Since when has "the consensus" been worth paying attention to? No one has gone broke so far betting that things would get worse than "the consensus" forecast.
I think 2 years is optimistic. Morgan Stanley's Asia analysts have been saying America will have its version of Japan's lost decade. 2014 seems more likely for a recovery.
The contruction industry (comercial) is in shambles. I went to a job walk last week $700K budget for hospital work (notoriously difficult). 9 general contractors there. 1 year ago 3 tops. Now we have 9 guys that usually build projects 100x this size... The blood is just starting to run too....
what we need is a hedge fund type gate on the stock market so people won't damage themselves selling their equities -this would create bull market confidence and save the economy
Unless there is a complete! societal collapse I do not foresee law enforcement being cut back drastically. Benefits and pension plans maybe but not number of officers.
The coming state/municipality bail outs will have a large portion earmarked for law enforcement.
I could be falling prey to the man whose livelihood depends on it camp but I do not believe that to be the case.
Darth Paulson writes:
Roubini has been getting laid so much more now that he is a media darling....I fear he has gone pollyanna on us.
Darth Paulson | 01.08.09 - 4:44 pm | #
However long the recession may last, I have my doubts about the recovery. It seems that the American economy is totally dependent on the stimulus of low interest rates and deficit spending to maintain any kind of GDP growth. Those two wells have about run dry, so my guess is that we will see a long recession and then perhaps a weak, slow expansion. Even if we are not technically in recession for 10 years, I expect something similar to the Japanese experience of periods of weak growth alternating with mild recession for many years to come - that is, after we get through the current recession which will probably be deep and long.
I get the magnitude but I don't get the duration. We live in a sped up world. What used to take months now takes days. Except for some construction projects and long lived contracts if I was an employer why wouldn't I try and get ahead of the curve. I just don't see the logic of a long build up in unemployment unless it is a statistical matter i.e. discouraged workers who are being counted coming back into the workforce.
Angry Saver - we are signatory to the carpenters and laborers. I'm in Diego. The union isnt that strong here. Still at the larger building level most of the trades are union. There is on major non-union drywall and one major electrican. In LA the unions are stronger. Its difficult to do a major project with out union subcontractors.
Roubini thinks the recession will last for 2 years? Based on what? That the government will shovel borrowed money at the plebes and stop taxing the patricians?
It could be a long time is we proceed with all the crazy stimulus plans. You don't try and fix a levy breach the moment it breaks- any attempt to do so is a waste of money. The stimulus should be used to jump start the economy after it has corrected. To use my analogy it is like the pumps that are used dry out an area after the levy has been fixed.
Mainstrean economists are making the same assumption that got us into this problem in the first place- the assumption that debt levels could keep growing. It wasn't for consumers and it is not going to be true for the government.
Peter Schiff talks about stimulus plan
"Sullivan: How is taking money from the well-to-do and giving a $500 or $1000 check once a year back basically to a family going to create a job? A thousand dollars wouldnt matter to a lot of families in America, but right now a thousand bucks might. But how is it going to create a job?
Schiff: Well its not. Its going to destroy jobs, but also hes not even talking about big tax increases. Hes talking about printing a bunch of money and just spending it because governmentI heard Obama talk about all the things that government is going to give us. The government is broke. The government cant give us anything it doesnt take."
Exactly - the Obama plan is to borrow a HUGE amount of money today, drop it from helicopters, then make you pay it back, with interest, later. I wonder how that's going to work out.
Obama does not seem to understand that unless he acts swiftly against the venal greedsters who precipitated this debacle, HE HIMSELF will get blamed as depression wreaks bitter hardships on the nation.
We'd better see active prosecutions fired up immediately after January 20, because Obama has only the narrowest of windows in which to act.
If Obama's administration becomes the main target of the rising anger, it will lose its credibility and before long its control of the situation.
"the assumption that debt levels could keep growing"
There's a lot of truth there, crazyvermonter. Debt is debt is debt and all the 'bailouts do is transfer it from individuals to government, which is... taxpayers... who are individuals. It is still the same claim against future work, just renamed.
"HE HIMSELF will get blamed as depression"
unirealist - agreed. It is very important for Obama to be seen as having adversaries to 'fight' so that he is on the side of the 'people'. Very important.
And my calculations are that GDP will fall just under 39% in this Greater Depression (GDP fell 25% in the Lesser Depression).
When the Q4 Z-1 comes out in 30 days or so, I will update my calculations, which are based on Q4 '07 debt and income levels. I am afraid that things have merely gotten worse during the interim, which means a greater and longer fall.
CA by its self is enough to slow our crazy world down significantly. We put the brakes on while doing 120MPH and people faceplanted. No airbags, no belts. Now we peel them off the window and begin triage.
General Opinion of economists- excessive spending and borrowing by consumers got us into this mess-
Solution- lets have the government borrow and spend. Didn't you hear that if you tie two stones together they will float.
Only in America would incompetents be considered experts. Disappointed that the Economist magazine would publish anything written by that moron Greenspan.
Q2 2009 RECOVERY! Doom Lite Only! Well, maybe Yellowstone then...
What was that Ohio, North Carolina and New York unemployment claims systems crashing? 10000 calls per hour in New York alone last Tuesday...helluva lot of careless fat finger wrong number callers?
"The concensus (and the Fed forecast) is that the economy will bottom in Q2 2009 with a sluggish recovery in the 2nd half of this year."
You know that if it is the concensus, it is wrong. At least, if the pattern continues from the last three years.
CR, in the future, when posting Roubini takes, please include his Glamour Shots photo. It could help drum up business for a struggling mall based business. Thank you in advance.
Have any municipalities had to completely shut down their law enforcement yet?
Uncle Billy, Mental Widget | Homepage | 01.08.09 - 4:39 pm | #
Unless there is a complete! societal collapse I do not foresee law enforcement being cut back drastically. Benefits and pension plans maybe but not number of officers.
anon | 01.08.09 - 4:47 pm | #
When cities can't afford their PD, they usually close the PD and contract with the county sheriff. The city officers get absorbed as sheriff's deputies and the facility becomes a sheriff's substation, if it continues to be occupied. In normal times, most LE agencies can't hire cops fast enough, so there are vacant positions to absorb the laterals.
Anon - many cities have already cut vacant officer positions are are laying off cops. There will be MANY more lay-offs to come. Public Safety takes the lion's share of any local government budget - eventually it has to be cut.
The smart thing to do is to replace cops with civilians in all jobs that don't require police powers - every PD has plenty such jobs. But the local government has to be willing to stand up to the cops' union. Cops don't let anyone cut their ranks unless it's to fund their raises.
Mob is not doing well in NYC
- series of crane accidents
- cessation of CRE and RRE construction
- their own investments plummeting
- drug use down
- gambling down
- can barely collect rent
- harder to smuggle with lower traffic volume, homeland security upgrades
- bosses still clinging to hope it is very temporary
Expect infighting to spill on to newspaper front pages before this is over
Comrade-Dope jg (jg)(Unrated) writes: \tAnd my calculations are that GDP will fall just under 39% in this Greater Depression (GDP fell 25% in the Lesser Depression).
When the Q4 Z-1 comes out in 30 days or so, I will update my calculations, which are based on Q4 '07 debt and income levels. I am afraid that things have merely gotten worse during the interim, which means a greater and longer fall. \t Comrade-Dope jg (jg) | \t \t \t \t01.08.09 - 5:03 pm | #
So this jives with the down ~1/3 for the market for consumer electronics that I mentioned earlier. Ouch; This is going to suck. But I wonder if it won't suck more for the net exporters?
Mainstrean economists are making the same assumption that got us into this problem in the first place- the assumption that debt levels could keep growing. It wasn't for consumers and it is not going to be true for the government.
crazyvermonter
~~
Anything to keep the banks in government bonds ! The tax payer must be buggered and buggered and buggered ...
Sloppy journalism: According to industry data, 1 in 10 homeowners -- about 4.6 million people -- are either delinquent in their mortgage payments or in the process of foreclosure.
That's incorrect. I've seen this written a lot - wrongly. It's 1 in 10 mortgage holders. There's a significant difference.
"Sullivan: How is taking money from the well-to-do and giving a $500 or $1000 check once a year back basically to a family going to create a job? A thousand dollars wouldnt matter to a lot of families in America, but right now a thousand bucks might. But how is it going to create a job?
Schiff: Well its not. Its going to destroy jobs, but also hes not even talking about big tax increases. Hes talking about printing a bunch of money and just spending it because governmentI heard Obama talk about all the things that government is going to give us. The government is broke. The government cant give us anything it doesnt take."
Actually, the well-to-do are hoarding cash (at least that's what zero percent 3-month T-bills means to me). They're not investing in diddly squat, so no jobs will be lost.
What Obama's plan reported will do is force the wealthy to invest in the nation's crumbling (assuming he doesn't cut taxes at the same time).
SHANGHAI, Jan 8 (Reuters) - China's Ministry of Commerce may ask Chinese companies to apply for approval from the ministry if they want to invest $100 million or more overseas, it said in new draft rules published late on Wednesday, after a few major Chinese companies reported big book losses on investments abroad.
Roubini hasnt seem the same guy since he watched Krugman get a Nobel for kow-towing to the orthodox line.
Also, I think Latvia's arrest of a native economist for 'pessimistic forecasts' akin to inciting public discord, was not easily dismissed by the Economics Club here in 'free' America; and the recent polls findings that the public blames the media for dampening consumer & business confidence and deepening the recession seems to have stung the timid members as well.
Nonetheless, Roubini has made his invaluable contribution to us readers and I remain grateful for his past fortitude and independence.
Mob optimism looks for
- higher tariffs internationally (black market is bread and butter historically)
- break even on counterfeiting as some will increase alongside the decrease in trendy fashion/luxury
- smaller police budgets
- increased construction for stimulus
- desperate borrowers
Anon, Feck, thanks. Local PD ---> Sheriff in normal times. But when the county has no money? Any idea how things worked in GDI? (Stretch to find significant indicators of future behavior).
There's a lot of truth there, crazyvermonter. Debt is debt is debt and all the 'bailouts do is transfer it from individuals to government, which is... taxpayers... who are individuals. It is still the same claim against future work, just renamed.
wally | 01.08.09 - 5:00 pm | #
Ok suppose that everyone who gets the $1000 or what ever check uses it to simply pay down debt, say a mix of cc and mtg, no, zero, nada actual spending, just pay down debt. Well if it were a mix of 18% cc and 6% mtg, it would mean about a 10% interest rate. Right now the govt borrows at 2.5% Thus even in this extreme scenario there is a benefit from transfering the debt from the individual level to the govt level. No jobs created, but consumer balance sheets in much better shape.
The small towns/cities contracting out just makes sense. I've always thought most towns under 50,000 having their own police was more about venality then common sense.
Concentrating law enforcement at the county level saves a lot of resources. It also concentrates power which can have some local side effects.
Cops need to be patrolling and investigating and not doing the long list of admin that most aren't qualified to perform. Big agreement with you on cost saving by hiring civilians.
Dirk van Dijk,
But the government is running a deficit in order to hand out the $1000... which is just a future debt for taxpayers.
The whole issue of a credit collapse or debt deflation is that there is only so much of the future that can be promised before people start to disbelieve.
Increase of tariffs 100% around 1920 lead to roaring 20s. Admittedly possibly just correlation. Just crying "Smoot-Hawley" is making conclusions from small sample size.
If I no longer have work, I will become a professional commenter on Calculated Risk and spend my hours making absurd remarks and insulting intelligence. Oh, wait, I already do that. Should I add it to my bio? -- "Blog Professional -- Mr. Elvis belittles the economic follies of the USA gov't and its people."
Does anyone ever ask an economist what his/her assumptions/inputs are when they interview them?
The thing about when he suggested there might be a collapse is that his steps had a logic to them. I haven't read his blog in a long time. Has he provided something similar describing 1) why, when, and how specific government measures would gain traction; 2) when the gov't might unwind its intervention; and 3) what effects doing so might have on the markets?
It seems like so many economists are so engrossed with the play-by-play of economic indicators that they do not see the forest for the trees - implementation and funding of the stimulus, a long time without consumer spending as it once was, etc. Can they predict what China's purchases of Treasuries will be in September? Do they have the foggiest clue how many American companies will survive to see 2010? I doubt it.
helluva lot of careless fat finger wrong number callers?
supafly73 | 01.08.09 - 5:04 pm | #
"The fingers you have used to dial, are too fat. If you would like to order a special dialing wand, please mash the keypad with your hand at the tone."
"And my calculations are that GDP will fall just under 39% in this Greater Depression (GDP fell 25% in the Lesser Depression)."
Exactly. Nowadays USA GDP: 70 percent (consumption) - 30 (production). Normal is around 50-50. 30 percent from 14000 billion is 4200.
Now that production part shrinks a little bit too during this depression, maybe 3800 and in the bright new future it is 50 percent from GDP.
So the new Glorious GDP for the Divided States of America (California will be first to secede!) is 7600 BILLION dollars (or 760000000000000000000000000000000000 after Bernanke's hyperinflation).
40-50 percent is quite possible as well as 30-40 percent unemployment rate. This is easy!
Any investment that outstrips general GDP growth by more than 3% is speculation. Equities are speculation, otherwise all funding would be fixed by bond or mortgage contract.
The aristocrats must ever fleece the serfs. Thus tax policy steers you into the lion's den of speculation, wage deflation urges you into mad gambling, inflation goads you into games of chance.
Your government is your enemy. The central banks are its dictator.
It is a bubblenomics, voodoo, and speculajactulorium economics.
We are in the final phase of straight-face financial system. The next epoch is war after its breakdown. War also a great way to extract wealth from the productive class...as well as their lives.
Obama has 15 months, tops, to get things back on track. Mid-terms are already approaching.
He will do pretty much anything - except war - to get us out of this, or least bring us off the precipice...Never underestimate the power of staying in power.
We'll know by June whether The Fabulous Roubini is wrong or got his head in the wrong "v curve"...
But the government is running a deficit in order to hand out the $1000... which is just a future debt for taxpayers.
The whole issue of a credit collapse or debt deflation is that there is only so much of the future that can be promised before people start to disbelieve.
wally | 01.08.09 - 5:15 pm | #
Wally, agree that it is simply a transfer of debt from one pocket to another, however in the right pocket people are paying 18% on cc bills, and in the left pocket they are paying 2.5% as there share of future taxes. Now if the increased borrowing causes T rates to go to double digits, that is a different story, but durring this flight to saftey, there is a huge interest rate arb. Not so nice for the banks though since they will not be collecting that 18% credit card balance.
Left Shoe Waiting Ouch! Our execs are running around the office looking for work everywhere. We have 3 guys scouring the interent and the green sheets for work. Keep in mind 3 months ago everyone was convinced we were all set and this was just going to blow over. from zero to panic in 3 months. I still dont think they have any idea how bad it is.... Good news tho, we just got a call back for a school. We made the short list, 6 f'in contractors. I thought short lists were 2-4 max.... Times they are a'changin.....
"In a concession to lenders, if a lender is found to have violated the Truth in Lending Act during bankruptcy proceedings, the institution would be subject to fines, but would not have to forgive the loan, as is the case currently."
10,000 economists in America, teaching, forecasting, advising. What would it be like to go to work everyday and looked at like you were incompetent.
