Maybe Haloscan's acting up because everybody's searching the archives for their predictions. I found mine:
10% chance that we aren't in recession in Q4, the markets won't likely tank until Jan 08(though the action during the dog trading days of August will be telling.) How bad it gets from there, I have no idea.
Alec | 05.31.07 - 1:20 pm
The "stimulus" in Q2 will be what passes for the acme of the double dip recession.
MLM - It is so confusing. What numbers are real? It seems to be that PCE is always way higher than what is used to calculate the GDP, and so much so that GDP has been negative for quite awhile now. And even more confusing is that everyone seems to know this, yet they treat the GDP as if it is something meaningful. Paul Kriesal uses it. CR uses it. Why? If the GDP calculation is such an obvious lie to someone as ignorant as I, why are the knowedgeable and intelligent people giving it any credibility?
"It seems to be that PCE is always way higher than what is used to calculate the GDP, and so much so that GDP has been negative for quite awhile now. "
When the referee is on your team it's hard not to run up the score. But in the end, declining incomes and increasing unemployment numbers will do the work the officials refuse to.
No rate hikes and more stimulus is on the menu. Yum.
Does this not open up the FDIC to take over banks "too big to fail"?
- Bloomberg.com
Once banks are taken over by the FDIC, capital rules no longer apply. The Fed will no longer have to pay penalties on loans it makes to institutions taken over by the Federal Deposit Insurance Corp. The Federal Reserve Act's Rule 10B penalizes the Fed for loans to undercapitalized institutions exceeding specific time periods. The original provision was aimed at preventing the central bank from keeping failing banks open.
awgee - I think saying the government is cooking the books is probably a very difficult stand to take as a professional economist or respected blogger, even if you might scratch your head late at night about some of numbers.
My outlook is that this is a gift. While the whole rest of the world may be getting misled, you've got a chance to get your affairs in order. Don't miss taking it.
it is not necessary a lie. They have to calculate so many factors that it is impossible to give the accurate number right away. Therefore they produce rough estimation and revised it after more data is analyzed. In addition, you have to adjust for seasonal changes, etc.
Haloscan must be killed before it commits suicide.
CR ecrit:
Unfortunately, by the time RI bottoms, non-residential investment will probably have taken over as a significant drag on GDP - suggesting the recession will linger.
By that time the real overhang on investment will be the baby boomers transitioning from their maximum investment years to their highest divestment years. We may look longingly at the brevity and mildness of Japan's recession.
Haloscan must be killed before it commits suicide.
CR ecrit:
Unfortunately, by the time RI bottoms, non-residential investment will probably have taken over as a significant drag on GDP - suggesting the recession will linger.
By that time the real overhang on investment will be the baby boomers transitioning from their maximum investment years to their highest divestment years. We may look longingly at the brevity and mildness of Japan's recession.
"it is not necessary a lie. They have to calculate so many factors that it is impossible to give the accurate number right away."
Look at the PCE deflator that has been used for the last eight quarters. Do you really think that it is impossible to get more accurate? At some point, knowedgeable people need to cry foul.
"July 31 (Bloomberg) -- California led the U.S. into the worst housing recession since the 1930s. Now the most populous state may be the first to find the bottom."
HAHA, are they HIGH? Have they ever looked at the previous RE slowdowns to see how long down cycle last?
There should be some kind of license for reporters, similar to CFA.. And all question on exam should point: "Do not make conclusions out of your Axx but rather base them on real facts."
Go check out Market Ticker for real time market rumour mongering...we occasionally dabble here but look more to the fundamentals (with the occasional swift kick in the rear from the bunny slippers o' death).
But all evidence suggests this investment is about to slow sharply.
And if it was a bad investment to begin with (see-thru buildings), then what? Do we hope all the buildings are built so poorly that they fall down whilst we work our way thru this recession and we then need to "invest" in new ones when the economy comes back?
" Do you really think that it is impossible to get more accurate?"
Yeah, the amount of the data is huge. In order to get more accurate they would have to wait another 6 weeks before release, and we-PEOPLE want it NOW!
p.s. There is no point for statistical office to manipulate data, they don't get any motivation or financial gains for that. (Same goes with FED)
and another BS for the same source:
"July 31 (Bloomberg) -- The U.S. government is ignoring its own guidelines for HIV screening, putting more than 15 million people covered by federal health-care plans at risk of unwittingly carrying and spreading the deadly virus.
In 2006, the Centers for Disease Control and Prevention called for routine testing of all teen and adult Americans up to age 65 to find 250,000 people who might be unaware they're infected. Payment for such screening, though, isn't offered under the health plan for 8.5 million federal employees or Medicare, which covers 7.1 million disabled people under age 65."
it is INSANE to screen everyone due to possibility of FALSE-Positive. Pretty much they will find way too many people that are not sick to be sick, just because the population is so large...
We may look longingly at the brevity and mildness of Japan's recession.
That's a possibility. But what really worries me is that the majority of the baby boomers have jack didly squat in the way of retirement. Many of the boomers that do have retirements are public servants - that will require higher public outlays. 401k's aren't going to replace the corporate pensions. When it comes time to get the $$$, the boomers will find that they bought inflated assets and have way less in real terms than they were led to believe.
In one example from 2006, Suzette Francis, a woman with two young children, no assets, working as a $10-an-hour security guard and living in a homeless shelter, obtained a mortgage for $470,000 that, as the report stated, "exhibited...every characteristic and feature associated with dangerous subprime loans."
Francis had down payment and no proven income or assets. Her adjustable rate mortgage started at 10.8% and was capped at 16.85%. At that rate, even her initial monthly payment came to more than $4,400. She would have to work 400 hours a month just to pay her loan.
"I'm, like, in a million dollar debt in housing and cash poor," Francis told the Commission while testifying earlier this year.
I would have loved to have heard Bernanke explaining his hair loss when it hit full force.
"Hair falls out all the time. I see no reason to believe this is systemic hair loss."
"While my forehead seems to be growing, I do not expect a concurrent loss of hair."
"While the top of my head is experiencing some hair loss, growth along the jaw and on the front of the neck should compensate."
"Although I may look bald headed, hair follicle counts indicate a net gain in hair growth when you factor in my chin, face, and neck. Overall, hair growth has slowed, but not receded."
FMAC doubles incentives for mtg servicers on workouts..
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FRE 8.52, -0.21, -2.4%) is doubling incentives for mortgage servicers for aiding delinquent borrowers with Freddie Mac-owned mortgages out of foreclosure, the mortage provider said Thursday. Freddie Mac will also start reimbursing servicers for the cost of door-to-door outreach programs, give servicers more time to negotiate workouts in states with fast foreclosure processes, and make administrative changes intended to streamline the workout process. Freddie Mac will extend the time for foreclosures in Washington D.C. and 20 states, including Arizona, California, Georgia, Michigan, Mississippi, Tennessee and Texas.
Public pensions are Inherently tied to the US markets. they are limited to the amount of money they can invest overseas including foreign stocks/bond and even commodities. Some public servants make lots of money in salary but in many cases they took lower pay for outrageous pension promises. The greatest source of pension growth are working employees paying into the fund.
My GGP happened to be a big winner today. As we already have seen, excessive leverage and contracting economy are a nasty mix. GGP down 10% and headed lower...
July 31 (Bloomberg) -- The Federal Reserve will be able to lend more easily to failed banks under government control because of a provision in legislation that bailed out Fannie Mae and Freddie Mac.
In the rescue signed into law by President George W. Bush yesterday, the Fed will no longer have to pay penalties on loans it makes to institutions taken over by the Federal Deposit Insurance Corp.
The measure may mean more use of the central bank's balance sheet to prop up the U.S. financial system, after the Fed began lending to investment banks in March, analysts said. The FDIC has taken over seven banks this year, with 90 on a watch-list of troubled firms as lenders are hit by the surge in credit losses.
``We are pushing forward the line on what the government will backstop, and what the Federal Reserve will backstop,'' said Vincent Reinhart, former director of the Fed's Monetary Affairs Division who is now at the American Enterprise Institute in Washington.
Fed officials yesterday also extended their two lending programs to Wall Street through January, after judging that markets are still ``fragile.''
The Federal Reserve Act's Section 10B penalizes the Fed for loans to undercapitalized institutions exceeding specific time periods. The original provision was aimed at preventing the central bank from keeping failing banks open.
July 31 (Bloomberg) -- The Federal Reserve will be able to lend more easily to failed banks under government control because of a provision in legislation that bailed out Fannie Mae and Freddie Mac.
