The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc. That is the one that matters.
Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism.
The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings. The local sheriff will escort them out of the door, often with some sympathy –– just like the police in 1932, mostly Irish Catholics who tithed 1pc of their pay for soup kitchens.
Realtytrac says defaults and repossessions have been running at over 300,000 a month since February. One million American families lost their homes in the fourth quarter. Moody's Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck's Grapes of Wrath.
Judges are finding ways to block evictions. One magistrate in Minnesota halted a case calling the creditor "harsh, repugnant, shocking and repulsive". We are not far from a de facto moratorium in some areas.
This is how it ended between 1932 and 1934, when half the US states declared moratoria or "Farm Holidays". Such flexibility innoculated America's democracy against the appeal of Red Unions and Coughlin Fascists. The home siezures are occurring despite frantic efforts by the Obama administration to delay the process.
This policy is entirely justified given the scale of the social crisis. But it also masks the continued rot in the housing market, allows lenders to hide losses, and stores up an ever larger overhang of unsold properties. It takes heroic naivety to think the US housing market has turned the corner (apologies to Goldman Sachs, as always). The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of "option ARM" contracts due to reset violently upwards this year and next.
US house prices have eked out five months of gains on the Case-Shiller index, but momentum stalled in October in half the cities even before the latest surge of 40 basis points in mortgage rates. Karl Case (of the index) says prices may sink another 15pc. "If the 2008 and 2009 loans go bad, then we're back where we were before – in a nightmare."
David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War.
Fed hawks are playing with fire by talking up about exit strategies, not for the first time. This is what they did in June 2008. We know what happened three months later. For the record, manufacturing capacity use at 67.2pc, and "auto-buying intentions" are the lowest ever.
The Fed's own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) in since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc.
Professor Tim Congdon from International Monetary Research said the Fed is baking deflation into the pie later this year, and perhaps a double-dip recession. Europe is even worse.
This has not stopped an army of commentators is trying to bounce the Fed into early rate rises. They accuse Ben Bernanke of repeating the error of 2004 when the Fed waited too long. Sometimes you just want to scream. In 2004 there was no housing collapse, unemployment was 5.5pc, banks were in rude good health, and the Fed Multiplier was 1.73.
How anybody can see imminent inflation in the dying embers of core PCE, just 0.1pc in November, is beyond me.
Mr Rosenberg is asked by clients why Wall Street does not seem to agree with his grim analysis.
His answer is that this is the same Mr Market that bought stocks in October 1987 when they were 25pc overvalued on Shiller "10-year normalized earnings basis" – exactly as they are today – and bought them at even more overvalued prices in 2007, long after the property crash had begun, Bear Stearns funds had imploded, and credit had its August heart attack. The stock market has become a lagging indicator. Tear up the textbooks.
Great article that fully comprehends the issues that we currently face and those on the not so distant horizon. The housing market is reminiscent of Christmas in Bandah Aceh several years ago after the first wave had receded and prior to the real killer about to roll in. Somewhat amazing that such objectivity comes from a U.K. publication while our national media organs serve up a steady stream of pablum. (aside from WSJ and B'Berg)
Prosperity is not just around the corner. Banks are being allowed to shore up capital at an astonishing rate through FED policies of relatively cost free borrowing while carrying assets at highly inflated levels. Meanwhile GSE housing finance agencies are in disastrous condition. TARP and Stimulus packages are effectively political "slush funds" to be doled out to favored constituencies. Readers of financial news should take note of how often the phrase "kicking the can down the road" is being used. The administration is papering over problems without taking any meaningful action. Then again, we probably don't want this bunch to take meaningful action prior to the congressional elections and a return of some semblance of sanity to Washington.
Forgotten in all this is the real reason for this mess.
That Bill Clinton believed that minorities (read blacks) had a "right" to home ownership. Minorities could bring in welfare/unemployment checks as "proof" of an income. When they could no longer make their ballooning payments, they simply walked away from their responsibilities.
At last, Americans are waking up. They are tired of the fact that their children cannot attend the university of their choice, whilst underachieving minorities can. They are tired of shelling out higher and higher taxes to keep lazy minorities in overpayed, busy-work government jobs, or paying for the room and board of minority welfare sows. Lastly, they have had enough of the usurper-in-chief, who is so openly crooked that only the truly blind cannot see.
Throw off your chains, America! There are 80 million firearms out there, use them! Civil war now, civil war forever!
Too bad the American media doesn't have the same clarity as to what the realities are as this article has. I guess they are all too busy trying to protect Obama from himself.
Barry the Clown couldn't spell economics if you ... well he just can't spell the word.
It is time we call for a NO CONFIDENCE VOTE on our Government.
Why doesn't the gov. just give each family a gun with the amount of bullets for each family member?
If you aren't going to help us why not release us from your corrupt style of Government? Dying in this country at this time is a better solution than living in the streets, cold and hungry.
By keeping the same Representatives the American people have ALLOWED them to get to big for their britches. We have given them the power to tell us F*** You. Corporations should be ILLEGAL in the US!
