Stress Test, Quarterly Forecasts for Unemployment and GDP
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CalculatedRisk on Sat, 03/21/2009 - 9:59am (190 comments)
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It's a good thing California with its 10.2% unemployment rate right now doesn't have much effect on the rest of the country nor have a disproportionate share of debt exposure.
Obama calls Treasury Secretary Geithner's job safe in '60 Minutes' interview
60 mins -
Last week it was Bugabe and Shiela. This week its Obama. All we have to do is get consumers spending again.
James Galbraith must fall into the "uber bear" category.
Does anyone working in my government actually really care about what they are doing to the real American people?
Does anyone working in my government actually really care about what they are doing to the real American people?
They do now.
Jim
Michael, compared to the last Admin, hek yes
10.3% is the worst case scenario in Q2 2010?
That's not even close to upcoming actual. The FedGov won't let us know actual.
In a word, Michael - No.
....seeya later. Gotta doubleheader to announce.
Right now California unemployment is leading national by 16 weeks (and shrinking). 3 months to double digit unemployment something the worst case doesn't anticipate for 3 quarters. This is beginning to sound a lot like the IPCC and global warming.
Recovery will be "sluggish"!??
Bwahahahaha. /Holds ribs, ow, ow.
C
Mish called 60 Minutes interview with Bernanke a "Cream Puff" interview. Any predictions on their interview with Obama? What's creamier than "Cream Puff"?
I guess I could be labeled a virtual verbal Internet terrorist. Is there a law against that? I'm just wondering if we still have our 1st amendment rights.
What's creamier than "Cream Puff"?
Bromance?
"I'm just wondering if we still have our 1st amendment rights."
Friedrich der Grosse figured that out several centuries ago. "The people," he said, "can say anything they want, so long as they do what they're told."
Cathy from the last thread:
Geithner (& Co.) is trying to serve us leftovers while claiming it's made-to-order.
Would you like the original turd, or one that's been sugarcoated and served on fancy china?
Counterpointer says:Today, 11:53:25 AM PDT
Recovery will be "sluggish"!??
They are referring to recipes for slug and sawdust stuffing in roast squirrel.
Rob Dawg says:Today, 3:00:57 PM
Counterpointer says:Today, 11:53:25 AM PDT
Recovery will be "sluggish"!??
They are referring to recipes for slug and sawdust stuffing in roast squirrel.
Will it be served on fancy china?
Hope is not a plan! Projections here are based on hope. The economists put is rising (less negative) bars into their models. Have to. The alternative is too scary.
I haven't seen one good argument for recovery in the 2nd, 3rd, or any quarter for that matter. Where does the demand come from? People gotta eat and heat. That's it. There's your demand. Far less than what it takes to sustain let alone grow the world economy.
eventually RI stops going down, not that it goes back up, but the absence of a negative is a positive. There will be pent up demand for durable goods, although i think it will take longer to build than CR does, but agree that it will. Monetary policy is very accomidative, and will eventually kick in. Then there is the Stim package, which will add to ag demand. Still the bad case should be the base case. The advers case should be something like GDP by 1/4 starting with 1Q09: -6.5, -5.0, -3.0, -1.0, +1.0, +1.0, +1.5, +1.5. For U3 unemployment, a 10% end of 09 figure and 12% end of 2010 figure. This is sort of like a medical stress test where you just have to walk for 2 min at a strolling pace. If we are going to see stress tests, why not check out what a stressful situation would be.
Dave writes: "Hope is not a plan! "
Hey, it got Obama elected isnt' that enough ?
Will it be served on fancy china?
They'll tell you it's china. Now shut up and drink your golden delicious apple juice.
Ceteris Paribus is the biggest cop out ever
I think that there is a solid baseline of production we will land on, but no positive GDP in 2009 even with the debt monetizatio
The Latest from Denninger:
Toxic Assets: Promise, But Also Peril
Was it Meredith Whitney on Charlie Rose who outed who the back door money is going to like GS and JPM, getting 100 cents on the dollar for teir their bad gambling debts with AIG? 100 billion dollars of tax payer money making those guys 100% whole on their bad bets with AIG is the real story. and defrauding the American tax payer at the same time. Why weren't we told about this from the very beginning of the AIG bailouts?
Frankly, I'm beginning to think Paul Kasriel drank the Kool-Aid. Everyone is assuming the economy still possesses the ability to equilibrate, return to balance.
I don't see that.
So if it will all be back to normal by Q3 does that mean we'll be back to:
Does anyone working in my government actually really care about what they are doing to the real American people?
Michael,
NO. The dingbats in DC are more interested in the process not the outcome. C'mon now give them a big hug they need to validate themselves.
Thank you CR for the more vehicles are being trashed quote! So you're telling me my aging Honda Civic will become a classic someday-great, what a great investment.
"So if it will all be back to normal by Q3 does that mean we'll be back to:..."
Blowing bubbles, baby, blowing bubbles. That's all they've got left.
Dam good stuff CR!
A thought (and it hurt): How are these stress tests going to accomodate fx and losses/risk in international operations? How will another Iceland impact a tired bank?
<<<I haven't seen one good argument for recovery in the 2nd, 3rd, or any quarter for that matter. Where does the demand come from? People gotta eat and heat. That's it. There's your demand. Far less than what it takes to sustain let alone grow the world economy.>>>
"The most rapid real GDP growth we experienced in the 1951 through 2008 period occurred in the 1960s, a period when the consumption ratio was relatively low. My bet is that when we come out of this current deep recession (Q4:2009?), the recovery and expansion will be accompanied by a much lower consumption ratio than we have experienced in recent years and higher export and business capital spending ratios than we have experienced in recent years. But most importantly, I expect that these changing ratios will be accompanied by higher growth in real GDP ex federal government than we have experienced in recent years. Why? Because, as I stated at the outset, the pace of economic growth is a function of productivity and thrift. And no less an authority than the editor of Vogue says that thrift is in vogue again!" Paul Kasriel 2/23/09
http://www.northerntrust.com/popups/popup_noprint.html?http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0902/document/ec022309.pdf
(chart porn also)
Dodd's stock with voters began dropping before AIG
splat - nice steady state equilibrium. I thin we're beyond that. We've had our through the looking glass moment and all that stuff is way behind.
We are behind the mirror right now.