That's got to be a confidence killer. Probably promotes much more gloomy forecasts. Better for things to get better then to be wrong about how much worse it is going to get.
I'm in the doom and gloom camp but there is some truth to the future not being as bad as we are being told everyday.
"Wally, agree that it is simply a transfer of debt from one pocket to another"
Dirk, my take has been that it is the total amount of money - that is, debt - as compared to the theoretical amount - that is, future labor - that can exist that is the stress factor that causes debt deflation. It doesn't matter who creates or holds or promises. There is only so much future to be promised. That is why the only two ways out are seen to be debt destruction or inflation. The debt MUST go away because it is not payable, realistically.
Ok suppose that everyone who gets the $1000 or what ever check uses it to simply pay down debt, say a mix of cc and mtg, no, zero, nada actual spending, just pay down debt. Well if it were a mix of 18% cc and 6% mtg, it would mean about a 10% interest rate. Right now the govt borrows at 2.5% Thus even in this extreme scenario there is a benefit from transfering the debt from the individual level to the govt level. No jobs created, but consumer balance sheets in much better shape.
Dirk van Dijk | 01.08.09 - 5:11 pm | #
but that is not the point of the tax cut- it is keep spending that everybody agrees is too high to begin with up.
Even though I disagree with the policy I think there is some non economic value in having a Democratic politician keep their promise on cutting taxes.
On our end the panic hasn’t really set it yet. The backlog will keep us healthy for a while but after that who knows. The plan seems to be to wait for the smaller hands to fold while we wait for a recovery to avoid a further bidding down of the market. Maybe it will even work?
Read some interesting proprietary analysis suggesting that one resolution of the Ukraine/Russia gas showdown would be Gazprom taking an equity position in Naftogaz - Ukraine can't pay more and Gazprom can't carry them at a huge subsidy any longer...
In order for this to work properly, the following caveats must be in place:
-For any Federal Reserve-held mortgages that are crammed, an equal amount of cash must be retired from the seller's account. -For any GSE-held mortgages that are crammed, an equal amount of bondholder equity must be reduced. -For any FHA-held mortgages that are crammed, an equal amount of cash must be paid by the originator, builder, or "non-profit" donor organization that assisted in the transaction. -For any loan held by the FDIC through a bank seizure that are crammed, an equivalent amount of cash must be paid by over-the-limit depositors, bond holders, or equity holders.
The cram-down concept only works if moral hazard is eliminated.
Left Shoe Waiting thanks for the luck. We'll need it. We had a healthy backlog then we lost a $800MM project. That leaves a mark.... Good luck to you too....
"Yep ... Roubini is only giving out his best case scenario ... The word is out ... economists play ball or be put in professional purgatory ..."- mmckinl
yup...you can add Barry "Big Picture" Ritholtz to the list too.
Latvia has stressed its support for free speech despite the arrest of an economist over comments he made, a spokesman for the prime minister says.
University lecturer Dmitrijs Smirnov told a newspaper the nation's currency, the lat, was heading for devaluation.
He advised people to withdraw their money from banks or change it.
Mr Smirnov was later arrested by Latvia's security police, who usually hunt for terrorists and organised criminals, before begin released.
Mr Smirnov was locked up for two days last month before he was freed. No decision has been made yet whether to charge him.
Anonymous writes:
"Yep ... Roubini is only giving out his best case scenario ... The word is out ... economists play ball or be put in professional purgatory ..."- mmckinl
yup...you can add Barry "Big Picture" Ritholtz to the list too.
Roubini is wrong. He's optimistic about the declines: a mere 5 percent decline would be fine. But the problem is that we're headed for a housing crisis in 2011 as workouts fail and as various other mortgages come due.
This will be a depression with 10-15 percent decline by 2012.
Jan. 9 (Bloomberg) -- Russia and the European Union clinched a deal on monitoring gas shipments through Ukraine, paving a way for the resumption of deliveries to EU countries.
Russian Prime Minister Vladimir Putin reached an accord with Czech Prime Minister Mirek Topolanek, who holds the EUâs rotating presidency, on conditions for deployment of a monitoring commission. The agreement âshould lead to the Russian supplies of gas to EU member states being restored,â the Czech presidency said on its Web site.
It appears to me that Russian President Dmitry Medvedev is irrelevant
Princeton Proposes 2.9% Cost Increase; Ivy Peers May Follow
By Brian K. Sullivan
Jan. 8 (Bloomberg) -- Princeton University, expecting a 25 percent loss in its endowment by next June, may set the lowest cost increase to parents and students since 1966 and provide a marker for other top U.S. schools.
Thanks to the radical actions of the G-7 and others, the risk of a total systemic financial meltdown has been reduced. But unfortunately, the worst is not behind us. This will be a painful year. Only very aggressive, coordinated, and effective action by policymakers will ensure that 2010 will not be even worse than 2009 is likely to be.
But a deal to send international monitors unraveled late Thursday over Gazprom's insistence that Russians be among the observers in Ukraine. Kiev had agreed to EU monitors, not Russians. The article requested is no longer available.
For any loan held by the FDIC through a bank seizure that are crammed, an equivalent amount of cash must be paid by over-the-limit depositors, bond holders, or equity holders.
The cram-down concept only works if moral hazard is eliminated.
Max | Homepage | 01.08.09 - 5:39 pm | #
That is the crux of the issue and the single point that has been missed- who takes the loss- that is the only decision that Paulson and crew need have made. Of course since forcing the equity and bond holders would have got him blackballed at the country club he couldn't do that nor could he say he wouldn't let them take a loss. So we end up with this crap.
IMO a lot of problems would have been avoided if (a) they had guaranteed all deposits upto $1MM , (b) corporate transactional balances (c)interbank deposits of banks with surplus funds and then let the chips fall.
Where's the prosecutions and the promised transparency of the TARP funds and the FED's balance sheet!
If I choose a cause it is those two.
anon is easy. I don't like to be pigeonholed by past comments when the circumstances are changing so rapidly. It's the internet! Investing in a handle always seemed counter productive to me. IMO! I respect many posters due to their history of previous comments. I also ignore many posters for the same reason and probably miss out on some great insights. It is what it is.
I got word, earlier this week, that I would be laid off. I'm a contractor at a large company, so must be sacrificed, so that a direct employee can survive a little longer. I hope Roubini is right about the duration of this thing.
IMO a lot of problems would have been avoided if (a) they had guaranteed all deposits upto $1MM , (b) corporate transactional balances (c)interbank deposits of banks with surplus funds and then let the chips fall.
crazyvermonter
~~~~
Like a Bank Holiday but without the FDIC ?
With $500 trillions in derivatives we might want to take a look first ...
I agree with the point about so much debt and so much future labor, and was giving what most people would think of as the worst case scenario for the consumer oriented part of the tax cuts (not addressing the tax loss carry backs for business or accel depreciation etc). Perhaps not a perfect solution, but it would help a bit, and could be done relatively quickly.
If it is a fully refundable credit, it would also have redistributive effects, transfering money to the middle and lower parts of the income distribution, and from upper income, provided that future taxes are more progressive than they are today. Given the huge income disparity that has grown over the last few decades that is not exactly a bad thing.
So the bank's pound of flesh for agreeing to cramdowns is... immunity from prosecution for TILA violations, i.e. their share of the lending fraud? And we'll overwrite all state laws in the process? And only "major violations" (defined how exactly???) will get full legal sanctions?
"In a concession to lenders, if a lender is found to have violated the Truth in Lending Act during bankruptcy proceedings, the institution would be subject to fines, but would not have to forgive the loan, as is the case currently. Major violations would still be subject to full sanctions under the law. The TILA provisions would pre-empt any state lending laws."
One can predict a future in which all violations of TILA get crammed down onto the lenders' employees (no "major violations" likely, except for the politically disconnected)... the lenders get off scot-free with token fines... the mortgage bondholders benefit from not having to forgive the loans outright... and the borrowers who suffered the economic and psychological consequences of the predatory lending won't get their free ponies (houses) after all. But at least some might get cramdowns.
"Why will it not work, whats the problem? Simple. There are still people who clamor that credit rates are too high. They are wrong.
The problem is that there is no credit. But we just gave the banks $1-2-3-4 trillion, they say. Nice try, but it's not enough. The banks are too broke. In fact they are so broke they shouldn't have received a penny. Their position is far too bad to be quenched with that sort of petty cash. If they would start lending again, and prop up those much-too-high real estate prices, they'd be signing their own demise. Not that that can be avoided, but the trillions do work to let them live a few more months, in which the staff can quibble over bonuses yes or no, and the resorts in which those questions need to be addressed. Thai massage, or Swedish?"
I think it is very interesting that Roubini has such a positive estimation of our economy.
I've read him regularly for the past year, and gleaned some amazing insights particularly in the first half of last year. But lately I'm losing faith in him for his devotion to Keynesian economics and his assertion that we will avoid a depression.
Interestingly enough, despite the media's tendency to portray Roubini as doom and gloom -- I've considered him an optimist for the past 9 months. In which time he is constantly revising his outlook downward.
I suspect that given his broad based following, he doesn't want to be accused of "triggering" the depression with his statements. He may just be hedging here -- if we do hit a depression, his track record is still far better than most other economists. And if things improve he's right again.
He also has a relationship with Geitner, so perhaps his optimism is a display of confidence for his old boss? Or perhaps he has been approached by some Fed/Treasury/Gov officials to show solidarity? Conspiracy theories abound...
Speaker Nancy Pelosi told reporters Thursday that she wants to see the Bush-era tax cuts for the wealthy repealed "as early as possible."
The call for repeal may place Pelosi at odds with President-elect Obama; during the campaign he called for repeal but his aides have since indicated that due to the deteriorating economy, he was leaning towards allowing them to expire.
Subtext: Let me look good on this and we'll give it all back as part of the stimulus package. You know how liberal my district is and I need something to show them I'm on their side.
Successful historical eras have less income disparity, according to the Great Wave. Wonder if the author has revised the book.
lawyerliz | 01.08.09 - 5:56 pm | #
Let me look good on this and we'll give it all back as part of the stimulus package. You know how liberal my district is and I need something to show them I'm on their side.
Citizen Jacked
~~~~
Pelosi comes from a very wealthy district ...
And yes we need higher taxes on the rich to pay for the two wars that Bush didn't raise taxes for
... Remember Afghanistan and Iraq ?
They are still eating our lunch ... Maybe if the rich had to pay for our wars we wouldn't be starting so many of them ...
If this thing goes on it's current range of trajectories we won't have any meaningful recovery for years. mmckinl | 01.08.09 - 4:52 pm | #
What does the rate of change have to do with when it will turn around? My thougts are that the sooner we get back to sane valuations on equites and housing, the sooner businees and investment can get back in the game. Drawing out the decline seems to be the worst way to go about things.
I'm with Dirk on the recasting of consumer debt from 18% to Treasury debt at 2-4% being a net positive. It will be painful for the wealthier to forego the interest income and possibly pay more in taxes from now until recovery, but there won't be a recovery unless the consumers have enough cash flow to cover their debts and rebuild the demand side.
But we have to inflict enough pain on the consumers, and rebuild the regulatory infrastructure (plus punish the guilty) to prevent further predatory lending. Because we also need to prevent the debt bubble from regrowing. The former is happening but I don't see the latter yet.
At the macro level, it's better to refinance-and-repay the excess/bad debts, than to go through a nonlinear cascade of defaulting dominos.
I'm with Roubini based on population growth reality, housing inventory overhang and multi-trillion losses, which will take more like 7+ years to write off.
Also see: Prosecutors said Thursday that investigators found 100 signed checks worth $173 million in Bernard Madoff's office desk that he was ready to send out to his closest family and friends at the time of his arrest last month in what is alleged to be largest financial fraud in history.
"anon writes:
Unless there is a complete! societal collapse I do not foresee law enforcement being cut back drastically. Benefits and pension plans maybe but not number of officers."
Couldn't be more wrong. New hires are the first place to cut. Benefits and pensions are protected in law -- the only way to cut those are to get the unions to agree or to file and take the expenses before a bankruptcy judge.
Pelosi is moving onwards and upwards. I think she has a better shot at being the first woman president before Hillary. She does seem to be building her resume.
I say again: The Roubini quote looks like it's out of context. See his blog (link from me posted above). He is hoping that smart action occurs in 2009 so that the SHTF scenario is avoided in 2010.
With $500 trillions in derivatives we might want to take a look first ...
Where's the Bank Holiday ?
mmckinl | 01.08.09 - 5:48 pm | #
There were certain facts that the policy makers were trying to avoid recognizing. Bad decisions were made and there were loses that banks were going to suffer. The only question was how those losses were going to be apportioned between taxpayers, depositors and investors. That was the policy decision that had to be made.
Do we stick with the letter of the law only cover upto $100,000 and if we say that what are the ramifications. Or do we have a more expansive view e.g. protect the regional bank who has surplus funds by guaranteeing their deposit if it is lent to Citibank.
Once that decision is made the market will sort it out. A bank that gets taken over its counter parties have to swallow the derivatives loss. BTW the exposure on derivatives has been way overblown. AIG was a big deal because they anchored one end of the change.
At the macro level, it's better to refinance-and-repay the excess/bad debts, than to go through a nonlinear cascade of defaulting dominos.
Wisdom Speaker
~~~~
And moral hazard ... ?
The banks, their CEOs , shareholders and bond holders need to eat it before tax payer money is used ...
After the steel bust of the 1980s, the steelworkers union (district council 50 out of WV, & Western PA) started crossing picket lines and pirating many of the Heavy & Highway projects. They essentially worked under non-union rules yet maintained they were a legitimate union under NLRB rules. They spread from West to East and over period of 10-20 years came to dominate the industry.
Unionized contractors in Eastern PA (including Philly a heavily unionized city) took a beating and never recovered. NJ fared somewhat better after an AFL-CIO brokered deal limited the steel workers' ability to solicit work via a grandfather clause.
Once the steel workers had cleared a path, non-union/non steel worker followed and started pushing out the steel worker contractors.
The new hires will get the new pay/benefit packages ala the UAW.
The state/municipal workers will be offered tough choices to renegotiate their contracts or be forced to under municipal BK's.
Contract law is taking some big hits with the housing crisis. Putting trust in what was agreed upon under better economic circumstances might not be written in stone like you think it is.
[California's headed for a depression, and they alone could take the other wise "functioning" rest of the country down with it.
Jerry ]
PLENTY of wealth left to confiscate in CA.
The fly-overs will have little sympathy to bail out those with homes still valued in the $1MM+ range. I would say a condition of and federal bailout would be a repeal of prop 13 and a plan including property taxes raised to pay back any loan.
Couldn't be more wrong. New hires are the first place to cut. Benefits and pensions are protected in law -- the only way to cut those are to get the unions to agree or to file and take the expenses before a bankruptcy judge.
syvanen | 01.08.09 - 6:08 pm | #
That why I would be very careful about muni bonds. most munis had horribly underfunded pension plans before this crisis. Taxpayers are not going to pay higher taxes to support those plans so I would expect there to be a wave of BK.
Flippers. TPTB had to flip Roubini hoping his cult following would make like lemmings. Anyone who has done their homework, anyone who has a historical view, anyone who saw the RE orgy knows were in the end game without an exit strategy.
