Talk about the global and national economy to your heart’s content, as much as it takes to get it out of your system so the rest of the site can stick to real estate and housing.
For previous economic open threads, click here.
As of 09/07/2010, global economic comments that do not directly relate to Seattle-area real estate go only in threads designated for this specific subject.
home prices to fall another 7%.
MICHELLE MEYER: Home Prices Will Continue To Plunge, And 2013 Will Be The Worst Year For Foreclosures In History
http://www.businessinsider.com/michelle-meyer-on-housing-in-2012-2011-12#ixzz1fWCpQBRi
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RE: pfft @ 1 –
Let me just add this foreclosure crisis is also global. There are millions of housing units, globally, that are worth much less than what people paid for them.
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RE: David Losh @ 2 – People all over the world buy assets that quickly decrease in value with loans all the time. Cars are a great example. The main issue is will the borrower be able and willing to meet their loan obligations. I hear a lot of people on this site railing about the lack of jobs, and when we have a positive jobs report, that they are all minimum wage jobs. The fact is that the unemployment rate increased dramatically in 2007-2008, but the vast majority of those losing jobs were those in the bottom tiers of education and employment. (http://topforeignstocks.com/2010/02/20/us-unemployment-varies-significantly-based-on-income-levels/) The top third or so have unemployment rates that are far lower than the 8.6% or 9% we have been talking about. If you have software writing skills you are beating off jobs with a stick. If you are a high school drop out, or modestly skilled construction worker, or used to work in the mill or factory doing repetitive stuff the robots or poorly paid people in other nations can do, you are having a very hard time. This is a long term problem since populations with lower education and employment prospects also often have higher birth rates. http://www.census.gov/compendia/statab/cats/births_deaths_marriages_divorces.html
The home occupancy rate is around 85%. 56% of the total is occupied by owners, 29% by renters. Rents are rising. Nationally they are the 2007 level and trending up. They weren’t this high prior to 2007. http://www.census.gov/hhes/www/housing/hvs/qtr311/files/q311press.pdf Homeownership rates are just a couple (about 3) percent below their peak in 2004-5 and are bumping along pretty close to their standard error for the last year.
The economy is slowly improving, but we keep laying off government (mostly well paid) workers – which is the biggest drag on employment gains. Large corporations have record profits and incomes at the top are very high.
To get this economy going we need a bit more taken out of the savings of the big corporations and fed back into the economy among the lower income levels where it can be fuel for the engine – purchasing education, appliances, and everyday goods and services. And it would be great to stop wasting money on unnecessary wars and subsidies to the most profitable corporations on the planet.
Just a few thoughts from sunny NE Seattle.
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I’ve often referred to the declining labor participation rate and its tie-in with unemployment rates. Here’s an expanded analysis that suggests demographics were expected to reduce participation rates even without the current drop in economic activity. In short, we can’t expect the percentage of the population actively working to significantly increase for decades. This is deflationary news. Only workers can be taxed. Having a decreasing percentage of the population working while the percentage of the population requiring and/or expecting government support increases leads to additional financial pressure on the federal budget. It’s ever more obvious we’ve pretty much run this game out. With medicare/medicaid costs alone rising at 10% annualized rates, increasing social security payouts, etc. and ever fewer workers to support such demands it won’t end well.
http://www.calculatedriskblog.com/2011/12/comments-on-employment-population-ratio.html
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RE: NESeattleSeller @ 3 –
Yes, the unemployment rate for those with a degree is about 4%. The problem is that college degrees aren’t putting food on the table, literally.
Since the beginning of the computer age, and tech revolution, more people sit, and make complex financial calculations based on risk, and rewards.
Glenn buddy compared redfin to ETrade which is the perfect storm of idiot analysis. Billions, and trillions have been lost in the global economic crisis, but by all means you can get online, and make bets based on data provided to you by all the people who run the stock market.
What do you think? Do you think an online Brokerage has any interest in whether you win or lose your bet? As a matter of fact if you lose your investment that is a profit to some one else.
OK, let’s take farming, because that used to be a muscle job. Farmers get subsidies as an insurance for the very tight margins that they run. No need to risk a surplus, no sir, cut that margin so we can keep the prices were we want ‘em.
Manufacturing jobs that we used to have are going over seas. Is that because the labor is cheaper? or is it because we can avoid taxation on several levels?
We are in the bean counters paradise. All profits are squeezed from every little accounting trick any one ever thought of. People are sold, extorted, extolled, and then scammed , every frigging day by that 4% unemployment rate bunch of vandals.
