CR - I was north of Chicago last week between I 90 & I 94 (Milwaukee WI to Beloit WI)... no truck traffic to speak of and no one in the hotels or restaurants I stopped at - as slow as over the Holidays. Slower maybe. So much for Q1.

TARP the truckers

This is partly a reply to Bondgirl- Romer is not contradicting her GD research- the research specifically showed that tax increases were counterproductive to the fiscal stimulus- a conclusion Keynes would have agreed with.

She had to tapdance, because when you see data that looks like teotwaki, you have to pull out the really old playbook.

Anyone who suggests Mellonesque liquidation is going to be crucified. CF the Republican Party in Arizona- when the cuts come down to 30% of an already anemic state government, the cry to Uncle will be loud and clear.

This is now proceeding to a collapse in demand, a position the Fed has tried to avoid, but the collapse at the consumer level has been worsened by the employment damage. Tarping banks only delayed the inevitable to the next administration. Much of the conservative philosophy of Reagan is inoperable now, the economy is not moribund from excessive taxation and regulation, in contrast, it has no pricing power, no wage pressure, and no government misdirection.

Now, Bond girl, you can panic now, or panic later- I have been planning a cram down with all my creditors should I become unemployed. I would suggest that anyone who is in the same position be prepared to unwind their lives.

I am.

Someday this war's gonna end...

So far the markets have taken all the news in their stride and seem to have priced in a positive post-successful stimulus-based recovery. The majority of the analysts seem to be singing Kumbaya. When the poor results start pouring in as earnings seasons starts, what is it going to do to consumer psychology? In the last Depression, the markets seemed to be able to disengage from Main Street's pain. Why was that possible?

Wow, that is a very interesting little blurb. CR, if a link later shows up can you update your post with it? Thanks

Trucking is the canary in the coal mine. My family in the industry says no backhauls. Nobody is buying replacement inventory.

Citizen AllenM writes:

... it has no pricing power, no wage pressure, and no government misdirection ...

Please could you expand on that, for those of us without a formal economics background.

Thanks in advance for any response.

Much of the conservative philosophy of Reagan is inoperable now, the economy is not moribund from excessive taxation and regulation, in contrast, it has no pricing power, no wage pressure, and no government misdirection.

In 1980, what was left of American business had pricing power, as inflation was quickly passed right through to the consumer.

In 1980, a significant portion of the wage earners were covered by union COLA contracts leading to inflation in wages in lockstep. (I believe 36% in 1980)

The entire disaster of the 70s was replete with stupid measures to combat inflation- WIN, wage and price controls, excessive taxation, you name it.

Now we have none of those conditions.

Standard republican prescriptions of tax cuts and deregulation have no real world traction. Anybody who thinks otherwise has drank Kool-aid from the Cato institute and should be kept away from policy for the duration.

That is as cogent as I can get without going technical.

Does this help?

Someday this war's gonna end...

Citizen AllenM, you frequently state that there is no other option but to default on government debt through inflation of the currency, which will coincidentally also fix the underwater-house problem, the perception of declining wealth, and the paucity of savers vs. debtors in society.

If you believe this, then where are you keeping your money? Surely not in dollars. Surely not in the bubble of gold. Where are you hiding your wealth?

you can panic now, or panic later...

Our reptilian brains can take just so much change at a time. I think Obama knows by now there is nothing his administration can do to prevent the crash. It's coming. His best shot is to slow it down enough to give the public time to get our minds around it. The last thing we need is to amp up our collective adrenaline and panic. We need to stay calm, keep our brains engaged, and focus on controlled descent.

Fear is not our best option.

I have a setup that saves all AM radio programs to MP3, I've been running it since 1/1/2003. I've been listening to "how was this year's black friday" for each year since 2003 as my sunday project. It's interesting to hear these AM talk show hosts talk about the meaning of each year's numbers.

Gold is not a bubble, as for keeping my money, it is spread out as much as possible.

I have raw rural property with no mortgage, I have a pension, I have a small legacy ira invested in the far east. I have a 457 plan in natural resources, I have a small brokerage account currently selling calls on an underwater position in a solar stock.

I have a house so far underwater, along with a rental property in the same boat. I have some glod in a safety deposit box, I have some silver, I have a lot of junk to be sold on ebay and craigslist. Oh yeah, a small amount of cash and a ton of credit card debt with very low fixed rates that will go bye bye with my employment. Along with a universal variable life policy I will cash in if it hits the fan. Two old antique cars, one inoperable.