In the rescue signed into law by President George W. Bush yesterday, the Fed will no longer have to pay penalties on loans it makes to institutions taken over by the Federal Deposit Insurance Corp.
The measure may mean more use of the central bank's balance sheet to prop up the U.S. financial system, after the Fed began lending to investment banks in March, analysts said. The FDIC has taken over seven banks this year, with 90 on a watch-list of troubled firms as lenders are hit by the surge in credit losses.
``We are pushing forward the line on what the government will backstop, and what the Federal Reserve will backstop,'' said Vincent Reinhart, former director of the Fed's Monetary Affairs Division who is now at the American Enterprise Institute in Washington.
Fed officials yesterday also extended their two lending programs to Wall Street through January, after judging that markets are still ``fragile.''
The Federal Reserve Act's Section 10B penalizes the Fed for loans to undercapitalized institutions exceeding specific time periods. The original provision was aimed at preventing the central bank from keeping failing banks open.
OT- Crazy Canadian chops a dude's head off on a Greyhound bus.
A passenger sleeping on a Greyhound bus was killed and decapitated by his seatmate on Wednesday night as the vehicle rolled across the Canadian prairies, witnesses said.
SRS has a nice looking chart. The are two u formations each culminating in a newer high. The last move Aug-Jan was about five mos. The next move may be March to Aug. Take it for what it is a simple pattern.
The fundamentals/news is also horrible so it supports a thesis of being long srs
Hey, billionaire Bill Gross of Pimco has recently suggested that we dynamite 1 million homes as a way to stimulate the economy. No joke. That shows the false nature of our economy.
Hell, why not pay the unemployed to make pebbles out of rocks with sledge hammers.
In the introduction to this series on government reporting, I mentioned political manipulation of the GNP/GDP in the Johnson and first Bush administrations that went beyond overly positive methodological changes. In both instances, my sources were consulting clients who had been involved directly in the process. In the latter instance, an individual at the BEA also confirmed the situation.
There are very strong motivations for the administration in power to manipulate the figures. Whether to try to ensure reelection, give their political party a leg up in the next election, or shift blame to an incoming administration from the other party. To suggest otherwise seems quite naive to me. Do you really think there's no way BEA employees could be encouraged by the administration to recheck their numbers?
--
"(housing starts are now below housing sales)."
Starts have to fall below the demand for new housing and not sales. Has anyone ever tell you that during recessions the demand goes negative? Starts have to goes to zero for a few years to really work off inventory of all existing homes, especially vacant homes, not juts new homes. Got it?
Number of Vacant Units increased by 1.25M for the past 12 months, 2007Q2-2008Q2.
Do you just base your forecast on wishful thinking, CR? And your estimate of the demand at 1.7M is absurd, but you are afraid to correct it. I wonder why.
We could always hype up a foreign enemy, insist that this enemy is always and everywhere, and grow a police state as the center of our economy. That way the government could control spending through security fears and push prisons, goons, and surveillance equipment.
Instead of a consumer economy, we could have a thriving security state economy.
Stock Repurchases as an Earnings Management Device
Paul Hribara, Nicole Thorne Jenkinsb, W. Bruce Johnsonc
...stock repurchases have a direct, mechanical impact on reported EPS that is determined by three factors: the timing of the repurchase, the proportion of share bought back,and the financial return forfeited on the funds used to buy back shares. The first two factors are responsible for a reduction in the EPS numerator, but the third factor (forfeited return) decreases the EPS numerator. The net result is that some stock repurchase increase reported EPS while other repurchases decrease EPS
Northern Europe 4 country (Sweden, Denmark, Norway, and Finland) enhances the welfare policy, prevents the difference expansion, and is accomplishing economic growth.
However, the United States not only has been expanding the difference at the expense of welfare now but also essential economy reduces far from growth.
The curious fact comes to the surface when the correlation with the Gini's coefficient that is the index that measures the GDP growth rate and equality a person from 95 years to 2006 is examined. As for showing a high expansion of GDP, there are a lot of countries (country where the Gini's coefficient is low) where the equality of the income is high.
?@ Norway: GDP a person who was top in nine countries for 41,819 dollars becomes 71,857 dollars (Increase by a factor of 1.72) in 2006, pulls the 2nd place following apart greatly, and is top in 2002.
?A Denmark: GDP a person who was nine country third grade of junior high-school title in 2002 for 32,318 dollars became 50,791 dollars (Increase by a factor of 1.57) in 2006, the United States was pulled out, and it rose to 2nd place.
?B Sweden: GDP a person who was nine country 5th place when mesne in 2002 for 27,275 dollars became 42,264 dollars (Increase by a factor of 1.55) in 2006, Japan was pulled out, and it rose to 4th place.
?C Finland: GDP a person who was nine country 7th place when mesne in 2002 for 25,442 dollars became 39,796 dollars (Increase by a factor of 1.55) in 2006, Britain and Japan were pulled out, and it rose to 5th place.
The United States: It came in 3rd place because it was pulled out by Denmark though pretext GDP that was nine country second grade of junior high-school title in 2002 for 36,124 dollars increased up to 43,801 dollars (1.21 times) in 2006.
It is pointed out that Scandinavian countries that take a high welfare policy are accomplishing the high growth.
Social security benefits are the obstruction factors of growth according to "Market principle". However, it is a factor that the social security benefits promote growth in Northern Europe.
Scandinavian countries are reducing the wealth gap by re-distribution by the government. In a word, it is a composition of a lot of collecting from the high income earner in the form of a tax and social insurance and distributing it to the low income earner cordially.
The problem on and attendance on old people ..unemployment and healthy.., and and, it deals with the problem with the safety net of the society, and the one.
It is possible to dismiss, and the rehire is also flexible in the convenience of management easily in Northern Europe 4 country and United States and Britain. Therefore, it will be able to be said that long-term unemployed' ratios have lowered.
?When having questioned, that is, "Do you feel insecurity in the loss of a present employment?", the ratio of respondents who had answered, "It is" might have been the lowest in Scandinavian countries for the worker in each country of Europe of B. And, the respondent of having received the favor by job change exceeded the majority.
?The worker who doesn't fear C unemployment demands defeated neither enterprise nor industry by the tax in the competition for global ..protection... In a word, it is positive in an economic globalization. The growth rate of the real wages is also large in Scandinavian countries though the globalization of the economy is advanced though the globalization also has the criticism "It is a reduction of pay competition".
As of the June 2008 distribution, S&P said that severely delinquent loans (90-plus days, foreclosures, and REOs) for the affected transactions made up an average 17.85 percent of the current pool balances. Over the past three months, severe delinquencies had increased by an astounding 28.70 percent, underscoring just how bad things are getting in Alt-A and just how fast its taking place.
this stood out in this article...in 3 months....whew thats bad..thier is not enough sand to stop this big rig without brakes coming down the tejon pass
barely writes:
ADP showing job creation in July. Can anyone that has a clue tell me what they base their guesses on ?
My understanding is that ADP is a business survey asking "how many people due you can or hire". There are a lot of temps and non payroll workers that won't show up on the ledgers.
Reason why Clinton administration makes it big to economic growth and
simultaneous achievement of fiscal reconstruction
When you examine the history of rice of all tax systems｢The United States misunderstood the preferential treatment to the well-to-do population in 1925 as a correct selection. The income deregulation plan decreased to 25% though the boom was praised at the high graduated income tax rate of 50?73% at that time was executed. The world great depression following the large sudden fall of stock prices was caused in 1929 since it continued for four years. ｣｡
It graduated increased taxes and it did and the income restriction strengthening was done from 25 ..top rate of income tax.. % to 63?>92% in dramatic form three years later. The result and the United States completely recover national revenue of the rise in the unemployment rate before burst of the economic bubble of holding off in only six years, and are ..real economic recovery orbit.. ..recording...
However, a large tax cut policy is forced about the well-to-do population of Reagan Administration that generates large-scale fiscal deficit after 50 years and present child Bush administration the evaluation as the policy unavoidably taken the tax increase plan of this United States.
However, it made it big to real economic growth and the simultaneous achievement of the fiscal reconstruction in the tax increase policy of the criticized graduated income tax etc. when Clinton administration after the political power of Reagan failed claptrap.
What is with all the Wright Model B references?