We are not represented by a Democracy anymore. This is truly a Corporate world. Who else in the world creates as much mass destruction as the USA? So sad our country has DIED. Why would anyone want to give their life for this country today? It is an embarrassment to us as the whole world. We steal our children's education and for what? A war we have no business being a part of, but who cares we only let them grow up for the government to send off to get killed for corporate America. Such a tragedy! Such a loss of human life, all for old mens oil :(
Down with Abortion (we carry them)
UP with WAR (the government kills them) where is JUSTICE?
How can any idiot politician think they can take tax money (Stimulus) to give to the people and banks and these are the same ones that have to pay it back.
They are giving out $100 and the people they are giving it to will pay back $10 in taxes. Every $100 will see a $90 loss. This is lunacy. Reminds me of those pyramids schemes. Eventually there is no one left to bring in the $10 and the $100 that has been mounting will NEVER get paid.
I think the citizens of this country had better wake up because if we look at the history of Germany after the "29 crash" and before Hitler this is exactly what brought this country to economic ruin. Hitler took advantage of this to rise to power.
We need to vote the present "Politicians" out and start following sound economic policies or the same thing will happen here as the voting populace gave the power to the people that would follow this disastrous type of thinking!!
We are not talking Republican or Democrat. We are talking "Collapse" of the American economy.
WAKE UP AMERICA before it is too late! We need to be like Paul Revere and spread this word!!
Fell behind on my citibank credit card and have been getting hounded by them to pay my payment. I've taken a 5% paycut at work and my home value has dropped 30 % from its highest level. All the while I have 3 children in various stages of university. Should I pay my credit card? Yes - Should Citibank have been bailed out by me, one of the many taxpayers who saved their asses? NO! - Reprocicity does not appear to be in the language of Wall Streeters who owe a debt to the american nation yet use strong-arm tactics to demand payment from those who just saved their lives. This country is in the toilet!
G.- a very good post however you are wrong on one major point. You seem to think that Obama is different from Bush and is truly trying to do the right thing by cleaning up the mess the government and financial companies made under Bush. Your own political idealogy is blinding you to the fact that Obama is taking Bush's policies and increasing them by orders of magnitude. This train wreck is only getting worse under Obama. Not better.
I am not an economist. I am not a politician. I am a consummer, a regular citizen.
When I use to go shopping I could buy what I wanted when I needed it. But, no more though. I need to look for coupons, sales, buy one get one, anything. The size of the products on the shelves are getting smaller, lighter, and have fewer count in them. But the price stays the same. I eat a lot more rice which I now buy in a 25 pound bag. Turn off lights when I'm not in the room. And lower the heat as much as I can. Plus I use a wood stove now in the winter. I have to pay cash for most everthing since my credit card line has been lowered so much. I have to put gas in my car a couple of gallons at a time. I can't belive what has happened.
It is like a cold winter night mare. My current salary is down a third from my last postion. And my current salary is about one fifth of what it was 10 years ago. By the way, I also had to put out over 400 resumes to just 'find' my current position.
I am not in a position to discuss things that are beyond me. What I do know is that if you are very rich you really don't care and if you are very poor you really don't care. But, if you are like me, somewhere between those two groups, then my prayer is that GOD will help us!
-basil cardew- ...Americans may one day question the idea of a 'million man military overseas', but it will be to question Why the U.S. is still compelled to provide implicit & explicit defense for most of Europe, Canada, S. Korea, Japan, and a host of others currently skating by behind U.S. Guns. Then you will have China, Russia, and Iran providing your "security", through capitulation to their growing demands of course.
I think this might be just fine. The U.S. wasn't going to be the big military/diplomatic stick forever. And frankly many of us over here are fed up with being the free world's scapegoat while Europe jumps on the Demonize-America bandwagon...at the same time we finance your defense through OUR blood and treasure.
The world is changing, but it's an old story of taking sides before the next big war. God help us all, God willing.
To Gary:
A "Dumb Housewife" as President of the United States can do a better job of running this country than the moron Marxist that is currently running this nation. The elections of 2010 and 2012 can't get here fast enough. Hopefully, the nation will stay together long enough to see the next elections.
Nothing is too big to fail and if a homeowner's underwater, they can move out and rent.
THAT's how this problem will correct itself.
Get Guns, Gold, Food and Water and through those corrupt, Marxist/Socalist out of Washington DC.
Then we'll roll back all the political pork and "free ride" bills, finish the border fence, get our small businesses going again payoff all the trillions in debt and recaim our Country.
Americans (here at least...must be republicans) seemingly blame Prez Obama for their nations traumatic financial decline. However all the present players like Geithner and the man at the Fed are all men from the Bush era. Recall it was CLINTON that repealed GLASS-STEAGALL under the auspices of that great American ALAN GREENSPAN the man that demanded subprime mortgage subprime dirivatives. Thats why we are all up the Kyhber....and in stuck like glue to Afghanistan.