And a prenup. A bathroom I have all the material for to finish a renovation should I become involuntarily unemployed.

In short, I have mostly sheltered my assets for an eventual need to bk or cram down my creditors. Much of this was necessitated by my wife's desire to purchase a very expensive house with 20% in december 2005, in Phoenix.

So, I deal with what I have, and make the best of a so so situation.

Someday this war's gonna end...

We learned in WWII that we could go 4 years without new cars, for example

way different situation.

• there were essentially no suburbs at that time
• cities had streetcars
• auto plants were making tanks et. al.
• people worked near where they lived
• gasoline was severely rationed (to send it to the military overseas)
• auto tires were unavailable (rubber was needed by military)
• food and other essentials was rationed (no butter, for instance)

Yeah, cars can last 7-10 years, but WWII doesn't provide a real example of consumer cutback.

What it means is that we are not currently facing instant inflation- the endgame of the 1970s- it will take a long time for inflation to reignite, but when it does the only solution will be to Volcker it.

Now, right now, with 0% Fed funds rates being totally supported by the markets, there is no domestic inflation. On the other hand, as the value of the dollar falls, we will have inflation in anything that has an international price. That is the reason why gold and silver are already recovering in price, along with the stock market. These are conditions that are temporary- eventually a lot of foreign investors and US investors will demand an inflation premia to fund our deficits.

These things take time. The bubble didn't appear overnight, and the solution will take years.

It is roughly 1975- a long six years to turning the corner on inflation and employment. But for right now, we must provide sufficient stimulus to prevent 1931. Take your pick of poisons, and since we have democrats in charge it will be massive stimulus.

Someday this war's gonna end...

AllenM, thanks, sorry for asking the question two days in a row. I think you're a very smart and astute contributor, and I'm curious on keeping tabs on what various people here are doing.

For instance, pissed off in california is hiding his money in various currencies via an HSBC account. A random assortment of people are buying gold.

Me? For now, I'm convinced that there will be a dollar devaluation -- there has to be -- but I'm afraid to invest in gold. While it's unfair to characterize the current gold price as a "bubble", it is quite apparent that the current price is being propped up because of gold's utility as a disaster shelter, a value modifier which will cease as soon as (a) gold possession is made illegal by private parties or (b) the disaster has passed. So, my money is tied up in I-Bonds and TIPS, two kinds of inflation protected securities which are, unfortunately, dollar denominated.

All I need to do is shelter my wealth long enough to go to medical school. I'm a big corporate lawyer now, but I suspect my kind of paper pushing job is not going to be so cushy for a while, and I'd better retrain to do something actually useful.

ova, any chance DC will tighten the beltway

In fact you can't even find someone who sells nightcrawlers anymore.

Hoop, you mileage may vary. What I have done is essentially prepare a little bit for everything. But I have explicitly prepared for a bad outcome, something I have always had in mind.

I have family support and resources to fall back on to. But I fully plan to not have to use the fallback plans.

I would not retrain from lawyer to doctor- the course is waaay too long. I would instead specialize in workouts and cramdowns- the corporate need will be drastic. Shift and specialize within your field. Drastic second career changes have a poor payback with a heavy investment of time.

I don't plan on bk- I have the ability to negotiate for most of it, and cram down quite a bit. If I have stubborn creditors, by the time I bk, there will be nothing left, and all moneys will be well accounted for.

I would be willing to tap the 457 for instance, if I could settle all the credit card debt and some of the real estate. The real estate debt is all nonrecourse, and if I am unemployed for more than six months- will be gone. The firewall in family resources is handy, as my wife's employment looks to be more secure than mine.

Anon, you should explain those dates better for the noninitiated.

Someday this war's gonna end...

"Drastic second career changes have a poor payback with a heavy investment of time."

I don't consider the retraining time an investment -- I think I'll have fun retraining, and I hate being a lawyer. Always wanted to be a doctor, in fact. I've got cash saved up and I want to spend it on something that's totally recession and inflation proof - skills.

The long retrain time also means I can be under the radar in school while the worst of this crap goes on. 401k bankruptcies mean fewer daddy's babies competing for med school slots too. Win all around.