"After I've mortgaged all my tomorrows, how will I spend my today's"
BTW the exposure on derivatives has been way overblown. AIG was a big deal because they anchored one end of the change.
crazyvermonter
~~~~
So you've seen their books and know the derivatives positions? Just because they might net theoretically doesn't mean solvency through the process leaving good positions bad.
If US GDP only contracts by 3.4% in 2009, that is because currency devaluation (inflation importation) and government spending fills in the remainder of a 10% decline.
I am not an alarmist, there simply are a handful of key economic blocks like $800 billion of mortgage equity withdrawal have melted. (as surveyed by FRB: Federal Reserve Board: Error Page
Will the recession ending in 24 months repair the currency whipsaws, the bond dislocations, the incompetence in oversight and regulation?
Of course, happy days here again. We've taken our medicine with a spoonful of deficit-spending sugar and now weese all bedder.
Is that a bluebird on the Roubini shoulder? YouTube - The National - Fake Empire
Toyota workers (in Asia) are seriously considering a 17% wage rollback to help the company. Would this happen in Amerika?
Barley | 01.08.09 - 6:15 pm | #
Let's see...wages and salaries are insufficient to provide an adequate level of aggregate demand, requiring consumers to take on more and more debt to soak up overproduction, and the solution is...wage rollbacks!
She represents the emptiness that has become the American ideal. Also the failure of the media to actually cover something important other than what happens to her or the other vapid celebrities. More noise to distract.
Princes Hilton of the royal Hilton family. Our own nobility. Ain't it grand.
mmckinl - Agree on moral hazard issue, which is why I had the paragraph about doing something intelligent to prevent a repeat of the credit bubble, and pointed out that we weren't doing it.
But the larger hazard of a Greater Depression leading to World War 3 (with nukes in play) suggests that we shouldn't let moral hazard concerns prevent us from doing what needs to be done to truncate the deflationary death spiral.
There are millions of innocent folks who've now lost jobs, home equity, and retirement savings. Should they be punished further just to drive home a very blunt point about moral hazard?
The liars and fraudsters need to be drawn and quartered, but in the meantime the rest of us have to get the wreck back on the tracks...
State and Municipal Pensions are not protected under ERISA. They are protected under state law, so the protection is not nearly as strong.
Also because they are not regulated under ERISA they have been able to invest in much riskier assets. I think you'll see much bigger loses in state and muni pension funds.
Wisdom Speaker writes:
mmckinl - Agree on moral hazard issue, which is why I had the paragraph about doing something intelligent to prevent a repeat of the credit bubble, and pointed out that we weren't doing it.
But the larger hazard of a Greater Depression leading to World War 3 (with nukes in play) suggests that we shouldn't let moral hazard concerns prevent us from doing what needs to be done to truncate the deflationary death spiral.
~~~~~
I didn't say don't re-capitalize. I said take out the CEOs, Shareholders and Bond Holders before tax money is spent ... These banks have to be rationalized and their books scrubbed or a lurking disaster could remain on their balance sheets.
Then create a public central bank to create all currency and credit. Why should banks take all the profit from the creation of credit when the Constitution leaves the right of credit to We the People through the government.
Yalt,
There is an overproduction of vehicles. Without superfluous credit, America would only today be at 12 million annual sales during regular good economic times. They were selling 17 million annually at peak. Similar problems exist in the emerging markets where they built anticipating significant growth. However the first stage in any cyclical downturn is to try and win market share. Eventually that causes consolidation, and/or the market demand grows. I find it very Japanese to endure the bad times at all costs in wait of the next boom.
However (depending on the plant) ~80% of the vehicle cost is in materials, energy, and non factory worker overhead. That 17% wage rollback is small compared to the declines in steel, distribution, and such costs.
The real thing they are preparing for is the disintegration of just in time inventory -- which keep in mind has never been tested by a tough global recession.
If you want a good education or entertainment, I would watch Boeing and GE for the upcoming year.
"There are millions of innocent folks who've now lost jobs, home equity, and retirement savings. Should they be punished further just to drive home a very blunt point about moral hazard?"
This seems like it is postworthy. The second derivative is a corker - 185% increase in the rate of change!
Consumer borrowing falls by $7.94B in November
The 3.7 percent drop in total borrowing in November followed a 1.3 percent decline in October Yahoo! 404 - Page Not Found
Pavel Chichikov writes:
What could he say, really - we saw it coming and did nothing? It came, but we didn't see it?
Be honest for once and say we missed it big time...we had plenty of warning and we screwed up, just like we screwed up in Katrina, Iraq, Afghanistan, 9/11, Guantanmo, etc....
That why I would be very careful about muni bonds. most munis had horribly underfunded pension plans before this crisis. Taxpayers are not going to pay higher taxes to support those plans so I would expect there to be a wave of BK.
crazyvermonte
I watched negotiations going on between my city and police and fire unions for the last 5 years. At the beginning the city assumed that the valuation of the pension plan would increase 7.8% per year and agreed to make up the any short falls out of general revenues. They then signed a contract allowing full retirement after age 55 with 20 years experience at 90% of last three years salary. Some tried to warn that the 7.8% growth was unsustainable but a majority of the politicians negotiating with the unions had been endorsed by them. Talk about watching a train wreck in slow motion.
Anyway this was going on all over California at the time. Our city will never go into bankruptcy but we have already cut the number of cops on the beat by 10%. Yes muni bonds are very scary. I would be particularly wary of any of the more modest income central valley towns. Towns along the 99 corridor south of Sacramento have already seen housing price declines in the 40-60% range. These will result in immediate property tax revenue declines.
b..b..but... the NRA worked! the economy grew like crazy from 1933-1935! really, it, like, did!
bgates | 01.08.09 - 6:21 pm | #
just like the Economist said that stock prices had their best gains in 1933 and 1935. Not hard to do when you are down 82% lets see if market goes from being down only 77% that would be a 25% gain- wow what a performance.
@Anonymous 6:32 pm: "disintegration of just in time inventory"
Do you see this being a serious issue in a world awash in surplus production capability? I can see this in politically fragile areas (Gazprom/Ukraine collateral damage to Europe), and also how local disruptions could be an issue (Bakersfield refinery going down temporarily due to owners going BK, causing local gas shortages)... But can you put some more color on what you see happening?
I would think that an inventory rebuild to cope with disintegration of just-in-time could be good for the economy. But it would soak up scarce capital/credit without delivering end-use products...
bgates,
Manufacturing will return to the US, along with other OECD countries. The Asian exporters cannot maintain their desired currency prices in a volatile environment, it was much easier when all charts were smooth lines to the moon. You will need to shipping containers for something more than scrap metal and antiquated electronics.
On another note. This game does not end until all losses have been distributed. It's not about job creation, money printing, or anything other than playing "hot potato" by a different name
Three associations representing fund managers in Australia, the UK and US have joined forces to warn that their industry would be damaged if market regulators publish detailed information on short selling trading positions.
Sacramento have already seen housing price declines in the 40-60% range. These will result in immediate property tax revenue declines.
syvanen | 01.08.09 - 6:36 pm | #
Don't know about CA but in our state current prices have no bearing on total taxes collected.
Bust: '29-'33; MCM debt fell 8% per year and GDP fell 12% per year --> ratio of MCM debt/GDP grows to 124% in four years
Recovery: '33-'39; MCM debt remained flat and GDP grew 10% per year --> it takes until '39 for MCM debt/GDP to fall to normal level of 51%
This depression -- debt problems are with mortgages and consumer credit
Boom: '80-'07, MCM debt/GDP: 48% --> 104%
Bust: '08-'12, assume that, again, MCM debt falls by 8% per year and that, again, GDP falls by 12% per year --> ratio of MCM debt/GDP grows to ~125% in five years
GDP falling 12% per year over '08-'12, compounded, yields a drop of 39%, peak to trough
Recovery: '13-'22; assume that, again, MCM debt remains flat and that GDP grows by 10% --> it takes until 2022 for MCM debt/GDP to fall to normal level of 48%
15 years in total: five years of downward movement and ten years of recovery until we reach normal levels of MCM debt/GDP
He also has a relationship with Geitner, so perhaps his optimism is a display of confidence for his old boss? Or perhaps he has been approached by some Fed/Treasury/Gov officials to show solidarity? Conspiracy theories abound... Gavshire Hathaway | 01.08.09 - 6:01 pm | #
Roubini is forecasting a pretty serious recession, but far short of a "depression" which is usually defined as a 10% decline in real GDP.
This is interesting, because GDP has been around $13 Trillion +/- so if we have TARP and stimulus infusions well over $2 Trillion, a loss of jobs that will be around 10% and, if you think about this old figure from back in October, and then possibly consider the Trillionst lost in housing wealth:
"The equity sell-off has eviscerated some $4.6 trillion of global stock market wealth in the past three weeks alone, according to the market capitalization loss on MSCI's main world equity index. Over the last 12 months, that figure is more than $12.4 trillion, of which some $7 trillion comes from the United States. "
With all that, GDP will obviously be in a depression and Roubimi is full of shit to suggest that GDP will not be impacted by this cash burn vacuum!!!!!
Wisdom Speaker,
Good point on the macro notion of inventory growth. I guess the flip side is if the top of the food chain corporation is capitally constrained then any production is impeded.
I should add that I did not mean to convey the disappearance of JIT production, but rather the building in of adequate risk margins (which will bring shorter supply chains, reduce the value generated by what amounts to deceptive accounting)
When politicians start saying no one is at fault because no one could have foreseen what happened, it tends to deflate confidence in the political system (to put it mildly). It is a very unfortunate thing to say, almost as unfortunate as it is to have happen.
la rochefoucauld (paraphrase): Many complain of their health, few complain of their judgment.
eal gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- decreased at an annual rate of 0.5 percent in the third quarter of 2008,
(that is, from the second quarter to the third quarter), according to final estimates released by the Bureau
of Economic Analysis. In the second quarter, real GDP increased 2.8 percent.
Who to believe? The democrats of Roubini? The day will come when Roubini silently goes away as this Great US of A becomes a major giant again. It shall return. So. Be. It.
Output and Inflation: Are We Mismeasuring Them?
The "CPI Inflation" and "Chain-Weight GDP" Debates Output and CPI Mismeasurement Debates
However, the move to the new method led to some surprising implications that have become a contentious source of debate among economists and policy makers. Using the new chain-weight method to measure output implies that:
GDP growth after 1987 is lower than previously estimated (2.2% per year in the 1990s against the 3.0% obtained using the fixed weight method).
Productivity growth is lower than previously estimated (1.4% per year in the 1990s against the 2.2% obtained using the fixed-weight method).
Is anyone willing to entertain a discussion of the Euro, limited to scenarios that don't result in the disappearance of the Euro or the EU?
My sense is that Germany, and the ECB, understand the need for spending and lowering of interest rates. However there are some family problems with certain countries which are benefiting from the Euro's protection. Use Italy as an example.
By dragging their feet on government spending, Germany can passively apply pressure to Italy while it passively feels pain. An internal game of chicken that Germany should win given their individual advantage in bond market access.
I wouldn't consider anything like EU's expulsion of Italy because the Italian government would first fall, unions broken, assets privatized, and spending slashed before it came to that.
Regarding whether this is an "engineered depression" or just a normal human mess: there were many folks who saw the bubble before the 1929-46 Great Depression for what it was, but either they lacked the power to act, or in order to act they had to commit career suicide. Career suicide because anyone who acted to cut off the speculation and stop the bubble was going to get blamed for ending the good times. No one wanted to be the architect of a recession, and there were too few people who could have understood that by stopping the speculation the brave one would have prevented a Great Depression.
This time around, you can see the same thing - we saw Bernanke (a Depression expert) continuing Greenspan's sustained raising of short term interest rates to fight inflation into 2006. This helped to cut off the ARM leg of the mortgage bubble, and did much to halt the rest of the speculative bubble. He did the right thing to stop the inflation then (imagine how much worse things would be now if the party had gotten even more out of hand)? But fortunately for him, instead of being blamed for ending the boom, he is now being blamed for being behind the curve on preventing the deflationary recession.
Pavel, you are falling for the okey-doke with Cheney
Bush and Cheney foresaw just about everything that has happened, or, at least, the possibility that it might happen, because they recognized the probable consequences through their looting of the US economy, directly through tax cuts, deregulation and the expansion of a credit bubble, indirectly through the channeling of federal funds through allies in control of private contractors involved in Iraq
now, as they exit stage right, they are laughing to themselves while Obama makes plans to make us all bagholders by cutting social security and medicare to pay for the bailout and his stimulus package
then, 4 or 8 years from now, Obama and Bush will be collecting appearance fees at the same events together in places like Dubai, Davos and Taipei, protected by security provided by us
this is all more incestuous than most of us realize
Nice rebuttal of Keynesianism, from the '20-'21 experience.
"...Harding inherited Wilsons mess in particular, a postWorld War I depression that was almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933 that FDR would later inherit. The estimated gross national product plunged 24 percent from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million to 4.9 million...
"...Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes fell from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922...
"...With Hardings tax and spending cuts and relatively non-interventionist economic policy, GNP rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million a reported 6.7 percent of the labor force in 1922..."
Rothbard stated that the '20-'21 recession was the last one unfettered by Keynesianism. I had not seen the numbers on the turnaround, before. Looks mighty compelling to me, a 'slash government spending and taxes' approach.
If only O- would listen, save America, guarantee himself reelection, and earn his 'Savior' moniker.
I truly blame B/C along with Bill Clinton for this mess the US is in at this point in time.
Somo;ia Pirates protect their shitty little boats better than these three protected the foundation on which Americans have worked for generations to build.
These economist spin crap that they have no idea where they even read it or heard it and I for one don't believe a word they say.
"The overwhelming story is that the export numbers have offset this domestic weakness in consumer spending and business investment. We have a domestic recession.''
Also worth noting: larger than earlier reported gains in every single government expenditure category. If you are wondering why the government does not know what it is actually spending in near real time, welcome to the club.
That boldface was mine. If that isn't sus, I don't know what is.
Barry in a later post, with the help of a chart provided by Michael Panzner, found the real smoking gun: a laughable assumption for inflation. The lower the inflation assumption, the higher the GDP figure. Not only was the 1.2% chosen lower than CPI, which has been adjusted over time to underreport inflation so to reduce payouts on CPI-indexed programs, most notably Social Security, but as a commentor on Econompics noted, constituted the biggest gap between the GDP deflator and CPI since 1980 (squinting at the chart, that seems to be accurate): ...
Rothbard stated that the '20-'21 recession was the last one unfettered by Keynesianism. I had not seen the numbers on the turnaround, before. Looks mighty compelling to me, a 'slash government spending and taxes' approach.
If only O- would listen, save America, guarantee himself reelection, and earn his 'Savior' moniker.
Comrade-Dope jg (jg)
~~~~
Yeah that'd do the trick ... idiot National Review Reader ... are there any homo sapiens left at the National Review ?
I guess I have a different view about unions. - Blackhalo
FWIW, as a union contractor, I lived that experience. Forced me to move most of my business north towards NYC where unions have more sway.
I know more than most about the abuses of unions. That said, those abuses pale in comparison to the inflationary & political abuses that continually short change the producers for the benefit of the rentier class.