Should have elected Ron Paul. But no, we'd rather have a race between two know nothing morons...so much more exciting! I can hardly wait til 2012 when the tools of this country elect the lipstick pig.
And anyone believes the Fed will allow deflation? That $13 trillion is going to be hard enough to pay back as it is. Making each of those dollars worth more in goods and services won't help matters.
The reason for coming inflation is China. Raw material prices up, including oil, leads to inflation. Very simple Ben can not stop it.
Here's age old the story. Power hungry elitists who lie and corrupt the system gain electoral victories to complete their ongoing attempts to destroy the free market system and gain everlasting power. Obama's administration will continue its current policies, which are designed to create crisis thereby providing him and the Leftists congressional leaders the excuse to seize even more power. Their mistake, though, is that Americans are very intolerant of ongoing economic downturn and constitutional malfeasance. A second revolution is coming.
"The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus)."
ARE YOU KIDDING ME? CAN YOU PROVE IT? I think you mean "despite the Obama 'stimulus." More government spending will not get us out of a recession, not now, not ever. As always the answer is in freeing more people and more dollars to produce, and you do that by lowering taxes and cutting government spending.
As a Republican I am delighted with the Obama administration! My primary concern when Obama took office is that the Democrats would have learned from history and would check their ideology at the door. The put the lie to their rhetoric of governing in a pragmatic and reasoned manner the nanosecond they got the keys to the White House. It turns out that my worries were unfounded. Like a bunch of deliquents in juvenile hall who have just broken in to their headmaster's office these soi-dissant intellectuals, "czars" and leftie sychophants wasted no time in laying to waste everything they put their hands on while living out their fantasy "Animal Farm 2009-2010". Their pending, but certain, electoral obliteration will be a fitting end to what only can be described as total incompetence on a massive scale.
The real economy is not recovering. Any bump up in the economy is temporary. Why? Simple. Though trillions have been used to "bailout" companies, and purchase companies, etc. the root of the problem has not been touched - and that is bad loans that are being held but not searched for.
No one knows - in the government or private sector - which pieces of paper are good and which pieces of paper are bad. Therefore, we do not know who we can trust and who we can not.
This stimulus has been a shame from day one. The economy is being purposely wrecked in the U.S. in order to "transform" it. It's working.
In the meantime, we continue to have depression era unemployment, foreclosures, etc and the U.S. media continues to cover it up or try to give it a positive spin all to help Obama - screw the nation. Help Obama.
The post by G illustrates the type of thinking that has gotten us into this debacle. G's talking points come straight from the media and pundits in which he pretends to rail against. When Reagan won his first term he set in motion a recovery plan that worked without complaining about Carter and Carter's fiasco. In contrast, Obama and his supporters (including G) refuse to accept responsibility for being in charge right now. Obama is to blame for the U.S. economic crisis because he has intentionally choses not to implement Reagan's economic recovery plan.
Also, neocon is a racial slur against Jews. Second, Bush 41 and Bush 43 were not conservatives. They were Republicans.
Never thought I would see the day - The USA is no longer #1 -China is #1 - here is a hint for the politico thugs in Washington - the Chinese don't tolerate corruption in their government -
Small business employ and hire the most, yet they are being ignored. Obama & Co., are advocating higher taxes and changing regulation with Health care reform, Cap & Trade, The energy bill, etc... Most small businesses are in a "hunker-down" mode and are not considering hiring until things settle. If Obama & Co., would stop the 'Change' and establish more of an atmosphere of stability then many small businesses would get back to work and start hiring.
A better indicator of US unemployment (I wonder about the process used to calculate this) can be found at the web site www.BLS.GOV
Each month the US Department of Labor publishes detailed job,labor force & unemployment
data on a "local area metro" basis. This includes stats on about 350 metro areas across the 50 states of the USA.
Of course this has recently made for gloomy reading,but one does get a rather more thorough idea of the jobs situation across the United States. HLK- PA
China Just passed the USA as the largest car market.50 years of government regulation and Unions finally killed the goose that layed the golden egg.The Obama-crat solution? Subsidize a disfunctional industry buy selling treasuries that are approaching junk bond status and Crush future workers with unpayable debt.But hey, you can buy a "green" car for $60,000 and cure the uncurable imaginary global warming,ahem, I mean climate change.Oh yes,Frightem Industry by promising "Climate change Bill" and levy yet another tax on the citizenry at the molecular level on carbon.Yup, I would take my buisness to China as well. In the meantime the crown Jewel and the democrat city on the hill is Detroit. The irrefutable example and tangible result of left wing policy in america.To top it all off the first act by Obama's Ken Salazar was to cancell ALL Oil,Gas,exploitation and drive yet another nail in the coffin of the American Economy.CHANGE, here it is
Over the top taxation is killing the U.S. economy together with over the top federal spending. U.S. citizens are still facing higher unemployment and rising foreclosures provided Obama stays his course.
Obama is a miserable failure. He wasted nearly a trillion dollars on a stimulus full of pork and waste and he knew it from the start.