-HJ

Someday this war's gonna end...
Citizen AllenM | 01.11.09 - 1:46 pm | #

So are you suggesting that the tax cut makes the stimulus okay in Romer's opinion?

It is not just her writings on the Great Depression that make me think she is contradicting herself. In her paper "What Ends Recessions?" Romer argues that fiscal policy generally does not have an effect prior to the the trough in economic activity.

This makes sense if you take into account that it takes time to get infrastructure projects up and going, even if you already have the plans for them collecting dust on a shelf.

crazyvermonter: I think due to the trauma of this market, I'll probably be chasing a yield that is slightly above inflation for the rest of my life. I'm sure I'm not alone.

OT: Why in the world is ITT Tech advertising contruction training?  Do they really think there is going to be some great market for home construction moving forward (as the advertisement suggests)?  Give me a break.

i have noticed the air is markedly cleaner in NW portland since the collapse began. For one thing the steel foundry that smells up trendy 23rd ave is down. i wonder if changes in the atmosphere like this could affect the weather. could that be why it recently got cold all over the world?

if the devil is 6 than god is 7!

Bond Girl, in a typical recession, state and local government contract slightly- right now we have state and local governments facing insolvency in a matter of months, with economic activity falling off a cliff.

Stop thinking like this a garden variety recession- this is not 1990 or 2002. This is much much much worse.

Someday this war's gonna end...

i have noticed the air is markedly cleaner in NW portland since the collapse began. For one thing the steel foundry that smells up trendy 23rd ave is down. i wonder if changes in the atmosphere like this could affect the weather. could that be why it recently got cold all over the world?
otishertz | 01.11.09 - 2:42 pm | #

Seriously, that's a joke.  Right?

No, she is pretty clear that the effect of monetary policy in the recovery from the GD was so significant that "even with an extreme change, such as cutting the monetary policy multiplier in half and quadrupling the fiscal policy multiplier, real GNP in 1942 would have been roughly 25 percent lower than it actually was had monetary policy been held to its normal level during the mid- and late 1930s." Perhaps I am mis-reading her, and I am certainly nowhere near through with her research, but I'm really not sure what is lost in translation here. Unless she thinks that the effect of tax cuts would have been just as huge, but given her other work, I doubt that too. Alas, without being able to supply a link, I am at a loss for further debate on the matter.

Her work does renew the idea that we are in uncharted territory here, though.

I don't know.... Seeing people flock to T-bills is not as surprising as seeing sustained demand for longer maturities, which I think is where we are going to need to dump a lot of this new supply.

I'm not saying I agree with her research. I'm just saying it's surprising to see her pitching a fiscal stimulus like the world will end if it doesn't. (Well, actually, that is Obama's take - that we might find ourselves ultimately out of tools without the spending bill. Her analysis is that without it, employment will peak 1% higher and remain higher for what, a year.)

I think no one knows what we are dealing with, and I'd like to see a better case made for this particular version of a stimulus package before they move on it.

T-bills are a temporary parking place. They are not a long term investment- going further out on the curve when everyone wants safety is a recipe for suicide. One way to look at it is the government has become a giant capital parking lot for the investor class, with zero long term investment from that capital as it is recycled into economic stimulus. That leads you straight into the Keynesian liquidity traps, which I think the Japanese have proven does exist.

Now, if you add in the reserve currency problem to the variable mix, and the loss of confidence in the currency stability over the long term, you have the missing piece of the puzzle that seems to elude most of the commenters, and most of the economics profession. What you have is domestic substitution of treasury funding, allowing large deficits to be funded, but without a continuous supply of new money being plowed into the treasury market from domestic sources (Liberty bonds, anyone?)

This ultimately results in the bond vigilante revival and the return of the infamous "crowding out" situation of the late 70s/ early 80s when rates had to rise to bring enough money in to fund.

In other words, in this golden moment, we can print and run huge deficits, but eventually conditions will change.

Someday this war's gonna end...

fallonPDX,
Be so, after all your creditors play the same games. What we have bred is a more business like economic relationship due to financial disintermediation. I feel no great loyalty to Citibank and it's Prince.

They sure have none to me. I just have horded stuff, instead of cash. Ebay is my friend.

Now I just have to contemplate the amount of effort necessary to get to the number sufficient to do a bk, if necessary. What I will preserve is the land through a transfer to a family corporation for what it is currently worth (i.e. crap), and my retirement accounts.

