“Companies may be losing confidence in the recovery and are hesitant to hire, raising the risk of further erosion in consumer spending, the biggest part of the economy. Federal Reserve policy makers this week said growth “is likely to be more modest” than they previously projected, prompting central bankers to take additional steps to spur a rebound.”
∙ Jobless Claims in U.S. Unexpectedly Climbed Last Week [Bloomberg]
We still have too much debt on all levels. We still have huge structural imbalances (Global Wage Arbitrage expanding to new fields daily). The only way for businesses to increase profit is still to lower expenses. The growth that was supposed to pick up after the recession doesn’t seem to materialize. Most growth happens outside the US. No wonder consumers have little or no confidence.
Maybe the fed should monetize cisco routers.
Maybe the fed should monetize cisco routers.
only a matter of time. As I said in a recent post, it will be no surprise for us to go into a double dip recession, or to have such slow “recovery” that it feels like recession. And then the Fed will start Quantitative Easing (QE) part 2.
I was intrigued and slightly surprised that they (arguably) started the first step towards QE this week. some are calling this “Quantitative Neutralizing, but it is clearly step one towards QE. I was thinking this wouldn’t happen until after the election, and probably not until 2011.
Initially, the equity markets rejoiced (more free government cheese!) until they realized that this means that there is no foreseeable V shaped recovery.
but only fools believed the V shaped recovery tripe anyway (most “economists” are fools, not to mention our political appointees and the so-called journalists on CNBC). there was no reason to believe in the V shaped recovery. credit crises last many years, and we just went through a doozy. as I’ve said since before the recession officially began: “this will be like watching the paint dry on a painting of grass growing”.
we have years of this left. our leaders refuse to address the structural problems in our economy. instead they focus their efforts on the affluent and the financial elite, to the detriment of the economy as a whole. it is possible that Japan’s lost decade may be as good as we have to hope for.
good luck to us all, we will need it
ex SF-er is exactly right. The fed/govt need to (1) pump up the economy and get the unemployed back to work regardless of deficit impacts right now and (2) wrap up the regulatory reforms so that everyone knows what the rules are and are going to be, so the banks — happy or not — get on with it. Then we can crawl out of this.
I don’t expect this to happen. The “deficit hawks” have the ear of the (disappointing) powers-that-be. Here is what “austerity” gets you in times like these:
http://www.bbc.co.uk/news/business-10951857
It would also help immensely if we simply killed off the zombie banks and let the strong ones loose. But that will never ever happen.
“but only fools believed the V shaped recovery tripe anyway (most “economists” are fools, not to mention our political appointees and the so-called journalists on CNBC).”
Really most economists were claiming we were going to have a V shaped recover? What is your source for claiming that over 50% of economists were predicting a V shaped recovery? Way to lump a diverse group with diverse opinions together, then attribute an opinion to some nebulous majority them, then call them fools for having the opinion you attribute to them. Seems to me the someone is being foolish here.
Just busting your chops for a pet peave of mine, which is the failure of people to properly use the correct word in the few, some, many, most, all progression.
The two back to back bubbles covered up the problems that were created while so many jobs were moving overseas. Whether it was part of a plan or just a response to the fact that it was happening is debatable. China is a communist country – they plan their economy, and they understand politics. Whether they understood that this country would suffer while they imported our jobs, and decided to help pump up the second bubble is an open question in my mind, but the fact is that the jobs are gone and they aren’t coming back.
Obama is a brilliant guy. He sees the future of a country of fewer and fewer jobs and most of his programs and policies can be predicted by the fact that he is expecting it to get worse. If employers provide most of the health care in the country, and the jobs are gone and NOT coming back, ever, you had better come up with a different system or the government is going to get stuck paying for a lot of healthcare. If you can suck up a lot of unemployable people by sending them overseas to fight, you may as well keep the wars going, regardless of what you said to get elected. And next up: you sure as hell had better bring as many illegal aliens into this country as fast as you can: they will work for practically nothing and they are the only ones who will.
The can is not being kicked down the road. There is no can. The can has been breaking into little pieces and the pieces got shipped to China piece by piece starting ten years ago and the country just hasn’t realized it yet. It was easy to miss when you could get a home equity loan for $100K every 4 years and buy a new car and a boat. The car salesman and boat salesman took their cut so everyone was happy. But it was all a mirage. We built second homes for people who didn’t pay for them at all. The country has far too many houses.
The country is full of very stupid people. People who think you can actually sustain an economy by selling ever increasingly priced housing to one another, and employing an army of real estate agents, pretend appraisers (i.e. fiction writers), stagers (watch how funny that total waste of resources will look in 5 years as the country realizes it is poorer and poorer), mortgage brokers (more fiction writers), photographers, color copier makers, etc. 2430 Scott got a high price without any of it. No staging, no realtor, no professional photographer no nothing. The house sold for the same price it would have gotten with all the people sucking 5-6% out of the transaction for half as much work. You haven’t realized it but the market will start to realize it and the fake jobs that ended up replacing the real jobs will vanish and then we’ll be left with more of nothing.