Everything is going according to plan. The Alinsky plan that is. You know, the plan that Obama uses to guide his destruction of the U.S. economy and the world as well. Obama has in just 11 months killed almost 3 million jobs while at the same time declaring he saved jobs. This is right out of the Alinsky Marxist Play Book. Lies about lobbyists, earmarks, transparency. All lies that rival the same used by Lenin, and Stalin. 2010 will be worse than 2009 and things will not get better unless Obama and his fascist thug minions are voted out of office. The big question is, can we survive the next Alinsky scheme of his. Legalization of the illegals. You know, his scheme to create a one party statist dependancy state.
Reading all these 'comments' is a true barometer of the anger and frustration of the American people. Rightly so, we have been financially raped by cheap politicians (both Democrat and Republicans) and the white collar scum on Wall Street.
Where are the real MEN in American? Where are our veterans who will 'defend' their country and protect their Constitution as they raised their right hand and swore to God to do? Where are our REAL LEADERS, General's and Colonel's that can take control of this mad house? Lock up all these crooks, drug peddlers, deport illegal people, and corrupt politicians!
We don't need another stimulus.
The Muslim idiot in the White House needs to force the banks to renogiate those loans to a manageable level.
Clearly, he is NOT interested in doing that. Not interested in helping the people.
Could those who elected this traitor be any more stupid? The answer is yes.
With the "One Worldians" running their sham worldwide now, the North American Union is poised to conjoin together like misfit pie to attempt to correct the imbalance of world economies and currencies. This is being done of course with the support of the EU which was the greatest sham the Bilderberg group ever assembled and did with the total buy in of all European Nations. Once the North American Union is ratified , the next will be the South Pacific Union that will include the Micronesians, New Zealandrs, Australians, Malaysians, and the other Island Nations who will, just like the EU and NAU, hold leadership roles on a rotational basis so that each country can capitalize on the revenues of their percentage of the One World Economy. By 2025 there will be the South American and African Union, the Pan-Arab Union, and lastly, The Pan-Asian Unoin in which the Chinese will never relinquish their power. And if this isn't enough to parch your mouth, understand that when this happens, the UN will control and rule all nations. And if Maobama has his way, there will be a bronze bust or statue outside of the UN showing him off to all of the pigeons capable of assembling throughout the history of man. Exactly what he would have deserved while the rest of us are recycled for future subsistance a la Soylent Green...
Looks like the Manchurian Candidate is doing his job! How stupid are the American people for thinking this socialist lawyer who never had a real job in his life would save our country. Democrats want to destroy the US.....and they are well on their way to doing it!
Are we surprised we're being governed by the three stooges, the katzimjammer kids? We elected a bafoon whose only claim to fame was he was a "community organizer" and rejected a sitting governor as vice president 'cause she had "no experience." Yeh, the left makes a lot of sense like their running of this country. God help us 'till November.
thats why I have my ar15 and plenty of ammo!
More blame it on Bushies here I see. Well it would do you good to remember that it was Clinton who started the flood of manufacturing jobs out of the US, not Bush. Bush was not much better but it's far from his fault.
Financial jargon apart, this article appears to say that the real American economy is not recovering as the nominal numbers suggest but sliding into a real depression that will trigger a second bubble burst in the virtual economy on Wall Street. Does this mean that bail-outs have failed to fix the problems and left more deeply indebted governments facing another crash? Does Europe go the same way?
Despite a low PCE, the US dollar monetary base jumped from 10 to 18 trillion in a brief span of months; an 80% increase. It would seem reasonable to anticipate at some point not far off, the inflationary pressure shoe will drop.
@ G.
on January 11, 2010
at 06:02 AM
Very good post, except you seem to think that Obama is different. He has been selected by the same elite that's selected previous presidents. Obama is singing off the same hymn sheet as Bush with only slight differences.
People think the Democrats and Republicans are so different and they have a choice, but both parties have been brought off. America is a one party state with two different factions.
The article mentions "Coughlin Fascists." That's fair enough, I suppose. But it's worth remembering that Coughlin spoke in the name of "social justice," not property rights and the free market. Fascism was, in some ways, a movement of the Left, at least as the terms are defined in the U.S. Europe, with it's aristocratic traditions, is different.
"Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism."
Actually, it is an exhibit of the massive transfer of wealth from taxpayers to shareholders, thanks to TARP and the stimulus bill(s?).
Inflation refers to the devaluation of currency, which has clearly happened here. Food staples have been climbing steadily in price but aren't counted when they become incovenient for politicians.
I do believe that eventually, the wealth transfer to the upper 2% will come back around to bite them. They cannot continually chip away at the foundations and expect to remain standing without supports. The fact that ever-larger numbers of people no longer have money to spend will effect their bottom line sooner or later.
The free market like the Efficient Market Hypothesis (EMH) is a good academic abstraction that does not exist in reality.
Americans and American economists support outsourcing and the free movement of jobs oversees because - well the academics argue that is the correct theoretical thing to do (and people remind us of the lessons of the Great Depression as to why we should continue to have free markets).