CR, how about you start giving an award to the most outstanding comment of each month?
My nomination so far is for Darth Paulson who wrote:
Roubini has been getting laid so much more now that he is a media darling....I fear he has gone pollyanna on us.
Darth Paulson | 01.08.09 - 4:44 pm | #
FWIW, as a union contractor, I lived that experience. Forced me to move most of my business north towards NYC where unions have more sway.
I know more than most about the abuses of unions. That said, those abuses pale in comparison to the inflationary & political abuses that continually short change the producers for the benefit of the rentier class.
If you want to know what Summers, Geitner, Obama, etc. are thinking, listen to Roubini. He is friends with Summers and Geitner and they are all going off the same set of premises. I do think the risk for Roubini now is erring on the side of slight optimism because he feels invested in the outcome.
What Roubini is forecasting is literally impossible.
With the debt to GDP ratio we have, a 5% drop in GDP will cause so much debt to be defaulted that it is literally impossible for GDP to decline only that much.
The physical term in 'unstable equilibrium'...a ball balanced on a pyramid. When the ball moves...it does not just go down a few steps....it falls the the ground.
Even Roubini is falling victim to the fallacy of econometrics...where you plug a bunch of numbers into some multivariable curve fit and it kicks out a number. There forecasts will not work in the current scenario.
@bgates - I hear you ... Kennedy and Livermore saw what would happen and profited from the result, but ... they weren't in a position of sufficient power to actually terminate the bubble.
Regarding just-in-time production and food shortages: I think this is unlikely at the macro level, although for individual food items there will be problems (like the rice crisis last year).
Folks who are strapped will be cutting back on ALL their spending, including the excess food (that made us all fat). Americans throw away an enormous amount of food, which probably won't be thrown away as much going forward. Commodity prices are way down - surplus, not shortage. Milk prices have already hit the federal price-support floor.
By way of reference, I think the food problem in Great Depression 1 wasn't with food shortages (industrialization created large production surpluses) but starvation of the unemployed due to lack of income to buy food (at newly-subsidized prices implemented to protect the farm sector).
How is that? Cal is capped by prop13 though, how does any other state bump up taxes without pause for valuation?
Blackhalo | 01.08.09 - 6:45 pm | #
At least in Vermont every 10 years they are required to do a general valuation of all properties. Those assessed values then stay constant. It provides an aggregate tax base (denominator). They figure what municipal expenses will (numerator)and calculate a tax rate that is applied to individual properties assessed value. Thus any change in property values results in no change in the taxes collected. If the aggregate assessed values go up the tax rate declines and vice versa.
It's beginning to sound like "We've captured/killed Al Quida number 3 man in Iraq" with all these "experts" calling for another 2nd half recovery. Second half of what, year, decade, score, century, millennium?
"they weren't in a position of sufficient power to actually terminate the bubble."
nor did they have any interest. kennedy successfully consolidated h'wood studios and packaged them for the street... while banging norma desmond and leaving her millions in debt as her manager. a true american icon.
Bush and Cheney foresaw just about everything that has happened, or, at least, the possibility that it might happen
While the general consensus is that Cheney is a manipulative, diabolic SOB, I find it fascinating that the opinion of GWB varies from bumbling idiot to dastardly mastermind.
Is it safe to use the "D" word yet?
ot till you lose your job....
Not yet...
I figure i have 4 months left (SoCal General Contractor)
Gloom & Doomers:
Only 2 years of suffering? NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO! We demand our collective pat-on-the-back for seeing the problems!
Roubini has betrayed us!
SoCal gonna take longer.
So then, this recession is half over. Time to back up the truck and buy like crazy! It's all good.
All these high priests of modern society are just as smart as their predecessors.
Didn't they say everything was well contained a while back?
If we hit negative GDP, we're screwed. Depression. Might as well call it what it is.
Have any municipalities had to completely shut down their law enforcement yet?
Roubini is forecasting a pretty serious recession, but far short of a "depression" which is usually defined as a 10% decline in real GDP.
Give him a little more time! He will.
Since when has "the consensus" been worth paying attention to? No one has gone broke so far betting that things would get worse than "the consensus" forecast.
I think 2 years is optimistic. Morgan Stanley's Asia analysts have been saying America will have its version of Japan's lost decade. 2014 seems more likely for a recovery.
There will be no recovery until another bubble is clearly identified and exploited.
Could it be in food/energy/metals?
Or will it be the "anti-bubble" of the dollar and most world currencies collapsing?
A little of both I think.
That's not a "recovery" but lower standard of living.
Unemployement will "ease" but the real number of unemployeed will be pushed off the books as per the definition... again not a real recovery.
My unemployment isn't even going to be counted. The same with many of my other contractors.
Roubini is an optimist. If this thing goes on it's current range of trajectories we won't have any meaningful recovery for years.
Unless we do something far more significant and game changing, it is one long downward spiral.
The contruction industry (comercial) is in shambles. I went to a job walk last week $700K budget for hospital work (notoriously difficult). 9 general contractors there. 1 year ago 3 tops. Now we have 9 guys that usually build projects 100x this size... The blood is just starting to run too....
Another 2nd half recovery, classic!
deja vu
what we need is a hedge fund type gate on the stock market so people won't damage themselves selling their equities -this would create bull market confidence and save the economy
Interesting Times writes:
There will be no recovery until another bubble is clearly identified and exploited.
Could it be in food/energy/metals?
Itll be in Tinfoil hats!
OT: here is a pretty good write up about the VW / Porche fisaco from a few months back: http://radian.org/notebook/porsche
Roubini has been getting laid so much more now that he is a media darling....I fear he has gone pollyanna on us.
I don't hate the player_economista_pimp, I hate the game.
Nades,
Is So. California building work performed by union or non-union workers.
Unless there is a complete! societal collapse I do not foresee law enforcement being cut back drastically. Benefits and pension plans maybe but not number of officers.
The coming state/municipality bail outs will have a large portion earmarked for law enforcement.
I could be falling prey to the man whose livelihood depends on it camp but I do not believe that to be the case.
Darth Paulson writes:
Roubini has been getting laid so much more now that he is a media darling....I fear he has gone pollyanna on us.
Darth Paulson | 01.08.09 - 4:44 pm | #
He deserves it. Go Roubini. That Playboy!
However long the recession may last, I have my doubts about the recovery. It seems that the American economy is totally dependent on the stimulus of low interest rates and deficit spending to maintain any kind of GDP growth. Those two wells have about run dry, so my guess is that we will see a long recession and then perhaps a weak, slow expansion. Even if we are not technically in recession for 10 years, I expect something similar to the Japanese experience of periods of weak growth alternating with mild recession for many years to come - that is, after we get through the current recession which will probably be deep and long.
I get the magnitude but I don't get the duration. We live in a sped up world. What used to take months now takes days. Except for some construction projects and long lived contracts if I was an employer why wouldn't I try and get ahead of the curve. I just don't see the logic of a long build up in unemployment unless it is a statistical matter i.e. discouraged workers who are being counted coming back into the workforce.
The NYTimes is a little bit late to the show but:
Bull Market Dividends Were a Sign of Lax Lending
Next we'll find out that stock options and stock repurchases were simply wealth transfers to management...
Mish Shedlock has been using the D word a bit.. as has Eric Sprott in Canada.
I'm inclined to agree.. it's comin..
Gee. I'm actually more pessimistic than Roubini. That's a first for me.
meanwhile.. Mereidth Whitney is at it again..
FT Alphaville » Blog Archive » Whitney: TARP funds go down the downgrade drain
I'm In bed with the devil :
Lucifer writes:
Roubini is an optimist. If this thing goes on it's current range of trajectories we won't have any meaningful recovery for years.
Unless we do something far more significant and game changing, it is one long downward spiral.
~~~~
Yep ... Roubini is only giving out his best case scenario ... The word is out ... economists play ball or be put in professional purgatory ...
Where's the Bank Holiday ?
Angry Saver - we are signatory to the carpenters and laborers. I'm in Diego. The union isnt that strong here. Still at the larger building level most of the trades are union. There is on major non-union drywall and one major electrican. In LA the unions are stronger. Its difficult to do a major project with out union subcontractors.
So Roubini and the Fed are not far apart on this one. They are saying 6 quarters, he is saying 8.
Roubini thinks the recession will last for 2 years? Based on what? That the government will shovel borrowed money at the plebes and stop taxing the patricians?
It'd be nice if anyone cited his reasoning...
One year down...
Then again doing work out side of the city limits or on smaller projects and it quickly becomes non-union.........
Dr. Doom Roubini is not an optimist he is a realist. He hedges his mild gloom by saying that it could be much worse than he is now predicting.
Damn it, too slow to keep up with CR. last time I'll repost this link to excerpts from GS report on NYC housing market:
Curbed NY: We Read Goldman Sachs' Mind-Numbing NYC Real Estate Report So You Don't Have To (Kill Yourself)
Sorry for the multiple posts.
It could be a long time is we proceed with all the crazy stimulus plans. You don't try and fix a levy breach the moment it breaks- any attempt to do so is a waste of money. The stimulus should be used to jump start the economy after it has corrected. To use my analogy it is like the pumps that are used dry out an area after the levy has been fixed.
Mainstrean economists are making the same assumption that got us into this problem in the first place- the assumption that debt levels could keep growing. It wasn't for consumers and it is not going to be true for the government.
Can we not get Peter Schiff as Treasury Sec?
Peter Schiff talks about stimulus plan
"Sullivan: How is taking money from the well-to-do and giving a $500 or $1000 check once a year back basically to a family going to create a job? A thousand dollars wouldnt matter to a lot of families in America, but right now a thousand bucks might. But how is it going to create a job?
Schiff: Well its not. Its going to destroy jobs, but also hes not even talking about big tax increases. Hes talking about printing a bunch of money and just spending it because governmentI heard Obama talk about all the things that government is going to give us. The government is broke. The government cant give us anything it doesnt take."
Exactly - the Obama plan is to borrow a HUGE amount of money today, drop it from helicopters, then make you pay it back, with interest, later. I wonder how that's going to work out.
Obama does not seem to understand that unless he acts swiftly against the venal greedsters who precipitated this debacle, HE HIMSELF will get blamed as depression wreaks bitter hardships on the nation.
We'd better see active prosecutions fired up immediately after January 20, because Obama has only the narrowest of windows in which to act.
If Obama's administration becomes the main target of the rising anger, it will lose its credibility and before long its control of the situation.
California's headed for a depression, and they alone could take the other wise "functioning" rest of the country down with it.
The Depression is NOT coming.
It is HERE:
Per Shiller, home prices have already fallen twice as much as they did over '29-'33.
Per St. Louis FRB FRED dataset, risk premium (Baa-Aaa) has risen to levels last reached in '31.
Today, it was announced that per capita foreclosures, as of Nov., are already higher than the peak level reached over '29-'33.
Roubini is wrong.
We have completed year one of a five year downleg. We have that much debt to write-off/liquidate.
"the assumption that debt levels could keep growing"
There's a lot of truth there, crazyvermonter. Debt is debt is debt and all the 'bailouts do is transfer it from individuals to government, which is... taxpayers... who are individuals. It is still the same claim against future work, just renamed.
Dear American Taxpayer,
Since you are unwilling to take on more debt, the government has decided to do it for you. Here's a $1000.
You're welcome.
Sincerely,
Pres. Obama
Bingo ! Way more important then ??? stimulus program.
Why are we spending all this money? We cannot solve our problem by doing exactly the same thing that got us into this mess. Ron Paul
Pres. Obama
Speed | 01.08.09 - 5:00 pm | #
Now over the next 10 years, please pay back an extra $1200 in taxes and + 20% in your cost of living.
"HE HIMSELF will get blamed as depression"
unirealist - agreed. It is very important for Obama to be seen as having adversaries to 'fight' so that he is on the side of the 'people'. Very important.
And my calculations are that GDP will fall just under 39% in this Greater Depression (GDP fell 25% in the Lesser Depression).
When the Q4 Z-1 comes out in 30 days or so, I will update my calculations, which are based on Q4 '07 debt and income levels. I am afraid that things have merely gotten worse during the interim, which means a greater and longer fall.
I for one am confused. How iz it that we'll get new ponies and be happy within two years if we all had new ponies to start with two years ago?
Will some one please tell the ponies?
Dat aint right!
CA by its self is enough to slow our crazy world down significantly. We put the brakes on while doing 120MPH and people faceplanted. No airbags, no belts. Now we peel them off the window and begin triage.
Oh, does anyone smell gasoline?
General Opinion of economists- excessive spending and borrowing by consumers got us into this mess-
Solution- lets have the government borrow and spend. Didn't you hear that if you tie two stones together they will float.
Only in America would incompetents be considered experts. Disappointed that the Economist magazine would publish anything written by that moron Greenspan.
Q2 2009 RECOVERY! Doom Lite Only! Well, maybe Yellowstone then...
What was that Ohio, North Carolina and New York unemployment claims systems crashing? 10000 calls per hour in New York alone last Tuesday...helluva lot of careless fat finger wrong number callers?
"The concensus (and the Fed forecast) is that the economy will bottom in Q2 2009 with a sluggish recovery in the 2nd half of this year."
You know that if it is the concensus, it is wrong. At least, if the pattern continues from the last three years.
CR, in the future, when posting Roubini takes, please include his Glamour Shots photo. It could help drum up business for a struggling mall based business. Thank you in advance.
WSJ is reporting that the judges can cramdown principal:
Plan to Cut Foreclosure Rate Clears Key Hurdle - WSJ.com
That would make cramdown much more palatable to the borrower.
can someone please post the Roubini with his babes photo... god I love that one... laugh every time.....
Have any municipalities had to completely shut down their law enforcement yet?
Uncle Billy, Mental Widget | Homepage | 01.08.09 - 4:39 pm | #
Unless there is a complete! societal collapse I do not foresee law enforcement being cut back drastically. Benefits and pension plans maybe but not number of officers.
anon | 01.08.09 - 4:47 pm | #
When cities can't afford their PD, they usually close the PD and contract with the county sheriff. The city officers get absorbed as sheriff's deputies and the facility becomes a sheriff's substation, if it continues to be occupied. In normal times, most LE agencies can't hire cops fast enough, so there are vacant positions to absorb the laterals.
Anon - many cities have already cut vacant officer positions are are laying off cops. There will be MANY more lay-offs to come. Public Safety takes the lion's share of any local government budget - eventually it has to be cut.
The smart thing to do is to replace cops with civilians in all jobs that don't require police powers - every PD has plenty such jobs. But the local government has to be willing to stand up to the cops' union. Cops don't let anyone cut their ranks unless it's to fund their raises.
Mob is not doing well in NYC
- series of crane accidents
- cessation of CRE and RRE construction
- their own investments plummeting
- drug use down
- gambling down
- can barely collect rent
- harder to smuggle with lower traffic volume, homeland security upgrades
- bosses still clinging to hope it is very temporary
Expect infighting to spill on to newspaper front pages before this is over
Comrade-Dope jg (jg)(Unrated) writes:
\tAnd my calculations are that GDP will fall just under 39% in this Greater Depression (GDP fell 25% in the Lesser Depression).