OK, so here we are, and your question is if people will pay for non performing assets after they realize they were taken advantage of. They won’t, they can’t.
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By NESeattleSeller @ 3:
That very well could be the case, but those running small businesses (contractors and such) were also hard hit. That doesn’t show up in the employment numbers at all, unless those small businesses have employees they lay off in order to survive. More likely a number of their employees become part time.
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By Scotsman @ 4:
no it doesn’t. we can shore up the budget if we just do nothing and let the bush tax cuts expire.
The do-nothing plan: now worth $7.1 trillion
http://www.washingtonpost.com/blogs/ezra-klein/post/the-do-nothing-plan-now-worth-71-trillion/2011/08/25/gIQAmfIIYN_blog.html
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RE: pfft @ 7 –
A perfect example of your lies and distortions. Out of the $7.1 T in claimed deficit reduction over the next 10 years (the $700B/year is about half the current defict) only about $200B/year or 15% of the current deficit would be closed by letting the tax cuts expire. But why stop there? Let’s take all personal income over $100K/year and tax it at 100%. Yup, take all of it. Guess what- we’d STILL run a deficit.
If your income depends on the government you are going to be in for one h%ll of a shock. It’s funny in a dark way watching everybody run around here and in Europe trying to come up with a way to make 2+2=37. Ain’t gonna happen.
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By Scotsman @ 8:
1. your numbers are wrong and I posted why months ago.
2. sources please.
“Guess what- we’d STILL run a deficit.”
it would be negligible. less than $200/billion a year in a growing economy.
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RE: pfft @ 9 –
“less than $200/billion a year in a growing economy”
Badda-Boom. So now you admit all of your claims are wrong. Nice. As for sources, do your own homework, carry your own weight.
Nero Wolfe Mysteries. Wolfe is asked. “Is there anything you can’t do?”
Wolfe answers. “I can’t pour sense into the mind of a fool. I’ve tried.”
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By Scotsman @ 10:
the deficit is negligible. debt as a % of GDP would stabilize.
sources still please.
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By Scotsman @ 10:
tough talk for a guy who predicted economic armageddon and failed miserably.
#notwinning
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RE: pfft @ 12 –
“a guy who predicted economic armageddon and failed miserably”
It’s all around you. The worst is starting to fully reveal itself in Europe and will soon enough be here. We already have $trillions in lost wealth, an unsustainable federal government, a pretty much non-existant recovery from the last leg down- and more to come.
Did you think something that took 200+ years to build would crumble overnight?
Jeremiah 5:21
“Hear now this, O foolish people, and without understanding; which have eyes, and see not; which have ears, and hear not”
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By Scotsman @ 13:
you didn’t say anything about Europe. Europe’s problems are the lack of growth and employment due to the adoption of the Euro and now the austerity measures aren’t helping.
” an unsustainable federal government”
government spending is helping to keep the economy growing. austerity has failed miserably everywhere. in the Eurozone and in Britain it’s failing.
still waiting on those sources…
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“Did you think something that took 200+ years to build would crumble overnight?”
you said give it six months. it’s been a year and 6 months since you said that. any new excuses?
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Will a change in the Fed’s board increase the likelyhood of more QE? Some think it may. But then there’s still the political mood in the country to contend with:
http://www.zerohedge.com/news/when-doves-laugh-4-weeks-until-quiet-coup-fed-gives-qe3-green-light
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still waiting for those source…
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RE: Scotsman @ 13 –
Once you start quoting the Bible you’re lost.
The dynamic of the fed is interesting, but hardly important to the recovery we currently have. You may not like it, it may be built on sand, but it is growth, and movement.
The one point that I want to emphasize is that foreign investment is here to stay.
We may be on shakey ground, but we have a government that is open to investment. You may not like Obama, but his inclusion of the Asian corridor is by far the best step he could have made. Obama has opened a lot of doors for us.
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here is how it goes.
1. scotsman makes a wild claim
2. I ask for a source.
3. scotsman turns it around on me and tells me he isn’t going to do my(his) homework
4. scotsman never sources what he says
5. I ALWAYS source what I say
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The other side of income inequality:
http://townhall.com/columnists/kevinmccullough/2011/12/05/why_income_inequality_is
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RE: David Losh @ 18 –
“it may be built on sand, but it is growth”
No David, it’s not growth. It’s balance sheet expansion. It’s a mirage- yup, just like the ones you see over sand.
