I still don't believe this is going to get very bad for Average Joe. To be sure, a recession means some people are out of work. (I'm sticking to my recession prediction, but I'm also sticking to my view that it's not going to be a very bad one.) Many of them will be working people who weren't engaged in the psychotic behavior of the last several years. And that's awful. But a lot of this is going to be little more than Wall Street bigwigs losing their asses because they were doling out $500k loans to people earning $40k per year. "What could go wrong?"
Finance may account for a large share of GDP, but falling values in that sector will provide incentives to move one's money into other (more productive) sectors. And that's helped by the falling dollar, which is finally moving our trade deficit in the right direction.
It's entirely feasible to me that the losses in the finance sector could be mostly offset by gains in trade.
Again, mild to moderate recession. House prices are crashing at much faster rates than anyone seemed to guess, which is a good thing, since it suggests that homeowners who need to sell aren't hanging on for dear life hoping to turn a profit. It means we're not prolonging the inevitable, and we'll be able to get our shit back together much quicker than one might have feared.
It's a bit weird. My reading of everything that's happening right now is that it's roughly as I would've expected, albeit a bit late (I owe wchurchill a pint), but it's happening much faster. (Once more, if we Yanks get credit for nothing else, we get credit for doing things big.) Speed can make it seem more frightening, but I think it's a good thing. WHEEEEEEEEEEEEEEEEEEEEE!
Unemployment is over 12%. They don't count the people who are not getting UE benefits. Inflation is over 10% by the CP index as it was defined before 1982. This means that all of the GDP and related data is actually negative. MP3 ran at an annualized 15% for November, all because the money machine is running overtime to bail out the investment houses via federal bank loans.
If the financial system only gets constipated by fear of the level of fraud at their erstwhile partner's establishment, it may be that there will be a mere contraction. If people go to the vault and find it empty, then there will be dire consequences for the U.S. and associated economies. In either case the people that will be hurt the worst will be the people making $40k, whether they tried to buy a million dollar condo or not. Your comments do not imply much sympathy for them.
Yes, it is happening fast. That's what happens when the dam bursts. Trade won't solve the problem. Very few people need anything that the U.S. produces nowadays. Better to look inward for solutions, and the only ones that will work are political. paul spencer
Really, it's more the $80-100k/year crowd than the $40k/year crowd.
I'm not at all sympathetic to the upper-middle class, because it is a class of spoiled brats. As spoiled and greedy as the wealthy. These are the people -- largely Boomers -- who bought into the Reagan-Bush fairy tales of Supply-Side economics, who jumped on board when that crowd was demonizing the working class and promising that tax cuts would pay for themselves. It's the crowd that bought into the psychotic idea of Saddam Hussein attacking us with a nuclear weapon, when any sane person knows we could blow the entire Middle East off the map if we truly wanted to.
It's the Faux News crowd. The crowd that thinks Iran is our enemy, despite Iran helped us after 9/11 (and despite Iranians holding candlelight vigils in the streets of Tehran after the attacks). The crowd that spent three years obsessing over Bill Clinton's penis. The crowd that thinks missing white women and talentless idiots like Britney Spears are more important than global warming and credit-market crises on the news.
I'm always reminded of Matt Taibbi's description: The Culture of Emboldened StupidityTM.
As for your numbers on the economy, I don't know where you get them. And, as someone who actually, you know, helps produce those numbers for a living, I'm reasonably comfortable in saying that you're wrong. Were unemployment above 12%, it would be impossible to hide, and you'd see enough whistleblowing to deafen half of Washington from the agencies involved in it.
And let's keep something else in mind: Growth in M2 and M3 is not at all out-of-line with other countries/areas, including Canada, Australia, Britain and the Eurozone. I know everyone wants to see some sort of grand conspiracy in M3, but it's just not there. WHEEEEEEEEEEEEEEEEEEEEE!
By the way, overlooked in all of the panic in our business media and stock exchanges these last couple of weeks was the fact that productivity growth in America jumped to 4.9% in Q3. Real hourly compensation was up 3.1% overall, and 2.7% in nonfarm business.
I'm going to ask again: Why have interest rates been cut seventy five basis points since September?
Someone's got to tell me how this possibly amounts to anything other than a much better picture than we could've expected, or else these rate cuts are complete and utter horseshit. WHEEEEEEEEEEEEEEEEEEEEE!
Why would you include future SSA liabilities in a present-day deficit figure? (Lift the cap on payroll taxes, and that figure is wiped out.) I, further, don't accept the premise that these are unfunded liabilities, nor do I accept the premise that the projections on these liabilities are built on solid assumptions. This clown wants to use government stats when they suit his political and financial agenda, but call them into question when they don't.
And this is the same game the Republicans and their little prison bitch, Joe Lieberman, play when they try to convince us that Social Security is on the verge of collapse: Take the future obligations, cram them into present-day figures, and hope it so thoroughly scares Joe Sixpack that privatization is on the table.
I can get on board with the CPI understating inflation a fair amount. (That graph shows 6%, not 10%. Even deducting the necessary portion of real GDP, it wouldn't qualify as a recession.) 6% is still too high.
Are there any other sources? WHEEEEEEEEEEEEEEEEEEEEE!
Williams' numbers seem grotesque, but that is because we are the frogs being slowly boiled. Now the underlying issues have reached the geometric progression stage. Jerome brings up examples constantly.