JP
A certain poster used to boast about using a modified Wright Model B(PDF warning) to predict the economic future which was all rainbows and unicorns. All the while the model actually predicted a 50% chance of recession in April 07, the poster ignored the housing bust and credit contraction and the guy who came up with the model says he didn't even know if it worked.
Now it's (much like that poster), is a running joke here.
What is with all the Wright Model B references?
JP
A certain poster used to boast about using a modified Wright Model B(PDF warning) to predict the economic future which was all rainbows and unicorns. All the while the model actually predicted a 50% chance of recession in April 07, the poster ignored the housing bust and credit contraction and the guy who came up with the model says he didn't even know if it worked.
Now it's (much like that poster), is a running joke here.
ADP survey has been wholly unreliable except for the 1st few months of their revision. Very little correlation to the establishment survey, let alone reality.
ADP uses their customers, about 400K. According to ADP they use actual payroll records, not surveys. This should give a better number then the govt. Of course, the ADP customer distribution of jobs is not aligned with the US as a whole and I don't think they are adjusting correctly for this problem. Here are the ADP vs payroll #s for the last four months. ADP in paranthesis.
March 08 -88,000 (+8,000); April 08 -56,000 (+10,000); May 08 -62000 (+40,000); June 08 -62000 (-79,000). With a track record like this, I don't know how the MSM can report their numbers with a straight face.
"Northern Europe 4 country (Sweden, Denmark, Norway, and Finland) enhances the welfare policy, prevents the difference expansion, and is accomplishing economic growth."
well, are the numbers you provide PPP adjusted or just in the $ term? If they are in the $ term, the increase of their GDP might be due to the exchange rate ($ de-valuation) and not due to Economic growth.
TO illustrate my point, imagine $ going up 30% this year. The next year when GDP/Capita based on just exchange rate will be calculated, the GDP for those countries will be 30% less relatively to us (give or take couple of % growth difference).
It is true though, Nordic countries have been on the top in terms of many various level of life measurements for a long time. However those achievements are not necessary due to their welfare system. They also have the lowest level of bureaucracy in the world. There might be some other factors/reasons.
Once more, since it was swallowed in the other comments:
Yes, calculating GDP is hard, but does anyone really believe that a 1.1% deflator is the right number? Even approximately? Even within, say, 3 sigma of the real number?
I, for one, do not.
Given that, this number is garbage - garbage in, garbage out.
"However it does not imply there is a conspiracy to make this number higher."
At every turn, the choices they use to set the numbers are weighted toward a "better" set of numbers - for instance, OER instead of user cost, chain-inflation (core only, thanks), instead of straight CPI, hedonic adjustments of computer equipment that execute essentially the same code...
So, while one could argue it's incompetence, instead of a concerted effort, I think the facts known require a vigorous defense of that position, since the "concerted effort" explanation seems to have the most evidence to support it.
barely writes:
ADP showing job creation in July. Can anyone that has a clue tell me what they base their guesses on ?
barely | 07.31.08 - 12:23 pm | #
I think recent college and high school grads starting to work might cause an upsurge in ADP's numbers, although the specifics of their sampling approach I'm not familiar with. But today the NY Times had an article and graph showing employed workers are being channeled into part-time work from preferred full-time work in unprecedented numbers.
barely writes:
ADP showing job creation in July. Can anyone that has a clue tell me what they base their guesses on ?
barely | 07.31.08 - 12:23 pm | #
I think recent college and high school grads starting to work might cause an upsurge in ADP's numbers, although the specifics of their sampling approach I'm not familiar with. But today the NY Times had an article and graph showing employed workers are being channeled into part-time work from preferred full-time work in unprecedented numbers.
"true, there is high probability that the number is garbage. However it does not imply there is a conspiracy to make this number higher."
Who said anything about a conspiracy? I initially was asking why knowledgeable people like Paul Kasriel and CR gave credence to a number that you even admit is probably garbage. You recognize it. I recognize it, and I am nto so informed, but it is darned obvious to me. Why does everybody behave like it is relevant? It is garbage.
Today, the MSM are saying the reason the mkt is down because Exxon's profits are somewhat less magnificent than anticipated.
Well so what? Why should that affect other sectors?
I think this is a meaningless narrative that the MSM makes up to soothe and explain things. In fact, the mkt indexes and movements of stocks are almost neve explainable.
Of course there is Fear and Greed and Stupidity, totalling about 80% of the changes and then something we could refer to as mkt fundamentals, for the other 20%. We don't understand the fundamentals--people who are losing money do their best to hide it until they can't hide it anymore. And I leave fear greed, etc, to the shrinks and future experts in psychohistory if that science ever comes up with that.
Meanwhile, MSM and the rest have a soothing entertaining function because they create what sounds like a plausible story. The fact is any headline is meaningless, it cannot summarize what happened that day. But these guys have to fill up the spaces somehow, and get paid for it and so they do.
Sorry haven't had time to read the rest of the thread, but the muse was upon me.
Ok a lil late, but here is my take on the GDP numbers. Warning its a bit on the long side. Cross post from Zacks.com:
This morning the government came out with its first stab at the second quarter GDP numbers, as well as revisions to past periods. While the headline growth of 1.9% (all percentages are annual rates) was a bit less than the market was expecting, it was far from recessionary. However there appears to be far less to the number than meets the eye, and the revisions were generally to the down side. Each of the last three full years was revised down. Growth in 2005 is now seen as having been 2.9% rather than the previously reported 3.1%, for 2006 it was 2.8% not 2.9% and for 2007 it was 2.0%, not 2.2%. Within 2007, there was an upward revision to the second quarter, but a big downward revision to the fourth quarter. Growth in the fourth quarter was actually -0.2% rather than the plus 0.6% number that had been in use up until now. The first quarter was revised down to growth of 0.9% from 1.0%.
Within the second quarter numbers there was some good news. The change in private inventories actually subtracted 1.92 percentage points from growth. Usually declines in inventories are made up in later quarters, so one might be tempted to argue that the second quarter was much stronger than the headlines let on. Real final sales were up 3.9%, which is a fairly healthy showing. What were the drivers of GDP growth in the second quarter? Personal Consumption Expenditures (PCE) added 1.08 points to GDP growth (i.e. 57% of the 1.9% total growth), largely due to strong showings for Non-Durable Goods and Services, while Durable Goods sales were a drag on growth, most notably vehicle sales which subtracted 1.07 points from growth. The PCE growth was much more significant than in the first quarter when it added only 0.61 points to growth.
Building was a big help, as Investment in Non-Residential structures was up 14.4%, adding 0.51 points to growth. Residential Construction continued to be a drag on growth, but less of one than in the first quarter (or the fourth quarter for that matter). It fell 15.6%, subtracting 0.62 points of growth, which was not as bad as the 25.1% decline subtracting 1.12 points from growth in the first quarter.
International Trade was the real hero of the quarter, Exports surged 9.2% adding 1.16 points to growth while imports fell 6.6%. Falling imports add to growth in the GDP calculations and that decline added 1.26 points to growth in the second quarter. Thus taken together, net exports added 2.42 points to growth, or significantly more than the total growth of 1.9%. This was a big improvement over the first quarter when net exports added 0.77 points or the fourth quarter when they added 0.93 points to growth.
Higher government spending also added to growth. Overall Federal spending grew 6.7% adding 0.48 points to growth, of which 0.36 came from defense and 0.12 came from increased Non-Defense spending. In the first quarter Federal Spending added 0.41 points to growth while in the fourth quarter it actually slightly subtracted from growth (0.04 points). Increased State and Local spending added 0.20 points to growth.
Ok, now that we have gotten all those numbers out of the way, what does it mean? Well clearly the stimulus checks helped with PCE, but it is interesting to mote that most of that went for non-durable goods like food and energy, not to durable goods like autos. Second debasing the currency can help growth at least in the short term, as the weak dollar is clearly a factor in the strong net export showing.
The debasing the currency part brings us to the real fly in the ointment in this release, and a reason that every one of the numbers cited above should be taken with a few pounds of salt. We are talking about real GDP here, not nominal, which grew at a very low 3.0% following 3.5% growth in the first quarter. Real GDP depends pretty critically on the implicit price deflator used to translate nominal GDP into real GDP. The government would have you believe that inflation in the second quarter, at least the inflation measure used to calculate GDP, was running at just 1.1%, down from 2.6% n the first quarter and 2.5% in the fourth quarter.