When the Q4 Z-1 comes out in 30 days or so, I will update my calculations, which are based on Q4 '07 debt and income levels. I am afraid that things have merely gotten worse during the interim, which means a greater and longer fall.
\t Comrade-Dope jg (jg) | \t \t \t \t01.08.09 - 5:03 pm | #
So this jives with the down ~1/3 for the market for consumer electronics that I mentioned earlier. Ouch; This is going to suck.
But I wonder if it won't suck more for the net exporters?
Mob is not doing well in NYC
Sheesh, there is an unintended consequence I didn't think about.
Wait until the black market takes off.
Mainstrean economists are making the same assumption that got us into this problem in the first place- the assumption that debt levels could keep growing. It wasn't for consumers and it is not going to be true for the government.
crazyvermonter
~~
Anything to keep the banks in government bonds ! The tax payer must be buggered and buggered and buggered ...
Sloppy journalism:
According to industry data, 1 in 10 homeowners -- about 4.6 million people -- are either delinquent in their mortgage payments or in the process of foreclosure.
That's incorrect. I've seen this written a lot - wrongly. It's 1 in 10 mortgage holders. There's a significant difference.
"Sullivan: How is taking money from the well-to-do and giving a $500 or $1000 check once a year back basically to a family going to create a job? A thousand dollars wouldnt matter to a lot of families in America, but right now a thousand bucks might. But how is it going to create a job?
Schiff: Well its not. Its going to destroy jobs, but also hes not even talking about big tax increases. Hes talking about printing a bunch of money and just spending it because governmentI heard Obama talk about all the things that government is going to give us. The government is broke. The government cant give us anything it doesnt take."
Actually, the well-to-do are hoarding cash (at least that's what zero percent 3-month T-bills means to me). They're not investing in diddly squat, so no jobs will be lost.
What Obama's plan reported will do is force the wealthy to invest in the nation's crumbling (assuming he doesn't cut taxes at the same time).
China may put new curbs on overseas investments
China may put new curbs on overseas investments
| Markets
| US Markets
| Reuters
SHANGHAI, Jan 8 (Reuters) - China's Ministry of Commerce may ask Chinese companies to apply for approval from the ministry if they want to invest $100 million or more overseas, it said in new draft rules published late on Wednesday, after a few major Chinese companies reported big book losses on investments abroad.
"And my calculations are that GDP will fall just under 39% in this Greater Depression (GDP fell 25% in the Lesser Depression)."
Please refer to it as its proper name, "The Naked Recession 2 and 1/2 -- The Smell of Fear."
Roubini hasnt seem the same guy since he watched Krugman get a Nobel for kow-towing to the orthodox line.
Also, I think Latvia's arrest of a native economist for 'pessimistic forecasts' akin to inciting public discord, was not easily dismissed by the Economics Club here in 'free' America; and the recent polls findings that the public blames the media for dampening consumer & business confidence and deepening the recession seems to have stung the timid members as well.
Nonetheless, Roubini has made his invaluable contribution to us readers and I remain grateful for his past fortitude and independence.
Mob optimism looks for
- higher tariffs internationally (black market is bread and butter historically)
- break even on counterfeiting as some will increase alongside the decrease in trendy fashion/luxury
- smaller police budgets
- increased construction for stimulus
- desperate borrowers
Anon, Feck, thanks. Local PD ---> Sheriff in normal times. But when the county has no money? Any idea how things worked in GDI? (Stretch to find significant indicators of future behavior).
There's a lot of truth there, crazyvermonter. Debt is debt is debt and all the 'bailouts do is transfer it from individuals to government, which is... taxpayers... who are individuals. It is still the same claim against future work, just renamed.
wally | 01.08.09 - 5:00 pm | #
Ok suppose that everyone who gets the $1000 or what ever check uses it to simply pay down debt, say a mix of cc and mtg, no, zero, nada actual spending, just pay down debt. Well if it were a mix of 18% cc and 6% mtg, it would mean about a 10% interest rate. Right now the govt borrows at 2.5% Thus even in this extreme scenario there is a benefit from transfering the debt from the individual level to the govt level. No jobs created, but consumer balance sheets in much better shape.
There is no original Nobel prize for economics, it is given on behalf by the banksters!
Remember this well!
Roubini rhymes with Houdini. Sleight of hand, y'all.
"Nonetheless, Roubini has made his invaluable contribution to us readers and I remain grateful for his past fortitude and independence.
avl dao"
I agree and his photographs have provided hours of laughs.
Feckless Ness | 01.08.09 - 5:06 pm | #
Good points. Thank you.
The small towns/cities contracting out just makes sense. I've always thought most towns under 50,000 having their own police was more about venality then common sense.
Concentrating law enforcement at the county level saves a lot of resources. It also concentrates power which can have some local side effects.
Cops need to be patrolling and investigating and not doing the long list of admin that most aren't qualified to perform. Big agreement with you on cost saving by hiring civilians.
"There is no original Nobel prize for economics, it is given on behalf by the banksters!"
You are either on the bus or off the bus.
Comrade-Dope jg (jg) writes:
"The Depression is NOT coming. It is HERE."
No, I still got my job.
Dirk van Dijk,
But the government is running a deficit in order to hand out the $1000... which is just a future debt for taxpayers.
The whole issue of a credit collapse or debt deflation is that there is only so much of the future that can be promised before people start to disbelieve.
No, I still got my job.
MiTurn
~~~~
Wait until your friends and family move in ...
Where's the bank Holiday ?
Moderate tariffs == Mafia Rule ?
WTF?
Increase of tariffs 100% around 1920 lead to roaring 20s. Admittedly possibly just correlation. Just crying "Smoot-Hawley" is making conclusions from small sample size.
"No, I still got my job.
MiTurn"
If I no longer have work, I will become a professional commenter on Calculated Risk and spend my hours making absurd remarks and insulting intelligence. Oh, wait, I already do that. Should I add it to my bio? -- "Blog Professional -- Mr. Elvis belittles the economic follies of the USA gov't and its people."
Does anyone ever ask an economist what his/her assumptions/inputs are when they interview them?
The thing about when he suggested there might be a collapse is that his steps had a logic to them. I haven't read his blog in a long time. Has he provided something similar describing 1) why, when, and how specific government measures would gain traction; 2) when the gov't might unwind its intervention; and 3) what effects doing so might have on the markets?
It seems like so many economists are so engrossed with the play-by-play of economic indicators that they do not see the forest for the trees - implementation and funding of the stimulus, a long time without consumer spending as it once was, etc. Can they predict what China's purchases of Treasuries will be in September? Do they have the foggiest clue how many American companies will survive to see 2010? I doubt it.
helluva lot of careless fat finger wrong number callers?
supafly73 | 01.08.09 - 5:04 pm | #
"The fingers you have used to dial, are too fat. If you would like to order a special dialing wand, please mash the keypad with your hand at the tone."
wally writes:
Dirk van Dijk,
But the government is running a deficit in order to hand out the $1000... which is just a future debt for taxpayers.
~~~~~
And income producing debt for the banksters ...
Where's the Bank Holiday ?
"And my calculations are that GDP will fall just under 39% in this Greater Depression (GDP fell 25% in the Lesser Depression)."
Exactly. Nowadays USA GDP: 70 percent (consumption) - 30 (production). Normal is around 50-50. 30 percent from 14000 billion is 4200.
Now that production part shrinks a little bit too during this depression, maybe 3800 and in the bright new future it is 50 percent from GDP.
So the new Glorious GDP for the Divided States of America (California will be first to secede!) is 7600 BILLION dollars (or 760000000000000000000000000000000000 after Bernanke's hyperinflation).
40-50 percent is quite possible as well as 30-40 percent unemployment rate. This is easy!
Peak Oil update;
Chevron warns after hours
chevron warns of significant lower earnings due to oil prices..
per marketwatch
Any investment that outstrips general GDP growth by more than 3% is speculation. Equities are speculation, otherwise all funding would be fixed by bond or mortgage contract.
The aristocrats must ever fleece the serfs. Thus tax policy steers you into the lion's den of speculation, wage deflation urges you into mad gambling, inflation goads you into games of chance.
Your government is your enemy. The central banks are its dictator.
It is a bubblenomics, voodoo, and speculajactulorium economics.
We are in the final phase of straight-face financial system. The next epoch is war after its breakdown. War also a great way to extract wealth from the productive class...as well as their lives.
Nades,
Don't feel too bad... In NJ we recently bid on the CM side for a small mission critical facility, $20MM tops. There were 15 'qualified bidders.
what, profits decrease when oil is trading at $40/bbl and not $147?
Shocking!
Obama has 15 months, tops, to get things back on track. Mid-terms are already approaching.
He will do pretty much anything - except war - to get us out of this, or least bring us off the precipice...Never underestimate the power of staying in power.
We'll know by June whether The Fabulous Roubini is wrong or got his head in the wrong "v curve"...
Crispy,
your good:)
OT-
Calif next 14 days will be dry...
soon water will be bigger issue here.....unless la nina brings forth her life supporting rains...
Uncle Billy,
No idea, did a search and came up with nothing solid.
I'll always go with the assumption that the wealthy and business assets need protected and the funds will be found.
The rise of private security is a concern and bears watching.
Peak Oil update:
Natural Gas and Petroleum Navigator Error Page
But the government is running a deficit in order to hand out the $1000... which is just a future debt for taxpayers.
The whole issue of a credit collapse or debt deflation is that there is only so much of the future that can be promised before people start to disbelieve.
wally | 01.08.09 - 5:15 pm | #
Wally, agree that it is simply a transfer of debt from one pocket to another, however in the right pocket people are paying 18% on cc bills, and in the left pocket they are paying 2.5% as there share of future taxes. Now if the increased borrowing causes T rates to go to double digits, that is a different story, but durring this flight to saftey, there is a huge interest rate arb. Not so nice for the banks though since they will not be collecting that 18% credit card balance.
Comrade-Dope: Where is your calculations?
Do they have the foggiest clue how many American companies will survive to see 2010? I doubt it.
Bond Girl | Homepage | 01.08.09 - 5:18 pm
~~~~
right on the money ...
It's all PR at this point ... one thing is for sure, the real figures point significantly lower than they are ...
The projection implies rising incomes and/or a resumption of credit creation. And how is that supposed to occur?
Can you imagine Paris Hilton's lawn brown...or only showering once a day...the horror
Left Shoe Waiting
Ouch! Our execs are running around the office looking for work everywhere. We have 3 guys scouring the interent and the green sheets for work. Keep in mind 3 months ago everyone was convinced we were all set and this was just going to blow over. from zero to panic in 3 months. I still dont think they have any idea how bad it is.... Good news tho, we just got a call back for a school. We made the short list, 6 f'in contractors. I thought short lists were 2-4 max.... Times they are a'changin.....
Can you imagine Paris Hilton's lawn brown...or only showering once a day...the horror
cd | 01.08.09 - 5:25 pm | #
In the video there was no lawn? Oh, never mind.
Lol Gary..
So this Fed Forecast of a Q2 recovery.. are these the same people who said sub-prime was contained?
Just checkin..
"Can you imagine Paris Hilton's lawn brown...or only showering once a day...the horror
cd"
I thought Paris had a Brazilian wax.
Gary beat me to the punchline.
I'm eatin your lunch, Elvis!
elvis and gary,
lol..nice setup huh!
I thought Paris had a Brazilian wax.
~~~~
Just thinking about Hilton makes me cringe ...
Bottom in Q2? Are people blind? Unemployment could be double digits by the end of the year. The BLS has to unwind some of it's B.S. job creation.
re: ® | 01.08.09 - 5:06 pm
"In a concession to lenders, if a lender is found to have violated the Truth in Lending Act during bankruptcy proceedings, the institution would be subject to fines, but would not have to forgive the loan, as is the case currently."
10,000 economists in America, teaching, forecasting, advising. What would it be like to go to work everyday and looked at like you were incompetent.
That's got to be a confidence killer. Probably promotes much more gloomy forecasts. Better for things to get better then to be wrong about how much worse it is going to get.
I'm in the doom and gloom camp but there is some truth to the future not being as bad as we are being told everyday.
Of course I'm not betting on it.
Ben meant to say Hank is his bottom...sorry for the confusion...
"Wally, agree that it is simply a transfer of debt from one pocket to another"
Dirk, my take has been that it is the total amount of money - that is, debt - as compared to the theoretical amount - that is, future labor - that can exist that is the stress factor that causes debt deflation. It doesn't matter who creates or holds or promises. There is only so much future to be promised. That is why the only two ways out are seen to be debt destruction or inflation. The debt MUST go away because it is not payable, realistically.
Just thinking about Hilton makes me cringe ...
mmckinl | 01.08.09 - 5:31 pm | #
This is the thread where all that OT talk of antibacterial agents would come in handy.
This is the thread where all that OT talk of antibacterial agents would come in handy.
Gary | 01.08.09 - 5:32 pm | #
Why? She claimed to have only shagged "a couple of people".
On a positive note I do remain confident that this crisis will remained contained and only effect the Planet Earth.
Rule of thumb I have when any industry supports a change in legislation or regulation:
The industry will benefit. Banks seem exceptionally good at ensuring this outcome.
10,000 economists in America, teaching, forecasting, advising. What would it be like to go to work everyday and looked at like you were incompetent.
~~~~
What do you mean "looked at like you were incompetent" .... they ARE incompetent and those that are not incompetent are LIARS ... take your pick ...
Where's the Bank Holiday ?
Ok suppose that everyone who gets the $1000 or what ever check uses it to simply pay down debt, say a mix of cc and mtg, no, zero, nada actual spending, just pay down debt. Well if it were a mix of 18% cc and 6% mtg, it would mean about a 10% interest rate. Right now the govt borrows at 2.5% Thus even in this extreme scenario there is a benefit from transfering the debt from the individual level to the govt level. No jobs created, but consumer balance sheets in much better shape.
Dirk van Dijk | 01.08.09 - 5:11 pm | #
but that is not the point of the tax cut- it is keep spending that everybody agrees is too high to begin with up.
Even though I disagree with the policy I think there is some non economic value in having a Democratic politician keep their promise on cutting taxes.
And for the sake of being on topic, I think Roubini is overly optimistic.
Never thought I'd type that, but there it is.
ades,
On our end the panic hasn’t really set it yet. The backlog will keep us healthy for a while but after that who knows. The plan seems to be to wait for the smaller hands to fold while we wait for a recovery to avoid a further bidding down of the market. Maybe it will even work?
Good luck to you BTW.
"Why? She claimed to have only shagged "a couple of people".
Eric"
I bet Paris is no different that 3/4ths of sorority girls. If your daughter is in a sorority, I would be shaking in my shoes right now.
Read some interesting proprietary analysis suggesting that one resolution of the Ukraine/Russia gas showdown would be Gazprom taking an equity position in Naftogaz - Ukraine can't pay more and Gazprom can't carry them at a huge subsidy any longer...
This is the thread where all that OT talk of antibacterial agents would come in handy.
Gary
~~~~
Do they have a cooties vaccine yet ? Hilton's got stuff they don't have a name for yet ...
Never thought I'd type that, but there it is.
Gary | 01.08.09 - 5:35 pm | #
from Doctor Doom to Doctor Bloom in 6 months....
mmckinl | 01.08.09 - 5:34 pm | #
PLEASE let there be a bank holiday. I worry about your future mental outlook if this doesn't happen.