Drew asked about the .75 interest rate drop in the last few months. It's a desperate attempt to keep the financial institutions working their Ponzi scheme - nothing more. It's another cycle of the virtual generation of money, and it, plus the 200 billion released by the Fed bank last month, are why M3 is jumping.
The problem with saying that removing the cap on SS contributions will lower the debt figure in short order is the political reality of actually doing that. It's true that one part of the solution to many financial issues in the U.S. is to squeeze the super-rich. Who's going to do it? Meantime, they don't know how to do anything except try to shill the system. paul spencer
Eight Levels of Inflation Annual Inflation for June to September 2007 Measure Jun Jul Aug Sep I.1 Core PCE Deflator 1.9% 1.9% 1.8% n.a. I.2 Core Chained-CPI-U 1.8% 1.8% 1.7% 1.7% I.3 Core CPI-U 2.2% 2.2% 2.1% 2.1% I.4 PCE Deflator 2.3% 2.1% 1.8% n.a. I.5 Chained-CPI-U 2.3% 2.1% 1.8% 2.3% I.6 CPI-U 2.7% 2.4% 2.0% 2.8% I.7 Pre-Clinton CPI-U 6.1% 5.7% 5.4% 6.1% I.8 SGS Alternate Consumer Inflation 10.3% 10.1% 9.9% 10.4%
"As suggested by the SGS-Alternate GDP, an annual third-quarter contraction of roughly 2.3%, the same as in the second quarter, is more in line with underlying fundamentals."
"SGS-Ongoing M3 Annual Growth Tops 15%. Subject to tonight's release of the large time deposits at commercial banks for the last week in October, the SGS-Ongoing M3 estimate of October annual growth tentatively is at 15.2%, the highest level since August 1971 (closing of the gold window), up from 14.7% in September and 13.9% in August."
"SGS" figures are explained on his site, but, essentially, they mean data based on the CPI format previous to 1983.
Here are some interesting excerpts from his monthly report of December 2006:
"The U.S. economy and financial markets face significant peril in 2007, with the dollar sitting on the brink of a major collapse. The positive 2006 U.S equity markets and reasonably tranquil credit markets belie the pending turmoil that already has been set in motion by a rapidly deepening inflationary recession and exacerbated by the de facto long-term insolvency of the U.S. government.
"Financial concerns in the year ahead should become dominated by growing recognition of a severe structural recession that is beyond traditional remedies, high inflation against which the Fed will appear impotent, and a sharp loss in the foreign exchange value of the U.S. currency. In conjunction with the inflation woes, the dollar crisis will lead to significant loss in the greenback's global purchasing power.
"This environment will not be a healthy one for equity and bond prices, as the dollar's weakness increasingly will mirror the flight of foreign capital and liquidity from the U.S. markets. On a financial-weighted basis, the dollar has the potential to lose more than 30% of it value. Gaining from these difficulties will be the precious metals, particularly gold, which has the potential easily to push above $1,000 per troy ounce in the year ahead. Enhancing the demand for that safe-haven metal likely will be continued deterioration in the U.S. and global political environment.
"Ultimately, the current circumstance will evolve into a hyperinflationary depression. Although such is not likely until the end of the decade, that financial end game for the current markets will tend to come sooner rather than later and will break with surprising speed when it hits."
And some more:
"Recession Recognition Likely in 2007. The 2005 to 2008 recession is getting worse, and continues to be reflected in a number of key economic series, ranging from retail sales to the purchasing managers survey, which showed an outright decline in November manufacturing activity. The various employment indicators remain in deterioration, while payroll growth broadly remains statistically indistinguishable from contraction.
"The U.S. economy is in a deepening and protracted recession that likely will endure through 2007 and into at least 2008. With recent economic history properly accounted for, this downturn is the second leg of a double-dip recession that began with the downturn in 2000. The economic contraction is structural in nature, driven by the loss of production jobs to offshore manufacturing facilities in recent decades.
"The effect of this structural change is that most consumers are unable to sustain adequate income growth beyond the rate of inflation. The only way that personal consumption -- the dominant component of GDP -- can grow in such a circumstance is for the consumer to take on new debt or liquidate savings. Both those factors are short-lived and have reached untenable extremes.
"The federal government and the Federal Reserve also are in untenable positions, with standard economic stimuli unavailable. From the standpoint of the federal government, traditional fiscal stimulus in the form of tax cuts or increased federal spending have reached their practical limits with the actual annual budget deficit running out of control at $4.6 trillion per year (see this month's Reporting/Market Focus).
"From the Fed's standpoint, it can neither stimulate the economy nor contain inflation. Holding or lowering rates will do little to stimulate the structurally-impaired economy, and raising rates may become necessary in defense of the dollar. Similarly, raising rates will do little to contain a non-demand driven inflation, such as seen in the current circumstance that is so heavily affected by high oil prices."
And one more:
"Of some concern, annual M3 growth is accelerating, picking up to 10.8% in December from 10.4% in November. Such is enough to begin raising issues of inflationary pressures from excessive monetary growth."
I suggest that his predictions are close enough to current reality to qualify his work as worthy of a hearing. In some previous comments I have discussed the concurrence of his model with specific examples such as the prices of postage stamps and gasoline. paul spencer