Unless one has recently ingested large quantities of peyote, that is a very hard number to believe. Now I dont like to say bad things about the ref, it usually is just an excuse used by a bad coach, but really now folks, this simply does not pass the smell test. Every other measure of inflation was far, far higher than this, and was accelerating in the second quarter. The CPI rose at an annual rate of 10.3% in the second quarter and was up 5.0% on a year over year basis, the PPI was up at a 14.3% rate in the second quarter and was up 9.1% year over year. I know there are technical differences in how the indexes are constructed, and that the implicit price deflator is designed to measure domestic inflation and much of our inflation has been imported, but these are HUGE differences. Plug in any realistic measure of inflation and the growth vanishes.
I have no proof of anything nefarious going on here, but I have yet to see a convincing explanation for this very low inflation number. Then again, this is an administration that had the VP go over to closely question any CIA analysts who were not on board with the idea that Saddam was about to launch a WMD attack on U.S. cities. It is an administration that in job interviews to fill non-political carrier prosecutor positions at the Justice Department questions like What is it about George Bush that makes you want to serve him? It does not take a tin foil hat to think that just perhaps someone was leaning on a few G-10s at the BEA, to reexamine their inflation assumptions for the report. If anyone in Congress asks, just claim executive privilege and stonewall them. Of course it could be some unexplained technical factor or something going on with seasonal adjustment, but anyway you slice it, the inflation number which is central to this report, looks very fishy.
I expect this number will be revised down over the course of time
This morning the government came out with its first stab at the second quarter GDP numbers, as well as revisions to past periods. While the headline growth of 1.9% (all percentages are annual rates) was a bit less than the market was expecting, it was far from recessionary. However there appears to be far less to the number than meets the eye, and the revisions were generally to the down side. Each of the last three full years was revised down. Growth in 2005 is now seen as having been 2.9% rather than the previously reported 3.1%, for 2006 it was 2.8% not 2.9% and for 2007 it was 2.0%, not 2.2%. Within 2007, there was an upward revision to the second quarter, but a big downward revision to the fourth quarter. Growth in the fourth quarter was actually -0.2% rather than the plus 0.6% number that had been in use up until now. The first quarter was revised down to growth of 0.9% from 1.0%.
Within the second quarter numbers there was some good news. The change in private inventories actually subtracted 1.92 percentage points from growth. Usually declines in inventories are made up in later quarters, so one might be tempted to argue that the second quarter was much stronger than the headlines let on. Real final sales were up 3.9%, which is a fairly healthy showing. What were the drivers of GDP growth in the second quarter? Personal Consumption Expenditures (PCE) added 1.08 points to GDP growth (i.e. 57% of the 1.9% total growth), largely due to strong showings for Non-Durable Goods and Services, while Durable Goods sales were a drag on growth, most notably vehicle sales which subtracted 1.07 points from growth. The PCE growth was much more significant than in the first quarter when it added only 0.61 points to growth.
Building was a big help, as Investment in Non-Residential structures was up 14.4%, adding 0.51 points to growth. Residential Construction continued to be a drag on growth, but less of one than in the first quarter (or the fourth quarter for that matter). It fell 15.6%, subtracting 0.62 points of growth, which was not as bad as the 25.1% decline subtracting 1.12 points from growth in the first quarter.
International Trade was the real hero of the quarter, Exports surged 9.2% adding 1.16 points to growth while imports fell 6.6%. Falling imports add to growth in the GDP calculations and that decline added 1.26 points to growth in the second quarter. Thus taken together, net exports added 2.42 points to growth, or significantly more than the total growth of 1.9%. This was a big improvement over the first quarter when net exports added 0.77 points or the fourth quarter when they added 0.93 points to growth.
Higher government spending also added to growth. Overall Federal spending grew 6.7% adding 0.48 points to growth, of which 0.36 came from defense and 0.12 came from increased Non-Defense spending. In the first quarter Federal Spending added 0.41 points to growth while in the fourth quarter it actually slightly subtracted from growth (0.04 points). Increased State and Local spending added 0.20 points to growth.
Ok, now that we have gotten all those numbers out of the way, what does it mean? Well clearly the stimulus checks helped with PCE, but it is interesting to mote that most of that went for non-durable goods like food and energy, not to durable goods like autos. Second debasing the currency can help growth at least in the short term, as the weak dollar is clearly a factor in the strong net export showing.
The debasing the currency part brings us to the real fly in the ointment in this release, and a reason that every one of the numbers cited above should be taken with a few pounds of salt. We are talking about real GDP here, not nominal, which grew at a very low 3.0% following 3.5% growth in the first quarter. Real GDP depends pretty critically on the implicit price deflator used to translate nominal GDP into real GDP. The government would have you believe that inflation in the second quarter, at least the inflation measure used to calculate GDP, was running at just 1.1%, down from 2.6% n the first quarter and 2.5% in the fourth quarter.
Unless one has recently ingested large quantities of peyote, that is a very hard number to believe. Now I dont like to say bad things about the ref, it usually is just an excuse used by a bad coach, but really now folks, this simply does not pass the smell test. Every other measure of inflation was far, far higher than this, and was accelerating in the second quarter. The CPI rose at an annual rate of 10.3% in the second quarter and was up 5.0% on a year over year basis, the PPI was up at a 14.3% rate in the second quarter and was up 9.1% year over year. I know there are technical differences in how the indexes are constructed, and that the implicit price deflator is designed to measure domestic inflation and much of our inflation has been imported, but these are HUGE differences. Plug in any realistic measure of inflation and the growth vanishes.
I have no proof of anything nefarious going on here, but I have yet to see a convincing explanation for this very low inflation number. Then again, this is an administration that had the VP go over to closely question any CIA analysts who were not on board with the idea that Saddam was about to launch a WMD attack on U.S. cities. It is an administration that in job interviews to fill non-political carrier prosecutor positions at the Justice Department questions like What is it about George Bush that makes you want to serve him? It does not take a tin foil hat to think that just perhaps someone was leaning on a few G-10s at the BEA, to reexamine their inflation assumptions for the report. If anyone in Congress asks, just claim executive privilege and stonewall them. Of course it could be some unexplained technical factor or something going on with seasonal adjustment, but anyway you slice it, the inflation number which is central to this report, looks very fishy.
I expect this number will be revised down over the course of time
I love how Residential Investment (as a percentage of GDP) drops just before every recession. Except in 2002, where it kept rising right through the recession. That tells me that the housing bubble began before 2002.
who's on first?
Fiiiirst
remember,this IS the good news.
Think you mean Q2 2008, not 2007.
Any idea what PCE deflator was used to calculate GDP this time?
No whammy. No whammy. Damn, double whammy.
awgee - John Williams from Shadowstats says it was an unbelievable 1.1% annualized. WTF!
"Real personal consumption expenditures increased 1.5 percent in the second quarter, compared
with an increase of 0.9 percent in the first."
But then it goes on to talk about "core" without food and energy. I wonder which one they use.
Maybe Haloscan's acting up because everybody's searching the archives for their predictions. I found mine:
10% chance that we aren't in recession in Q4, the markets won't likely tank until Jan 08(though the action during the dog trading days of August will be telling.) How bad it gets from there, I have no idea.
Alec | 05.31.07 - 1:20 pm
The "stimulus" in Q2 will be what passes for the acme of the double dip recession.
"Excluding trade, the economy would have contracted at a 0.5 percent pace, the second such decline in the last three quarters."
U.S. Economy: Growth Rate Falls Short of Forecasts (Update3) - Bloomberg.com
p.s. overall we are still in "hanging there" shape, however the failure of the trade talk is the precursor to the trade wars; fun has just started!
FNORD
MLM - It is so confusing. What numbers are real? It seems to be that PCE is always way higher than what is used to calculate the GDP, and so much so that GDP has been negative for quite awhile now. And even more confusing is that everyone seems to know this, yet they treat the GDP as if it is something meaningful. Paul Kriesal uses it. CR uses it. Why? If the GDP calculation is such an obvious lie to someone as ignorant as I, why are the knowedgeable and intelligent people giving it any credibility?
Where're Sebastian and O-Joe? Haven't seen them in a while.
p.s.
will this (1.8%) number be revised down again? Any bets?
"It seems to be that PCE is always way higher than what is used to calculate the GDP, and so much so that GDP has been negative for quite awhile now. "
When the referee is on your team it's hard not to run up the score. But in the end, declining incomes and increasing unemployment numbers will do the work the officials refuse to.
No rate hikes and more stimulus is on the menu. Yum.
Sorry; It is Paul Kasriel.
Does this not open up the FDIC to take over banks "too big to fail"?