But China does not follow the academic model. Frequently dumping goods oversees plus artificially pegging the Yuan to the dollar it continues to raid American jobs (and India goes along for the ride too).
In other words the US (and Europe) play by the rules while China does not.
And jobs continue to flood oversees as a result.
Viva la Bush MORONS, reap it.
Like I said"the idiot never was the president" Dumb housewife will be next president if we live that long
Yea, I think the problem is lack of another stimulus. We should be printing more money, devaluing the dollar even more, and drop more dollars from the clear blue sky. Then we have to raise taxes to pay the debt. Yup, I'm sure that's the cure to all our problems.
It's amazing how we have such economic illiterates running our country. God help us.
eqcitizen is right, but nobody will listen.
The american people need to wake up to the fact the international bankters own and control us. Stripping the wealth of the people with the inflation of the money supply. The biggest tranfer of wealth in the history of america is taking place right now. Fiat currency worthless paper backed by nothing have taking the place of real money gold and silver. This have been going on since 1913. Just read LOUIS T MACFADDEN CONGRESSMAN FROM PA. On who is ripping us off. And why.
"A roaring US recovery is underway" according to today's Times
*********************************
LOL, based on WHAT? If you remove the government spending the economy had NO GDP growth in the 3rd quarter last year. Americas economy is 70% reliant on consumer spending and that has NOT increased except in areas in which the government has subsidized it such as the auto clunker program and the first time homeowners program.
Real unemployment is at 17.5% and with the total unknown of just how monstrous the tax increases to fund the health care bill will be, no one wants to spend any money. Business will NOT hire without knowing what the expense of an employee entails and that is why the hiring of temporary employees is skyrocketing. These are not permanent jobs and will go away, maybe to be replaced by real" jobs or perhaps eliminated by the employer ramping up productivity.
What many publications such as the Times are doing is attempting to cause the economy to turn by convincing consumers it is ok to spend money. As long as the unemployment rate is this high and climbing they are indulging in fantasy at best and criminal behavior at it's worst.
Change you can believe in!
You better keep the jingle in your pocket!
THIS IS WHAT HAPPENS WHEN YOU ELECT A MAN LIKE OBAMA, LACKING IN INTELLECT AND ABILITY.IT IS ONLY GOING TO GET WORSE UNTIL THE PEOPLE THROW OUT THE COUNTRY'S LARGEST HATE GROUP THE DEMOCRAT PARTY, IN THE MID-TERM ELECTIONS.
The best solution for the crisis is to let the free market rip. It will be painful and long but as someone once said, "progress through pain"
It is entirely possible Fed. could be manipulating the stock market at this juncture through proxy of course. Activity is all the traders ask for. They will buy or sell at any level with the intention of a quick profit and their aggregate capacity is considerable especially with the advent of electronic trading.
This will be fatal in the long run & could be the worst mistake of an illiterate economist.
Having said that stock market has not become a lagging indicator but has always been 6 to 8 months behind economic events as per conventional knowledge.
This quote illustrates why we are in this crisis:
"The middle class has been gutted by offshoring and outsourcing.It takes a government to change that but governments still seem to be in the thrall of the free trade orthodoxy that caused this."
People do not understand that we do not have free trade, nor do we have free markets.
Everything is regulated or taxed and then you ask why companies offshore their labor? Could it be because the restrictions and laws drive costs up and make labor more expensive? We cannot look to the government to solve the problem which they created with their easy money policies and broken Keynesian ideologies. Free markets are the only way to pull out of this recession without creating another one down the road. Read mises or rothbard.
The middle class has been gutted by offshoring and outsourcing.
It takes a government to change that but governments still seem to be in the thrall of the free trade orthodoxy that caused this.
This is very bad.
Today the FTSE100 is up another 33 points.
Today we are told by SHELTER that up to one million households have borrowed money on a credit card to pay their mortgage or rent over the past year.
"Housing charity Shelter said this figure represented 6% of UK homes.
Shelter said people in lower social groups had been most likely to need to use their credit cards, but that the middle classes had also been affected.
The charity said the figure was a "shocking discovery"."
http://news.bbc.co.uk/1/hi/business/8450518.stm
There is madness afoot.....
There is still consumer inflation - it's just in things that aren't counted in the CPI such as food and gasoline - thanks to cheap credit where Investment banks and so forth have bid up commodity and oil prices in the face of falling demand.
"A roaring US recovery is underway" according to today's Times.
Is the glass half full or half empty? The answer seems to depend on who you ask. There is a clear lack of concensus.
There are reasons to believe that the dollar will strengthen for fear of losing its global status and in recognition of the damage to a global economic recovery an excessively weak dollar is doing. The Euro will become more competitively priced to accommodate the needs of Ireland, Greece, Spain and eastern European EU members.
The dangers to the dollar, the euro and sterling are being flagged up clearly enough for policymakers and central banks to take action.
