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Here is your open thread for the weekend beginning Friday March 23rd, 2012. You may post random links and off-topic discussions here. Also, if you have an idea or a topic you’d like to see covered in an article, please make it known.
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ECRI Says Recession Call Stands
Many have questioned why, in the face of improving economic data, ECRI has maintained its recession call. The straight answer is that the objective economic indicators we monitor, including those we make public, give us no other choice.
In contrast to the 3% GDP growth widely reported for the latest quarter, year-over-year growth in GDP, after peaking at 3½% in Q3/2010, has basically flatlined around 1½% for the last three quarters. Broad sales growth has followed a similar pattern, while the growth rates of personal income and industrial production have dropped to their lowest readings since the spring of 2010.
Most data, both public and private, are seasonally adjusted. But the nature of the Great Recession seems to have had an unexpected impact on the statistical seasonal adjustment algorithms that are hard-wired to detect when the seasonal patterns evolve and change over the years. This is normally a good thing, but when the economy fell off a cliff in Q4/2008 and Q1/2009, it was partly interpreted by these procedures as a lasting change in seasonal patterns. So, according to these programs, data from Q4 and Q1 would be expected thereafter to be relatively weak, and therefore automatically adjusted upwards. Our due diligence on this subject indicates a widespread problem, resulting in many recent economic headlines being skewed to the upside.
http://www.businesscycle.com/news_events/news_details/5065
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RE: Pegasus @ 1 – Move along. Nothing to see here.
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RE: Pegasus @ 1 –
I’m going to say this again, it’s all about debt, and consumer spending.
Consumer spending goes up, and credit card use goes up. Refinancing may add dollars back into the economy, but that is based on long term debt. Gas prices go up, and more debt goes to the credit card.
There gets to be a point where the consumer says no, then the negative headlines start again.
In the mean time the financial market grows like crazy. Traders buy, sell, and trade this debt, and generate more profits that the stock market buys. More investors hold more debt instruments, then count broad based paper equity as if it were money; It’s only money when it’s cashed in.
These are the makings of another collapse, or recession, or depression, depending on who cashes in first.
What happened to all that talk about deleveraging?
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RE: Pegasus @ 1 –
Yes Pegasus
Another skewing of the data is the top 1% household incomes seeing massive positive income shifts, like oil companies and stocks that are energy based. The base price they sell from all goes up with oil, then they add their constant profit on top of that….this pyramid scheme works until the consumer stops buying at higher and higher prices. We saw that happen in 2008 after the $145/bbl oil, then the bank collapse. How quickly we plummeted back down to $50/bbl after that fiasco.
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RE: David Losh @ 3 – GDP growth and “expansion” is debt fueled by design. The efficiency of this strategy has declined greatly. The TBTF’s, ratings agencies and other institutions are partners with the USG in this plan, hence, no one goes to jail. The increasingly toxic debt is bundled into securities and sold to suckers. Institutions who are complicit in this machine are ultimately bailed out, and their toxic garbage is bought by the Fed as a part of “monetary policy”, all for the greater good, you see.
Toxic student loan debt directly and indirectly fuels consumpmtion, and hence, GDP growth. If you subtracted bogus housing consumption from GDP over the last 10 years, GDP would likely have been shown to be negative. But on one is doing this. It is like a business that inflates revenue by shipping empty boxes to customers. Their stock goes up, everyone is happy.
It is all smoke and mirrors, but you better obey the law, ya hear.
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I wonder if one could make a blanket statement that as long as interest rates (specifically, savings accounts) are below x% (maybe define x = 6) the economy cannot be considered healthy.
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RE: ChrisM @ 6 – I think that is a reasonable statement. The Economist, a publication I tend to agree with, has argued this for years. If you are referring to retail savings accounts, I’d say that figure may be closer to 4.5% – 5%. More of a gut feeling, but this figure is low enough that borrowing is still reasonable, but high enough that it encourages consumer saving. In other words – promotes a real economy.