China will continue to fund the assistance programs that avert civil strife as long as they feel they should. Maybe that means as long as we keep buying their products. Maybe it means as long as they feel there are more jobs they can import. At some point it will stop, but not for many years. The reality will then sink in that China and Korea have lots of our jobs and lots of our wealth and it gets worse every day.
The rich are over there, in China. That’s where I’m seeing my wealthy customers heading. The opportunity here isn’t over, but it’s just easier over there. Most startup companies are NOT going to hire many people here. Some will if they have to, but it’s going to look very different over the next ten years than it has in the last ten years.
Opportunities will remain, but there will be many fewer of them. Home prices will continue to fall. Plan accordingly.
“And next up: you sure as hell had better bring as many illegal aliens into this country as fast as you can: they will work for practically nothing and they are the only ones who will.”
Huh, I love how you are willing to make up things to support whatever story you are trying to tell.
“In 2009, the United States deported a record 387,790 people – a 5 percent increase over 2008. Nearly two months before the end of the 2010 federal fiscal year, the deportation rate is down slightly from 2009, but the number of removals is still likely to be more than triple what it was in 2001.”
http://www.csmonitor.com/USA/Justice/2010/0812/Obama-as-border-cop-He-s-deported-record-numbers-of-illegal-immigrants
Really most economists were claiming we were going to have a V shaped recovery?
actually, at one time, yes.
whatever “most economists” believe/forecast/think is encapsulated in the “consensus” view.
if you read “consensus” views from 2006 (when they claimed there was no bubble) to 2007 (ok, there was a bubble but it will deflate like a souflee, and don’t worry because recession is unlikely or if it does happen it wil be mild) to 2008 (well it’s just a subprime problem, but it’s contained) I think you will find that indeed most economists are fools (or paid hacks).
the same for politicians and CNBC.
although your point is well taken that I cannot PROVE that >50% of economists believed in the actual V shaped recession.
thus I will change my statement to
“only fools (including the consensus view by economists) believed in a mild recession from which we would quickly rebound”.
======
all that said, if we’re going to police language, you made a comprehension error in your assumption.
I did not say that most economists believed in a V shaped recession.
I said that
-only fools believed in the V-shaped recession.
and
-most economists are fools.
this does NOT mean necessarily mean that “most economists believed in the V shaped recession”.
an easy example. let’s pretend (made up #’s here):
-40% of economists believed in the V shaped recession. (they are by my definition fools)
-11% of economists did not believe in the V shaped recession, but WERE STILL FOOLS in my opinion.
-49% of economists did not believe in the V shaped recession, and are also not fools in my opinion.
in this case:
49% of economists are not fools
51% are fools (so most economists are fools)
only 40% believed in the V shaped recession.
(so most economists did not believe in the V shaped recession).
all semantics my friend!
Excellent rebuttal! If you are going to nit-pick language, you sure as heck better nit-pick the actual language that was used.
And if everything anyone writes on this anonymous blog is subject to fly-specking and rebuttals to the fly-specking, this will get really boring really quickly. I suspect that most/many/all/some people who post simply whip out a thought and click “post.”
actually, my goal wasn’t really to slam anybody. although I often disagree with Rillion s/he is a pretty good poster and I enjoy his/her input.
“only fools believed in the V-shaped recession”
ex SF-er never said *all* fools believed in the V-shaped recession, but rather that people who believed in the V-shaped recession were fools.
Rillion is correct that the stats show we’re deporting more people than before. But the problem is that tipster is partly right because mass deportation costs our economy much more than legalizing people would cost:
http://www.americanprogress.org/issues/2010/01/pdf/immigrationeconreport.pdf
Rillion, go back and actually read the article you posted. Read every statement. It supports my argument. It supports it perfectly.
He’s deporting far more of the criminals, and the total is up a massive, massive, 5% (sarcasm) last year, but down this year. That lets him say he’s tough on enforcement (the last quote in the article you posted states exactly this – did you need to be hit in the head with it), while he deports the bad ones and keeps EVEN MORE of the hardworking ones.
That’s right, the ones who are willing to work and stay out of trouble are getting even less interest than ever. Exactly what he should be doing when high paying jobs are gone for good and Americans refuse to do the low paying ones.
Tipster –
No, you go back and read the article. Half of the people being deported have NO criminal background.
1. the V exists and will evidence itself, except that it started in september ’08 and is an upside down one.