The dangers to the dollar and sterling are excessive weakness. The danger to the Euro and its struggling members is excessive strength.
It is not clear what measures the US is taking to cut its fiscal deficit. Cutting public spending, although essential will keep the US and UK firmly in recession, not matter how cheerful Mr Kaletsky is feeling today.
No inflation? Have you seen the inflation rate on commodities in the last 6 months, its not showing any signs of slowing. Its called Stagflation.
Ambrose
Your remarks about Steinbeck brings me back to august 2008 when I visited Monterey,California where all the sardine factories were closed down and all the rainjackets for sale were made in China.I wonder what John Steinbeck would say about that now.On the way home I visited Wall St where the dutch traders built a wall to keep the english out.
Ambrose,Can you see a comparison today with the Great Depression of 1873 to 1896 when Hetty Green made a fortune on Wall St
Michael Mcmahon,Navan,Ireland
Sound market economics is always built on a sound means of exchange (money). If the currency is continually being devalued the market will be distorted by violent booms and busts. The only cure for a devalued currency created boom is the bust. The American Federal Reserve has only one unimaginative cure - - print money. Sound money is such an archaic idea to the Fed, that we are doomed to continual bubbles and busts. The sooner Keynes is allowed to die or be sentenced to a purgatory of reading Von Mises, the sooner our Western Civilization will discover the blessings of sound money and honest economics.
So, no end to QE yet then! The banksters will continue to pile into the stock market with this free new money...footsie at 10k by the end of the year?
If America today is another Roman Empire in decline...soon the legions will be returning home to see what can be salvaged.
Now thats a real revolution. Someday Americans may question deploying a million military personnel overseas...to protect what? Apple? Disney? Florida oranges? Hollywood?
Hollywood should make a blockbuster movie to celebrate the occasion:
The Reunification of America: The homecoming.
It would appear changing captains of SS Britain is now totally irrelevant. No leader can walk on water unless they are on some ego-trip on drugs. We are currently stuck on an iceberg that Gorsky Bronsky told us was a save haven. RBS is now a government department that cost more than the NHS...if thats possible. And still he smiles like a cheshire cat! Meanwhile the mice are laughing in the cayman islands....with all our money.
Phew at least we are in the EURO so we don't need to worry about all this. No, wait a minute. We aren't thanks to Ambrose' enthusiasm for America!
Woo hoo another shot in the foot eh?
And yet the FTSE powers on this morning, buoyed by the latest state-sponsored, debt-fuelled binge in China, believing this is a harbinger of a return to the times of milk and honey...
It's just another debt bubble.
Strange times in our 'free market system'; state funded stockmarket recovery.
Ten thousand families a day losing their homes in the USA is a truly frightening number.
Statistics in the UK suggest 6% of people have had to use credit cards in order to pay mortgages or rent.
And yet the push to return to debt-based consumerism continues, and high real estate prices are still apparently a good thing...
What a truly 'bankrupt ideology'.
More fool those who buy - or should I say borrow - into it.
"Europe is even worse" claims Ambrose from his vantage point. At least the euro has erected some barrier against the speculators that thrive like flies in this environment. The single most important question is what happens if most of the regional banks in North America go upside-down and commercial real estate follows suit. Has our new pure instant raw form of capitalism (blessed by offshore hedge funds acting as predators)delivered its final blow of unintended consequences that 10 percent own everything and 90 percent just make do with stale crumbs from their overflowing table?
The Great Recession (that started in 1929) finished with the World War 2 (in 1939). We do not know where this recession will lead us. If you want to know how serious the current crisis is (and how far we are from REAL recovery) READ:
"The largest heist in history" -
http://gregpytel.blogspot.com/2009/04/largest-heist-in-history.html
No joke by any standard, and not for fainthearted.
At least America's got Ron Paul.
Combine this with the Euro Zone's problems and we do live in interesting times.
What was the manufacturing capacity use in Zimbabwe when they tried to print their way out of trouble, 5% ?
There may be deflation for those who do not eat or use no energy.
Economists and politicians are similar, half say black and half say white ergo 50% are wrong all the time.
In fact the answer is probably grey, so I suspect the stupidity of humans will endure.
The US dollar is in grave danger of losing its status as the global reserve currency.
The first requirement of such a reserve currency is stability. The US certainly hasn't got that. The US economic system is rotten to the core.
The jibe of a US Treasury Secretary, John Connally that "It's our currency, but it's your problem" was never more apt.
The extraordinary defence of the dollar's global reserve status by the CEO of Google (DT 9 Jan "Google boss warns UK over debt mountain") only serves to highlight the pressures the US is feeling to abandon the dollar's reserve currency status.
Apparently Guido Romero 6.09am is blissfully unaware that the Gulf states are already making moves away from the dollar, and there have been some ominous statements about the dollar coming from China.
Connally's remark only highlights the indifference with which America views its beggar they neighbour dollar decline.
It only takes oil and commodity contracts to be negotiated in a currency or currencies other than the dollar for the bubble of the dollar's magical reserve status to burst.