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RE: ChrisM @ 6 –
An Interesting Analogy Chris
Without Social Security there is no America. Same with other retirement consumer spending, i.e., 401Ks, with retirees’ interest buying things like Boeing plane tickets and MSFT computers/software.
The Yin and the Yang of keeping savings interest zombie 0% is butcher axed consumer spending destroying the economy’s consumer base with lower mortgage interest rates keeping home prices as high as they are now.
Which is better for the economy, a saving base for the future, or a propped debt structure of past bubble sins? There’s two sides to this argument, i.e., if you’re an investor you want higher interest rates, if you’re in debt or want to be in debt, you want 0%.
I imagine this fight will be going on for the next few decades. The Tim’s Seattle Bubble will have lots to blog on for a long time it appears.
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RE: wreckingbull @ 7 – RE: wreckingbull @ 7 –
Yes Wrecking Bull
Businessweek just put out an article on the fact that higher interest rates actually help the stock market. Article:
“..According to the S&P analysis, going back to 1953, U.S. stocks actually posted their best returns when 10-year Treasury yields rose to almost 4 percent. The S&P 500-stock index gained on average 1.7 percent a month during periods when 10-year yields climbed to a range of 3 percent to 4 percent. When yields exceeded 6 percent, stocks would finally cry uncle and start losing money….”
http://www.businessweek.com/articles/2012-03-22/who-says-rising-rates-are-bad-for-stocks
Your 6% figure limit makes sense to the article above.
.
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Another deadbeat corporation walks away from its mortgage commitment. They coud pay, but regard the underwater investment as unprofitable. You can bet they are able to raise additonal loans to buy additonal properties.
Is anyone in the media calling them out as deadbeats? Are they banned from borrowing additonal monies? Why are consumers held to a double standard?
Deadbeat Walton Street Capital: http://www.waltonst.com/
No bidders for Smith Tower
Chicago’s Walton Street Capitol owns the building, but apparently wasn’t making payments on loans backed by it and and the adjacent Florence Building.
http://www.seattlepi.com/local/article/Smith-Tower-3429909.php
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Our reliance on high cost foreign energy is over!
http://www.extremetech.com/extreme/123387-save-money-on-energy-costs-with-845000-porsche-918-plug-in-hybrid
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RE: Kary L. Krismer @ 11 –
I Think Electric Cars Only
Aren’t going to sell well, without gasoline engine backup. It takes too long to fillup the batteries. Europe made the GM Volt their car of the Year BTW.
Maybe some day we’ll invent an engine that runs on tap water?
Most of today’s new type production units’ concepts were invented decades ago by my dad’s generation, we need more inventors of brand new technology and not just miniaturization of old technology either. A computer driven flying car that gets 30 mpg and carries 4 passengers for under $50K for instance?
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By softwarengineer @ 12:
I would agree, unless you can basically rent batteries and swap out a fully charged one at a changing station.
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RE: Kary L. Krismer @ 13 –
I love swapping out the propane tanks for my grill.
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Symptom or cause. I agree with the debt position statement stated earlier but ask is debt spending a symptom of people trying to keep a lifestyle. The housing bubble masked the real issue of no jobs. The United States has the 400,000 less jobs today than it did 10 years ago. The real problem is that instead of adding 20 million new jobs (2 million a year) to the economy we actually lost 400,000.
Since 1960 the United States has always added 20 million new jobs each decade or about 2 million per year. Then the US went flat all at once while the population has grown over the last 10 years by 27 million more people.
As of 2008 the US had 138 million people employed and was already 10 million jobs behind the job creating pace of 2 million new jobs a year that had been going on since the 1960’s. The crash did not put America in this place, the problem started back in the year 2000. Until that changes the fundamentals will not change.
Both services and the remaining manufacturing became automated over the last decade as well. That is why corporations give such amazing bonuses to CEO’s that increased Americas GDP by almost 50% with the same number of workers.
What the numbers show is 33% of the jobs in 1980 made something aka (produced goods). In 2000 it dropped to 24%. By 2010 only 17% of the jobs produced goods.