- Bloomberg.com
Once banks are taken over by the FDIC, capital rules no longer apply. The Fed will no longer have to pay penalties on loans it makes to institutions taken over by the Federal Deposit Insurance Corp. The Federal Reserve Act's Rule 10B penalizes the Fed for loans to undercapitalized institutions exceeding specific time periods. The original provision was aimed at preventing the central bank from keeping failing banks open.
awgee - I think saying the government is cooking the books is probably a very difficult stand to take as a professional economist or respected blogger, even if you might scratch your head late at night about some of numbers.
My outlook is that this is a gift. While the whole rest of the world may be getting misled, you've got a chance to get your affairs in order. Don't miss taking it.
well
"GDP calculation is such an obvious lie"
it is not necessary a lie. They have to calculate so many factors that it is impossible to give the accurate number right away. Therefore they produce rough estimation and revised it after more data is analyzed. In addition, you have to adjust for seasonal changes, etc.
Haloscan must be killed before it commits suicide.
CR ecrit:
Unfortunately, by the time RI bottoms, non-residential investment will probably have taken over as a significant drag on GDP - suggesting the recession will linger.
By that time the real overhang on investment will be the baby boomers transitioning from their maximum investment years to their highest divestment years. We may look longingly at the brevity and mildness of Japan's recession.
Haloscan must be killed before it commits suicide.
CR ecrit:
Unfortunately, by the time RI bottoms, non-residential investment will probably have taken over as a significant drag on GDP - suggesting the recession will linger.
By that time the real overhang on investment will be the baby boomers transitioning from their maximum investment years to their highest divestment years. We may look longingly at the brevity and mildness of Japan's recession.
What happened now? Any breaking rumor right now?
"it is not necessary a lie. They have to calculate so many factors that it is impossible to give the accurate number right away."
Look at the PCE deflator that has been used for the last eight quarters. Do you really think that it is impossible to get more accurate? At some point, knowedgeable people need to cry foul.
"July 31 (Bloomberg) -- California led the U.S. into the worst housing recession since the 1930s. Now the most populous state may be the first to find the bottom."
HAHA, are they HIGH? Have they ever looked at the previous RE slowdowns to see how long down cycle last?
There should be some kind of license for reporters, similar to CFA.. And all question on exam should point: "Do not make conclusions out of your Axx but rather base them on real facts."
jin,
Go check out Market Ticker for real time market rumour mongering...we occasionally dabble here but look more to the fundamentals (with the occasional swift kick in the rear from the bunny slippers o' death).
You know, a flu in U.S. is a pneumonia in the rest of the world...
So, I hope that the FED Aspirin work fine, soom!
regards,
Stock Buster (from Brazil).
And if it was a bad investment to begin with (see-thru buildings), then what? Do we hope all the buildings are built so poorly that they fall down whilst we work our way thru this recession and we then need to "invest" in new ones when the economy comes back?
Can capitalism work any better than that?
" Do you really think that it is impossible to get more accurate?"
Yeah, the amount of the data is huge. In order to get more accurate they would have to wait another 6 weeks before release, and we-PEOPLE want it NOW!
p.s. There is no point for statistical office to manipulate data, they don't get any motivation or financial gains for that. (Same goes with FED)
and another BS for the same source:
"July 31 (Bloomberg) -- The U.S. government is ignoring its own guidelines for HIV screening, putting more than 15 million people covered by federal health-care plans at risk of unwittingly carrying and spreading the deadly virus.
In 2006, the Centers for Disease Control and Prevention called for routine testing of all teen and adult Americans up to age 65 to find 250,000 people who might be unaware they're infected. Payment for such screening, though, isn't offered under the health plan for 8.5 million federal employees or Medicare, which covers 7.1 million disabled people under age 65."
it is INSANE to screen everyone due to possibility of FALSE-Positive. Pretty much they will find way too many people that are not sick to be sick, just because the population is so large...
Is it bottom when ego hits the ground with a loud thud?
We may look longingly at the brevity and mildness of Japan's recession.
That's a possibility. But what really worries me is that the majority of the baby boomers have jack didly squat in the way of retirement. Many of the boomers that do have retirements are public servants - that will require higher public outlays. 401k's aren't going to replace the corporate pensions. When it comes time to get the $$$, the boomers will find that they bought inflated assets and have way less in real terms than they were led to believe.
Geezer, yes 2008.
Best to all
More subprime stories, this time from New York
Subprime fraud ran rampant in New York - Jul. 31, 2008
In one example from 2006, Suzette Francis, a woman with two young children, no assets, working as a $10-an-hour security guard and living in a homeless shelter, obtained a mortgage for $470,000 that, as the report stated, "exhibited...every characteristic and feature associated with dangerous subprime loans."
Francis had down payment and no proven income or assets. Her adjustable rate mortgage started at 10.8% and was capped at 16.85%. At that rate, even her initial monthly payment came to more than $4,400. She would have to work 400 hours a month just to pay her loan.
"I'm, like, in a million dollar debt in housing and cash poor," Francis told the Commission while testifying earlier this year.
Will the real Sebastian please come back, so he can join the recession with the rest of us in Americastan.
I would have loved to have heard Bernanke explaining his hair loss when it hit full force.
"Hair falls out all the time. I see no reason to believe this is systemic hair loss."
"While my forehead seems to be growing, I do not expect a concurrent loss of hair."
"While the top of my head is experiencing some hair loss, growth along the jaw and on the front of the neck should compensate."
"Although I may look bald headed, hair follicle counts indicate a net gain in hair growth when you factor in my chin, face, and neck. Overall, hair growth has slowed, but not receded."
We're not going bald, we're just adjusting.
This story may have been missed by some: Telegraph | Error 404 | Sorry, the page you have requested is not available
Sex change Paratrooper wins £250,000 for 'hurt feelings
U.S. President George W. Bush said on Thursday that the latest economic data showed the foundations of the U.S. economy are strong.
Bush says economy has strong foundation
| Reuters
Actually they a full of termite holes due to corruption and fraud but don't let that get in the way of a good story.
The more government does and the more it spends in an attempt to prop up insolvent banks and overvalued asset prices the worse this will get.
U.S. President George W. Bush said on Thursday that the latest economic data showed the foundations of the U.S. economy are strong.
Bush says economy has strong foundation
| Reuters
Actually they a full of termite holes due to corruption and fraud but don't let that get in the way of a good story.
The more government does and the more it spends in an attempt to prop up insolvent banks and overvalued asset prices the worse this will get.
Time to get into SRS?
FMAC doubles incentives for mtg servicers on workouts..
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FRE 8.52, -0.21, -2.4%) is doubling incentives for mortgage servicers for aiding delinquent borrowers with Freddie Mac-owned mortgages out of foreclosure, the mortage provider said Thursday. Freddie Mac will also start reimbursing servicers for the cost of door-to-door outreach programs, give servicers more time to negotiate workouts in states with fast foreclosure processes, and make administrative changes intended to streamline the workout process. Freddie Mac will extend the time for foreclosures in Washington D.C. and 20 states, including Arizona, California, Georgia, Michigan, Mississippi, Tennessee and Texas.
is this with new found money?
Angry Saver +1
Public pensions are Inherently tied to the US markets. they are limited to the amount of money they can invest overseas including foreign stocks/bond and even commodities. Some public servants make lots of money in salary but in many cases they took lower pay for outrageous pension promises. The greatest source of pension growth are working employees paying into the fund.
"Time to get into SRS?"
My GGP happened to be a big winner today. As we already have seen, excessive leverage and contracting economy are a nasty mix. GGP down 10% and headed lower...
File under things that make you go "hmmmmmm"...
Fed Loans to Banks Made Easier By Fannie Mae Rescue (Update1)
By Craig Torres
July 31 (Bloomberg) -- The Federal Reserve will be able to lend more easily to failed banks under government control because of a provision in legislation that bailed out Fannie Mae and Freddie Mac.
In the rescue signed into law by President George W. Bush yesterday, the Fed will no longer have to pay penalties on loans it makes to institutions taken over by the Federal Deposit Insurance Corp.
The measure may mean more use of the central bank's balance sheet to prop up the U.S. financial system, after the Fed began lending to investment banks in March, analysts said. The FDIC has taken over seven banks this year, with 90 on a watch-list of troubled firms as lenders are hit by the surge in credit losses.
``We are pushing forward the line on what the government will backstop, and what the Federal Reserve will backstop,'' said Vincent Reinhart, former director of the Fed's Monetary Affairs Division who is now at the American Enterprise Institute in Washington.