The Emperor has no clothes!
Unfortunately the news in the US will never get past the surface and report things like hidden unemployment and option ARM contracts, especially broadcast media. But plenty of time for Oprah's move to cable.
If, as I believe, AEP paints a truer picture than the MSM then there will be severe social and political consequences flowing from this that we have still to comprehend. My guess, for what its worth, is that there will be a huge anti incumbent vote in November (that's conventional wisdom) but it will be followed by increasingly radical and protectionist policies in 2011-12 with as yet unfathomable consequences on the 2012 Presidential electiion.
As the Chinese curse goes: may you live in interesting times!
Ambrose, what has happened to you? For months you have been harping on about how strong the USA is and how it will come out of this depression early. For months I have disagreed with you.
The statistics are appalling from the USA. Govt and private debt is truely astonomical. The banks are hiding massive home/property loan losses by not foreclosing. The banks are basically insolvent. The Obamie forecasts of GDP growth of over 4% average for the next four years are a joke. When interest rates rise it will hammer the debt repyaments on the debt. Unemployment is huge. One major reason why the unemployment level is not even worse is that the 'stastics' show a falling number of total people available for work in the USA. This has been at least 100K short for the over 6 months. It is known that the US workforce is growing by 100K a month and yet the number of people available for work is reportred as falling!
The stockmarket will eventually crash. The world situation is slowly getting worse and worse and I just wait for China to implode.
to Chelyabinsk
I am not at all sure that pricing oil or anything in a basket of currencies can be a solution.
The US$ is the reserve currency of all sovereign currencies in a floating exchange rate fiat monetary system.
Thus, for as long as inflation can be induced into the monetary system, then the floating exchange rate concept works.
If inflation should abate or, God forbid, reverse, all currencies implode regardless of whether it is the Dollar or the Euro or the Yen.
The thing is that inflation cannot be infinite because it is constrained by the finiteness (can you say that?) of the underlying economy. Ergo, it is constrained by the ability of underlying economic actors to service debt.
At a time when the credit markets are contracting globally (not withstanding the suspension of mark to market rules in favor of a chosen few in an attempt at waiting the crisis out) global currencies are at risk. This is borne out by the trend of the last few years as evident in the charts on page 3 at this link:
http://www.stockcharts.com/def/servlet/Favorites.CServlet?obj=ID3585763
Irish American's tithing even 1%? That's a new factoid for this I-A grandchild of the depression. Or should I have read the statement to be about I-A cops?
But otherwise another sobering column by AEP. This feels much like the 14 months of the credit crunch when no one in the media or on the streets seemed to comprehend the gravity of the situation. They act like something was fixed last year and the storm has passed. Maybe something was "fixed", but not in the sense of corrected.
I've been waiting for well over a decade for Americans to wake up, and wondering what it would take to do that. I'm starting to wonder if my sleepwalking countrymen are just brain dead.
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Ambrose- Another excellent article and I quote my British mother when I say "Spot On." It seems you British know more about America's problems then we Americans do.
However, I might know why my fellow Americans seem so blind to the obvious political & economic realities stated in your excellent column. It seems Americans like "vegetating" while the Elites chosen US Government officials, media moguls and pundits lead us down the garden path and pick our pockets. You see Americans "were" so obsessed with self gratification and acquiring more toys they couldn't think outside of the "media generated box" they live in and do not understand the simple concept of logic based thought.
This lack of critical thinking, call it Blind Ignorance, is the American way to avoid truths that hurt and if believed won't allow "their political side" to win. It's much easier for them to believe political & Wall Street lies, phony government statistics, propaganda in TV commercials, media whores, and bully pulpit prolife preachers, radical Neoconservatives or the neighbors email as it just takes a few minutes to grasp a deceitful point of view... and then promote it. It's troublesome to look for truths, read, study, ask questions and "think." Logic based thought processes are foreign to these people as they've been dumb down by the Elite controlled US media.
Unfortunately all Americans, the British and rest of the World have paid a heck of a price for those Americans too lazy to do their homework... that helped elect Bush... "Twice" and who lay blame for the poor performance of the American Economy on Obama's 11 month stint in office. They won't acknowledge that during 8 years of Bush's Neoconservative Republican reign Americans sacrificed many Freedoms and their Democracy as the Bush Administration brought America "Corporatism" and the World a "derivative" generated Depression. For those Americans whom continue to remain blindly ignorant of all truths it should be noted Corporatism started in America when Bush allowed the Neoconservative & Elites, "Goldman Sachs," banks, investment banks and other corporations to run the US Government. The current Bush created Depression has changed the economies dynamics as retail purchases continue their decline... along with jobs, house prices, wages, benefits and Americans trust in their government. It seems 17.4% of Americans have been left on the side of the road holding the empty bag.
