BOSTON (MarketWatch) -- The counter-revolution is underway.
The G-20 calls for members to slash their budget deficits. The U.S. Senate ices further aid for the unemployed. The head of the Business Roundtable slams President Obama for undermining American capitalism. Wall Street succeeds in watering down reform.
Depending on your politics, you'll love this or hate it.
But there's just one problem.
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We're still living in a fantasyland. rappelz rupees Most people have no idea what's really going on in the economy. They're living on spin, myths and downright lies. And if we don't know the facts, how can we make intelligent decisions?
Here are the three biggest economic myths -- the things everything thinks they know about the economy that just ain't so.
Myth 1: Unemployment is below 10%
But they're not. It's that simple.
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If they were, world of warcraft gold the interest rate on government bonds would be skyrocketing. That's what happens with risky debt: Lenders demand higher and higher interest payments to compensate them for the dangers.
They aren't seeing inflation either. On the contrary, they're saying it will average just 2.3% a year over the next three decades. That's the gap between the interest rates on inflation-protected Treasury bonds and the rates on the regular bonds. By any modern standard the forecast is low. Instead of worrying about inflation, some are starting to worry about something even more dangerous: deflation, or falling prices.
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If that takes hold, maple story power leveling cutting spending and raising taxes would be a bad move.
It's certainly possible the lenders buying these bonds are being foolish. And it's worth noting that the Treasury market is also subject to political distortions, because foreign are among the heavy buyers of bonds. So it's worth treating its apparent verdicts with some caution. Nonetheless, the burden of proof, as usual, is on those who argue the market is wrong.
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Myth 3: world of warcraft gold The U.S. is sliding into "socialism"
Numbers published by the Federal Reserve a few weeks ago show that corporate profit margins have just hit record levels. Indeed. Andrew Smithers, the well-regarded financial consultant and author of "Wall Street Revalued," calculates from the Fed's latest Flow of Funds report that corporate profit margins rocketed to 36% in the first quarter. Since records began in 1947 they have never been this high. The highest they got under Ronald Reagan was 30%.
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The picture is also similar when you exclude financials. world of warcraft gold
Meanwhile, federal spending, about 25% of the economy this year, is expected to fall to about 23% by 2013. In 1983, under Ronald Reagan, it hit 23.5%. In the early 1990s it was around 22%. Some socialism.
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These days, Atlantica gold three-fifths of the entire budget goes on just three things: Insurance for our old age (through Social Security and Medicare), defense, and debt interest.
Conservatives don't want to cut the $700 billion-plus we spend on defense. We can't cut debt interest payments. And while Social Security and Medicare certainly need reform, the main "problems" are simply rising life expectancy and health care demands. If we didn't provide for the insurance through our taxes we'd have to do it individually.
What about the rest of the budget? It's jumped from around 7% of GDP a few years ago to about 10% now. Out of control? It's been in the 6% to 9% range for decades. It's forecast to fall to about 8% again in a few years.
So much for a revolution. But here comes the counter-revolution just the same.
The three biggest lies about the economy