2. without really caring, can my pet peeve be people who complain about using words incorrectly and then misspell “peave”? better to be thought a fool than open your mouth [keyboard] and remove all doubt, right? no offense; just sayin’.
xcellent rebuttal! If you are going to nit-pick language, you sure as heck better nit-pick the actual language that was used.
And if everything anyone writes on this anonymous blog is subject to fly-specking and rebuttals to the fly-specking, this will get really boring really quickly. I suspect that most/many/all/some people who post simply whip out a thought and click “post.”
Excellent rebuttal? When pressed he offered up unverifiable opinion, solely. And he did so in a manner that often sees you, AT, ask others to provide citations to support. You agree. That’s all.
And now on to the second thing you wrote. I can’t believe you of all people would say something like that. When pressed, you are “internet arguing 101” personified, clinging to minutiae flotsam and jetsom more than any other poster on this website by a wide margin.
And the predicable response from fluj — most predictable for the impossibility of one’s even being able to discern what the heck the point is.
“‘internet arguing 101’ personified — uh, OK (by the way, it’s flotsom and jetsam).
Along with ex SF-er, I like Rillion’s input and was just chop-busting the chop-busting.
The country is full of very stupid people.
If only our problems were so simple. Competitive intensity and labor productivity have increased, but returns on assets and corporate life spans have dropped. If anything we are a bit too smart for our own good and ended up running circles around ourselves. This global economy we have built runs so fast that new patterns of innovation are going to be needed to make it work.
It’s flotsam and jetsam. You’re both wrong. For the love of jeebus.
Is it just me or did we witness yet another “criticize the form, then the poster and see the thread plunge into a death spiral”?
Is it just me or did we witness yet another “criticize the form, then the poster and see the thread plunge into a death spiral”?
It’s probably the powerful Rothschild bankers who do this on purpose to derail an important macroeconomic thread. (that’s a joke, folks)
I personally think we are in very interesting times. Maybe not quite as interesting as end 2007-early 2008, but it’ll be interesting.
a lot of people are positioning themselves to see where QE ends up. will it be routine equities? will it be housing again? will it be the Treasury market?
the one biggest mistake I made in my predictions back in 2007 is that I thought we’d never see mortgage rates in the 5% range in a generation at least. The reality: mortgage rates continue to drop. this is partially due to the unprecedented govt support of housing, and partially due to the Treasury bubble and the “flight to safety” that is still on hard. how much longer can this last?
The various markets are odd. Not only are the RE markets heavily manipulated by govt, but also the volume on stock exchanges is low and it seems to be primarily computers trading with computers and hedgies trading with proprietary trading firms while regular people continue to flee.
The equity markets were acting as though we had a V shaped recovery last year (up nearly 70%) but the bond markets are pricing in long term economic pain. (sub 3% long dated Treasuries? who would have guessed that.)
something has/had to give. usually bond markets are more “reliable” than equity markets but not always.
add in our government/Fed’s newfound decision to “do something” and that just throws a wrench in everything. as example, we just found out this week that the Fed will buy certain Treasuries, and also that Obama et al will try to support housing again with yet another housing program (that is really meant to help the big banks).
Tariffs are needed.
We can’t deficit spend to stimulate demand, because that will just increase imports and the trade deficit.
The global economy has an ad hoc architecture that has allowed, for example, Chinese currency pegging and other export promotion. Japan did similar things. There is no way to respond. We are in so deep (into global imbalances) that it may take another financial crisis to get out.
see
http://economistsview.typepad.com/timduy/2010/08/renminbiyendollar-collision-course.html
and also
http://economistsview.typepad.com/timduy/2010/08/trade-deficit-explodes.html
tipster wrote:
For those of you who missed it, From the New York Times yesterday, Debts Rise, and Go Unpaid, as Bust Erodes Home Equity:
I just thought I’d share that. I wish, though, that news outlets would realize that “the boom” was in credit creation and poor/nonexistent mortgage underwriting, not housing per se.
Brahma, thanks for the link.
A very instructive article of the unintended consequences of the bank bailouts. Now the end players are asking “where’s my bailout?” and making decisions to stick someone else with the bill.
Try and put that Moral Hazard toothpaste back into the tube!
The equity markets were acting as though we had a V shaped recovery last year (up nearly 70%) but the bond markets are pricing in long term economic pain. (sub 3% long dated Treasuries? who would have guessed that.
This is easy enough to explain: corporate profits have rebounded very well and are likely to hit an all time high in 2011. It is corporate profits that drive the stock market.
Treasuries are based on future inflation expectations and fear to a certain extent. The former is low and the latter is high.
