Don, it could also mean a "soft landing". Take a look at this table from the Census Bureau - the trade deficit peaked in 1987 at $151 Billion. Over the next few years, exports grew much faster than imports - even before the recession of '91. That fits the description of a "period in which domestic demand grows more slowly than output" - so it doesn't have to be a recession.
I'm still coming to an assessment of Bernanke, but I think that the Economist's unfair characterization of him being "keen to slash interest rates when bubbles burst to prevent a downturn" is more from the infamous helicopter statement than from anything he's done.
I leave out hope that B-B-B-Benny and the Feds (ha, I thought of it first!) will correct the worst excesses of the pseudo-Maestro. Not much, but give him a chance. He's being handed a crummy situation, and it looks like things will need to get worse before they get better. It's not the bitter pill that concerns me--I know that it's coming. It's how much better off we'll be afterwards--or it at all--that has me biting my nails (chomp).
Best to all the CR regulars--I haven't checked in for quite a while.
"He is likely to continue the current asymmetric policy of never raising interest rates to curb rising asset prices, but always cutting rates after prices fall."
This describes central banking everywhere not just Greenspan or what is expected from Bernanke. The price stability ECB is in a state stupor as housing prices in Spain, France, etc have gone through a boom over the last few years.
the housing asset rise is about tapped out. what next can they pumped liquidity move into? i fear there isn't much left that would benefit a majority of Americans.
Housing is only tapped out if people stop using it as an ATM and/or if personal cash flow becomes so limtited (credit crunch.. i..e higher rates or new regulations) that people dump their houses onto the market and prices drop. This has not yet happened and my guess is that unless some form of panic or global shift in current balances happens, it will be at least 10-12 months until housing is tapped out.
That said you are correct there is not much left to pump-up. How about flatware; we all have some of that.
The housing market IS clinically insane however. For ye SUB MEDIAN house for a first time buyer in the bay area, a nice happy $500k means a $100k down payment, monthly costs of $3200 a month, and TAX NEUTRAL NONSAVINGS (interest, taxes, maintinence tec, considering tax savings) of 2350/month. Owch, man.
BBB -- Not happening? Let's see, this year banktrupcy rules are tighter, home prices flat (so lots of visitors to atm well are finding it dry), and it's more likely that not rates will keep rising. It's happening already. Folks are still in a denial/holdout phase. I guess just depends on how long they can hang on, and how many of them (whether speculators or naive buyers) are hanging by a thread
Exactly, the question is how long they can hold on until they feel the pain of being over leveraged. As long as they can extract equity then they will.
I predict the next bubble will be in...drumrolll.....cars!!! My 2003 Dodge Durango will be selling for TWICE what I paid for it in another year....They just aren't making as many as they used to AND not only can you use your car for transportation, you can also LIVE in it when your house gets foreclosed on....AND you can run from the repo man---can't do that with a house!!!
See..I'm waaayy ahead of the curve...lol
To be honest, I was more worried about the economy when I saw Jim Cramer on the cover of Time (or wherever). Somehow, the Economist being negative about the economy doesn't worry me too much. Wall of worry stuff.
Churlish indeed! Such a conundrum for B-B-Benny and the Feds (good one Emanuel).
Who needs to worry about deficits when liquidity is as free and easy as a coed in Ibiza? For example the total fed credit expanded by $9.2 billion last week alone, and currency in circulation increased to $8.2 billion, even before the soon to be disappeared in March M3 data. What's left to bubble? Or at this point is it just to monetize the debt, foreign creditors be darned?
Seriously, I'm having a hard time envisioning a soft landing. Corporations are not going to be putting any CAPEX liquidity into the US manufacturing area or workers wages, MA's and stock buy back's will remain the rule. Deficit spending will not significantly decrease (ha!), taxes will not go up.
Who knows, but it seems like an upward spiral for awhile...
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. .... Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
The danger is not inflation through pub money creation (when was the last time a government controling a central bank monetised a huge part of its deficit ? in the 50's?)
But deflation through debt.
I have shorts on the stock market ending at the end of march. My only question is will the crash happen before !!! And It seems not.
An interesting trend that I have noticed in the job market working in IT is the acceleration of offshoring. Now I know everyone's heard this, but companies are doing this in a very interesting way. They're not replacing existing onshore jobs with offshore resources, rather, while expanding, they are filling the new jobs with offshore. This way, CEO's and such can explain that "we have not replaced a single onshore job, offshoring is helping us expand, etc etc". Additionally, with the IT job market extremely hot in CA and I'm sure other areas, with high onshore salary demand, and the talent pool is low, offshoring is an easy fix. Now, when the economy slows, and companies need to tighten there purses, and they look at there books with $80/hr onshore and $15/hr offshore resources doing the same thing, onshore's will get the boot.