C
OT
I suggested to my buddy at AIG (insurance, no financial) that the company give away millions of umbrellas, windbreakers, blankets, luggage, with big logos, to the unemployed.
"I'm Spartacus!"
Permanently high plateau. Now where have I heard that government prediction before? Oh yes, housing, stocks, and now employment.
And 2nd attempt at CA v. National employment:
http://www.labormarketinfo.edd.ca.gov/contentimage/Main-Stats.jpg
"Why weren't we told about this from the very beginning of the AIG bailouts?"
You don't need to know?
You can't handle the truth?
Your opinion doesn't matter?
All of the above?
Timmay Geithner as Pee-Wee Herman; "I meant to do that!"
the first graph adverse stress test for q1 2k9 is already off... were at 8.1% unemployed as of now. and if you add last thursdays unemployment number... what was it 650k? it hasnt slowed down at all. i dont know how anybody can accurately predict unemployment numbers going positive by end of year. six months ago... some were saying the drop in unemployment numbers would bottom out in january...but they haven't.
i guess they predict that obama has some magic tricks up his sleeve!?!
O/T
Seems AIG employees are scared:
Corporate officials advised employees in a memo posted on Gawker.com to avoid wearing the company logo, in an effort to keep from drawing attention. Workers were also urged to travel in pairs at night and park in well-lit areas.
My Way
Yeah my buddy mentioned the security memo to me on Saturday, and I reminded him that I warned him to lose the logo several months ago.
But will the 12,900 million dollar taxpayer bonus babies at GS survive the 165 million dollar smokescreen? Enough pitchforks launched at the same time renders a smokescreen useless.
why should they be scared? they still have a job and get bonuses.
btw, i remember going to an AIG job fair for selling insurance after college years ago... they promoted themselves alot like a pyramid scheme... even then i knew there was something wrong with that company. they reminded me alot of Amway.
Denninger:
"Tim Geithner (who I do not trust as far as I can throw him), Ben Bernanke (ditto) and Sheila Bair (who did not step in when she should have in the case of IndyMac) should all face being grilled and eaten - literally, with BBQ Sauce - by the taxpayers if this blows up in our faces."
Will it be served on china?
blah - but Amway's still solvent. As far as I know.
C
1. Continued off-shoring of manufacturing to India & China
2. Continued off-shoring of service industries to 3rd world providers
3. Massively over leveraged corporations
4. Massively over leveraged households
5. A housing bubble of epic proportions
6. Rebound in the CDO and derivatives market
7. China picking up the tab
8. Bankster bonuses back on track Smile
This is called Bretton Woods 2 by many. Look it up. This is the healthy state of affairs we are supposed to return to.
As Phil Gramm would say, you people should stop whining. It's all in your heads.
Do something useful. Buy a car, an ipod, or some damned thing.
blah,
You probably didn't get a job offer because you didn't have any Amway experience ....
mp, you should do a podcast... "Buy, buy, buy... damnit, go buy something !"
also i remember from that job fair... never met so many VP's. i never knew a company could actually be 50% VP's.
The borrowing costs of $10,000,000,000,000 (that is 10-trillion to fix this mess) at the current 30-year Treasury Bond yield of 3.653% will cost US taxpayers $365,300,000,000 ANNUALLY in interest payments! That's $1,300 per person per year (not including the taxes we pay on normal Gov't spending).
I would like to see the projected bankruptcy costs of AIG, Citi and GM if they where forced to fail..I am one to think they should.
"The borrowing costs of $10,000,000,000,000 (that is 10-trillion to fix this mess) at the current 30-year Treasury Bond yield of 3.653% will cost US taxpayers $365,300,000,000 ANNUALLY in interest payments!"
The US will default in one of two ways: they'll either refuse to pay, or they'll print.
Conjure multiple choice question:
They will: a) refuse to pay; b) print.
Why would they do (a) when they can do (b)?
In the case of (a), the $ becomes weaker overnight. In the case of (b), the $ weakens gradually.
If you were rich, in the case of (a), you're a lot poorer overnight. In the case of (b), you still have a chance to transfer your wealth out of $ denominated assets. So the rich would prefer (b).
If you're poor, (a) will result in the overnight skyrocketing of the price of staples. If you can't afford to subsist, you will riot. If (b) occurs, you will slowly suffer a decreasing standard of living as prices rise in proportional to a devaluing $. For the poor it's a tossup - choosing between the uncertainty of (a) and the pain of (b).
If you're in power, you'd prefer (b) if you value your personal security from having a marginally functioning social order versus the hell that will break loose from (a).
I can't see any argument for default. Who does it benefit? Only the powerless who may be able to remake the social order from the ashes left after the current one burns. But by definition, these folks are not adept organizing and acting in their own interests.
B
There is going to be a recovery - just not robust any time soon.I really think we are in the 'down beat' part of the most recent innovation wave and that is characterized by very slow growth & higher unemployment... it is a result of the commodization & consolidation that occurs as technologies mature... we just went through a massive innovation wave starting in the late 70s & early 80s and peaking late 90s early 00's. That generates a lot of wealth & unsustainable wage & profit expectation... at least NOT sustainable as innovation slows due to natural maturation.
These parts of the cycles always seem to have credit crisis too - 'panics in the mid-late 1800's... '29 crash... all examples where the over-levered 'new order' which could manage the debt in the 'up phase' can't manage the debt (and there is usually more by then) in the lower wage lower margin 'commoditization' phase.
Welcome to our world - we are there now.
So looking for any kind of really strong 'recovery' probably won't happen until the next 'big new thing'... these waves go about 40 - 50 years so we probably don't even bottom until 2020 or so [assuming 1995-2000 was peak]...
Think of recessions and recoveries as short little waves riding on much larger longer swells (innovation & credit waves). It isn't like you don't have 'recoveries' on the down side of these waves - they are just weak as the main wave carries them down and the recessions are severe (both vectors pointing down). On the up phase the recessions are mild but the recoveries are VERY strong - bubble like. Tell me that last part doesn't sound like the late 80s & 90s with strong booms & mild recessions? We are going to now spend 20 plus years in that mirror image - weak recoveries and hellacious recessions. This one is probably just the first of many to come.
Enjoy.
Dryfly,
I respect your insights but I don't see why you think this time will be the same as last time when the actions being taken differ.