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RE: Scotsman @ 21 –
Not a mirage, you know that it’s real, you are focused on the numbers, which are huge.
Donald Trump pointed to the $15 Trillion debt and said that if we paid a Billion dollars a day it would take 36 years to pay that debt off. That’s only $365 Billion a year for 36 years.
By inserting the word “only” into the statement it makes sense. It’s something we can do. We can, in fact, afford to pay $365 Billion a year to pay off the debt.
I don’t know if it’s a true statement or not. It’s Donald Trump; the guy is an unpatriotic sociopath who is ego centric to the point of insinuating himself into a Presidential campaign. It does show that the spin is in that we can fix the debt crisis the government has.
The way I see it is that we should expand the social programs for the poor, and now, middle class. We should provide health care, and education. We should have more robust social programs that provide food, and shelter. We can do all of that at reasonable price.
If America is so resourceful, if the America entrepreneur is so successful, they shouldn’t need all of the subsidies, all of the tax breaks, all of the government support that we give, at a very unreasonably high cost. Let farmers farm, and buy what they grow. If oil is such a hot deal then let it stand on it’s own. I don’t care if a car is safe as long as it’s effective. Let’s open up the auto industry to who ever can build a better product.
Let’s stop protecting patents indefinitely for huge corporations that only prolong high prices for excessive profits. How about that drug business. We have drugs that have been tested, and proved effect for thousands of years, and they are illegal. What’s the deal with that when we can put a Celebrex on the market, or Halcyon?
Our government should be providing for the Public Welfare, and not protecting corporate profits with unfair legislation. There are a lot of things we can do to make the United States productive again, pay off debt, and become a desirable place.
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By David Losh @ 22:
amen sir.
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everyone should see this article. this is very relevent to an economic thread because HC is a growing part of our economy and is a significant cause of personal bankruptcy.
‘Obamacare’ to the rescue
A woman who felt President Obama had let the middle class down has changed her mind.
http://www.latimes.com/news/opinion/commentary/la-oe-ward-in-praise-of-obamacare-20111206,0,6794828.story
SOCIALIST!
“A woman who felt President Obama had let the middle class down has changed her mind.”
yeah, a serious illness will do that for you.
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who could have predicted this?
U.S. Hit by 12 Weather Disasters Costing $1 Billion Each in ’11, Most Ever
http://www.bloomberg.com/news/2011-12-07/u-s-hit-by-12-weather-disasters-costing-1-billion-each-in-11-most-ever.html
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It looks like Corzine will testify rather than seeking the protections offered by the 5th amendment. However, I predict he will deploy the ingeniously crafty and far more effective Homer Simpson defense:
“I didn’t do it! I didn’t do it!
It was that way when I got here.”
I’ll bet a lunch on it. Any takers? Ira? Scotsman? Pegasus? Blurtman?
And I’ll give you odds – lunch at Wild Ginger vs a Claim Jumper “fire in the hole” entree.
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RE: One Eyed Man @ 26 – Doesn’t Sarbanes-Oxley remove ignorance as an excuse for CEOs? I thought that was what SOX was supposed to be all about.
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RE: One Eyed Man @ 26 – LOL. How about the “Fog of war” excuse?
I am afraid it will be the usual “I was too high up the ladder to have knowledge of the day-to-day ongoings of the company” excuse. But curiously, no one who might have had such knowledge will ever be brought to justice.
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RE: One Eyed Man @ 26 –
He’s a patsy.
The investments of the Global firm were in European, and global debt. Look at the returns offered on this foreign debt.
Now we are going to, or Congress is going to, arm chair quarter back that we should have all known that the Euro would tank, Greece would be on the brink of default, and that national debts were unsustainable.
Well, wait a minute, if Congress knew all of that how is it we have the massive debt crisis that Congress handed us.
I know, let’s blame Obama. Let’s haul him in next because he should have protected those investors.
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RE: ChrisM @ 27 –
I’m pretty sure you’ll see by his testimony that he was in compliance.
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Should be interesting to see how OWS interacts with the unions on the west coast. I don’t expect they’ll get much, if any support. The bigger question is whether they will become the target of any violence.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/12/08/BUTP1M8VTI.DTL&type=business
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More fun with government statistics:
Week ended Dec. 3 initial unemployment claims- 381,000, down 23,000 from the previous week. Yeah- the recovery is picking up!
Unadjusted (i.e. raw data) claims for the same period- 523,000, up 151,000 from the previous week. Holy Sh%t, Batman!!