My point is this, the IT market is hot, as well as other job markets, a little too hot from my perspective, which falls inline with the bloated consumer spending and ATM HELOC theory. Now, when this ends and corporations notice, I believe we will see a sharp reversal in the onshore job market but continued high demand for cheap offshoring. And as I understand it, increased unemployment is a catalyst for a housing crash.
Now I know everyone's heard this, but companies are doing this in a very interesting way. They're not replacing existing onshore jobs with offshore resources, rather, while expanding, they are filling the new jobs with offshore. This way, CEO's and such can explain that "we have not replaced a single onshore job, offshoring is helping us expand, etc etc".
matt - its more than that... when a program or project is on the drawing board they 'offshore' that 'expansion'... but when an existing domestic product or project is being terminated it is not replaced with another new domestic project... most of the new ones are sourced offshore.
So when lay offs occur here it is due to 'declining business'... when hires are made over there it is due to 'growing business'... but the two happen simultaneously.
matt, dryfly: There is also the chicken & egg problem that your field & support staff has to be (close to) where the action is (depending on which industry). If your customers offshore to India, you better build competent field organizations there. You cannot reasonably fly in your troops from the US every few weeks, or field phone calls in the US during India business hours.
Once this type of activity gives you a "foot in the door", it is tempting to expand into other job functions there, particularly when it's the current vogue ("what, you don't have an India R&D office?").
Once this type of activity gives you a "foot in the door", it is tempting to expand into other job functions there, particularly when it's the current vogue ("what, you don't have an India R&D office?").
"If the imbalances are to unwind, America needs to accept a period in which domestic demand grows more slowly than output.
Can anyone read that in any other way than saying "The United States needs to experience a recession--and sooner rather than later"?
I'm not sure we need advice like that.
Don, it could also mean a "soft landing". Take a look at this table from the Census Bureau - the trade deficit peaked in 1987 at $151 Billion. Over the next few years, exports grew much faster than imports - even before the recession of '91. That fits the description of a "period in which domestic demand grows more slowly than output" - so it doesn't have to be a recession.
Best Regards.
I'm still coming to an assessment of Bernanke, but I think that the Economist's unfair characterization of him being "keen to slash interest rates when bubbles burst to prevent a downturn" is more from the infamous helicopter statement than from anything he's done.
I leave out hope that B-B-B-Benny and the Feds (ha, I thought of it first!) will correct the worst excesses of the pseudo-Maestro. Not much, but give him a chance. He's being handed a crummy situation, and it looks like things will need to get worse before they get better. It's not the bitter pill that concerns me--I know that it's coming. It's how much better off we'll be afterwards--or it at all--that has me biting my nails (chomp).
Best to all the CR regulars--I haven't checked in for quite a while.
"He is likely to continue the current asymmetric policy of never raising interest rates to curb rising asset prices, but always cutting rates after prices fall."
This describes central banking everywhere not just Greenspan or what is expected from Bernanke. The price stability ECB is in a state stupor as housing prices in Spain, France, etc have gone through a boom over the last few years.
Thus the "Greenspan put" becomes the "Bernanke put," encouraging ever more moral hazard in the name of sustained economic growth.
the housing asset rise is about tapped out. what next can they pumped liquidity move into? i fear there isn't much left that would benefit a majority of Americans.
Housing is only tapped out if people stop using it as an ATM and/or if personal cash flow becomes so limtited (credit crunch.. i..e higher rates or new regulations) that people dump their houses onto the market and prices drop. This has not yet happened and my guess is that unless some form of panic or global shift in current balances happens, it will be at least 10-12 months until housing is tapped out.
That said you are correct there is not much left to pump-up. How about flatware; we all have some of that.
The housing market IS clinically insane however. For ye SUB MEDIAN house for a first time buyer in the bay area, a nice happy $500k means a $100k down payment, monthly costs of $3200 a month, and TAX NEUTRAL NONSAVINGS (interest, taxes, maintinence tec, considering tax savings) of 2350/month. Owch, man.
BBB -- Not happening? Let's see, this year banktrupcy rules are tighter, home prices flat (so lots of visitors to atm well are finding it dry), and it's more likely that not rates will keep rising. It's happening already. Folks are still in a denial/holdout phase. I guess just depends on how long they can hang on, and how many of them (whether speculators or naive buyers) are hanging by a thread
Alo,
Exactly, the question is how long they can hold on until they feel the pain of being over leveraged. As long as they can extract equity then they will.