Fed officials yesterday also extended their two lending programs to Wall Street through January, after judging that markets are still ``fragile.''
The Federal Reserve Act's Section 10B penalizes the Fed for loans to undercapitalized institutions exceeding specific time periods. The original provision was aimed at preventing the central bank from keeping failing banks open.
[snip]
File under things that make you go "hmmmmmm"...
Fed Loans to Banks Made Easier By Fannie Mae Rescue (Update1)
By Craig Torres
July 31 (Bloomberg) -- The Federal Reserve will be able to lend more easily to failed banks under government control because of a provision in legislation that bailed out Fannie Mae and Freddie Mac.
In the rescue signed into law by President George W. Bush yesterday, the Fed will no longer have to pay penalties on loans it makes to institutions taken over by the Federal Deposit Insurance Corp.
The measure may mean more use of the central bank's balance sheet to prop up the U.S. financial system, after the Fed began lending to investment banks in March, analysts said. The FDIC has taken over seven banks this year, with 90 on a watch-list of troubled firms as lenders are hit by the surge in credit losses.
``We are pushing forward the line on what the government will backstop, and what the Federal Reserve will backstop,'' said Vincent Reinhart, former director of the Fed's Monetary Affairs Division who is now at the American Enterprise Institute in Washington.
Fed officials yesterday also extended their two lending programs to Wall Street through January, after judging that markets are still ``fragile.''
The Federal Reserve Act's Section 10B penalizes the Fed for loans to undercapitalized institutions exceeding specific time periods. The original provision was aimed at preventing the central bank from keeping failing banks open.
[snip]
OT- Crazy Canadian chops a dude's head off on a Greyhound bus.
A passenger sleeping on a Greyhound bus was killed and decapitated by his seatmate on Wednesday night as the vehicle rolled across the Canadian prairies, witnesses said.
Suspect in bus beheading identified - Americas- msnbc.com
I bet he was stressing from a foreclosure.
SRS has a nice looking chart. The are two u formations each culminating in a newer high. The last move Aug-Jan was about five mos. The next move may be March to Aug. Take it for what it is a simple pattern.
The fundamentals/news is also horrible so it supports a thesis of being long srs
Can capitalism work any better than that?
Hey, billionaire Bill Gross of Pimco has recently suggested that we dynamite 1 million homes as a way to stimulate the economy. No joke. That shows the false nature of our economy.
Hell, why not pay the unemployed to make pebbles out of rocks with sledge hammers.
In the introduction to this series on government reporting, I mentioned political manipulation of the GNP/GDP in the Johnson and first Bush administrations that went beyond overly positive methodological changes. In both instances, my sources were consulting clients who had been involved directly in the process. In the latter instance, an individual at the BEA also confirmed the situation.
Gross Domestic Product
There are very strong motivations for the administration in power to manipulate the figures. Whether to try to ensure reelection, give their political party a leg up in the next election, or shift blame to an incoming administration from the other party. To suggest otherwise seems quite naive to me. Do you really think there's no way BEA employees could be encouraged by the administration to recheck their numbers?
"The greatest source of pension growth are working employees paying into the fund."
They are also the greatest source of wealth for company insiders.
CSC I think he took his armrest or he fell asleep on his shoulder. Maybe they should have checked his "Rambo knife"
CSC- Scary...Wasn't Rambo last seen in british columbia?
He might still be working for the bush admin up there...
So while we're OT:
What is with all the Wright Model B references?
--
"(housing starts are now below housing sales)."
Starts have to fall below the demand for new housing and not sales. Has anyone ever tell you that during recessions the demand goes negative? Starts have to goes to zero for a few years to really work off inventory of all existing homes, especially vacant homes, not juts new homes. Got it?
Number of Vacant Units increased by 1.25M for the past 12 months, 2007Q2-2008Q2.
Do you just base your forecast on wishful thinking, CR? And your estimate of the demand at 1.7M is absurd, but you are afraid to correct it. I wonder why.
Jas
We could always hype up a foreign enemy, insist that this enemy is always and everywhere, and grow a police state as the center of our economy. That way the government could control spending through security fears and push prisons, goons, and surveillance equipment.
Instead of a consumer economy, we could have a thriving security state economy.
China can pick up the baton as "Consumer."
Just a thought...
ADP showing job creation in July. Can anyone that has a clue tell me what they base their guesses on ?
Stock Repurchases as an Earnings Management Device
Paul Hribara, Nicole Thorne Jenkinsb, W. Bruce Johnsonc
...stock repurchases have a direct, mechanical impact on reported EPS that is determined by three factors: the timing of the repurchase, the proportion of share bought back,and the financial return forfeited on the funds used to buy back shares. The first two factors are responsible for a reduction in the EPS numerator, but the third factor (forfeited return) decreases the EPS numerator. The net result is that some stock repurchase increase reported EPS while other repurchases decrease EPS
Northern Europe 4 country (Sweden, Denmark, Norway, and Finland) enhances the welfare policy, prevents the difference expansion, and is accomplishing economic growth.
However, the United States not only has been expanding the difference at the expense of welfare now but also essential economy reduces far from growth.
The curious fact comes to the surface when the correlation with the Gini's coefficient that is the index that measures the GDP growth rate and equality a person from 95 years to 2006 is examined. As for showing a high expansion of GDP, there are a lot of countries (country where the Gini's coefficient is low) where the equality of the income is high.
?@ Norway: GDP a person who was top in nine countries for 41,819 dollars becomes 71,857 dollars (Increase by a factor of 1.72) in 2006, pulls the 2nd place following apart greatly, and is top in 2002.
?A Denmark: GDP a person who was nine country third grade of junior high-school title in 2002 for 32,318 dollars became 50,791 dollars (Increase by a factor of 1.57) in 2006, the United States was pulled out, and it rose to 2nd place.
?B Sweden: GDP a person who was nine country 5th place when mesne in 2002 for 27,275 dollars became 42,264 dollars (Increase by a factor of 1.55) in 2006, Japan was pulled out, and it rose to 4th place.
?C Finland: GDP a person who was nine country 7th place when mesne in 2002 for 25,442 dollars became 39,796 dollars (Increase by a factor of 1.55) in 2006, Britain and Japan were pulled out, and it rose to 5th place.
The United States: It came in 3rd place because it was pulled out by Denmark though pretext GDP that was nine country second grade of junior high-school title in 2002 for 36,124 dollars increased up to 43,801 dollars (1.21 times) in 2006.
It is pointed out that Scandinavian countries that take a high welfare policy are accomplishing the high growth.
Social security benefits are the obstruction factors of growth according to "Market principle". However, it is a factor that the social security benefits promote growth in Northern Europe.
Scandinavian countries are reducing the wealth gap by re-distribution by the government. In a word, it is a composition of a lot of collecting from the high income earner in the form of a tax and social insurance and distributing it to the low income earner cordially.
The problem on and attendance on old people ..unemployment and healthy.., and and, it deals with the problem with the safety net of the society, and the one.
It is possible to dismiss, and the rehire is also flexible in the convenience of management easily in Northern Europe 4 country and United States and Britain. Therefore, it will be able to be said that long-term unemployed' ratios have lowered.
?When having questioned, that is, "Do you feel insecurity in the loss of a present employment?", the ratio of respondents who had answered, "It is" might have been the lowest in Scandinavian countries for the worker in each country of Europe of B. And, the respondent of having received the favor by job change exceeded the majority.
?The worker who doesn't fear C unemployment demands defeated neither enterprise nor industry by the tax in the competition for global ..protection... In a word, it is positive in an economic globalization. The growth rate of the real wages is also large in Scandinavian countries though the globalization of the economy is advanced though the globalization also has the criticism "It is a reduction of pay competition".
As of the June 2008 distribution, S&P said that severely delinquent loans (90-plus days, foreclosures, and REOs) for the affected transactions made up an average 17.85 percent of the current pool balances. Over the past three months, severe delinquencies had increased by an astounding 28.70 percent, underscoring just how bad things are getting in Alt-A and just how fast its taking place.
this stood out in this article...in 3 months....whew thats bad..thier is not enough sand to stop this big rig without brakes coming down the tejon pass
S&P Revises Most U.S. RMBS Loss Assumptions, Again : HousingWire || financial news for the mortgage market
barely writes:
ADP showing job creation in July. Can anyone that has a clue tell me what they base their guesses on ?