How can these both be true at the same time? It is true that in the past, it was rare that stocks and bonds were both strong at the same time. The main difference now is that the biggest components of the S&P 500 get most of their sales from overseas. So they are seeing strong revenue growth, particularly from emerging economies. They also laid off a bunch of people, mostly the lower performers, and pushed the remaining staff into longer hours. So productivity went up. So corporate profits *did* see a V shaped recovery.
I don’t know which economists you are reading, but you should stick to The Economist and maybe a few neo-Keynesians like Thomas and Krugman and you will be fine. I particularly recommend Buttonwwood:
Buttonwood’s Blog
None of them predicted a strong recovery, in fact The Economist in particularly has said that historically growth after a debt-fueled bubble like ours is a long, slow slog.
But for most people buying houses in San Francisco, the economy is not really that bad: unemployment for college grads is still only 3.5%, the big tech companies are hiring like mad and Google has gone on a big acquisition spree, which is putting equity money in people’s pockets. I know construction is still weak and will stay so for a while, but the rest of the regional economy seems to be reasonably healthy.
“I said that
-only fools believed in the V-shaped recession.
and
-most economists are fools.”
You really expect me to believe that those two statements used together in the same sentance are not meant to refer each other? Please.
“most economists are fools.”
Hardly, most economists are quite sharp. They know exactly which side of an issue their bread is buttered on. Every economist you see expressing an opinion in the MSM is a shill for somebody.
Marina girl – My apologies for my horrible spelling. I have struggled with it since elementary school. If only this site had better software that allowed us the ability to edit our posts. I did notice as right after posting that I had misspelled peeve but at that point it was too late.
I don’t know which economists you are reading, but you should stick to The Economist and maybe a few neo-Keynesians like Thomas and Krugman and you will be fine.
NVJ: you’ve got to be kidding me.
Do I really sound like a guy who gets his ideas from the Economist or Krugman/Thomas? or from any mainstream source for that matter?
It is corporate profits that drive the stock market.
no, you are wrong. it is the expectation of future corporate profits/future aggregate economic activity that drive the stock market. a big difference.
For example: many internet companies had high stock valuations all the while losing tons of money. (high stock valuation, negative earnings). it ‘made sense’ because the expectation of FUTURE corporate earnings was still quite high.
Likewise, Google’s stock doesn’t trade where it does today based on TODAY’S earnings, it trades where it does based on future expectations of earnings.
Don’t believe me, just see what happens to their stock price if/when their earnings growth slows or reverses.
How can these both be true at the same time
because this often happens in the short term (ESPECIALLY around transitionary times between bear/bull markets).
reread my post. I said very clearly:
The equity markets were acting as though we had a V shaped recovery last year (up nearly 70%) but the bond markets are pricing in long term economic pain. (sub 3% long dated Treasuries? who would have guessed that.) something has/had to give. usually bond markets are more “reliable” than equity markets but not always
it’s not unheard of for the stock market/equity markets to diverge in future expectations, it is only anomalous if it continues. thus my “something has/had to give” line.
in general I often side with the bond market because it is larger and more liquid. but the bond markets are not always more accurate (as I said)
in this specific case I believe the bond market is more accurate due to the major problems with the equity markets. (low volume, absence of retail investors, increasing frequency of HFT and algo trading, increasing frequency of proprietary trading, etc).
if your first premise that It is corporate profits that drive the stock market were correct then the rest of your logic would be more applicable here. but it is not correct.
instead the bond market is based on forward looking expectations of inflation, money supply, and economic prospects and the stock market is based on forward looking expectations of corporate profits/economic activity.
sub-3% 30 Treasuries indicate a severe disinflationary or even deflationary style environment or severely constrained economic activity.
70% stock gains indicate the opposite.
this of course can (and does) happen short term. But one or both of those must give over time.
I for one was not surprised in the least by the bear market rally, although 70% was more aggressive than I anticipated. Bear market rallies are COMMON and the bigger the bear market, the bigger the rally.
but bear market rally does not equal bull market.
Ex-SFer – I work in the financial industry with many people that could be considered “economists”. I also got my B.A. in Economics. The overwhelming majority of “economists” I know were never predicting a V-shaped recovery. I suggest you be cautious in attributing the opinions of some individuals onto a larger class of people, ‘economists’ in this case. That was really what I was trying to express in my own inarticulate way. Another word of advice, find a better class of economists to talk with in the future.
“If you are going to nit-pick language, you sure as heck better nit-pick the actual language that was used.”
I wasn’t intending to just nitpick the language used but the idea implied, that the majority of economists are fools and that the majority of economists believe we were in for a V shaped recovery. If that was not his belief then the language he used was vague, if that was his meaning I asked where he got his data to support the majority the economist believe in a V shaped recovery.
Personally I remember hearing several different letters used by many different people as to what we might be in store for, W, L, U, V were the common letters used. Further, I do not believe there was a consensus as to which one it would be.