I predict the next bubble will be in...drumrolll.....cars!!! My 2003 Dodge Durango will be selling for TWICE what I paid for it in another year....They just aren't making as many as they used to AND not only can you use your car for transportation, you can also LIVE in it when your house gets foreclosed on....AND you can run from the repo man---can't do that with a house!!!
See..I'm waaayy ahead of the curve...lol
CR:
I think you're leaving out an important part of this story: the Plaza Accord and the 50% in the value of the USD.
Another large dollar depreciation is a likely part of creating "a period in which domestic demand grows more slowly than output"
make that "50% drop in the value of the USD"
To be honest, I was more worried about the economy when I saw Jim Cramer on the cover of Time (or wherever). Somehow, the Economist being negative about the economy doesn't worry me too much. Wall of worry stuff.
Churlish indeed! Such a conundrum for B-B-Benny and the Feds (good one Emanuel).
Who needs to worry about deficits when liquidity is as free and easy as a coed in Ibiza? For example the total fed credit expanded by $9.2 billion last week alone, and currency in circulation increased to $8.2 billion, even before the soon to be disappeared in March M3 data. What's left to bubble? Or at this point is it just to monetize the debt, foreign creditors be darned?
Seriously, I'm having a hard time envisioning a soft landing. Corporations are not going to be putting any CAPEX liquidity into the US manufacturing area or workers wages, MA's and stock buy back's will remain the rule. Deficit spending will not significantly decrease (ha!), taxes will not go up.
Who knows, but it seems like an upward spiral for awhile...
"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. .... Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights."
Alan Greenspan 1966
"B-B-B-Benny and the Feds (ha, I thought of it first!)"
Hmmmm...I'm not sure you want to be admitting that...
The danger is not inflation through pub money creation (when was the last time a government controling a central bank monetised a huge part of its deficit ? in the 50's?)
But deflation through debt.
I have shorts on the stock market ending at the end of march. My only question is will the crash happen before !!! And It seems not.
will be loosing a few thousands dollars.
Not mentioned but significant is Employment--
An interesting trend that I have noticed in the job market working in IT is the acceleration of offshoring. Now I know everyone's heard this, but companies are doing this in a very interesting way. They're not replacing existing onshore jobs with offshore resources, rather, while expanding, they are filling the new jobs with offshore. This way, CEO's and such can explain that "we have not replaced a single onshore job, offshoring is helping us expand, etc etc". Additionally, with the IT job market extremely hot in CA and I'm sure other areas, with high onshore salary demand, and the talent pool is low, offshoring is an easy fix. Now, when the economy slows, and companies need to tighten there purses, and they look at there books with $80/hr onshore and $15/hr offshore resources doing the same thing, onshore's will get the boot.
My point is this, the IT market is hot, as well as other job markets, a little too hot from my perspective, which falls inline with the bloated consumer spending and ATM HELOC theory. Now, when this ends and corporations notice, I believe we will see a sharp reversal in the onshore job market but continued high demand for cheap offshoring. And as I understand it, increased unemployment is a catalyst for a housing crash.
Now I know everyone's heard this, but companies are doing this in a very interesting way. They're not replacing existing onshore jobs with offshore resources, rather, while expanding, they are filling the new jobs with offshore. This way, CEO's and such can explain that "we have not replaced a single onshore job, offshoring is helping us expand, etc etc".
matt - its more than that... when a program or project is on the drawing board they 'offshore' that 'expansion'... but when an existing domestic product or project is being terminated it is not replaced with another new domestic project... most of the new ones are sourced offshore.
So when lay offs occur here it is due to 'declining business'... when hires are made over there it is due to 'growing business'... but the two happen simultaneously.
matt, dryfly: There is also the chicken & egg problem that your field & support staff has to be (close to) where the action is (depending on which industry). If your customers offshore to India, you better build competent field organizations there. You cannot reasonably fly in your troops from the US every few weeks, or field phone calls in the US during India business hours.
Once this type of activity gives you a "foot in the door", it is tempting to expand into other job functions there, particularly when it's the current vogue ("what, you don't have an India R&D office?").
Once this type of activity gives you a "foot in the door", it is tempting to expand into other job functions there, particularly when it's the current vogue ("what, you don't have an India R&D office?").
Agree... I see it happening already.