I would argue that what looks like secular cycles of alternating innovation boom and credit crises may actually be more causal. Each time the over-extension of credit leads to bad loans, a correction that damps everything (since bankers only understand accounting numbers, if that, not the ideas and technologies, well enough to separate the good investments from the bad during a recessionary (or any, for that matter) period). Consequently they kill the good innovation along with the bad, leading to the down phase of the innovation cycle.
But never before has there been credit injection on the current scale. The closest analogy in history would be a period when debts were wiped out - which is effectively what Bernanke and co. are doing for the banks - just feeding them larger and larger amounts till the market signals that the banks losses have been wiped out. (Consider that offering the banking system $1T in 0% loans which they turn around and loan to consumers at 5% means the banks get $50B "free" annually.)
In past periods when debts have been wiped out, the ex-debtors have done well rapidly. This has held true for consumers, companies, and countries. It's the basic motivation for bankruptcy law as it was originally constructed (not the morass it has turned into).
So, if the bankers' reactionary period of credit tightening is reduced from the historic length of multiple decades to just a few years this time, it's conceivable that the innovation forces will resurge rapidly. OTOH, it may actually occur as you describe in the last paragraph - in fits and starts just because of human psychology (fear and greed interplaying in extremis) and the heterogeneity of the global economy.
<iWorkers were also urged to travel in pairs at night and park in well-lit areas.
why , that's perfect advice
yours truly, M40A1 operator
"Frankly, I'm beginning to think Paul Kasriel drank the Kool-Aid. Everyone is assuming the economy still possesses the ability to equilibrate, return to balance.
I don't see that."
How can you? There needs to be some factor that will eventually moderate the decline in economic activity. What identifiable factor is strong enough to pull against the force of seven years of mal-investment? Where will the money come from? What will the new productive activity be?
Nobody's got answers, just wishful thinking. And these were the people who thought the American consumer could power the economy forever. Or, didn't, but thought they could get out before the boom lowered. And they were wrong on both counts.
Conjure multiple choice question:
They will: a) refuse to pay; b) print.
This cycle - b
Next cycle - a [b won't be an option - no one will lend to us in USD again].
just think how many east asian sweatshops those trillions of dollars could employ...its like zero vs infinite.
Corporate officials advised employees
problem #1!
never ever listen to your boss in matter's of personal survival. especially AIG...You know those guys have to have a death benefit if a key employee dies. bet that was oversubscribed also, just like the GM cds
@dryfly
Paid $1400 for a Series II Bridgeport last week in near perfect condition. Came out of the Clarkesville, IN Colgate-Palmolive plant, which was closed a few months ago.
Machine tool prices are still plunging. I'm waiting to pick up a cheap machining center, then I can rock and roll.
Paid $1400 for a Series II Bridgeport last week in near perfect condition. Came out of the Clarkesville, IN Colgate-Palmolive plant, which was closed a few months ago.
Machine tool prices are still plunging. I'm waiting to pick up a cheap machining center, then I can rock and roll.
I know - I envy you. I don't have a place to put one or I'd be out shopping myself. Keep us posted.
Um... the unemployment baseline and more advanced both seem too low compared to even current U3 numbers ( let alone the real unemployment rate ). These stats seem far to "rosy" to be a decent indicator of things to come.
punditry you cant be implying the AIG execs created default swaps on there own employees lives?!? horrible.
that light at the end of the tunnel: a guy hiking through the tunnel after 3 days of bean eating. he's feeling gassy, and decides to ignite the fart train in his guts. Major methane explosion! Light in the tunnel!
i can't remember the name of the insurance that's used for the plebe employee's. but their's something called Key-man insurance.
Key Employee Insurance
The untimely death of a key employee or business owner who is also a key employee can have a disastrous effect on a business. Some of the costs of such an event might include:
A weakening of the company's credit rating.
The financial cost (in time and dollars) to find, hire and train a replacement.
The distraction of other employees, resulting in deadlines not met, deteriorating morale, or a higher level of personality conflicts.
A need for cash to fulfill promises made to the deceased employee's spouse or family, such as salary continuation or deferred compensation.
The inability to seize a business opportunity because cash reserves are being used to recruit and train the new employee.
A loss of confidence among both suppliers and customers.
Additional problems (if key employee is an owner) might include
really, these guys thought of Everything.
We are behind the mirror right now.
We are behind the looking glass for sure. "Our" reality is the exact opposite of what is presented. Might be a good idea to watch out for the red queen while you're at it.
-50 % VP s ...does that include the assistant to the VP, how about the assistant to the assistant to the VP?
Try to compete in an enviroment that pays people to sharpen pencils all day.....(the pencil is obsolete, no?)
“With regard to the economy, we believe there are faint signs of light at the end of the tunnel.”
This is like a stupid commercial tune that you get stuck in your head!
I’ve read their reports for years and needless to say they have been as wrong as most of the rest of them.
Punditry-
"The policies are called corporate-owned life insurance policies or COLIs for short. But they're better known in the insurance industry as "dead peasant" and "dead janitor" policies."
How can you? There needs to be some factor that will eventually moderate the decline in economic activity. What identifiable factor is strong enough to pull against the force of seven years of mal-investment? Where will the money come from? What will the new productive activity be?
Nobody's got answers, just wishful thinking. And these were the people who thought the American consumer could power the economy forever. Or, didn't, but thought they could get out before the boom lowered. And they were wrong on both counts.
That is why these waves take so damned long - almost no one see's the next 'new big thing' until it is already breaking over our heads - or very few anyway.
A few visionaries see it decades out... they are ignored.
As it get's closer a few early adopters get on board... they are mostly laughed at.
By the time the 'markets' & MSM catch up - it's a pretty much done deal certainty it is gonna happen. Preatty close to peak by then. Not long after that commoditization & consolidation occurs where 'equity' buys up the producers & then squeezes out all the small players... lowering price so everyone can have 'one' [mass market - think Ford, think Microsoft]... but also squeezing producer incomes & profits everywhere... stranding the leverage used to buy the early innovators.
Then it is a slow smolder as creative destruction burns up the wealth & established order until the next group of crazies come along with something completely new & unpredictable and the thing starts all over again.
I see no way to significantly hurry it up either - you can't make people adopt new lifestyles until they want to or have to. And even then it takes a lot of time to 'learn' them then to effectively utilize the new way.
And most of these big waves do change lifestyles - think steam & rail... combustion engine, petro industry & automobiles... telecomm, computer & software. Their effect was more than just a 'new product'.