Who ya gonna believe- the actual raw numbers, or the government adjusted numbers? Is an adjusted job the same as a real job? Are real workers seasonally adjusted out of existance? What happened to the 151,000 new claim filers? Soylent green? Are they they the new green jobs Obummer keeps talking about?
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By Scotsman @ 32:
strawman alert.
you’ll never ever point out the unadjusted numbers that make the unemployment claims look better than they are. I have no doubt about that so this is all pointless.
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RE: pfft @ 33 –
“the unadjusted numbers that make the unemployment claims look better than they are. ”
Please show them to me.
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By Scotsman @ 34:
you really want me to go through the weekly claims numbers and find when the unadjusted numbers make unemployment claims look better than the seasonal one’s do? no thanks. I wasn’t pointing out your bias. you only post when the numbers look bad, not when they look good.
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RE: pfft @ 35 –
” I wasn’t pointing out your bias. ”
Really? What were you pointing out then? If the data to support whatever your point is exists then let’s see it.
My source, the federal government, says in real terms the number of new unemployment claims jumped by 150,000 last week to 550,000. Then they magically adjusted it down (using seasonality during xmas?) to only 380,000.
The Feds are also selling bridges- to nowhere.
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By Scotsman @ 36:
oh god, the data is always seasonally adjusted. I just pointed out you will only point out the unadjusted data when it’s bad.
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By Scotsman @ 32:
speaking of green.
One Trillion Dollars Invested in Clean Energy In Past 7 Years
http://www.treehugger.com/renewable-energy/one-trillion-dollars-invested-clean-energy-past-seven-years.html
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RE: pfft @ 38 – Warren Buffett just made a $2B investment in the area.
http://greenstockscentral.com/warren-buffett-makes-big-solar-bet-with-2b-topaz-purchase-from-first-solar-fslr-is-the-bottom-in-4301.html
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By pfft @ 14:
Let me guess. You have your credit cards maxed out? It’s pretty fun living that way isn’t it?
http://www.nber.org/~wbuiter/cr1.pdf
Your hero Keynes recommended running a budget surplus during good economic times. Apparently, Keynesian spending doesn’t work so well if you start out in the sewer with the hope of someday getting half way to the toilet bowl swimming upstream fighting turds all the way. It works great right up until you get blasted by that massive wad of toilet paper. :)
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The brainwashed political worshipers among us really crack me up. So you really think your favorite candidate or party is going to ride to the rescue and save the day? I got news for you. They created this mess and have absolutely no intentions of fixing it. You are just the little people. Your job is that of a tax paying wage-slave for the super elite.
The reason we are in this mess is because you keep voting for these incompetent mouthpieces. So you are going to repeat the same course of action and expect different results?
You are a bunch of masochists.
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By Jonness @ 40:
I support the concept of stimulus, but I need to ask pfft how long is supposed to go on? We’re well over 4 years into the financial crisis, and I’m fairly sure that Italy, Greece and Spain were spending more than they were bringing in for all of that time. So just how long can it go on?
My answer would be that it’s something you could do for a year or two at most, and if it hasn’t worked at that point, it’s pointless to continue. Something else is structurally wrong with the economy of the country at issue.
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By Jonness @ 41:
I would agree with all of that, except I don’t think we’re wage-slaves for the super elite. The politicians only do things for the super-elite so that they have fewer sources they need to tap to get their campaign donations. They don’t care about the super-elite any more than they care for the rest of us.
Congress has become like professional wrestling. Just a show of words that no one means, said to attract a gullible audience.
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epic takedown of austerity/anti-kenyesianism.
Lessons From Europe
http://krugman.blogs.nytimes.com/2011/12/10/lessons-from-europe/
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By Jonness @ 40:
I don’t have a credit card.
” Keynesian spending doesn’t work so well if you start out in the sewer”
I don’t have a clue what this has to do with anything. stimulus saved/created millions of jobs. the output gap is near $1 trillion so we need to spend a lot more money.
the bond market with it’s record low rates is begging for more stimlus.
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By Jonness @ 41:
so who are we supposed to vote for? clueless ron paul?
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By Kary L. Krismer @ 42:
1. stimulus lasts as long as there is an output gap. that is the difference between what the economy can produce and what it actually is producing.
2. the structurally wrong thing with europe is the euro. some countries need massive devaluation and that just doesn’t work.
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By pfft @ 47:
Why not? How is Italy any different as to the Euro than California as to the United States?