Below is the link to the BLS site that shows “Historic Employment”
ftp://ftp.bls.gov/pub/suppl/empsit.ceseeb1.txt
If you go to the link you will see the following information:
1980 Total is 90.5 million people had a job 1980…… 90,528 (In thousands)
1990 Total is 109.4 million people had a job 1990…… 109,487 (In thousands)
2000 total is 131.7 million people had a job 2000…… 131,785 (In thousands)
2011 total is 131.3 million people had a job 2011…… 131,359 (In thousands)
Before 2000 the growth was about 2 million new jobs a year
1992…… 108,726
1993…… 110,844
1994…… 114,291
1995…… 117,298
1996…… 119,708
1997…… 122,776
1998…… 125,930
1999…… 128,993
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RE: yukon dave @ 15 –
We’ve talked about this before. There is no need to have 100% employment any more, and it probably isn’t possible. A lot of social programs that consrvatives consider free, or communist, or socialist, are simply keeping the population at bay while the economy continues to change.
That change came in 1998, or when there was a saturation of computer technology. Every one can be fed with a lot less labor than ever before with global co-operation. We already produce more goods, and provide more services with a lot less effort. I mean this idea that if we just bring back manufacturing, or we pump more oil, the economy will straighten out is a complete pipe dream.
I can only speak for myself that I have the capability to do worker production calculations with software, if I choose, but I do it sitting here with an excel spreadsheet. My Quick Books shows me everything I need to know about worker productivity.
When I started in business in 1972 it was all a crap shoot. I added workers to keep up with phantom demand. I can sit here at midnight doing lead generation work through the internet. My schedule is set, and can be accessed by an IPad. I’m typing for God sakes, when it never occurred to me to type before. My computer checks everything.
So as much as I would like to hire a hundred people, I don’t need to.
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RE: yukon dave @ 15 –
“The United States has the 400,000 less jobs today than it did 10 years ago. The real problem is that instead of adding 20 million new jobs (2 million a year) to the economy we actually lost 400,000.”
I would think the government was always counting on increased S/S and Medicare tax revenues to help with the Boomer retirment surge. But a decline in jobs must mean that tax receipts for these programs is declining. Is that correct? If so, that cannot be good.
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RE: Tatiana Kalashnikov @ 17 – If memory serves, we recently dipped into a period where SS disbursements exceeded income for the first time. The “tax holiday” contributes to that, in addition to unemployment.
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By yukon dave @ 15:
Good comment. That’s just the highly visible tip of the iceberg. The hidden part is gov borrowing is effectively creating millions of “fake” jobs. This current administration is borrowing over $1 trillion a year and spending it. Those jobs will vaporize when they are forced to cut back.
We’re really living in a great depression, hidden by big brother maxing out his credit card.
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Robosigning Settlement: Millions From ‘Foreclosure Party’ Firm
The New York-based foreclosure law firm infamous for their ill-themed Halloween party has agreed to fork over $4 million in a settlement with state prosecutors over tens of thousands of foreclosures it had filed.
The Steven J. Baum firm, which was New York’s largest foreclosure defense firm until it shut down last November, was sued for engaging in “robo-signing” and other deceptive practices to shortcut the processing of thousands of foreclosure cases. The firm’s clients included Wells Fargo, JPMorgan Chase, Bank of America, HSBC and Citibank.
“The Baum Firm cut corners in order to maximize the number of its foreclosure filings and its profits,” New York State Attorney General Eric Schneiderman said in a statement. Though the firm would not admit to any wrongdoing as part of the settlement, owner Steven J. Baum and managing partner Brian Kumiega have agreed not to represent lenders or servicers in new foreclosure cases for two years, Schneiderman added.
Another crooked firm escapes with no jail time……must have just been “sloppy paperwork”.
http://realestate.aol.com/blog/2012/03/23/infamous-foreclosure-party-firm-pays-4-million-in-robosigning/
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RE: Macro Investor @ 19 –
“We’re really living in a great depression, hidden by big brother maxing out his credit card.”