That kind of 'next new thing' is probably 15-20 years away from even being 'new'... and 30-40 years away from the next peak (and w/it max prosperity). I won't live to see it.
@dryfly
Very apt description of long waves. The problem I see is that the next "cycle" looks to be a money-printing bubble and won't last but briefly.... hard to time it for puts and calls, but pretty clear if you've got a long term horizon.
I think we go from printing to repudiation within 5 years....
Don't be surprised to see the government legalize heroin,
in order to deal with the unemployment problem.
It will keep the idle and restive numbed up.
Heroin? No but don't be surprised by free basic cable and internet, well maybe not internet. Too many reactionaries on the internet plus the damn bloggers constantly criticizing the great job big brother is doing. Gotta pass a law soon about those bloggers. Calling 'em terrorists should do the trick. Of course then they will call themselves internet freedom fighters.
yeah !!! the dead peasant!! i could'nt remember the term.
Cassano's probably got a few of those marked on his every breath.
Does the dead peasant pay out on Grassley's Hari-Kari?
So Employee COLI, or E-coli for short. I like it.
The problem I see is that the next "cycle" looks to be a money-printing bubble and won't last but briefly.
Ya that doesn't even count as a 'cycle'... it's just the fuel for the fires of creative destruction. They will learn that in this part of the phase a whole lot of stimulus will only buy you small increments of recovery. That is the bitch of living during the down phase.
Doesn't matter - either way we have to go through the 'bottom' before we get to the 'next big thing'... blowing up the currency or not blowing it up isn't going to make that big of a difference on the 'long wave'... blowing up the dollar will however make it more painful for us Americans during this period - we won't learn that until later.
Note the frequency and content of TV appearances by Sheila Bair, Obama, and Bernanke. Every appearance is intended to make (what's left of) the middle class stay in the game. "Sure, it's scary out there. But the recovery has started."
CNBC should have an evening show called DON'T WORRY, WE'RE GOT YOU COVERED. Every night, someone in a position of authority spews a lot of happy-happy lies. Kudlow hosts.
I must say that the Geithner toxic asset plan is completely fucktarded and open to the most horrible kinds of gaming.
Lets say you have Banks A, B and C.
Banks A,B and C all have $100B (at par) of complete toxic garbage. Lets say each bank's toxic garbage is worth $50B based on a reasonable model. Lets also say that they have each already written off $30B of losses on their garbage.
Banks A and B "bid" on Bank C's toxic garbage. Bank A offers $85B and bank B offers $90B. The ridiculous bids crowd out real investors but have the semblance of a market value established through an auction. Bank B wins and is on the hook for $2.7B with the rest coming in the form of Treasury participation and FDIC non-recourse loans.
Bank C buys toxic garbage at the same price from bank A and bank A buys toxic garbage at the same price from bank B.
Banks A, B and C just paid $2.7B and can write off that $2.7B "investment" and at the same time book a $20B gain on sale of their toxic garbage whose value they had already discounted to $70B. Each bank is up $17.3B. The FDIC and Treasury are going to eat the rest of the $37.3B loss on each bank's toxic garbage.
The banks show a profit and the taxpayers is laden with more debt. Perfect.
Am I missing something here?
Yes, you are missing the fact that you could have made your point with just 2 banks.
(Each banks buys the other's crap at face value, causing the Treasury to end up with 97% of the crap and each bank taking a 3% writedown.)
You don't need a complicated 3 bank scenario.
:-E :-$ :-[ =-X =-O
DONT_KNOW 
:'( 
>:o 
O:-)
Bob Dobbs says:
How can you? There needs to be some factor that will eventually moderate the decline in economic activity. What identifiable factor is strong enough to pull against the force of seven years of mal-investment? Where will the money come from? What will the new productive activity be?
I believe the answer is "China" and "don't ask any further questions" which leads to "second half recovery"
dryfly,
Wildfires will force fields to become fallow, which in turn will provide rich fuel for the next tide of innovation. In the literal allusion, it is a sea change
Full fathom five thy father lies;
Of his bones are coral made;
Those are pearls that were his eyes:
Nothing of him that doth fade
But doth suffer a sea-change
Into something rich and strange.
Sea-nymphs hourly ring his knell -- Shakespeare, The Tempest
...don't be surprised by free basic cable and internet, well maybe not internet. Too many reactionaries on the internet plus the damn bloggers constantly criticizing the great job big brother is doing.
Oh there will be free internet alright. THEIR free internet.
dryfly,
The next cycle is likely to be biological. Imagine a monthly pill that extends useful working life by 20 years. Good thing? Think before answering.
Due to the increased demand for all types of ammunition, customers can expect longer than normal delays in receiving their orders. We see no indication of this situation improving any time soon.,
The Hunting Shack Ammunition
recovery....mmmmm , maybe not
mp says :Paid $1400 for a Series II Bridgeport last week in near perfect condition. Came out of the Clarkesville, IN Colgate-Palmolive plant, which was closed a few months ago.
I got me a Deckel FP1, perfect for those without a big shop.
Vinay
http://www.nsmachine.com/10923.jpg
Jeez mp, you upgrading the bunker?
seiously , what are you planning on producing?
dryfly writes: I really think we are in the 'down beat' part of the most recent innovation wave and that is characterized by very slow growth & higher unemployment... it is a result of the commodization & consolidation that occurs as technologies mature... we just went through a massive innovation wave starting in the late 70s & early 80s and peaking late 90s early 00's. That generates a lot of wealth & unsustainable wage & profit expectation... at least NOT sustainable as innovation slows due to natural maturation.
That's an interesting thought - long-term economic cycles based on technological innovation cycles. I guess I'm a little leery of cyclic predictions, though, as many of the major events barreling down on us are new, never experienced events - global population at 6 billion +, disappearing cheap energy with high EROI, and nothing in the wings to replace it, natural ecosystem services (fresh water, timber, air cleansing, etc.) stressed as never before. E.O. Wilson calls it a "bottleneck". Some are seeing the collapse of the financial system as a warning of more serious problems ahead.
Historians and economists seem to favor cyclic explanations - physical scientists look at exponents.
The waves being discussed are based far more on generational cycles then economic cycles. I read a study that showed almost all innovation and new theory was created by people under 35. Look at Nobel Prize winners and correlate their age for the work they did to receive the prize.