Keep stating your case. It needs to be repeated and the associated blame be firmly established to the financial industry and the associated shills.
OT from last thread:
Cramdowns in context:
In order for this to work properly, the following caveats must be in place:
-For any Federal Reserve-held mortgages that are crammed, an equal amount of cash must be retired from the seller's account.
-For any GSE-held mortgages that are crammed, an equal amount of bondholder equity must be reduced.
-For any FHA-held mortgages that are crammed, an equal amount of cash must be paid by the originator, builder, or "non-profit" donor organization that assisted in the transaction.
-For any loan held by the FDIC through a bank seizure that are crammed, an equivalent amount of cash must be paid by over-the-limit depositors, bond holders, or equity holders.
The cram-down concept only works if moral hazard is eliminated.
Left Shoe Waiting thanks for the luck. We'll need it. We had a healthy backlog then we lost a $800MM project. That leaves a mark.... Good luck to you too....
whats with the bank holiday? I don't see how that helps anything? Could you explain your reasoning?
"Yep ... Roubini is only giving out his best case scenario ... The word is out ... economists play ball or be put in professional purgatory ..."- mmckinl
yup...you can add Barry "Big Picture" Ritholtz to the list too.
anon writes:
mmckinl | 01.08.09 - 5:34 pm | #
PLEASE let there be a bank holiday. I worry about your future mental outlook if this doesn't happen.
~~~~~
I can always use help ... using anon they won't figure who you are ... join up !
Where's the bank Holiday ?
seeee it's easy !
Perspective.
Great Depression taught lasting, positive life lessons
Watch out CR!
BBC NEWS | Business | Latvia defends economist's arrest
Latvia defends economist's arrest.
Latvia has stressed its support for free speech despite the arrest of an economist over comments he made, a spokesman for the prime minister says.
University lecturer Dmitrijs Smirnov told a newspaper the nation's currency, the lat, was heading for devaluation.
He advised people to withdraw their money from banks or change it.
Mr Smirnov was later arrested by Latvia's security police, who usually hunt for terrorists and organised criminals, before begin released.
Mr Smirnov was locked up for two days last month before he was freed. No decision has been made yet whether to charge him.
Anonymous writes:
"Yep ... Roubini is only giving out his best case scenario ... The word is out ... economists play ball or be put in professional purgatory ..."- mmckinl
yup...you can add Barry "Big Picture" Ritholtz to the list too.
~~~~~
You forgot to add :
Where's the Bank Holiday ?
Roubini is wrong. He's optimistic about the declines: a mere 5 percent decline would be fine. But the problem is that we're headed for a housing crisis in 2011 as workouts fail and as various other mortgages come due.
This will be a depression with 10-15 percent decline by 2012.
ades - Roubini does have some serious hawtness in his facebook circle.
Jan. 9 (Bloomberg) -- Russia and the European Union clinched a deal on monitoring gas shipments through Ukraine, paving a way for the resumption of deliveries to EU countries.
Russian Prime Minister Vladimir Putin reached an accord with Czech Prime Minister Mirek Topolanek, who holds the EUâs rotating presidency, on conditions for deployment of a monitoring commission. The agreement âshould lead to the Russian supplies of gas to EU member states being restored,â the Czech presidency said on its Web site.
It appears to me that Russian President Dmitry Medvedev is irrelevant
Disinflation?!
Princeton Proposes 2.9% Cost Increase; Ivy Peers May Follow
By Brian K. Sullivan
Jan. 8 (Bloomberg) -- Princeton University, expecting a 25 percent loss in its endowment by next June, may set the lowest cost increase to parents and students since 1966 and provide a marker for other top U.S. schools.
Princeton Proposes 2.9% Cost Increase; Ivy Peers May Follow - Bloomberg.com
Why? She claimed to have only shagged "a couple of people".
Eric | 01.08.09 - 5:33 pm | #
Eric, if you were one of them, I weep for your putz.
I'm having a hard time reconcile the CR quote with Roubini's Jan 7th commentary:
Thanks to the radical actions of the G-7 and others, the risk of a total systemic financial meltdown has been reduced. But unfortunately, the worst is not behind us. This will be a painful year. Only very aggressive, coordinated, and effective action by policymakers will ensure that 2010 will not be even worse than 2009 is likely to be.
Second link was supposed to be Roubini's
.
But a deal to send international monitors unraveled late Thursday over Gazprom's insistence that Russians be among the observers in Ukraine. Kiev had agreed to EU monitors, not Russians.
The article requested is no longer available.
For any loan held by the FDIC through a bank seizure that are crammed, an equivalent amount of cash must be paid by over-the-limit depositors, bond holders, or equity holders.
The cram-down concept only works if moral hazard is eliminated.
Max | Homepage | 01.08.09 - 5:39 pm | #
That is the crux of the issue and the single point that has been missed- who takes the loss- that is the only decision that Paulson and crew need have made. Of course since forcing the equity and bond holders would have got him blackballed at the country club he couldn't do that nor could he say he wouldn't let them take a loss. So we end up with this crap.
IMO a lot of problems would have been avoided if (a) they had guaranteed all deposits upto $1MM , (b) corporate transactional balances (c)interbank deposits of banks with surplus funds and then let the chips fall.
Where's the prosecutions and the promised transparency of the TARP funds and the FED's balance sheet!
If I choose a cause it is those two.
anon is easy. I don't like to be pigeonholed by past comments when the circumstances are changing so rapidly. It's the internet! Investing in a handle always seemed counter productive to me. IMO! I respect many posters due to their history of previous comments. I also ignore many posters for the same reason and probably miss out on some great insights. It is what it is.
Gary +1!
Feckless Ness writes:
Gee. I'm actually more pessimistic than Roubini. That's a first for me.
you're in good company with Shilling
The more optimistic roubini forecasts are written after having an orgy with 4 hot gals, the other forecasts are more objective
"I'm having a hard time reconcile the CR quote with Roubini's Jan 7th commentary"
Shnaps thanks! I love those! BTW i like you're home page... I got a kick out of some of those videos....
Has anyone looked at roubini's facebook... never mind.
I got word, earlier this week, that I would be laid off. I'm a contractor at a large company, so must be sacrificed, so that a direct employee can survive a little longer. I hope Roubini is right about the duration of this thing.
IMO a lot of problems would have been avoided if (a) they had guaranteed all deposits upto $1MM , (b) corporate transactional balances (c)interbank deposits of banks with surplus funds and then let the chips fall.
crazyvermonter
~~~~
Like a Bank Holiday but without the FDIC ?
With $500 trillions in derivatives we might want to take a look first ...
Where's the Bank Holiday ?
I've rather liked Paris, since her wrinkly white guy comments.
Comments on Miami-Dade ordinance on a dead thread a couple down.
Will leave shortly for Space Coast.
lawyerliz, I really dislike her but that ad she made did make me laugh...
Roubini is forecasting a pretty serious recession, but far short of a "depression" which is usually defined as a 10% decline in real GDP.
Some economists, call a depression anything over 10% UE...
I agree with the point about so much debt and so much future labor, and was giving what most people would think of as the worst case scenario for the consumer oriented part of the tax cuts (not addressing the tax loss carry backs for business or accel depreciation etc). Perhaps not a perfect solution, but it would help a bit, and could be done relatively quickly.
If it is a fully refundable credit, it would also have redistributive effects, transfering money to the middle and lower parts of the income distribution, and from upper income, provided that future taxes are more progressive than they are today. Given the huge income disparity that has grown over the last few decades that is not exactly a bad thing.
So the bank's pound of flesh for agreeing to cramdowns is... immunity from prosecution for TILA violations, i.e. their share of the lending fraud? And we'll overwrite all state laws in the process? And only "major violations" (defined how exactly???) will get full legal sanctions?
Plan to Cut Foreclosure Rate Clears Key Hurdle - WSJ.com
"In a concession to lenders, if a lender is found to have violated the Truth in Lending Act during bankruptcy proceedings, the institution would be subject to fines, but would not have to forgive the loan, as is the case currently. Major violations would still be subject to full sanctions under the law. The TILA provisions would pre-empt any state lending laws."
One can predict a future in which all violations of TILA get crammed down onto the lenders' employees (no "major violations" likely, except for the politically disconnected)... the lenders get off scot-free with token fines... the mortgage bondholders benefit from not having to forgive the loans outright... and the borrowers who suffered the economic and psychological consequences of the predatory lending won't get their free ponies (houses) after all. But at least some might get cramdowns.
Successful historical eras have less income disparity, according to the Great Wave. Wonder if the author has revised the book.
liz was the quote? i forgot how to google the comment sections...
"Why will it not work, whats the problem? Simple. There are still people who clamor that credit rates are too high. They are wrong.
The problem is that there is no credit. But we just gave the banks $1-2-3-4 trillion, they say. Nice try, but it's not enough. The banks are too broke. In fact they are so broke they shouldn't have received a penny. Their position is far too bad to be quenched with that sort of petty cash. If they would start lending again, and prop up those much-too-high real estate prices, they'd be signing their own demise. Not that that can be avoided, but the trillions do work to let them live a few more months, in which the staff can quibble over bonuses yes or no, and the resorts in which those questions need to be addressed. Thai massage, or Swedish?"
The Automatic Earth
Where's the Bank Holiday ?
I think it is very interesting that Roubini has such a positive estimation of our economy.
I've read him regularly for the past year, and gleaned some amazing insights particularly in the first half of last year. But lately I'm losing faith in him for his devotion to Keynesian economics and his assertion that we will avoid a depression.
Interestingly enough, despite the media's tendency to portray Roubini as doom and gloom -- I've considered him an optimist for the past 9 months. In which time he is constantly revising his outlook downward.
I suspect that given his broad based following, he doesn't want to be accused of "triggering" the depression with his statements. He may just be hedging here -- if we do hit a depression, his track record is still far better than most other economists. And if things improve he's right again.
He also has a relationship with Geitner, so perhaps his optimism is a display of confidence for his old boss? Or perhaps he has been approached by some Fed/Treasury/Gov officials to show solidarity? Conspiracy theories abound...
ipodius2008----->roubini2009
Speaker Nancy Pelosi told reporters Thursday that she wants to see the Bush-era tax cuts for the wealthy repealed "as early as possible."
The call for repeal may place Pelosi at odds with President-elect Obama; during the campaign he called for repeal but his aides have since indicated that due to the deteriorating economy, he was leaning towards allowing them to expire.
Pelosi Parts With Obama Over Bush Tax Cuts
Subtext: Let me look good on this and we'll give it all back as part of the stimulus package. You know how liberal my district is and I need something to show them I'm on their side.
Successful historical eras have less income disparity, according to the Great Wave. Wonder if the author has revised the book.
lawyerliz | 01.08.09 - 5:56 pm | #
That was a great book for perspective.
Paris Hilton is wealthy,she can take Golden Showers...
Let me look good on this and we'll give it all back as part of the stimulus package. You know how liberal my district is and I need something to show them I'm on their side.
Citizen Jacked
~~~~
Pelosi comes from a very wealthy district ...
And yes we need higher taxes on the rich to pay for the two wars that Bush didn't raise taxes for
... Remember Afghanistan and Iraq ?
They are still eating our lunch ... Maybe if the rich had to pay for our wars we wouldn't be starting so many of them ...
Where's the Bank Holiday ?
If this thing goes on it's current range of trajectories we won't have any meaningful recovery for years.
mmckinl | 01.08.09 - 4:52 pm | #
What does the rate of change have to do with when it will turn around? My thougts are that the sooner we get back to sane valuations on equites and housing, the sooner businees and investment can get back in the game. Drawing out the decline seems to be the worst way to go about things.
I'm with Dirk on the recasting of consumer debt from 18% to Treasury debt at 2-4% being a net positive. It will be painful for the wealthier to forego the interest income and possibly pay more in taxes from now until recovery, but there won't be a recovery unless the consumers have enough cash flow to cover their debts and rebuild the demand side.
But we have to inflict enough pain on the consumers, and rebuild the regulatory infrastructure (plus punish the guilty) to prevent further predatory lending. Because we also need to prevent the debt bubble from regrowing. The former is happening but I don't see the latter yet.
At the macro level, it's better to refinance-and-repay the excess/bad debts, than to go through a nonlinear cascade of defaulting dominos.
I'm with Roubini based on population growth reality, housing inventory overhang and multi-trillion losses, which will take more like 7+ years to write off.
Also see: Prosecutors said Thursday that investigators found 100 signed checks worth $173 million in Bernard Madoff's office desk that he was ready to send out to his closest family and friends at the time of his arrest last month in what is alleged to be largest financial fraud in history.
"anon writes:
Unless there is a complete! societal collapse I do not foresee law enforcement being cut back drastically. Benefits and pension plans maybe but not number of officers."
Couldn't be more wrong. New hires are the first place to cut. Benefits and pensions are protected in law -- the only way to cut those are to get the unions to agree or to file and take the expenses before a bankruptcy judge.
Pelosi is moving onwards and upwards. I think she has a better shot at being the first woman president before Hillary. She does seem to be building her resume.
I say again: The Roubini quote looks like it's out of context. See his blog (link from me posted above).
He is hoping that smart action occurs in 2009 so that the SHTF scenario is avoided in 2010.
If this thing goes on it's current range of trajectories we won't have any meaningful recovery for years.
mmckinl | 01.08.09 - 4:52 pm | #
What does the rate of change have to do with when it will turn around?
~~~~~
I was speaking of the lost GDP and jobs not valuations.
Where's the bank Holiday ?
syvanen - in the short term you are right, but in the long term? how does a police union fare when a city goes bankrupt?
I'll be really impressed if Princeton freezes their law school tuition, too.
"California's headed for a depression, and they alone could take the other wise "functioning" rest of the country down with it."
Conjob the Dodger cap says --- "Indeed, broseph"
citizen energyecon re Russian Gas - funny thing...in some mid-European countries there is a run on portable electric heaters
With $500 trillions in derivatives we might want to take a look first ...
Where's the Bank Holiday ?
mmckinl | 01.08.09 - 5:48 pm | #
There were certain facts that the policy makers were trying to avoid recognizing. Bad decisions were made and there were loses that banks were going to suffer. The only question was how those losses were going to be apportioned between taxpayers, depositors and investors. That was the policy decision that had to be made.
Do we stick with the letter of the law only cover upto $100,000 and if we say that what are the ramifications. Or do we have a more expansive view e.g. protect the regional bank who has surplus funds by guaranteeing their deposit if it is lent to Citibank.
Once that decision is made the market will sort it out. A bank that gets taken over its counter parties have to swallow the derivatives loss. BTW the exposure on derivatives has been way overblown. AIG was a big deal because they anchored one end of the change.
"She does seem to be building her resume."
perhaps as the next sf mayor after gavin "tootin' fat rails off my best friend's wife's ass" newsom is termed out...
At the macro level, it's better to refinance-and-repay the excess/bad debts, than to go through a nonlinear cascade of defaulting dominos.
Wisdom Speaker
~~~~
And moral hazard ... ?
The banks, their CEOs , shareholders and bond holders need to eat it before tax payer money is used ...
Where's the Bank Holiday ?
