There are plenty of people across the country as well as around the world who have something to say about the United States economy and Wall Street. The two have been skipping down the recession highway hand-in-hand for the past year and everyone sees it.

Executive pay is one of the things that gets a lot of people particularly fired up and you really know that the executives are making too much money when Bill Gates says they are.

Gates had this to say, “It was a bad milestone in controlling executive salaries when that $1 million cap went on. The compensation problem is a very interesting problem. I do think compensation is often too high, but it’s a very tough problem to solve.”

The cap he is talking about is a $1 million cap in executive pay that went into effect in 1993. Since the cap was put in place, companies have found other ways of showering their executives with gifts and other things such as lucrative stock options. The stock options were often worth FAR more than a year’s salary at one of the companies would have been.

The $1 million limit on salaries encouraged companies to instead give executives lucrative stock options, sending pay to vast new heights.

Gates also worries about the government’s control of AIG, “I do worry that when the government owns an entity like AIG that you can greatly devalue that entity by having it essentially have to behave as though it is part of the government. It is an unnatural situation when the government owns a lot of a private company. Unfortunately there is a view that it should exist for a long term. There is some devaluation of what that asset would have been worth if it hadn’t had to go through that kind of management structure. It is unavoidable.”

Bill Gates is one of the people who benefit from lucrative stock options with his company (which he stepped down from to focus on philanthropy). However, I do not see Microsoft taking down the entire United States economy like the banking industry did.

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The Consumer Board released October’s Consumer Confidence Index number today and it was below what anyone was expecting. It fell to 47.7 for the month which is the Board’s second lowest reading since May.

to put the number into perspective; a number higher than 90 means that the economy is doing well and anything above 100 says that there is strong growth in the economy. The lowest that the Consumer Board has ever measured was the record low of 25.3 in February 2009. It only took a few months to climb back up to 53.4 last month.

The reason that consumer confidence is so important is because it is the number that tells how much consumers are spending on items. Because spending on these items accounts for 70% of the United States economy (according to the government), it is an important economic indicator.

So, what does a drop in the consumer confidence index number mean? It shows that consumers have a grim outlook of the future.

According to Lynn Franco, the director of the Conference Board’s Consumer Research Center, “Consumers also remain quite pessimistic about their future earnings, a sentiment that will likely constrain spending during the holidays.”

This news is not welcomed by the retailers in the country. Last year, spending around the holidays fell to levels not seen since the 1960’s. With so many retailers across the United States still hurting and struggling and also going out of business, many of them are counting on this holiday season to prop them up and maybe put them in the black for the year.

The Consumer Board gets the Consumer Confidence Index by sending surveys to 5,000 homes across the country. For October’s numbers, the cutoff date was October 21st.

I honestly think all the figures and indexes like this put people into worry-mode. When people are truly worried about their jobs and their finances they don’t spend. For the past couple of months, people have been worried about their income even with plenty of job security. Jobs aren’t being lost at the rate that they were and there are plenty of places where people are working and not having to worry whether or not their job will be there the next day.

The Consumer Confidence Index was something that we didn’t have before the 60’s and it seems as though the country’s consumer spending was not that bad through the 50’s (after WWII anyway).

What do you think about the Consumer Confidence Index and any of the other financial indexes that come out telling you how the economy is doing? Are there any of these indicators that you follow to tell you how things are going?

I believe I would follow the unemployment numbers a bit more closely than this one.

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A disruption in the supply of oil could cause serious problems for the United States economy. Rather than an actual dependence on foreign oil, the supply of oil and the price increase that would happen as a result are actually a “national security” problem.

Keith Crane, a senior economist at Rand said that a drop in the supply of oil across the globe would start a rise in oil prices and “significantly affect the United States, no matter how much or how little oil the United States imports.”

The Rand study looked at links between oil and national security.

We have already seen what can happen if the price of oil goes up 100% from where it is right now, to back over $4 a gallon; everything gets more expensive, not just oil. The problem with that is if something were to happen now, many wouldn’t be able to afford anything. In a worst case scenario, more people would go unemployed because they simply could not afford to even make it to work.

There were moderate risks included with the benefits from higher revenues to oil exporting countries such as Venezuela that can be seen as rogue countries. Of course there is always a risk associated when you’re talking about countries like Venezuela or Iran; the countries have a long track record of being outrageous and hasty in decision making. More money means that they can do more irrational things. Higher revenues to organizations such as Hamas and Hezbollah would also cause quite a problem due to terrorist activities.

There were four policies recommended by the researchers to help with the global supply of oil if something were to happen. First, to impose a form of price control or rationing during a supply disruption, then examining domestic oil fields that have been off-limits in the past, helping develop green, alternative energy, and keeping the price of such forms of energy low when compared to the price of oil, and finally to impose an excise tax on oil that would help try to minimize the growth in demand for oil.

As I said, the last time a spike in oil happened, it was right before the economy really went south (even though we were already technically in a recession). Since then, oil prices have fallen dramatically, and while gas is back above $2 a gallon, it is still much easier to stomach than gas above $4 a gallon.

There will be several recovery-based articles written here in the next few months. That way all the readers here can either learn more about what will be written here by this author in the next few months, what to look for as we recover, or receive a nice, basic refresher course in macroeconomics. Unfortunately, yesterday was not a day worth analyzing due to the full closure of the entire United States economy for Memorial Day. We will not have the closing report from Wall Street or anything until 4:00pm eastern time today.