My understanding is that ADP is a business survey asking "how many people due you can or hire". There are a lot of temps and non payroll workers that won't show up on the ledgers.
underscoring just how bad things are getting in Alt-A and just how fast its taking place
And just in case we've forgotten the Alt-A resets on the horizon, the Credit Suisse chart is here.
Reason why Clinton administration makes it big to economic growth and
simultaneous achievement of fiscal reconstruction
When you examine the history of rice of all tax systems｢The United States misunderstood the preferential treatment to the well-to-do population in 1925 as a correct selection. The income deregulation plan decreased to 25% though the boom was praised at the high graduated income tax rate of 50?73% at that time was executed. The world great depression following the large sudden fall of stock prices was caused in 1929 since it continued for four years. ｣｡
It graduated increased taxes and it did and the income restriction strengthening was done from 25 ..top rate of income tax.. % to 63?>92% in dramatic form three years later. The result and the United States completely recover national revenue of the rise in the unemployment rate before burst of the economic bubble of holding off in only six years, and are ..real economic recovery orbit.. ..recording...
However, a large tax cut policy is forced about the well-to-do population of Reagan Administration that generates large-scale fiscal deficit after 50 years and present child Bush administration the evaluation as the policy unavoidably taken the tax increase plan of this United States.
However, it made it big to real economic growth and the simultaneous achievement of the fiscal reconstruction in the tax increase policy of the criticized graduated income tax etc. when Clinton administration after the political power of Reagan failed claptrap.
What is with all the Wright Model B references?
JP
A certain poster used to boast about using a modified Wright Model B(PDF warning)
to predict the economic future which was all rainbows and unicorns. All the while the model actually predicted a 50% chance of recession in April 07, the poster ignored the housing bust and credit contraction and the guy who came up with the model says he didn't even know if it worked.
Now it's (much like that poster), is a running joke here.
What is with all the Wright Model B references?
JP
A certain poster used to boast about using a modified Wright Model B(PDF warning)
to predict the economic future which was all rainbows and unicorns. All the while the model actually predicted a 50% chance of recession in April 07, the poster ignored the housing bust and credit contraction and the guy who came up with the model says he didn't even know if it worked.
Now it's (much like that poster), is a running joke here.
ADP survey has been wholly unreliable except for the 1st few months of their revision. Very little correlation to the establishment survey, let alone reality.
Thanks Alec.
barely,
ADP uses their customers, about 400K. According to ADP they use actual payroll records, not surveys. This should give a better number then the govt. Of course, the ADP customer distribution of jobs is not aligned with the US as a whole and I don't think they are adjusting correctly for this problem. Here are the ADP vs payroll #s for the last four months. ADP in paranthesis.
March 08 -88,000 (+8,000); April 08 -56,000 (+10,000); May 08 -62000 (+40,000); June 08 -62000 (-79,000). With a track record like this, I don't know how the MSM can report their numbers with a straight face.
"Northern Europe 4 country (Sweden, Denmark, Norway, and Finland) enhances the welfare policy, prevents the difference expansion, and is accomplishing economic growth."
well, are the numbers you provide PPP adjusted or just in the $ term? If they are in the $ term, the increase of their GDP might be due to the exchange rate ($ de-valuation) and not due to Economic growth.
TO illustrate my point, imagine $ going up 30% this year. The next year when GDP/Capita based on just exchange rate will be calculated, the GDP for those countries will be 30% less relatively to us (give or take couple of % growth difference).
It is true though, Nordic countries have been on the top in terms of many various level of life measurements for a long time. However those achievements are not necessary due to their welfare system. They also have the lowest level of bureaucracy in the world. There might be some other factors/reasons.
Once more, since it was swallowed in the other comments:
Yes, calculating GDP is hard, but does anyone really believe that a 1.1% deflator is the right number? Even approximately? Even within, say, 3 sigma of the real number?
I, for one, do not.
Given that, this number is garbage - garbage in, garbage out.
well
"Given that, this number is garbage - garbage in, garbage out."
true, there is high probability that the number is garbage. However it does not imply there is a conspiracy to make this number higher.
"However it does not imply there is a conspiracy to make this number higher."
At every turn, the choices they use to set the numbers are weighted toward a "better" set of numbers - for instance, OER instead of user cost, chain-inflation (core only, thanks), instead of straight CPI, hedonic adjustments of computer equipment that execute essentially the same code...
So, while one could argue it's incompetence, instead of a concerted effort, I think the facts known require a vigorous defense of that position, since the "concerted effort" explanation seems to have the most evidence to support it.
barely writes:
ADP showing job creation in July. Can anyone that has a clue tell me what they base their guesses on ?
barely | 07.31.08 - 12:23 pm | #
I think recent college and high school grads starting to work might cause an upsurge in ADP's numbers, although the specifics of their sampling approach I'm not familiar with. But today the NY Times had an article and graph showing employed workers are being channeled into part-time work from preferred full-time work in unprecedented numbers.
barely writes:
ADP showing job creation in July. Can anyone that has a clue tell me what they base their guesses on ?
barely | 07.31.08 - 12:23 pm | #
I think recent college and high school grads starting to work might cause an upsurge in ADP's numbers, although the specifics of their sampling approach I'm not familiar with. But today the NY Times had an article and graph showing employed workers are being channeled into part-time work from preferred full-time work in unprecedented numbers.
"true, there is high probability that the number is garbage. However it does not imply there is a conspiracy to make this number higher."
Who said anything about a conspiracy? I initially was asking why knowledgeable people like Paul Kasriel and CR gave credence to a number that you even admit is probably garbage. You recognize it. I recognize it, and I am nto so informed, but it is darned obvious to me. Why does everybody behave like it is relevant? It is garbage.
Today, the MSM are saying the reason the mkt is down because Exxon's profits are somewhat less magnificent than anticipated.
Well so what? Why should that affect other sectors?
I think this is a meaningless narrative that the MSM makes up to soothe and explain things. In fact, the mkt indexes and movements of stocks are almost neve explainable.
Of course there is Fear and Greed and Stupidity, totalling about 80% of the changes and then something we could refer to as mkt fundamentals, for the other 20%. We don't understand the fundamentals--people who are losing money do their best to hide it until they can't hide it anymore. And I leave fear greed, etc, to the shrinks and future experts in psychohistory if that science ever comes up with that.
Meanwhile, MSM and the rest have a soothing entertaining function because they create what sounds like a plausible story. The fact is any headline is meaningless, it cannot summarize what happened that day. But these guys have to fill up the spaces somehow, and get paid for it and so they do.
Sorry haven't had time to read the rest of the thread, but the muse was upon me.
Hello?
Pitchforks, so you are illuminated?
"(BBC) Inflation in the euro area rose to 4.1% in July but rising unemployment may mean interest rates are kept on hold."
bad, bad. bad Europe... (got to raise them rates before the damage is done...)
Ok a lil late, but here is my take on the GDP numbers. Warning its a bit on the long side. Cross post from Zacks.com:
This morning the government came out with its first stab at the second quarter GDP numbers, as well as revisions to past periods. While the headline growth of 1.9% (all percentages are annual rates) was a bit less than the market was expecting, it was far from recessionary. However there appears to be far less to the number than meets the eye, and the revisions were generally to the down side. Each of the last three full years was revised down. Growth in 2005 is now seen as having been 2.9% rather than the previously reported 3.1%, for 2006 it was 2.8% not 2.9% and for 2007 it was 2.0%, not 2.2%. Within 2007, there was an upward revision to the second quarter, but a big downward revision to the fourth quarter. Growth in the fourth quarter was actually -0.2% rather than the plus 0.6% number that had been in use up until now. The first quarter was revised down to growth of 0.9% from 1.0%.
Within the second quarter numbers there was some good news. The change in private inventories actually subtracted 1.92 percentage points from growth. Usually declines in inventories are made up in later quarters, so one might be tempted to argue that the second quarter was much stronger than the headlines let on. Real final sales were up 3.9%, which is a fairly healthy showing. What were the drivers of GDP growth in the second quarter? Personal Consumption Expenditures (PCE) added 1.08 points to GDP growth (i.e. 57% of the 1.9% total growth), largely due to strong showings for Non-Durable Goods and Services, while Durable Goods sales were a drag on growth, most notably vehicle sales which subtracted 1.07 points from growth. The PCE growth was much more significant than in the first quarter when it added only 0.61 points to growth.