Nades,
After the steel bust of the 1980s, the steelworkers union (district council 50 out of WV, & Western PA) started crossing picket lines and pirating many of the Heavy & Highway projects. They essentially worked under non-union rules yet maintained they were a legitimate union under NLRB rules. They spread from West to East and over period of 10-20 years came to dominate the industry.
Unionized contractors in Eastern PA (including Philly a heavily unionized city) took a beating and never recovered. NJ fared somewhat better after an AFL-CIO brokered deal limited the steel workers' ability to solicit work via a grandfather clause.
Once the steel workers had cleared a path, non-union/non steel worker followed and started pushing out the steel worker contractors.
What a mess.
Gav - I have enjoyed your posts. But, I did not know you were, um, so, well, doom and gloom.
syvanen | 01.08.09 - 6:08 pm | #
The new hires will get the new pay/benefit packages ala the UAW.
The state/municipal workers will be offered tough choices to renegotiate their contracts or be forced to under municipal BK's.
Contract law is taking some big hits with the housing crisis. Putting trust in what was agreed upon under better economic circumstances might not be written in stone like you think it is.
[California's headed for a depression, and they alone could take the other wise "functioning" rest of the country down with it.
Jerry ]
PLENTY of wealth left to confiscate in CA.
The fly-overs will have little sympathy to bail out those with homes still valued in the $1MM+ range. I would say a condition of and federal bailout would be a repeal of prop 13 and a plan including property taxes raised to pay back any loan.
I'll be really impressed if Princeton freezes their law school tuition, too.
I'd be really impressed as well since they don't have one ;p
Couldn't be more wrong. New hires are the first place to cut. Benefits and pensions are protected in law -- the only way to cut those are to get the unions to agree or to file and take the expenses before a bankruptcy judge.
syvanen | 01.08.09 - 6:08 pm | #
That why I would be very careful about muni bonds. most munis had horribly underfunded pension plans before this crisis. Taxpayers are not going to pay higher taxes to support those plans so I would expect there to be a wave of BK.
Flippers. TPTB had to flip Roubini hoping his cult following would make like lemmings. Anyone who has done their homework, anyone who has a historical view, anyone who saw the RE orgy knows were in the end game without an exit strategy.
"After I've mortgaged all my tomorrows, how will I spend my today's"
"I'd be really impressed as well"
wow, basel, nothing gets past you...
Angry Saver - Toyota workers (in Asia) are seriously considering a 17% wage rollback to help the company. Would this happen in Amerika?
" a repeal of prop 13 "
can we make the geriatrics do the DUI orange-vest cleanup thing on the weekend while we're at it?
BTW the exposure on derivatives has been way overblown. AIG was a big deal because they anchored one end of the change.
crazyvermonter
~~~~
So you've seen their books and know the derivatives positions? Just because they might net theoretically doesn't mean solvency through the process leaving good positions bad.
Where's the Bank Holiday ... ?
IMHO, unless we see a massive stimulus package that focuses on infrastructure rebuilding, we'll see a recession lasting more then two years.
imagine the labor force in the financial industry taking infrastructure construction jobs that require physical labor - I can't
Cinch
Some difficult news for the Teddy Bear business.
burlingtonfreepress.com | Burlington | The Burlington Free Press
Commodity bubble is bursting:
5:28 p.m. Schlumberger to lay off 1,000 workers in N. America: reports
5:32 p.m.
[AKS] AK Steel to start laying off workers on poor economy
Pelosi's resume-worthless...
Supporting her is supporting all the stupidity present in our congress today..
The day she's gone....Belvedere on the house...
pond scum=Pelosi
ipodius2008----->roubini2009
black dog | 01.08.09 - 6:01 pm | #
That is harsh man. As harsh as it gets.
and mmckinl, right on.
@ Barley,
I'm considering asking a 25% salary cut of my own to keep my job. Need to think this through however.
If US GDP only contracts by 3.4% in 2009, that is because currency devaluation (inflation importation) and government spending fills in the remainder of a 10% decline.
I am not an alarmist, there simply are a handful of key economic blocks like $800 billion of mortgage equity withdrawal have melted. (as surveyed by FRB: Federal Reserve Board: Error Page
"imagine"
no need to, we've seen these policies before
YouTube - Vintage 1960's East German Trabant Car Commercial
Cheney says no one saw financial crisis coming
Hmmmmm. Maybe we should send him a mortgage pig polo shirt.
[can we make the geriatrics do the DUI orange-vest cleanup thing on the weekend while we're at it?
bgates ]
OK. But to pay their fair share they can sell or take a reverse mortgage if they are inclined to hang on to their overpriced palaces.
Will the recession ending in 24 months repair the currency whipsaws, the bond dislocations, the incompetence in oversight and regulation?
Of course, happy days here again. We've taken our medicine with a spoonful of deficit-spending sugar and now weese all bedder.
Is that a bluebird on the Roubini shoulder?
YouTube - The National - Fake Empire
Why do people keep talking about Paris Hilton? Is it some kind of anxiety displacement?
" because currency devaluation "
b..b..but... the NRA worked! the economy grew like crazy from 1933-1935! really, it, like, did!
Toyota workers (in Asia) are seriously considering a 17% wage rollback to help the company. Would this happen in Amerika?
Barley | 01.08.09 - 6:15 pm | #
Let's see...wages and salaries are insufficient to provide an adequate level of aggregate demand, requiring consumers to take on more and more debt to soak up overproduction, and the solution is...wage rollbacks!
"But to pay their fair share"
I like it... can we also throw in a few hours a week cold-calling for the chron, bee or latimes depending on region while we're at it?
"Cheney says no one saw financial crisis coming"
The obvious reaction is: What else didn't they and don't they see coming?
Cinch,
I took a 70K cut..1/2 of previous..no debt makes it painless so far...
did get more shares though...
Hmmmmm. Maybe we should send him a mortgage pig polo shirt.
Curious | 01.08.09 - 6:20 pm | #
He is not worthy.
What a mess.
Angry Saver | 01.08.09 - 6:12 pm | #
I guess I have a different view about unions.
Cheney = idiot!
Pavel Chichikov | 01.08.09 - 6:21 pm | #
She represents the emptiness that has become the American ideal. Also the failure of the media to actually cover something important other than what happens to her or the other vapid celebrities. More noise to distract.
Princes Hilton of the royal Hilton family. Our own nobility. Ain't it grand.
worse than idiot. Pure evil.
Cheney may be a liar, but I don't believe he's an idiot.
"how does a police union fare when a city goes bankrupt?
Wisdom Speaker "
Ask the UAW.
mmckinl - Agree on moral hazard issue, which is why I had the paragraph about doing something intelligent to prevent a repeat of the credit bubble, and pointed out that we weren't doing it.
But the larger hazard of a Greater Depression leading to World War 3 (with nukes in play) suggests that we shouldn't let moral hazard concerns prevent us from doing what needs to be done to truncate the deflationary death spiral.
There are millions of innocent folks who've now lost jobs, home equity, and retirement savings. Should they be punished further just to drive home a very blunt point about moral hazard?
The liars and fraudsters need to be drawn and quartered, but in the meantime the rest of us have to get the wreck back on the tracks...
b..b..but... the NRA worked! the economy grew like crazy from 1933-1935! really, it, like, did!
bgates
~~~~
After the FDR Bank Holiday ...
Where's the Bank Holiday ?
and the solution is...wage rollbacks!
Yalt | 01.08.09 - 6:22 pm | #
I counter offer your example of the ludicrous with deficit spending and using debt to solve the debt problem.
State and Municipal Pensions are not protected under ERISA. They are protected under state law, so the protection is not nearly as strong.
Also because they are not regulated under ERISA they have been able to invest in much riskier assets. I think you'll see much bigger loses in state and muni pension funds.
Eric, if you were one of them, I weep for your putz.
Gary | 01.08.09 - 5:44 pm | #
Post of the month!
Why stop with Cheney, why not ask Manson his economic outlook?
What could he say, really - we saw it coming and did nothing? It came, but we didn't see it?
If the whole species ever has a motto, it should be this: How was I supposed to know?
Underneath, as a subscript (this might have been the motto on the DC license plate): Bitch Set Me Up.
Why stop with Cheney, why not ask Manson his economic outlook?
Markel | 01.08.09 - 6:30 pm | #
Because he would say he sees blood and might be right.
"so the protection is not nearly as strong"
significantly compounding the issue is the fact that public employees are often excluded from social security contributions and coverage.
Wisdom Speaker writes:
mmckinl - Agree on moral hazard issue, which is why I had the paragraph about doing something intelligent to prevent a repeat of the credit bubble, and pointed out that we weren't doing it.
But the larger hazard of a Greater Depression leading to World War 3 (with nukes in play) suggests that we shouldn't let moral hazard concerns prevent us from doing what needs to be done to truncate the deflationary death spiral.
~~~~~
I didn't say don't re-capitalize. I said take out the CEOs, Shareholders and Bond Holders before tax money is spent ... These banks have to be rationalized and their books scrubbed or a lurking disaster could remain on their balance sheets.
Then create a public central bank to create all currency and credit. Why should banks take all the profit from the creation of credit when the Constitution leaves the right of credit to We the People through the government.
Where's the Bank Holiday ... ?
Yalt,
There is an overproduction of vehicles. Without superfluous credit, America would only today be at 12 million annual sales during regular good economic times. They were selling 17 million annually at peak. Similar problems exist in the emerging markets where they built anticipating significant growth. However the first stage in any cyclical downturn is to try and win market share. Eventually that causes consolidation, and/or the market demand grows. I find it very Japanese to endure the bad times at all costs in wait of the next boom.
However (depending on the plant) ~80% of the vehicle cost is in materials, energy, and non factory worker overhead. That 17% wage rollback is small compared to the declines in steel, distribution, and such costs.
The real thing they are preparing for is the disintegration of just in time inventory -- which keep in mind has never been tested by a tough global recession.
If you want a good education or entertainment, I would watch Boeing and GE for the upcoming year.
"Bitch Set Me Up"
the clear winner, though "clean it or lien it" deserves a spot on the list as well
"There are millions of innocent folks who've now lost jobs, home equity, and retirement savings. Should they be punished further just to drive home a very blunt point about moral hazard?"
The answer is obviously "no."
CR,
This seems like it is postworthy. The second derivative is a corker - 185% increase in the rate of change!
Consumer borrowing falls by $7.94B in November
The 3.7 percent drop in total borrowing in November followed a 1.3 percent decline in October
Yahoo! 404 - Page Not Found
Bush and Cheney were not idiots. They accomplished everything they set out to do...
wage rollbacks!
Yalt | 01.08.09 - 6:22 pm | #
N
"The real thing they are preparing for is the disintegration of just in time inventory "
ding ding ding!
any way we can roll back that whole containerized shipping thing? we could use the extra jobs back.
reading this blog, I think this capitalism thingy is fatally flawed.
Pavel Chichikov writes:
What could he say, really - we saw it coming and did nothing? It came, but we didn't see it?
Be honest for once and say we missed it big time...we had plenty of warning and we screwed up, just like we screwed up in Katrina, Iraq, Afghanistan, 9/11, Guantanmo, etc....
Bush and Cheney were aptly assisted by Congress and ultimately the American people.
Citizens became consumers and quit looking up from the trough.
Comrade Kristina I agree this was done on purpose....
That why I would be very careful about muni bonds. most munis had horribly underfunded pension plans before this crisis. Taxpayers are not going to pay higher taxes to support those plans so I would expect there to be a wave of BK.
crazyvermonte
I watched negotiations going on between my city and police and fire unions for the last 5 years. At the beginning the city assumed that the valuation of the pension plan would increase 7.8% per year and agreed to make up the any short falls out of general revenues. They then signed a contract allowing full retirement after age 55 with 20 years experience at 90% of last three years salary. Some tried to warn that the 7.8% growth was unsustainable but a majority of the politicians negotiating with the unions had been endorsed by them. Talk about watching a train wreck in slow motion.
Anyway this was going on all over California at the time. Our city will never go into bankruptcy but we have already cut the number of cops on the beat by 10%. Yes muni bonds are very scary. I would be particularly wary of any of the more modest income central valley towns. Towns along the 99 corridor south of Sacramento have already seen housing price declines in the 40-60% range. These will result in immediate property tax revenue declines.
What else didn't they and don't they see coming?
Pavel Chichikov | 01.08.09 - 6:23 pm | #
Naz bubble, Enron, 9/11, Iraq/insurgency/civil war, Taliban resurgence in Afganistan/Pakistan....
"we screwed up, just like we screwed up in Katrina, Iraq, Afghanistan, 9/11, Guantanmo, etc...."
~~~~
What you mean WE pale face ?
Where's the bank Holiday ?
"Be honest for once and say we missed it big time..."
Not everyone has the guts of Dwight D. Eisenhower.
Comrade Kristina I agree this was done on purpose....
Credit enima is coming..... | 01.08.09 - 6:36 pm | #
anyone else recall the poster with the handle "engineered depression?"
b..b..but... the NRA worked! the economy grew like crazy from 1933-1935! really, it, like, did!
bgates | 01.08.09 - 6:21 pm | #
just like the Economist said that stock prices had their best gains in 1933 and 1935. Not hard to do when you are down 82% lets see if market goes from being down only 77% that would be a 25% gain- wow what a performance.
@Anonymous 6:32 pm: "disintegration of just in time inventory"
Do you see this being a serious issue in a world awash in surplus production capability? I can see this in politically fragile areas (Gazprom/Ukraine collateral damage to Europe), and also how local disruptions could be an issue (Bakersfield refinery going down temporarily due to owners going BK, causing local gas shortages)... But can you put some more color on what you see happening?
I would think that an inventory rebuild to cope with disintegration of just-in-time could be good for the economy. But it would soak up scarce capital/credit without delivering end-use products...
"What you mean WE pale face ? "
We as in Dick N Bush
bgates,
Manufacturing will return to the US, along with other OECD countries. The Asian exporters cannot maintain their desired currency prices in a volatile environment, it was much easier when all charts were smooth lines to the moon. You will need to shipping containers for something more than scrap metal and antiquated electronics.
On another note. This game does not end until all losses have been distributed. It's not about job creation, money printing, or anything other than playing "hot potato" by a different name
Fund heads voice short selling fears
FT.com / Equities - Fund heads voice short selling fears
Three associations representing fund managers in Australia, the UK and US have joined forces to warn that their industry would be damaged if market regulators publish detailed information on short selling trading positions.
The area of just in time inventory that most concerns me is food production...
Sacramento have already seen housing price declines in the 40-60% range. These will result in immediate property tax revenue declines.
syvanen | 01.08.09 - 6:36 pm | #
Don't know about CA but in our state current prices have no bearing on total taxes collected.
just in time inventory ...
TARP money until the next writedowns ...
Where's The Bank Holiday ?
Here's my calculation, supafly.