I can sort of see what you’re getting at, and I think the other way to put it might be the Euro didn’t go far enough and create only one country. Their recent negotiations seem to me trying to move in that direction a bit, with oversight over spending and budgets. As is they’re sort of a United States light, and perhaps that isn’t sufficient.
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“It’s time to start calling the current situation what it is: a depression, says Paul Krugman”
Well, well- if Krugman says it’s a depression, pffft can’t be far behind. Sounds like economic disaster to me- and Krugman.
http://economictimes.indiatimes.com/news/international-business/its-time-to-start-calling-the-current-situation-what-it-is-a-depression-paul-krugman/articleshow/11078385.cms?curpg=1
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RE: Scotsman @ 49 –
Did Krugman write that?
The problem in Europe is the Euro is over priced, and over valued. No one has ever looked at the European Economic Community as one unit. They formed the community then ran things like each country was still a sovereignty.
It’s still that way today with France, and Germany wanting to call the shots for Italy? Good luck with that.
The Euro should be much lower taking into account there is a massive black market in Europe that just got a lot worse. It’s open borders. There is less, and less to prop up this new currency other than the promises of governments to pay. Where are they going to get the money? They aren’t.
Whoever wrote this, or the person quoted from some think tank doesn’t get the Euro trash element. People keep looking at Germany, Switzerland, and Belgium like they will hold together when people take to the streets. Of course they will be taking to the streets in Greece, Spain, Ireland, and Italy, but this time the cleaner countries aren’t insulated.
They should devalue the Euro, and inflate out of debt, then call this whole thing a learning curve. I’m actually very encouraged.
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U.S. Economic Data is Surprising Forecasters
http://www.bloomberg.com/news/2011-12-12/forecasters-miss-by-most-in-nine-months-amid-improving-u-s-data-economy.html
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By Scotsman @ 49:
yeah, in Europe. you can’t even quote right.
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RE: pfft @ 52 –
Reading is hard. Comprehension is even more difficult- for some. Your buddy PK, writing in the New York Times, starts out talking about the U.S. Remember, he’s writing his column in the NY Times. Then he goes on to focus on ONE aspect of the consequences of a depression- the threat to democracy, and choses to focus on a couple of specific examples that happen to be in Europe. But the depression comment is clearly aimed first at the U.S., then at the rest of the world. Here’s the original:
http://www.nytimes.com/2011/12/12/opinion/krugman-depression-and-democracy.html?_r=1
Keep hope alive. Yes we can.
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By Scotsman @ 53:
ok you’re right but the unemployment level in the US is coming down and the US is much better off than Europe as long as we don’t enact austerity.
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RE: Scotsman @ 53 –
Here’s a couple of points about Europe. Number one the entire world hates Germany, and Germans in general. That is a blanket statement for you based on the resentment we have for the First, and more so, the Second World War.
Next, it is interesting that Japan had a booming economy after the war, and now it’s Germany’s turn. They have nothing better to do, they were defeated, and rebuilding without the bother of a military.
The “Allies” were stuck footing the bill, and taking reparations. Another boon doggle on top of that, Germany had the influx of investment dollars when the Berlin Wall came down. It was both a curse, and a gift.
I don’t want to get bogged down other than to say that Europe can now devalue the Euro, and go back to doing business. There may be some squabbling, but the mechanics are there if Germany can be put in her place.
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We’ve talked about tuition before. UC has an interesting program, where students from middle income, middle-class families get a reduced tuition, sort of like at private schools. Part of it is made up by their working for the school. And it’s basically funding by allowing in more out of state students. Their goal is to only allow in as many in-state students as what the state pays for.
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/12/14/MN4U1MCJQC.DTL
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RE: Scotsman @ 49 – That’s a great article for several reasons. The readers’ comments make good reading.
“Mr. Krugman its a great service that you r doing outlining how the world (western) is in depression. You should have also highlighted points in your very own country, where probably, situation is far more worse. EU is a unit and they might dismantle Euro and get back to their respective currencies. But, What about US? US as big as Western Europe is on the verge of great depression , greater than 1930. Occupy Wall street and what not. Its all about Karma. You pay for what you did to others.”