Building was a big help, as Investment in Non-Residential structures was up 14.4%, adding 0.51 points to growth. Residential Construction continued to be a drag on growth, but less of one than in the first quarter (or the fourth quarter for that matter). It fell 15.6%, subtracting 0.62 points of growth, which was not as bad as the 25.1% decline subtracting 1.12 points from growth in the first quarter.
International Trade was the real hero of the quarter, Exports surged 9.2% adding 1.16 points to growth while imports fell 6.6%. Falling imports add to growth in the GDP calculations and that decline added 1.26 points to growth in the second quarter. Thus taken together, net exports added 2.42 points to growth, or significantly more than the total growth of 1.9%. This was a big improvement over the first quarter when net exports added 0.77 points or the fourth quarter when they added 0.93 points to growth.
Higher government spending also added to growth. Overall Federal spending grew 6.7% adding 0.48 points to growth, of which 0.36 came from defense and 0.12 came from increased Non-Defense spending. In the first quarter Federal Spending added 0.41 points to growth while in the fourth quarter it actually slightly subtracted from growth (0.04 points). Increased State and Local spending added 0.20 points to growth.
Ok, now that we have gotten all those numbers out of the way, what does it mean? Well clearly the stimulus checks helped with PCE, but it is interesting to mote that most of that went for non-durable goods like food and energy, not to durable goods like autos. Second debasing the currency can help growth at least in the short term, as the weak dollar is clearly a factor in the strong net export showing.
The debasing the currency part brings us to the real fly in the ointment in this release, and a reason that every one of the numbers cited above should be taken with a few pounds of salt. We are talking about real GDP here, not nominal, which grew at a very low 3.0% following 3.5% growth in the first quarter. Real GDP depends pretty critically on the implicit price deflator used to translate nominal GDP into real GDP. The government would have you believe that inflation in the second quarter, at least the inflation measure used to calculate GDP, was running at just 1.1%, down from 2.6% n the first quarter and 2.5% in the fourth quarter.
Unless one has recently ingested large quantities of peyote, that is a very hard number to believe. Now I dont like to say bad things about the ref, it usually is just an excuse used by a bad coach, but really now folks, this simply does not pass the smell test. Every other measure of inflation was far, far higher than this, and was accelerating in the second quarter. The CPI rose at an annual rate of 10.3% in the second quarter and was up 5.0% on a year over year basis, the PPI was up at a 14.3% rate in the second quarter and was up 9.1% year over year. I know there are technical differences in how the indexes are constructed, and that the implicit price deflator is designed to measure domestic inflation and much of our inflation has been imported, but these are HUGE differences. Plug in any realistic measure of inflation and the growth vanishes.
I have no proof of anything nefarious going on here, but I have yet to see a convincing explanation for this very low inflation number. Then again, this is an administration that had the VP go over to closely question any CIA analysts who were not on board with the idea that Saddam was about to launch a WMD attack on U.S. cities. It is an administration that in job interviews to fill non-political carrier prosecutor positions at the Justice Department questions like What is it about George Bush that makes you want to serve him? It does not take a tin foil hat to think that just perhaps someone was leaning on a few G-10s at the BEA, to reexamine their inflation assumptions for the report. If anyone in Congress asks, just claim executive privilege and stonewall them. Of course it could be some unexplained technical factor or something going on with seasonal adjustment, but anyway you slice it, the inflation number which is central to this report, looks very fishy.
I expect this number will be revised down over the course of time
Sorry that Anonymous comment above was me, don't know why my computer didnt save my name and e-mail etc that time
This morning the government came out with its first stab at the second quarter GDP numbers, as well as revisions to past periods. While the headline growth of 1.9% (all percentages are annual rates) was a bit less than the market was expecting, it was far from recessionary. However there appears to be far less to the number than meets the eye, and the revisions were generally to the down side. Each of the last three full years was revised down. Growth in 2005 is now seen as having been 2.9% rather than the previously reported 3.1%, for 2006 it was 2.8% not 2.9% and for 2007 it was 2.0%, not 2.2%. Within 2007, there was an upward revision to the second quarter, but a big downward revision to the fourth quarter. Growth in the fourth quarter was actually -0.2% rather than the plus 0.6% number that had been in use up until now. The first quarter was revised down to growth of 0.9% from 1.0%.
Within the second quarter numbers there was some good news. The change in private inventories actually subtracted 1.92 percentage points from growth. Usually declines in inventories are made up in later quarters, so one might be tempted to argue that the second quarter was much stronger than the headlines let on. Real final sales were up 3.9%, which is a fairly healthy showing. What were the drivers of GDP growth in the second quarter? Personal Consumption Expenditures (PCE) added 1.08 points to GDP growth (i.e. 57% of the 1.9% total growth), largely due to strong showings for Non-Durable Goods and Services, while Durable Goods sales were a drag on growth, most notably vehicle sales which subtracted 1.07 points from growth. The PCE growth was much more significant than in the first quarter when it added only 0.61 points to growth.
Building was a big help, as Investment in Non-Residential structures was up 14.4%, adding 0.51 points to growth. Residential Construction continued to be a drag on growth, but less of one than in the first quarter (or the fourth quarter for that matter). It fell 15.6%, subtracting 0.62 points of growth, which was not as bad as the 25.1% decline subtracting 1.12 points from growth in the first quarter.
International Trade was the real hero of the quarter, Exports surged 9.2% adding 1.16 points to growth while imports fell 6.6%. Falling imports add to growth in the GDP calculations and that decline added 1.26 points to growth in the second quarter. Thus taken together, net exports added 2.42 points to growth, or significantly more than the total growth of 1.9%. This was a big improvement over the first quarter when net exports added 0.77 points or the fourth quarter when they added 0.93 points to growth.
Higher government spending also added to growth. Overall Federal spending grew 6.7% adding 0.48 points to growth, of which 0.36 came from defense and 0.12 came from increased Non-Defense spending. In the first quarter Federal Spending added 0.41 points to growth while in the fourth quarter it actually slightly subtracted from growth (0.04 points). Increased State and Local spending added 0.20 points to growth.
Ok, now that we have gotten all those numbers out of the way, what does it mean? Well clearly the stimulus checks helped with PCE, but it is interesting to mote that most of that went for non-durable goods like food and energy, not to durable goods like autos. Second debasing the currency can help growth at least in the short term, as the weak dollar is clearly a factor in the strong net export showing.
The debasing the currency part brings us to the real fly in the ointment in this release, and a reason that every one of the numbers cited above should be taken with a few pounds of salt. We are talking about real GDP here, not nominal, which grew at a very low 3.0% following 3.5% growth in the first quarter. Real GDP depends pretty critically on the implicit price deflator used to translate nominal GDP into real GDP. The government would have you believe that inflation in the second quarter, at least the inflation measure used to calculate GDP, was running at just 1.1%, down from 2.6% n the first quarter and 2.5% in the fourth quarter.
Unless one has recently ingested large quantities of peyote, that is a very hard number to believe. Now I dont like to say bad things about the ref, it usually is just an excuse used by a bad coach, but really now folks, this simply does not pass the smell test. Every other measure of inflation was far, far higher than this, and was accelerating in the second quarter. The CPI rose at an annual rate of 10.3% in the second quarter and was up 5.0% on a year over year basis, the PPI was up at a 14.3% rate in the second quarter and was up 9.1% year over year. I know there are technical differences in how the indexes are constructed, and that the implicit price deflator is designed to measure domestic inflation and much of our inflation has been imported, but these are HUGE differences. Plug in any realistic measure of inflation and the growth vanishes.
I have no proof of anything nefarious going on here, but I have yet to see a convincing explanation for this very low inflation number. Then again, this is an administration that had the VP go over to closely question any CIA analysts who were not on board with the idea that Saddam was about to launch a WMD attack on U.S. cities. It is an administration that in job interviews to fill non-political carrier prosecutor positions at the Justice Department questions like What is it about George Bush that makes you want to serve him? It does not take a tin foil hat to think that just perhaps someone was leaning on a few G-10s at the BEA, to reexamine their inflation assumptions for the report. If anyone in Congress asks, just claim executive privilege and stonewall them. Of course it could be some unexplained technical factor or something going on with seasonal adjustment, but anyway you slice it, the inflation number which is central to this report, looks very fishy.
I expect this number will be revised down over the course of time
GDP is a completely bogus number, because it uses a fictional inflation number.
I love how Residential Investment (as a percentage of GDP) drops just before every recession. Except in 2002, where it kept rising right through the recession. That tells me that the housing bubble began before 2002.