Tuesday, July 28, 2009
this is in marked contrast to the state street investor confidence index:
The report notes a building confidence that the global recession will ease more quickly than expected: "Investors are now adding risk to their portfolios at an impressive rate, faster than we have seen in several years."
UPDATE: pragmatic capitalist charts both the state street investor confidence series as well as the latest AAII survey.
So if this were a turned based simulation with the following conditions:
- The economy employs 1000 workers.
- The mean income for each employee is 100 per round.
- The mean expenditure for each employee is 100 per turn, or 100%.
- There are 1000 workers employed, making $100 000, and spending $100 000, or 100%.
- Companies fire 10% of the workers, or 100 workers.
- The economy employs 900 workers, making $90 000, and spending $90 000, or 100%.
- Workers grow concerned over job security and decide to save money. They now spend only 90%.
- The economy employs 900 workers, making $90 000, and spending $81 000, or 90%.
- Companies grow concerned over growth forecasts and decide to cut costs, firing another 100 workers.
- The economy employs 800 workers, making $80 000, and spending $72 000, or 90%.
- Workers freak out! Dual income households are down to a single income. Everybody knows somebody that lost a job. Many are helping friends and family out. The savings rate increases again. Now only 80% of income is spent.
- The economy employs 800 workers, making $80 000, spending $64 000, 80%.
- Companies freak out! They've been beating bottom line estimates by cutting jobs, but they can see their top lines getting hammered. With no end in sight, they cut another 100 people.
- The economy employs 700 workers, making $70 000, spending $56 000, or 80%.
- Where and how this self fulfilling destructive cycle ends nobody can know for sure. It happened during The Great Depression and it was not pretty.
Sounds about right to me and where we are and where this is headed.
The Problem is and has been too much debt.
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