Everybody knows that a recession is a general slowing of economic activity over a sustained period of time or portion of a business cycle, mostly if Gross Domestic Product (GDP) is down for two quarters. During a recession, many economic indicators will vary in the way they react, but all will fall relatively. This includes production as measured by Gross Domestic Product (GDP), employment (called joblessness during harsh economic times), investment spending, capacity utilization, household incomes and business profits. This is simply due to the fact that money begins circulating slower and there is less to go around. Governments usually respond to recessions by adopting expansionary macroeconomic policies, such as increasing money supply, increasing government spending and decreasing taxation, all hoping cash flow will spur. A depression is really only characterized as a recession that lasts longer than a year or two.

Now for the things you may or may not be as privy to. As briefly mentioned in a previous article, the indicators to the longevity of a recession and the possibility of a recovery are leading, lagging, and coincident. Leading indicators are the economic indicators that actually send us spiraling into a recession or jacking back up into prosperity. Lagging indicators react slowly to economic changes, and are therefore worthless as far as prediction goes. They really are best at assessing the current status of a recession, for instance, jobless numbers that are still on an incline even though the worst is over. Coincident indicators are also used to assess current economic conditions but are understood to be simultaneous or sectional and not always related to the entire economy as a whole.

Leading indicators (as found in the Index of Leading Indicators) are:

1. Average number of initial applications for unemployment insurance
2. Number of manufacturers’ new orders for consumer goods and materials
3. Speed of delivery of new merchandise to vendors from suppliers
4. Amount of new orders for capital goods unrelated to defense
5. Amount of new building permits for residential buildings
6. The S&P 500 stock index
7. Inflation-adjusted money supply
8. Spread between long and short interest rates (the yield curve)
9. Consumer sentiment
10. Average weekly hours worked by manufacturing workers

Lagging Indicators (as found in the Index of Lagging Indicators) are:
1. The average duration of unemployment (inverted)
2. The value of outstanding commercial and industrial loans
3. The change in the Consumer Price Index for services
4. The change in labor cost per unit of output
5. The ratio of manufacturing and trade inventories to sales
6. The ratio of consumer credit outstanding to personal income
7. The average prime rate charged by banks

Coincident indicators (as found in the Index of Coincident Economic Indicators) are:
1. Number of employees on nonagricultural payrolls.
2. Personal income less transfer payments.
3. Industrial production.
4. Manufacturing and trade sales.

As the leading indicators begin to show favor, we can start planning on a good recovery. Now remember, a full, solid recovery requires total solidarity under the foundation we’re currently rebuilding. That means a slow, steady recovery with wavering totals and indexes is good. It means that we are building only on the confidence we currently have instead of trying to jumpstart the economy onto a foundation that just is not ready. This author will be following the growth and decline of the economy as it comes and goes, referring to this article to show where we are in the economy, giving the best investment advice from experts all over the country and from myself, relating it to your pockets and your news.

According to a recent NewsWeek article, productivity could be the key to helping fix the economy.

When it comes to politics, neither side will ever agree on what exactly will save the economy. The conservatives on the right will tell you that tax cuts are the way to go, while liberals on the left will tell you that spending and public works projects are what will help rebuild the economy.

So the author of the article, Daniel Gross, wrote that if history can teach us anything that in order to get the economy back to the level we have been accustomed to over the past few years, we are going to need a boost in productivity. When there are periods of high growth, there is a trend that reaches to every part and segment of the economy, examples include electricity, railroads, and credit (ultimately leading to cheap money). In an economy the size of the one of the United States, there will have to be a trend as large as one of these to jumpstart the economy because a small “boom” won’t reach all the sectors that need to be reached in order to experience economy growth.

Of course, the problem with this idea is there has to be a great idea to jumpstart the economy again. Gross says that perhaps it won’t be a single game-changing idea, but a compilation of many small ideas that helps get the economy back on track.

His idea is that we all try harder to get the economy back on track.

I think it is always a good idea when everyone helps out to reach a cohesive goal; especially when it comes to something as large as fixing the United States’ economy. There are certain areas of the economy that no amount of tax cuts or public works spending will be able to fix and I suppose this is where he thinks that we should all step it up a little to help out.

Of course, perhaps a large idea is what could boost the economy. There is a huge market brewing for green energy and to eliminate or at least reduce our dependence on fossil fuels. We saw the tip of the iceberg last summer when gas hit record highs and everyone was complaining. There was a lot of complaining going around about the price of gas and it lit a fire under everyone to get out and do something. Emissions dropped, the use of public transportation increased, and gas prices fell.

Whatever will help fix the economy, hopefully something will start up soon to help give a boost growth.

GM is planning on showing the government the restructuring plan on February 17 to prove that is a viable company and that it is good enough and worth the money to save it.

Sure, the company is restructuring after years of wasting money on Chevrolet automobiles and job banks, but is it enough to prove to the government that is a vital business to the United States economy and that taxpayers should keep the business afloat until it can get “back on its feet”?

GM has a long way to go, in my opinion, before I can see it as a vital part of our economy. Whatever happened to it selling off brands to other companies to raise capital? If it isn’t willing to decrease its portfolio of automobiles to save money then the company won’t stay afloat.