My cousin’s Economics professor said the same thing. He said in a modern economy a depression comes along every 70 years or so. He added that nothing can really stop it. So he said that the US is only masking the symptoms through massive borrowing. But in the end the patient will die anyway.
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I hope everyone was out and about today enjoying this beautiful weather. When the world is running down, get the best of what is still around.
I am thankful that I live in the beautiful Northwest. I skied Stevens today. “50′s once the sun broke through. No crowds. Did Baker two weeks ago. Incredible snowpack.
I used to live close to Tahoe, but Tahoe is in California. I’d rather be in WA state.
Give thanks to Jah!
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RE: David Losh @ 16 –
I see no magic bullet but you can not continue to grow the population by 3 million people a year and not add jobs without real problems especially with those just graduating and not not finding jobs.
I am not sure what 100% employment is since the 2008 U3 numbers showed full employment yet it was only 6 million more jobs than the year 2000 while the population increased 24 million people. What number would worry you? 20 years no job growth?
To say the solution is not found in making or doing something people in other countries want to purchase makes no sense to me. In the end Americans will need to either borrow money from other countries, print money other countries will accept or trade a good or service they want or need.
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Yet another strategic default by a deadbeat corporation. It is apparently a smart business move. But when a homeowner does it, it is irresponsible and immoral.
Landlord to put Two California Plaza into receivership
Los Angeles office landlord MPG Office Trust Inc. said Friday it had consented to put its downtown skyscraper Two California Plaza into receivership.
The move was the first step in MPG’s plan to quit ownership of the 52-story tower at 350 S. Grand Ave., which is encumbered with $470 million of mortgage debt.
“Two California Plaza is an asset that is significantly over-leveraged,” Chief Executive David L. Weinstein said. “While we are disappointed that the company was unable to retain this asset, we were unable to restructure the loan on terms that were in the best interests of our stockholders.”
MPG determined that it was more prudent to use its cash to support its remaining downtown office portfolio, he said. Among its holdings is U.S. Bank Tower, the tallest building in the West, and One California Plaza.
http://www.latimes.com/business/money/la-fi-mo-cal-plaza-receivership-20120323,0,979705.story?track=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+MoneyCompany+%28Money+%26+Company%29
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By Macro Investor @ 19:
no fake economy or anything. there is a very simple explanation. we have huge deficits in part because of the bush’s unfunded wars, medicare part d, and 2 unfunded tax cuts for the rich courtesy of bush.
the even simpler explanation is that we had a huge recession that led to an unprecedented drop in tax revenue.
“Those jobs will vaporize when they are forced to cut back.”
our debt is very manageable. if we let the unfunded bush tax cuts for the rich expire our debt will stabilize. interest rates are very low. the market has no problems with our debt and deficit levels.
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By Tatiana Kalashnikov @ 21:
acutally the only thing that can save us from a depression is massive borrowing and spending by the government. this was first written about in 1937…
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By Blurtman @ 22:
climate change. period.
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The Occupy movement has accomplished something! They’ve closed down a park and put it’s future in jeopardy. :-(
http://www.nwcn.com/home/?fId=144108096&fPath=/news/local&fDomain=10212
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By pfft @ 25:
Is there some reason you’re totally ignoring stimulus spending when it comes to the deficit? Seemingly you’d at least recognize that started under Bush since you’re analysis seems very politically partisan.
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RE: Kary L. Krismer @ 28 – Actually the city closed down the park, not OWS. Concern about hoodies was cited as the rationale.
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By Kary L. Krismer @ 29:
deficits during a liquidity trap are a lot different than deficits during normal times. let’s not forget during GOOD times bush added $5 trillion to the deficit. under Obama government has grown slower than under any president other than clinton.
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By Blurtman @ 30:
more like concerns about too much democracy;)
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Are there stats for multi family permits over the past ten years?
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RE: pfft @ 32 – The area wasn’t zoned for a homeless shelter.
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RE: Kary L. Krismer @ 34 – “..zoned for a homeless shelter.” Now that is the sad language of the occupier, from the perspective of the native Americans. You do realize that you traffic in stolen property, so who are you to judge?
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