“Krugman is right. He is not a pessimist but a realist. I have been reading his columns since the 2008 crisis and he has been consistent. He objectively had pointed out the the shortcomings of the way things were handled in 2009 by the US (i’m no economist so i don’t remember the exact theories). On another note consider the following preconditions for a revolution and judge for yourselves where we are now: 1. Soaring then crashing standards of living 2. Rising class war/disillusionment 3. A generation of abandoned intellectuals 4. Incompetent government 5. Failure of leadership 6. Fiscal Irresponsibility 7. Inept and inconsistent use of force —————————————————————————-”
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RE: Scotsman @ 53 –
Do you ever post anything positive?
Just wondering…
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California unemployment drops to 11.3 percent! That’s a pretty bad number for one apparently showing improvement.
http://www.businessweek.com/ap/financialnews/D9RLUUV00.htm
Just shows what happens when you have a government that hates business.
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RE: Kary L. Krismer @ 59 –
To go along with some of the themes that I’m advancing, how much commerce do you think goes on in California that is black market?
When you say “hates business” do you mean big business, or pot shop business?
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RE: David Losh @ 60 – Big business. As I’ve said in the past, California’s solution to the energy crisis was largely to raise rates on business and commercial accounts, leaving over half the residential accounts untouched. They made the decision that a $10 a month increase in your electric bill was worse than you losing your job.
Other than tech (Silicon Valley), business isn’t really expanding in CA. And since CA is a large part of the US economy, it’s a huge anchor.
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RE: David Losh @ 60 – None of the states would probably be in financial trouble if they could regulate and tax part of that black market (weed). Governments used to be opposed to gambling too, with the main exception being horse tracks. The need for money has changed that. Don’t be surprised to see the need for money change more things.
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darn right. austerity and austrian economics has failed.
Well, It Sure Seems Like Keynes Was Right
http://www.businessinsider.com/keynes-was-right-2011-12#ixzz1gp4tVyht
austerity was supposed to inspire confidence.
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By Kary L. Krismer @ 59:
oh god. it’s the housing bubble not the government.
if the government is so anti-business how is california one of the largest economies in the world?
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By Kary L. Krismer @ 61:
you know that big business caused the energy crisis right?
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RE: Kary L. Krismer @ 61 –
Wow!
The energy crisis again?
California is anti business? Wow!
That was just to get to where you need to be with the out look that California has one of the highest demographics of people from Mexico. We have an entire economy in California that is based on open border trade.
The United States government has the immigration laws that restrict the free trade California has with Mexico. Is your unemployment number counting that trade? or is all about Alcoa Aluminum? Oh, energy crisis, California, is Alcoa.
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By pfft @ 64:
Because they weren’t always that way? I’m talking over the past 10 years. How has the economy of CA done over that time?
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By pfft @ 65:
No, stupid politicians did. Democrats and Republicans. Business just took advantage of it, as anyone who took Econ 101 would have known.
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RE: Kary L. Krismer @ 68 –
You must have taken econ 101, you rely pretty heavily on that.
However we are talking about California. If I recall correctly, which I do, California had an installed generating capacity of 45GW, but at the time of the blackouts demand was 28GW.
Your defense of Enron is bizarre. You bring this up every chance you can.
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By David Losh @ 69:
Because it’s a lesson Americans never learned and thus are doomed to repeat. You fell for the Enron fiction, as did almost everyone else. They were the scapegoat for the politicians’ stupidity.
You’re wrong on the generation issues, however. They barely had the electrical lines to carry the demand at times. What was needed was higher prices to reduce the usage, regardless of how many generators they had.
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RE: David Losh @ 69 – BTW, they knew exactly how much electricity was available, which plants were off-line and why they were purportedly off-line. These charts were available then–I used to watch them to predict the timing of blackouts.
http://www.caiso.com/Pages/TodaysOutlook.aspx
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RE: Kary L. Krismer @ 70 –
Usage? You mean air conditioning at Wal Mart.
Actually it was reselling. Yes they could have raised the prices even more, but why should the house hold consumer pay for a back room deal? Well they are now, but the use of household electricity was nothing compared to an Alcoa smelter.
Actually, if I recall correctly, Alcoa shut off the smelter in California, and resold the electricity it had under contrat for a hefty profit.
Enron was a patsy, I’ll give you that, but that doesn’t change the fact the deregulation in California made a lot of people, a lot of money.
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some good news.
note how california’s anti-business climate allowed the unemployment rate to get down to about 5%.
Inland Empire: Unemployment Rate now declining
http://www.calculatedriskblog.com/2011/12/inland-empire-unemployment-rate-now.html
State Budget Cuts: Nearing the End?
http://www.calculatedriskblog.com/2011/12/state-budget-cuts-nearing-end.html
if state budget cuts are nearing an end this will be a big boost to the economy. austerity at the state and local level has held back the recovery.
if even the inland empire is starting to recover this will be a big boost to the economy also.
let’s hope europe doesn’t mess it all up.