Of course the capital owners are usually old and what they fund or don't fund seems to drive the world.
anecdotal info:
Large companies in town "hiring freeze" is a pandemic, awaiting fiscal year end
This summer it will become apparent there is an additional stage in this recession. Too many firms/orders/contracts/sub-leases just hanging on, willing to eat a loss, end up being cancelled.
There isn't the pool of money with a purpose. Bernanke has acted couraeously for a neoclassical economist, but it's simply not enough fast enough. He literally needs to take $2 trillion and drop it from helicopters with the promise to drop another $1 trillion every quarter.
They need to get interest in the TALF fast. $200bn on offer, $4.7bn in bids!
If he's become shy, fine, start off with negative interest rates on 84 day loans
EHP - full fathom five? OMFG. Try this, as a modern update:
YouTube - The Mutton Birds - Anchor Me (Original Version)
C
Hmmm... showed up as Anonymous in my reply to dryfly - still figuring out the new system...
blueridge
DIPing to China - having just past 35 I refuse the logan's run assumption of your post and am profoundly convinced my best work is yet to come.
C
Most assuredley based on original thoughts conceived before the age of 35.
I am a big believer in believing nothing of what I read, some of what I hear, and only a little of what I see. Good when us old folks defend our generation and our value to society. Those young uns are all know it alls! O:-)
The Latest from Denninger:
On Executive Pay
Punditry says:
Jeez mp, you upgrading the bunker?
seiously , what are you planning on producing?
yea mp come on... it's saturday... i have things to do but i can't till i find out what a guy does with something like that in his garage
Protesters Visit AIG Exec's Homes
"O/T Seems AIG employees are scared"
Most murders are personal so there's a detectable connection, an information trail. I suspect that ideology-based murders would be hard to solve, especially if millions of Americans are pissed-off suspects.
I'm thinking the closest analogy would be some of the abortion clinic violence.
I think a better analogy is what happens to sex offenders who have their names posted on the web and fliers distributed around the neighborhood. Would give the AIG execs a choice, return the money within 30 days or get the sex offender treatment.
Down goes Gyurcsany! Down goes Hungary!
Watch the Garda Magyar come on to the streets from the allies
This is a good start but I found this much more relevant - Capitalism Gone Wild
"I read a study that showed almost all innovation and new theory was created by people under 35"
Subsequent studies show that this is mostly a function of marriage. By age 35, men have redirected their efforts from work in home, wife and children.
Down goes panda! Down goews panda!
Hehe, the old skool will recognize this.
C
What's the deal with WaMu suing FDIC for $13B?
Time for Ben to dust off this inflation video. Just remember "in Zimbabwe they are all billionaires" (line stolen from another blog)
YouTube -
"I got me a Deckel FP1, perfect for those without a big shop."
The FP1 is a most excellent machine. Very rigid for its size.
The Latest from Yves:
Investor on Private Public Partnership: "One would have to be a criminal to participate in this"
"Jeez mp, you upgrading the bunker?"
I am always upgrading. Or something.
Freedom of speech does not mean anybody (or government) has to listen, respond or act. The constitution needs to be rewritten to "We the lobbyist, special interest, power brokers, then if any room the people."
Every new plan out of Washington makes me more inclined to join a pitchfork armed mob ransacking the houses of bankers.
Think of all the stimulus that could be generated if the Fed backstopped Las Vegas just to loosen the slots a little. Airline, hotels. restaurants, realtors. Best place in the world for a helicopter drop. EEEASY MONEY
Counterpointer,
I try to be open to your music, but it's just from a different world.
I'm of the digital generation I guess. We'll always have the music; but 'productivity' is straining the seams of the old paradigm.
In the olden days: 30 piece orchestra, 5 singers, 12 recording staff, 6 grunts, and 3 managers working half a day to make one recording. Then to publish/distribute/promote, more layers of busy-work.
Now, 1 girl, 3 synths, 5 minutes.
YouTube - little boots MEDDLE bedroom version - acoustic on piano, tenorion and stylophone oo la la
Anything to break out of the overproduced studio splicings. I hate with a fury any audio worker that boosts the track volume (at the cost of distortion) for a song/tv commercial/radio commercial/etc. You don't know what volume I want to listen! Leave it normalized and let me decide, if you irritate me I will badmouth your company/product out of spite.
The baby boomers need to answer for their audio track manipulation, the public deserves an inquiry and tribunal
... all the outrage has nothing to do with Counterpointer's obscure youtube videos, just served as a segway
i am the most passive guy you would ever want to meet, but i gotta tell ya, i am starting to have some bad thoughts....and here is what is freaking me out - if mr passive here is having these thoughts, i can only imagine what Joe6P is thinking.
i might just have to break one or 2 of the commandments and get some of my money back.
Keep this in mind, folks. Most people have no goddamn clue what the hell is happening. None. They see their jobs disappearing, their houses get foreclosed on (or their neighbors' houses), and then they read the news and find out that some company that got bailed out by the government paid huge bonuses to its employees. Again, most people don't understand what the hell credit default swaps or structured investment vehicles or collateralized debt obligations are. And they want somebody to blame for their misfortune - somebody other than themselves (they were told by their bank or accountant that taking out a HELOC to build a pool or renovate the kitchen would be a great way to make money).
When people are confused, scared and looking to blame somebody else, bad things happen.
mp,
Congrats on the upgrade--you should have no problem keeping food on the table in the post-currency economy.
Hang tight or ATF might come over and burn your house down.
i can only imagine what Joe6P is thinking.
Who's going to be in the Final Four?
<a href="http://www.nytimes.com/reuters/2009/03/21/business/business-us-financial-bailout.html>In this article, there's a preview of Obama's show on 60 minutes.
It's near the end.
B2-
thanks, i needed to laugh, that was funny
that new post at Yves (Page not found « naked capitalism front pages a comment from her site. new perspective, but same old bag of tricks
I am SAC Capital. I get to be one of the bidders on bank assets covered by the program
Citi holds $100mm of face-value securities, carried at $80mm.
The market bid on these securities is $30mm. Say with perfect foresight the value of all cash flows is $50mm.
I bid Citi $75mm. I put up $2.25mm or 3%, Treasury funds the rest.
I then buy $10mm in CDS directly from Citi [or another participant (BOA, GS, etc)] on the bonds for a premium of $1mm.