It should be noted that Wall Street and its "derivatives" are nothing more than gambling. Wall Street is a giant Casino with government sanctioned gaming and commodity trading that recapitalizes the big banks at the expense of average Americans. It's rigged so the house (Goldman Sachs, JP Morgan, Citigroup, Wells Fargo etc.) always wins. The scary thing is... both the American and European economies are based upon this same phony gaming scheme. That extorts money from citizens of the World via gross lies about markets, stocks, derivatives, bank profits & capital, business growth & profits and World GDP's.
Wall Street and the Worlds big banks should be allowed to fail... as failure is a learning experience that won't soon be forgotten. The executives at Goldman Sachs, JP Morgan, Citigroup, Wells Fargo and other World Banks should be allowed to join Americans lucky enough to have Medicaid, the unemployed at food banks, soup kitchens, food stamp lines and shelters for the homeless. Let former Wall Street Executives join their fellow unemployed Americans as they shop for the new health insurance with empty pockets and broken souls.
Solutions; Obama during his campaign “promised” Americans single payer health insurance... where is it? Where are the work programs? Obama needs to clean house starting with corporatists such as Geithner, Summers, Robert Rubin, son Jamie Rubin & his hires, Bernanke and many other individuals. Paul Volker should be brought in to clean up this mess as his track record is impeccable and clearly indicates where his loyalties lie. Obama should bring in people that have no ties to Wall Street Casino's or the "big" banks. Obama needs to stand tall and prosecute Bush & Cheney Administration for war crimes, lies, questionable military contracts, miss appropriated and misplaced funds. The clock is ticking and Obama must act soon as Americans are growing restless.
This World Depression will end when the American rebellion starts. When "real" Americans have the gonads to do what's right. To "think" and fight for freedoms politically as their forefathers did. To take control of "their" Government from the Neoconservatives and Elites who trashed the American Constitution, Bill of Rights, Democracy and while doing so... destroyed the economy of the World.
Some true patriots will remember this line... "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defense, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."
So I ask... "Where have all the real Americans gone?"
John Wayne... the "Duke"... where are you when America needs you?
-----------------------------------
When economies are based upon consumption, giving the reins to appetite is dangerous, risky, even
iniquitous.
Ambrose, you are right, it is time
to tear up the old text books.
I am relieved to hear the US economic recovery is strongly underway!
Another data point is not just the unemployment level but the 26 week data - data on those who have been unemployed for 26 weeks or more. It's showing a real "hockey stick" effect.
The average length of unemployment has now reached 24 weeks and the rate of exhaustion of regular unemployment payments has reached 45%. That's when an unemployed worker makes the transition to emergency unemployment payments.
In December, the unemployment Bill reached $14.7bn, which is just over the total salary bill for the Federal Government.
But in a sense, this is just setting the scene. Unemployment is still rising because companies are cutting back on borrowing and investment. Unemployment is rising sharply among less skilled workers because construction and building are in a slump. And as the year wears on, the Banks will be hit by a wave of Commercial Real Estate loan defaults - one reason they are cutting back on lending. This will affect the small and regional Banks the worst.
Meanwhile, interest rate cuts are having the paradoxical effect of pushing money into the Bond Market and to a lesser extent into the Stock Market. Also China is busily creating a new asset bubble in minerals and commodities, with increased imports.
In the Thirties, the Depression tended to spiral around the World as one country suffered a crisis, then another, then another. After Dubai, the next place to look for trouble may be China. They also have a real estate bubble, but it is not the kind we are familiar with. In China people are simply buying houses and apartments as inflation hedges. They don't need to live in them, necessarily, because they believe they will eventually be worth more than cash. I guess time will tell.
AEP is beginning to make Jeremiah sound like an optimist. Will the American depression kick in before or after the run on the pound, the collapse of the Euro and the Japanese default?
For confirmation just visit Karl Denninger at http://market-ticker.denninger.net/archives/1835-A-Macro-Level-Look-At-The-Economy.html
The data coming out of the US is truly alarming. AEP is to be commended for his research and frank admission of the truth about the US economy. The social and political consequences for the US are likely to be profound.
The question is what effect is this likely to have on the global economy if the dollar nosedives?
The problem is that commodities especially oil are priced in dollars. A significant weakening in the dollar would cause global inflation to rocket.
Crisis meetings of the G20 are likely to be held to price commodities in a basket of currencies, in a move away from the dollar.
It seems that the period of the phoney war of goverments buying their own debt, as in the UK, is over. The blitzkreig of cuts is about to begin.
The challenge for politicians will be to hold together the social order.
I wonder if RealtyTrac's numbers are that accurate. There are a lot more repossessions at Credit Unions they don't take into account. http://www.repofinder.com tracks a lo of the smaller banks and credit union's numbers too. Any way you slice it America is in a world of hurt.
It's so refreshing that the Community Organizer in Chief can have us all share the pain.
All except Geitner and his buds of course.
It's so refreshing that the Community Organizer in Chief can have us all share the pain.
All except Geitner and his buds of course.
So Ambrose. Not disagreeing at all with eloquence. Just wondering where you get your (estimated) M3 numbers. A 5% decline is shiveringly scary.
And why is LIBOR-OIS not flaring?