Life is tough, and my creditors should understand if I lose my employment, pain will be widespread.

Now if the idiot politicians who live in the state legislature would only get the message- mass layoffs cause even more damage!!!

It just makes the bottom that much deeper.

Someday this war's gonna end...

i mean large amounts of heat and greenhouse gasses are produced by transportation and electricity production and declines of the magnitude we now see could have some effect on weather.

Here's a little anecdotal evidence of the state of the economy:

I am currently working in the Pittsburgh, PA, area. I talked yesterday with a gentleman who owns a plumbing business (a real "Joe the Plumber"). He said that his family had been in business for over 50 years. He told me that he had already laid off 3 of his 15 plumbers (20%) and was contemplating laying off 3-6 more.

What is surprising about this is that Pittsburgh is supposed to be doing relatively well. If things are devolving here that fast, I can imagine what it's like elsewhere.

Would be interesting to know what's happening with railroad traffic. Perhaps the truckers' pain is a continued shift from truck to rail traffic. Oil prices have fallen, obviously, but the trend may continue.

it is possible they are related.

Now there's an Armageddon for ya!

crazyV,

you may be right.

people are hiding from the pain. when we come out of the denial stage and accept our losses maybe we can move on rapidly with all the brand new cash waiting at the fed.

by take our pain i mean shrink the government, let mortgages fail, let insolvent businesses fail, and end unbacked derivatives.

that said, any non essential government spending (including any extra wars anyone might be thinking of entering)should be immediately diverted to stem the tide of economic refugees we call homeless.

we need to restore the dignity of human life in america by helping our own, even the losers, because everyone loses sometime.

we need to invest in our people, their health, and their economic security.

as an aside; homeless people don't worry about terrorism.

Freightliner announced layoffs of 2100 at 3 NC plants last Friday. Essentially shutting them down.

404

- CharlotteObserver.com

Slated to take effect in March.

You have to truck the fertilizer to the farm, and the corn to the hogs (what do hogs eat?), and the hogs to the Spam factory; and truck the dirt from the mine to the smelter and the aluminium from Alcoa to Spam.

I read that about a midsize cruise ship that gets 15 truckloads of supplies every couple of weeks. Four thousand pounds of butter. Ten thousand bottles of wine.

I hope so. What bits of the current society would you like to save? Where the main purpose of being is shopping? Where people are so crazy, violent, and brain washed? If they don't suffer from material lack, they are so neurotic that they suffer from their inner misery? Where there is so much fear of death? There is no sex anymore, there is only porn left in this old society.
I hope there are no religions in the new society, only a lot of religiousness, not based on faith, but on understanding that the world is divine, and we are too.

One thing I wonder about with these numbers is how much the auto plant shutdowns tie in. The last bit of December and the first part of the year are usually slow. Adding in a pretty steep cut in Auto Factory production (and parts and steel and...) and you probably have a lot of empty trucks in the upper midwest chasing very few loads.

Trucking's been struggling for a while. We started 07 with excess capacity and that is being wrung out by the downturn. The last two years have been tough. I have heard lots of complaints about no or slow freight. Lots of back door layoffs. Property damage accidents and logbook violations that were a cost of doing business are becoming firing offenses. Hiring standards are tightening.

Schneider National suspended and then closed its training operation in the last 6 months. In the good times they were cranking out about a hundred drivers every two weeks from four facilities around the country. I went through one and they are a pretty substantial investment. Several acres of land at each location (two facilities had semi truck sized skidpads, all of them had slow maneuvering and backing courses), a proprietary curriculum, a good sized experienced staff, lots of trucks and trailers, several hundred k in simulators. Schneider claims they have permanently closed. Apparently they don't see demand for drivers coming back soon enough to justify keeping the places even in a mothballed state.

Oddly enough last week I was incredibly busy. From chatting with dealers (I deliver auto parts to dealers) it seems like two things are happening. One, folks are starting to choose to put money into the car they've got rather than trade it. Two, we've had a couple of ice storms lately and that has providing a short term boost. My own cynical take is we aren't in that desperate of straights yet, When times get bad many of the insurance checks will be cashed and there will be a lot more dented cars driving around.

@ Augustus Gloops Mother | 01.11.09 - 2:05 pm

LOL!!

The following is trying to reproduce a bug, not an intent to spam. Sorry in advance.

CR Companion