning.

Think of "debt" as personal credit card debt, and "population" as potential for income. The more people we have, the more we can produce, and thus the more debt we can afford. I think as long as the population (of skilled people) grows, we can continue to afford (or increase) our debt.

[netrin]

its well known that population growth increases in good times and i can argue this is a distortion as well.  

This seems to contradict slightly different but related statistics, that richer (and smarter, more educated) people have fewer children. Perhaps all, including the poor, have fewer surviving children when the economy slumps, but I'm skeptical...

[cypherdoc]

the stock rout today says the debt does matter.

[hugolp]

the stock rout today says the debt does matter.

You want to bet 5 bitcoin that next week the stock market is higher than todays lows?

EDIT: Im not a short term trader so you have high chances of success...

[cypherdoc]

the stock rout today says the debt does matter.

You want to bet 5 bitcoin that next week the stock market is higher than todays lows?

EDIT: Im not a short term trader so you have high chances of success...

whats the basis of this bet?  i've been covering shorts like mad today taking profits b/c i too think we'll get a short term bounce.  what are you trying to prove?  some sort of thesis involved here?

i tell you what.  i'll bet you the stock mkt is lower in October than it is today.  how's that?

[hugolp]

whats the basis of this bet?  i've been covering shorts like mad today taking profits b/c i too think we'll get a short term bounce.  what are you trying to prove?  some sort of thesis involved here?

i tell you what.  i'll bet you the stock mkt is lower in October than it is today.  how's that?

Nothing, I wasnt trying to prove anyhing. Im not a trader so I was just being a bit goofy.

Lets forget the bet then.

[johnyj]

Actually I'm waiting any kind of rebounce to buy several put option tomorrow 

[cypherdoc]

Actually I'm waiting any kind of rebounce to buy several put option tomorrow 

trading declining mkts is a b*tch.  if we get a bounce, be careful about shorting too soon as we could get a week long bounce or so.  long term we're all dead though...

[johnyj]

Anything I learned about DOS, Windows 3.1, or Windows 95; anything I learned about Pascal, C++, and Java in the 90's; Anything I learned about IDE, Serial Ports, ISA, and old memory/processor types: It's ass sh*t now. Continuous learning just means you're current with current technology and knowledge. Anyone who is new and starts learning the same things I am currently learning is really on the same footing as me. The only advantage I have is that maybe I have a bit more experience "learning"

Try to find a newbie and explain to him what is "rising difficulty", I'm sure it takes much longer than explain to a miner 

[johnyj]

Actually I'm waiting any kind of rebounce to buy several put option tomorrow 

trading declining mkts is a b*tch.  if we get a bounce, be careful about shorting too soon as we could get a week long bounce or so.  long term we're all dead though...

Thanks, I just want to protect my stock holdings from a flash crash, it might happen tomorrow after NFP and Dow goes down 2000 points in 5 minutes maybe? 

Long term wise, I'm positive, QE3,4,5 is on the way, as long as Bernanke hold the joystick of his helicopter firmly(If he is as soft as Obama, there might be some severe problem)

[cypherdoc]

Long term wise, I'm positive, QE3,4,5 is on the way, as long as Bernanke hold the joystick of his helicopter firmly(If he is as soft as Obama, there might be some severe problem)

i'm not so sure he has that discretion anymore.  it would be very dangerous to assume so b/c if he doesn't, stocks could crash big time.

[CurbsideProphet]

Actually I'm waiting any kind of rebounce to buy several put option tomorrow 

trading declining mkts is a b*tch.  if we get a bounce, be careful about shorting too soon as we could get a week long bounce or so.  long term we're all dead though...

I'm thinking we'll have a bounce too.  I see it happening between 1175 and today's close at 1200.  However, I think it fizzles out around 1260 or the 200dma, which is currently 1286.  Trading below the 200dma seems like a bear market to me but I'm waiting to see how the market reacts to the bounce.  The market is oversold short term and is due for a healthy bounce.

That being said, the last support before bigger losses is around the 1175-1180 area.  If we break that support, look out below.