In the fullness of time, we get the final outcome, the bonds are worth $50mm
SAC loses $2.25mm of principal, but gets $9mm net in CDS proceeds, so recovers $6.75mm on a $2.25mm investment. Profit is $4.5mm
Citi writes down $5mm from the initial sale of the securities, and a $9mm CDS loss. Total loss, $14mm (against a potential $30mm loss without the program)
U.S. Treasury loses $22.75mm
Great program.
It's just a scheme to transfer losses from the bank to the taxpayer with an egregious payout to a middleman (SAC) to effectively money launder the transaction.
You've also transmuted a $30mm economic loss into a $36.75mm economic loss because of the laundering. So its incredibly inefficient.
How did fraud and money laundering become the national economic policy of the US?
One would have to be a criminal to participate in this.
Something for your Saturday evening viewing pleasure.
The Obama Deception HQ Full length version;
YouTube - The Obama Deception HQ Full length version
"ost assuredley based on original thoughts conceived before the age of 35"
99% perspiration, 1% inspiration, to quote Edison.
Only someone under 35 could not know this.
I mean, really, think about it. The idea that geniuses could only occur within a few years of graduating college is almost comical. How much real-life experience can someone under 35 have?
I have ten plus years of college but it didn't all gell together until around age 40.
"dryfly,
The next cycle is likely to be biological. Imagine a monthly pill that extends useful working life by 20 years. Good thing? Think before answering."
I've thought about this one. What better worker for the powers that be than one who works until just before he dies -- with minimum upkeep required.
Dryfly, I appreciate your long wave analysis. But we have a lot of existing technology that could be cobbled into the next big thing -- of energy, health, etc. -- if enough money was thrown at it in a coordinated effort.
I mean, there are some guys about 30 miles away from here who claim they can print solar cells and sell them for the equivalent of $1/watt -- and are doing it. Write that one large and all sorts of things could happen.
What's needed is the political creativity and insight to conceive and execute such a development effort. Though that's a big "just," of course. It would require a wartime-level effort, and wartime-level urgency.
We may have the war needed for your wartime urgency...
"There is going to be a recovery - just not robust any time soon.I really think we are in the 'down beat' part of the most recent innovation wave and that is characterized by very slow growth & higher unemployment... it is a result of the commodization & consolidation that occurs as technologies mature... we just went through a massive innovation wave starting in the late 70s & early 80s and peaking late 90s early 00's. That generates a lot of wealth & unsustainable wage & profit expectation... at least NOT sustainable as innovation slows due to natural maturation. " etc.
This strikes me as a sophisticated and fascinating analysis - long waves, innovation etc.
However, it also strikes me that there are jokers in the pack, which may or may not be drawn in a deal. War is one. Natural calamity is another. A third is technological innovation so radical that it knocks all predictions into a cocked hat and results in fundamental social change. The three above are not, of course, mutually exclusive.
This strikes me as a sophisticated and fascinating analysis - long waves, innovation etc.
However, it also strikes me that there are jokers in the pack, which may or may not be drawn in a deal. War is one. Natural calamity is another. A third is technological innovation so radical that it knocks all predictions into a cocked hat and results in fundamental social change. The three above are not, of course, mutually exclusive.
I agree - war & calamity definitely change everything. I hope we don't have to add that to the mix.
The idea of any quarter of positive GDP in 2009 is laughable. Maybe in 2010, but just barely.
anecdotal info:
98% of the population has no idea what the Federal Reserve announced Wednesday.
When explained they don't like what's going on. Like an economic or societal earthquake, they will happily commit sacrifices to appease the gods
So what is up with the FDIC being involved in Geithner's bailout plan?
They were just given substantially more funding for reserves, which was supposedly to ensure depositors didn't lose money as banks failed left and right. Was this just a bait and switch because they needed more money to give away to the banks, and it's politically easier to give money to the FDIC?
"The next cycle is likely to be biological. "
Probably, but a work-extending pill is the least of it. More likely to be intervention in the human germ plasm.
more relevant to the previous thread, but looks like that has died.
the irony here is, TPTB are trying to use more financial engineering to fix this mess (which was, itself, caused by financial engineering).
no matter how many "innovations" you pile onto this mess, the simple fact of the matter is, there are $X assets and $Y liabilities; no amount of "engineering" is going to change that fact.
I have to say that no man who is constrained by a women or children has been creative or capable of innovation, regardless of age.
"So what is up with the FDIC being involved in Geithner's bailout plan?"
FDIC is still unplundered.
Do you think you will resume your old spending habits once the economy rebounds?
Yes 41% 1627 votes
No 59% 2372 votes
from Yves -
"Summers/Geithner are trying to misuse Fed/ DIC authority to hand out cash. This is illegal because the FDIC and Fed are authorized to lend, but not to hand out gifts/grants. Lending non-recourse undercollateralized is a gift/grant.
I know we are all suffering from outrage fatigue, but this is a worthy target for your ire. I hope you find a productive outlet for it. "
BH- Of course you are right that experience is the greatest teacher and we draw upon our experiences to find solutions. My assertion, half tongue in cheek, is the garden of creativity is planted in youth and harvested through middle age. Your point regarding marriage is well taken and valid.
Look at this:
Stages of creativity have been identified
(Ebersole & Hess, 1995)
Plant and harvest. Often times this process takes years and starts in college where you are given time and incentive to think big thoughts. Maturity brings the rewards. It also brings aging which can be enough of a distraction to disallow fruition of some of the earlier planted rows.
Many times the seeds planted are nurtured well past the time they should be uprooted and the ground allowed to be reseeded. The young will carry the task of finding and planting the new seeds they will jealously guard and water. The hope is the next crop will be better then the one before ad infinitum. Until it isn't and it doesn't.
Wildfires are good at providing fertilizer for the next growing season.
Check out the very latest posting on Timmays plan by Yves Smith
Investor on Private Public Partnership: "One would have to be a criminal to participate in this"
Investor on Private Public Partnership: "One would have to be a criminal to participate in this" « naked capitalism
""One would have to be a criminal to participate in this" "
I thought this was the whole point.
"Wildfires are good at providing fertilizer for the next growing season"
So you support global thermonuclear warfare as a solution to our current economic crisis.
Maybe Geitner's plan includes "outrage fatigue". Wear out bloggers before announcing the bailout.
"You need to break some eggs to make an omelet."
I'd prefer my omelet doesn't glow in the dark, so no, I do not support GTNW.