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love when krugman takes on the inflationistas.
Inflation Conspiracy Theories
http://krugman.blogs.nytimes.com/2011/12/18/inflation-conspiracy-theories/
love the inflationista(austrian) playbook.
it’s always the governments fault
the government numbers are cooked
inflation and then hyperinflation is just around the corner!
just remember if you are an Austrian and your prediction doesn’t come true just blame the government.
if years ago you said interest rates would skyrocket and they haven’t just blame the Fed for artificially depressing interest rates.
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By David Losh @ 72:
I mean all usage. If unused computers had been turned off, that allegedly would have eliminated all the blackouts. If all the stoplights had been LED, same. It wouldn’t take much to eliminate them, as evidenced by the fact that the areas of blackout were typically rather small.
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RE: Kary L. Krismer @ 75 –
Sorry, this was a deregulation that profited a select few. This is just another example of how government makes policies that a few people can profit from.
It’s called the freeway exit. If you are a land speculator, and you know where the freeway exit will be, you can make a profit.
Dick Cheney, and Haliburton did the same with the Iraq war. In the case of Iraq a few thousand people had to die in the process. In California people were simply inconvenienced.
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By David Losh @ 76:
That was the result, but it wasn’t their intent. The politicians were just stupid, and then when bad things happened they remained stupid.
The sad thing is that what people learned from the experience was that deregulation is bad. It really had nothing to do with deregulation because the problem was with the part that remained regulated (although there were other issues with the legislation beyond that).
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By David Losh @ 76:
BTW, if you think it was merely an inconvenience, you really don’t understand the scope of the problem. The amount of money expended because of one state’s stupid mistake and then stubbornness was staggering. Even in Washington state. They caused real harm to the economy going forward. It’s not what tipped us over, but it certainly didn’t help.
How big it was is also why Enron wasn’t the cause of the problem. If Enron had been the cause, they would not have gone bankrupt. They would have been one of the most profitable companies in the country at the time.
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By Kary L. Krismer @ 77:
no the problem was private sector fraud.
http://en.wikipedia.org/wiki/California_electricity_crisis#Involvement_of_Enron
The Engineer and Grandma Millie: The California Energy Crisis Revisited
http://engineeringethicsblog.blogspot.com/2006/04/engineer-and-grandma-millie-california.html
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RE: pfft @ 79
- You’re a sheep. You fell for the politicians’ stories.
Note the $1B Enron settlement–a settlement where the amount didn’t matter because the company couldn’t pay for it, so presumably isn’t low. That’s a drop in the bucket. California’s treasury went though $20B after it bankrupted two huge utilities. And that’s only California. It doesn’t include the unnecessary losses in other states, like Washington.
Just in Seattle alone they raised electric rates by 10% but still had a $150M deficit.
http://www.fundinguniverse.com/company-histories/Seattle-City-Light-Company-History.html
People who think Enron was the problem has either no sense of the scale of the problem, or are horrible at math.
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RE: Kary L. Krismer @ 80 –
Your fixation on Enron mystifies me.
There was no crisis. This was market manipulation that we are all still paying for so some traders could keep profits.
Losses, or banruptcy to hide profits, don’t make a strong case that it didn’t happen.
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RE: David Losh @ 81 – You’re missing the first step. There would have been no crisis but for the situation California created. They kept consumer prices from rising at a point in time where no new generation capacity was being added. That created unnecessary shortages and caused wholesale prices to skyrocket.
My only focus on Enron is to point out that they are a scapegoat–something you’ve agreed with above.
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Vulture Capitalist Williard Mittens is supposed to beat Obama in an election? no way. not with this record!
Mitt Romney’s Bain Problem Worsens
http://2012.talkingpointsmemo.com/2011/12/mitt-romneys-bain-problem-worsens.php?ref=fpnewsfeed
it’s easy to see why their is an occupy movement in cities across the country. romney is the very epitome of what the OWS movement is protesting. he’s the 1%.
four more years of obama!
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By Kary L. Krismer @ 80:
did you read ANY of the links I posted? they purposely had TONS of capacity offline to jack up prices and make tons of money.
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By Kary L. Krismer @ 82:
gosh you just don’t read. they purposefully kept tons of capacity off the market with the specific intent to drive up prices. this is just unbelievable.