Last depression -- debt problems were with mortgages and margin loans
Boom: '22-'29, mortgages, consumer credit, and margin loans ('MCM debt')/GDP: 54% --> 69%
Bust: '29-'33; MCM debt fell 8% per year and GDP fell 12% per year --> ratio of MCM debt/GDP grows to 124% in four years
Recovery: '33-'39; MCM debt remained flat and GDP grew 10% per year --> it takes until '39 for MCM debt/GDP to fall to normal level of 51%
This depression -- debt problems are with mortgages and consumer credit
Boom: '80-'07, MCM debt/GDP: 48% --> 104%
Bust: '08-'12, assume that, again, MCM debt falls by 8% per year and that, again, GDP falls by 12% per year --> ratio of MCM debt/GDP grows to ~125% in five years
GDP falling 12% per year over '08-'12, compounded, yields a drop of 39%, peak to trough
Recovery: '13-'22; assume that, again, MCM debt remains flat and that GDP grows by 10% --> it takes until 2022 for MCM debt/GDP to fall to normal level of 48%
15 years in total: five years of downward movement and ten years of recovery until we reach normal levels of MCM debt/GDP
He also has a relationship with Geitner, so perhaps his optimism is a display of confidence for his old boss? Or perhaps he has been approached by some Fed/Treasury/Gov officials to show solidarity? Conspiracy theories abound...
Gavshire Hathaway | 01.08.09 - 6:01 pm | #
Or, maybe he's right, but you're short.
This is interesting, because GDP has been around $13 Trillion +/- so if we have TARP and stimulus infusions well over $2 Trillion, a loss of jobs that will be around 10% and, if you think about this old figure from back in October, and then possibly consider the Trillionst lost in housing wealth:
"The equity sell-off has eviscerated some $4.6 trillion of global stock market wealth in the past three weeks alone, according to the market capitalization loss on MSCI's main world equity index. Over the last 12 months, that figure is more than $12.4 trillion, of which some $7 trillion comes from the United States. "
Not everyone has the guts of Dwight D. Eisenhower.
Pavel Chichikov | 01.08.09 - 6:37 pm | #
Truman had a little something too...
Wisdom Speaker,
Good point on the macro notion of inventory growth. I guess the flip side is if the top of the food chain corporation is capitally constrained then any production is impeded.
I should add that I did not mean to convey the disappearance of JIT production, but rather the building in of adequate risk margins (which will bring shorter supply chains, reduce the value generated by what amounts to deceptive accounting)
When politicians start saying no one is at fault because no one could have foreseen what happened, it tends to deflate confidence in the political system (to put it mildly). It is a very unfortunate thing to say, almost as unfortunate as it is to have happen.
la rochefoucauld (paraphrase): Many complain of their health, few complain of their judgment.
Food production worries...
Short term. Long term everyone gardens or spends the majority of their income on food. Just like the third world.
Monsanto looks good and had a great year. Now there is a truly evil company.
Great investment for all you investors wanting a good return.
"Not hard to do when you are down 82%"
that whole instant-75%-devaluation thing may have helped too
More European government bank equity
Commerzbank Gets Fresh Bailout as Germany Takes Stake (Update4) - Bloomberg.com
Don't know about CA but in our state current prices have no bearing on total taxes collected.
crazyvermonter | 01.08.09 - 6:40 pm | #
How is that? Cal is capped by prop13 though, how does any other state bump up taxes without pause for valuation?
eal gross domestic product -- the output of goods and services produced by labor and property
located in the United States -- decreased at an annual rate of 0.5 percent in the third quarter of 2008,
(that is, from the second quarter to the third quarter), according to final estimates released by the Bureau
of Economic Analysis. In the second quarter, real GDP increased 2.8 percent.
Where is final 2008 GDP?
Here's my calculation, supafly.
Comrade-Dope jg (jg) | 01.08.09 - 6:42 pm | #
Nice stuff. I like it.
Who to believe? The democrats of Roubini? The day will come when Roubini silently goes away as this Great US of A becomes a major giant again. It shall return. So. Be. It.
Output and Inflation: Are We Mismeasuring Them?
The "CPI Inflation" and "Chain-Weight GDP" Debates
Output and CPI Mismeasurement Debates
However, the move to the new method led to some surprising implications that have become a contentious source of debate among economists and policy makers. Using the new chain-weight method to measure output implies that:
CR's own blogroll links directly to Roubini's current writings, in which he says things like:
Only very aggressive, coordinated, and effective action by policymakers will ensure that 2010 will not be even worse than 2009 is likely to be.
But for many, clicking a mouse and reading is just too, too exhausting, and a needless distraction from the pleasures of digital emesis.
Thank you, B-.
GDP also assumes positive Treasury yields and obviously there is a broken model in place, so GDP can not be measured!
Is anyone willing to entertain a discussion of the Euro, limited to scenarios that don't result in the disappearance of the Euro or the EU?
My sense is that Germany, and the ECB, understand the need for spending and lowering of interest rates. However there are some family problems with certain countries which are benefiting from the Euro's protection. Use Italy as an example.
By dragging their feet on government spending, Germany can passively apply pressure to Italy while it passively feels pain. An internal game of chicken that Germany should win given their individual advantage in bond market access.
I wouldn't consider anything like EU's expulsion of Italy because the Italian government would first fall, unions broken, assets privatized, and spending slashed before it came to that.
so GDP can not be measured!
Anonymous | 01.08.09 - 6:51 pm | #
Problem solved, if they can't measure it we can't go into a Depression, no 10% drop.
Is anyone willing to entertain a discussion of the Euro
No
~~~~
Greenspan misoverestimation to lower rates for banks ...
Greenspan loved productivity ...
Where's the bank Holiday ?
Regarding whether this is an "engineered depression" or just a normal human mess: there were many folks who saw the bubble before the 1929-46 Great Depression for what it was, but either they lacked the power to act, or in order to act they had to commit career suicide. Career suicide because anyone who acted to cut off the speculation and stop the bubble was going to get blamed for ending the good times. No one wanted to be the architect of a recession, and there were too few people who could have understood that by stopping the speculation the brave one would have prevented a Great Depression.
This time around, you can see the same thing - we saw Bernanke (a Depression expert) continuing Greenspan's sustained raising of short term interest rates to fight inflation into 2006. This helped to cut off the ARM leg of the mortgage bubble, and did much to halt the rest of the speculative bubble. He did the right thing to stop the inflation then (imagine how much worse things would be now if the party had gotten even more out of hand)? But fortunately for him, instead of being blamed for ending the boom, he is now being blamed for being behind the curve on preventing the deflationary recession.
Morgan Stanley projects that in 2009 the gross US fiscal deficit, including asset purchases from the private sector, will exceed 10 per cent of GDP.
Pavel, you are falling for the okey-doke with Cheney
Bush and Cheney foresaw just about everything that has happened, or, at least, the possibility that it might happen, because they recognized the probable consequences through their looting of the US economy, directly through tax cuts, deregulation and the expansion of a credit bubble, indirectly through the channeling of federal funds through allies in control of private contractors involved in Iraq
now, as they exit stage right, they are laughing to themselves while Obama makes plans to make us all bagholders by cutting social security and medicare to pay for the bailout and his stimulus package
then, 4 or 8 years from now, Obama and Bush will be collecting appearance fees at the same events together in places like Dubai, Davos and Taipei, protected by security provided by us
this is all more incestuous than most of us realize
so GDP can not be measured!
~~~~
GDP is now level 3 on the balance sheet ... mark to make believe ...
Where is the Bank Holiday ?
"was going to get blamed for ending the good times"
hogwash, joe kennedy shorted it all the way down and became the father of a nation (and founder of the SEC)
Nice rebuttal of Keynesianism, from the '20-'21 experience.
"...Harding inherited Wilsons mess in particular, a postWorld War I depression that was almost as severe, from peak to trough, as the Great Contraction from 1929 to 1933 that FDR would later inherit. The estimated gross national product plunged 24 percent from $91.5 billion in 1920 to $69.6 billion in 1921. The number of unemployed people jumped from 2.1 million to 4.9 million...
"...Federal spending was cut from $6.3 billion in 1920 to $5 billion in 1921 and $3.2 billion in 1922. Federal taxes fell from $6.6 billion in 1920 to $5.5 billion in 1921 and $4 billion in 1922...
"...With Hardings tax and spending cuts and relatively non-interventionist economic policy, GNP rebounded to $74.1 billion in 1922. The number of unemployed fell to 2.8 million a reported 6.7 percent of the labor force in 1922..."
Jim Powell on National Review Online
Rothbard stated that the '20-'21 recession was the last one unfettered by Keynesianism. I had not seen the numbers on the turnaround, before. Looks mighty compelling to me, a 'slash government spending and taxes' approach.
If only O- would listen, save America, guarantee himself reelection, and earn his 'Savior' moniker.
"and the expansion of a credit bubble"
don't forget the real sweet spot as big oil tripled, including HAL
I truly blame B/C along with Bill Clinton for this mess the US is in at this point in time.
Somo;ia Pirates protect their shitty little boats better than these three protected the foundation on which Americans have worked for generations to build.
These economist spin crap that they have no idea where they even read it or heard it and I for one don't believe a word they say.
Uncertain times. Indeed.
THURSDAY, AUGUST 28, 2008
GDP Release Signals Further Decline into Banana Republic Status
GDP Release Signals Further Decline into Banana Republic Status « naked capitalism
"The overwhelming story is that the export numbers have offset this domestic weakness in consumer spending and business investment. We have a domestic recession.''
Also worth noting: larger than earlier reported gains in every single government expenditure category. If you are wondering why the government does not know what it is actually spending in near real time, welcome to the club.
That boldface was mine. If that isn't sus, I don't know what is.
Barry in a later post, with the help of a chart provided by Michael Panzner, found the real smoking gun: a laughable assumption for inflation. The lower the inflation assumption, the higher the GDP figure. Not only was the 1.2% chosen lower than CPI, which has been adjusted over time to underreport inflation so to reduce payouts on CPI-indexed programs, most notably Social Security, but as a commentor on Econompics noted, constituted the biggest gap between the GDP deflator and CPI since 1980 (squinting at the chart, that seems to be accurate): ...
"...along with Bill Clinton"
don't blame him, the boomers can't help it. hard to teach a man to fish that has never seen water. same with boomers and moral hazard.
Rothbard stated that the '20-'21 recession was the last one unfettered by Keynesianism. I had not seen the numbers on the turnaround, before. Looks mighty compelling to me, a 'slash government spending and taxes' approach.
If only O- would listen, save America, guarantee himself reelection, and earn his 'Savior' moniker.
Comrade-Dope jg (jg)
~~~~
Yeah that'd do the trick ... idiot National Review Reader ... are there any homo sapiens left at the National Review ?
Where's the Bank Holiday ?
I guess I have a different view about unions. - Blackhalo
FWIW, as a union contractor, I lived that experience. Forced me to move most of my business north towards NYC where unions have more sway.
I know more than most about the abuses of unions. That said, those abuses pale in comparison to the inflationary & political abuses that continually short change the producers for the benefit of the rentier class.
"the last one unfettered by Keynesianism"
keynesianism is a sideshow, the natural discipline imposed on an economy by a commodity currency is the main event
CR, how about you start giving an award to the most outstanding comment of each month?
My nomination so far is for Darth Paulson who wrote:
Roubini has been getting laid so much more now that he is a media darling....I fear he has gone pollyanna on us.
Darth Paulson | 01.08.09 - 4:44 pm | #
Sorry about the anonynous/repost.
- Blackhalo
FWIW, as a union contractor, I lived that experience. Forced me to move most of my business north towards NYC where unions have more sway.
I know more than most about the abuses of unions. That said, those abuses pale in comparison to the inflationary & political abuses that continually short change the producers for the benefit of the rentier class.
If you want to know what Summers, Geitner, Obama, etc. are thinking, listen to Roubini. He is friends with Summers and Geitner and they are all going off the same set of premises. I do think the risk for Roubini now is erring on the side of slight optimism because he feels invested in the outcome.
This all goes back to the plaster vulva bait he set up in his swanky apartment, IMHO.
What Roubini is forecasting is literally impossible.
With the debt to GDP ratio we have, a 5% drop in GDP will cause so much debt to be defaulted that it is literally impossible for GDP to decline only that much.
The physical term in 'unstable equilibrium'...a ball balanced on a pyramid. When the ball moves...it does not just go down a few steps....it falls the the ground.
Even Roubini is falling victim to the fallacy of econometrics...where you plug a bunch of numbers into some multivariable curve fit and it kicks out a number. There forecasts will not work in the current scenario.
10%+ GDP drop is guaranteed.
"I do think the risk for Roubini now is"
as opposed to genital warts now that he's potentially getting more ass than a toilet seat?
"a ball balanced on a pyramid"
don't worry, maxwell's demon will be collecting interest on treasuries as of the next auction instead of giving it out
@bgates - I hear you ... Kennedy and Livermore saw what would happen and profited from the result, but ... they weren't in a position of sufficient power to actually terminate the bubble.
Regarding just-in-time production and food shortages: I think this is unlikely at the macro level, although for individual food items there will be problems (like the rice crisis last year).
Folks who are strapped will be cutting back on ALL their spending, including the excess food (that made us all fat). Americans throw away an enormous amount of food, which probably won't be thrown away as much going forward. Commodity prices are way down - surplus, not shortage. Milk prices have already hit the federal price-support floor.
By way of reference, I think the food problem in Great Depression 1 wasn't with food shortages (industrialization created large production surpluses) but starvation of the unemployed due to lack of income to buy food (at newly-subsidized prices implemented to protect the farm sector).
JimmyCrackCorn....what are the chances they are putting in the squeeze play? Trio going short and balance off Roubini's long estimate.
How is that? Cal is capped by prop13 though, how does any other state bump up taxes without pause for valuation?
Blackhalo | 01.08.09 - 6:45 pm | #
At least in Vermont every 10 years they are required to do a general valuation of all properties. Those assessed values then stay constant. It provides an aggregate tax base (denominator). They figure what municipal expenses will (numerator)and calculate a tax rate that is applied to individual properties assessed value. Thus any change in property values results in no change in the taxes collected. If the aggregate assessed values go up the tax rate declines and vice versa.
It's beginning to sound like "We've captured/killed Al Quida number 3 man in Iraq" with all these "experts" calling for another 2nd half recovery. Second half of what, year, decade, score, century, millennium?
The Secret Pleasures of Dr. Doom
The Secret Pleasures of Dr. Doom - Economics - Gawker
This marketing has worked well, but Roubini will fade off the map in 2009
There is way too much un-payable debt in the system to abandon Keynesianism. The bust would be nuclear.
Think of all the inflation since 1970 (tens of trillions).
That unwind would be something to see though.
"they weren't in a position of sufficient power to actually terminate the bubble."
nor did they have any interest. kennedy successfully consolidated h'wood studios and packaged them for the street... while banging norma desmond and leaving her millions in debt as her manager. a true american icon.
There is way too much un-payable debt in the system to abandon Keynesianism. The bust would be nuclear.
Angry Saver | 01.08.09 - 7:10 pm | #
It will be.
Does GDP increase as un-employment rockets?
" the food problem in Great Depression 1 "
half of the soil in the midwest leaving the ground forever also didn't help
Bush and Cheney foresaw just about everything that has happened, or, at least, the possibility that it might happen
While the general consensus is that Cheney is a manipulative, diabolic SOB, I find it fascinating that the opinion of GWB varies from bumbling idiot to dastardly mastermind.
Dickeylee....hell, even so, we would be told the market had "already priced it in".
We have morons on capital hill.
" varies from bumbling idiot to dastardly mastermind"
it fits - the texas mask and more-yokel-than-yokel accent and the real yankee bonesman underneath