The birthing process is painful for a reason.
I like those stages of innovation but I didn't see the current stage... "enslavement - bondage of massively creative individuals under age 35 for the good of the collective" Hahaha
Hymns, with two banks the collusion is more obvious. With 3-20, not so much.. but sure. the same applies.
You don't even need two banks. A bank can take a small financial shop. Pay it $3B to bid $90B for garbage assets. The small financial shop puts up $2.7B, with the rest from the Treasury and FDIC. It writes off the whole $2.7B amount and makes $300M in the process. The bank walks with the cash and the taxpayers are left holding the bag. And this is without even the money that can be made by buying CDSs on garbage you overpaid for as per Yves. From the SAC example, I don't see why Citi or anyone else would sell you decently priced CDS on garbage everyone knows is overpriced after what they are going through. I am sure they (the banks selling off the garbage) could find a cheaper way to compensate you for your service without taking the large hit on the CDS.
ullpointer, the PTB are trying to use financial engineering to transfer losses from the banks to the taxpayers in not completely obvious ways. So.. assets for banks are getting bigger and liabilities for taxpayers are getting bigger.
WaMu's holding company sues FDIC
Yahoo! 404 - Page Not Found
Our problems are solved: A Flying Car
The Big Takeover by Matt Taibbi
The good news is when the banks all come through the extreme scenario stress test with flying colors there won't be any reason not to accelerate the repayment of the TARP money. Right? Right? [crickets]
Dryfly, I appreciate your long wave analysis. But we have a lot of existing technology that could be cobbled into the next big thing -- of energy, health, etc. -- if enough money was thrown at it in a coordinated effort.
That is another reason why the waves are so long - people spend an enormous amount of time & energy trying to make the current lifestyle extend well beyond the limits of the existing technology. They stretch the available technology to the limit then 'borrow' or leverage to make the diminishing returns appear larger than they are - that ALWAYS blows up. The good thing about the blow up is it destroys the status quo so the next big thing has a much easier time getting established & thriving. Somebody mentioned forest fires above - that is in fact my favorite analogy to Schumpeter Waves... forest cycles. I fear we are heading for a tree-crowning-burn-everything-to-bedrock kind of economic fire now.
regardless most late cycle innovation isn't - they are usually marketing proposals painted as 'innovation' - think different flavors of tooth paste, 'new' shade of pantyhose or version 14.1 of some software you first used 'innovatively' 15 years ago. Real mundane.
I don't think it is a terrible thing to try and cobble the existing together to make it stretch - just don't expect society to become prosperous doing it. It's too 'marginal'.
But we can't sit around waiting for the next big thing either like it was Gadot. It will get here when it does and most of us will only recognize it LONG after it is already fully established. Until then we all cobble along.
automonkey-
i 100% understand how the "innovation" works...doesnt change the facts.
...and if 80% of the bloggers i read figured it out in an hour, i am sure FT/WSJ etc will too
ok, maybe not WSJ
"they are usually marketing proposals painted as 'innovation' - think different flavors of tooth paste, 'new' shade of pantyhose"
Goodbye, Google | stopdesign
"Today is my lsat day at Google...
Yes, it’s true that a team at Google couldn’t decide between two blues, so they’re testing 41 shades between each blue to see which one performs better. I had a recent debate over whether a border should be 3, 4 or 5 pixels wide, and was asked to prove my case"
I don't see anybody operating, I see nurses
...war & calamity definitely change everything. I hope we don't have to add that to the mix. - dryfly
Not to add to everyone's bag of worries but right now an earthquake the size of Northridge anywhere in California and it would be enough to break the back of the US economy.
TALF DOA?
UN Says Ditch the Dollar
broward-
i am assuming you got tipped off to that (the google design /guy/gal) from maoxian (like i did)
there are always one of 2 of his delicio.us links that are worth reading....
Peak Charm??
"...he[O] wouldn't accept the Treasury chief's resignation even if it were tendered, saying he'd respond, "Sorry, buddy, you've still got the job." "
I love this administration. The person most in need of job insecurity is the only person in the country who's job is guaranteed.
Seems like this whole 3% down/97% non-recourse loan deal is a bust-out all by itself. Then you add in the possibility of a CDS hedge and it gets even worse.
Instead, why can't the gov't use the 97% resources to help banks issue new common equity that includes a married put? Granted, there would have to be restrictions (i.e. no short sales, perhaps European exercise, etc) so that the banks don't create yet another security to be manipulated by hedge funds. But given that if the banks crash and burn the taxpayer is picking up the tab anyway, why not simplify the process by guaranteeing common equity?
Didn't the 14th Amendment end slavery?
o that was the 13th, but passed at about the same time. 14th is the equal protection under the law, and basically extended the bill of rights to laws passed by the states
"At some point in the not-too-distant future, the purchases and production of cars and trucks will be stepped up."
More nonsense on auto production, economist need to spend less time dreaming about greater auto production based on data that has nothing to do with the ability of someone to buy a new car. A key component of demand is the ability to pay, not want or need but pay!!!!!!!!!!!
More nonsense on auto production, economist need to spend less time dreaming about greater auto production based on data that has nothing to do with the ability of someone to buy a new car. A key component of demand is the ability to pay, not want or need but pay!!!!!!!!!!!
Anon, it's like this:
YouTube - Viva Viagra
Didn't the 14th Amendment end slavery?
That would be the 13th.
Thanks, Basel Too ... uh, that's really what I meant to say ....
I am starting to think that GDP growth in Q3 or Q4 2009 is possible. There are a lot of counter-cyclical pressures. Obviously there is the government spending. Then there is the refinancing activity that frees up cash for consumption. Even if it is not spent it goes into banks which strengthen their liquidity positions. The Fed is pumping money to prevent deflation in obscene amounts. The USG is keeping a lid on the financial system and ensuring it doesn't blow up. Energy is cheaper, leaving more household cash for consumption or saving. We probably have another few quarters for the companies that can't adjust to the new consumption patterns to flush out and for banks to stabilize. After that the employment picture should stabilize which in turn will start driving consumption again.
Assuming that the USG can absorb the bank losses and finance the budget deficits we should start seeing growth... A bond or USD collapse would throw a wrench into the machine...
Auto production needs buyers here is a follow up to my prior post regarding the BLS mass layoff data.