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“Gallup which constantly pools 30,000 people on a weekly basis, has found that for the past 4 weeks, both underemployment and unemployment have risen for 4 weeks in a row”
http://www.zerohedge.com/news/gallup-finds-unemployment-rises-fourth-week-row-cautions-bls-data
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By pfft @ 84:
“Purportedly”=B.S. Did you read my ISO link? They knew all the plants that were off-line, why they were off line and when they could come back on. There were sometimes some surprises, but those typically didn’t cause blackouts. In fact, once a blackout was avoided by a plant coming on line early.
Plants do not work 24/7 365 days a year.
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By pfft @ 85:
You just don’t understand. If the prices were higher for consumers then taking equipment off line (if you want to falsely assume that happened much) wouldn’t have any effect. That’s why that was the first step. Get it?
Do you think it’s just a coincidence that the last blackout in CA was before they raised consumer prices? Why do you think they didn’t just keep making tons of money after that? They couldn’t! The conditions were no longer right to do so.
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By pfft @ 83:
From your linked article:
Business consultants for troubled businesses always get paid as they go. So that’s only the “toughest part” to understand if you don’t understand how the world works.
I agree it could hurt Romney, because not that many people know how the world works. I used to run into those complaints all the time in the bankruptcy world where creditors were upset that those working for the trustee got paid ahead of them. If they didn’t, nothing would get done.
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RE: Kary L. Krismer @ 82 –
Because Enron was a bit player, the broker.
Yes the entire excercise was to drive up consumer pricing. We are all paying for the fact electricity was manipulated into a buying, selling, insuring, and deriviatives scheme that a few people profited from. That there is your deregulation, and free market.
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RE: pfft @ 85 – Just out of curiosity, do you deny that less electricity would be used at higher prices?
People in the electric generating business used to deny that. That’s why they tried to build all those nuclear plants in Washington. The problem was, once you priced electricity to pay for them, the electricity wasn’t needed. In fact, once you priced to only pay for part of them (what actually happened), it wasn’t needed.
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By Scotsman @ 86:
are you still on that?
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By David Losh @ 90:
You’re still not getting it. If CA had say raised the regulated consumer rates 10%, then the non-regulated market would have functioned properly, and none of the excess profits would have been made. The wholesale prices would have stayed where they were before the “crisis.” SPU would not have had to raise their rates 10% and would not have incurred $150M in debt.
The best example of the same thing happening today is China and a few other countries selling gasoline at heavily subsidized prices. That results in them using more gas than what they should, which results in more oil being bought, which results in much higher prices everywhere else.
California having too low of consumer prices raised wholesale electric prices on the whole west coast. China having too low of gasoline prices raises the price of oil and gasoline around the entire world.
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By Kary L. Krismer @ 88:
you’ll just never get it.
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RE: pfft @ 94 – I notice you didn’t answer my question about why the blackouts ended.
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By Kary L. Krismer @ 87:
please please please read the links. they purposely took plants offline.
Ex-trader charged in California crisis fraud
http://articles.chicagotribune.com/2003-06-04/business/0306040215_1_john-m-forney-enron-trading-strategies-manipulation-of-western-energy
is that good enough?
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By Kary L. Krismer @ 89:
you think it’s right that they were a “consultant” for a company they bought?
do you realize what they did to some of these companies? they bought the companies, loaded them up with debt using the companies credit rating and paid themselves a dividend using that borrowed money. many of these companies went bankrupt. many laid off all their employees.
is there anything a corporation can do that you won’t defend? anything?
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By Kary L. Krismer @ 95:
the government stupidly gouged consumers and californians had to pay billions of extra dollars to have the lights back on.
great deal for the electricity companies. I bet none of them gave any money to politicians in california?
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By pfft @ 96:
That link doesn’t say any of that. But let’s assume that’s the case. Why was I typically able to predict the time of the blackout 24 hours in advance using the ISO predictions of capacity and demand? Why was it that if I was wrong, it was usually because there was no blackout?
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By pfft @ 98:
You don’t even understand the parties. There were three groups of parties (ignoring traders). Producers, utilities and consumers. California forced utilities to buy power for $100 and sell it for $10. They did that until they ended up in bankruptcy. California then spent $20B of it’s own funds guaranteeing the utilities buying power at peak times for $100 (or more) and selling it for $10. If they’d just allowed the utilities to sell electricity for $11 then the utilities could have bought it for about $5.
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