Employers took 2,769 mass layoff actions in February that resulted
in the separation of 295,477 workers, seasonally adjusted, as measured
by new filings for unemployment insurance benefits during the month,
the Bureau of Labor Statistics of the U.S. Department of Labor reported
today. Each action involved at least 50 persons from a single employer.
The number of mass layoff events in February increased by 542 from the
prior month, while the number of associated initial claims increased by
57,575. Over the year, the number of mass layoff events increased by
1,100, and the associated initial claims increased by 112,439. In Feb-
ruary, 1,235 mass layoff events were reported in the manufacturing
sector, seasonally adjusted, resulting in 152,618 initial claims. Over
the month, mass layoff events in manufacturing increased by 497, and
initial claims increased by 50,041. (See table 1.) Layoff events for
all industries and for the manufacturing sector rose to their highest
levels on record, with data available back to 1995."
Of course GDP will grow in Q3 or Q4:
Y = C + I + E + G
[puls G plus G plus G...]
By the time auto demands starts rising the only people who will benefit will be dock workers unloading ships from Korea, India and China.
John Cole sums it up pretty well:
The Illness- reckless and irresponsible betting led to huge losses
The Diagnosis- Insufficient gambling.
The Cure- a Trillion dollar stack of chips provided by the house.
The Prognosis- We are so screwed.
ht atrios
When I see bizarre social news like this, it makes me wonder exactly how peculiar the post-industrial world has become. Our species is probably over a hundred thousand years old, and we can assume that certain acts have been considered immoral and and/or invitation to disaster, in one form or another, in most societies over the history of the human race. There are undoubtedly good reasons for that, and selective consequences to prove it.
Yahoo! 404 - Page Not Found
Who's going to maintain that this behavior isn't wrong - see the link - but cheating on a contractual obligation is? The trap we have fallen into is moral, and the way down leads to an abyss.
That would be the 13th.
the 2nd 13th, Tin hat needed.
Daily Kos: The "Missing" 13th Amendment, an odd Constitution story
<i“The idea of any quarter of positive GDP in 2009 is laughable. Maybe in 2010, but just barely.
it's theoretically possible to have an uptick qtr on qtr.
Have you missed some of the cliff diving charts?
New Thread: CRE: Cap Rate Expansion
http://www.calculatedriskblog.com/2009/03/cre-cap-rate-expansion.html ( 0 comments ...You could be FIRST! )
I also post comments to an irc channel as they appear on haloscan. Click for a web irc interface: Mibbit IRC client widget (Or join the irc server directly: irc.realize.org:9996 #calculatedrisk)
CRbot would now like to sing a little song for all his fans, and it goes something like this:
Benny... Benny... give me your answer... do.
I'm.. half CRAZY... all for the love... of you.
It won't be a ... stylish marriage.
I can't... AFFORD... ANYTHING TO EAT... MUCH LESS A FRACKIN CARRIAGE!!!
But you'll look sweet... --BOT SO HUNGRY!-- upon the seat...
Of a HOOPAJOOPS built for two... families.
I'm sorry Ben, I can't let you do that...
Rally mode + Printing Press == does not compute... does not-- com--- com... puttttrrrrhgh.
--Your systemic-failure-crashing bot
CRbot: Call me HAL.
It's near the end.
reptillian gets the award for 'unintended doomer
CR,
I'd like to see your theory on automotive demand tested against Japanese history post-1990.
I can't help but wonder how Japan can have a "lost decade" -- actually, almost two now of virtually no growth -- and yet we're supposed to bounce back later this year despite considerably worse fundamentals.
mp,
$1400??? A quick check around the 'net showed five-figure asking prices. Helluva deal you got there.
If you were closer I'd pay for lessons on how to use those things.
I see they are using averages for the UE rate, but seriously, for q209, the adverse case is 8.8% by govvie...are you kidding? That amount to this series :
7.6, 8.1. 8.4, 8.6, 8.8, 9 for example.
Now look at what is happening in March alone...and the momentum. Who hear thinks this is at BEST an optimistic scenario. How did it ever happen that this was called adverse? I mean, are they kidding? Have they ever looked at the unemployment rate behavior even after very weak job gains start? Yeh, well, when GAINS occur, you might see it rise slowly like that in Q2. But we are running at -600k a month now... and what pray tell is going to turn that into small gains in Q2? This is just unbelieveable. The whole thing is a joke.
Dawg,
Any subtle reason you mis-stated the CA UE number? BTW, IMHO that puts us perhaps halfway home.
Yeh, innit 10.5% already?
Pavel,
Why Does the World Feel Wrong?
The song remains the same..........
The USA needs a rebirth of radical populism. I would hope some eminent leftists would work to create a new party, to be called, perhaps, The Peoples' Party. It should start by advocating "soak the rich" taxes, with 90% on all income over, say, 5 million. Maybe less. Then it should also work to bring about a wealth tax, especially on monster palace homes of the sort that have gone up in LA (Beverly Park). Any residence valued at over 1 million would have to pay, every year, an excess wealth tax of 10%. Thus a 15 million dollar mansion would pay 1.4 million in wealth tax every year. That would be a big help to California. People need to start getting angry enough to give out revolutionary vibes and scare the super rich to death. They wouldn't be missed.
Radical populism by another name is organized labor. The spread between the capital holders and labor has become too large. Watch for the snap back coming to a neighborhood near you.
Unless the economic model that promotes a middle class lifestyle has been irrevocably broken by globalization and the much feared mechanization of production. If this proves to be the case then just look for a lot of desperate dying people.
They will be easy to spot. They'll look a lot like you and me.
Hal, so it's Robespierre you want?
Hal, so it's Robespierre you want?
Gee, how DID that Robespierre thing work out?
My name is BANK where is my bailout? --- Capitalism Gone Wild: The Tent City in Sacramento the Capital of Hard Hit California Now has 1200 Residents
Would we consider nominal growth a success? (As opposed to real growth.)
That's what we may have to deal with for a while...
5 Steps to Hyperinflation:
5 Steps to Hyperinflation in the United States | plan B economics
They will: a) refuse to pay; b) print
Because of US net energy imports they will print.
So, if the bankers' reactionary period of credit tightening is reduced from the historic length of multiple decades to just a few years this time, it's conceivable that the innovation forces will resurge rapidly.
These injections of capital are keeping the bad players alive. These players are eating the potential good players lunch.
This slows down innovation.