my okie oil and gas buddies are doing well. pumping oil 60 bpd from a new well that took five days to drill at 50K a day. they say they are gonna keep on till they hit a dry one.
coasts versus flyover? I'm hoping that coastal contagion don't spread!
Well, having been layed off in 1986 and again in 2005 at age 53 after 37 years of loyal work at a salary that never exceeded $80,000 I have no comment.
The bummer for the EU, IF they are in a similar situation is their lack of a federal government mechanism for giving out free money. Actually maybe the EU is lucky to not have a bunch of shills getting ready to inject 'stimulus' into a geographically wide region. Spain is not Norway, and Sweden is not Romania. Here in the States, its similar where a broad brush approach is confused in effect at least.
He(Krugman) did use BLS unemployment numbers didn't he? I hate shits like him - he plays the big con, the Cramer and Kudlows of the world play the little con.
The picture of unemployment in this country is incredibly falsified( just like inflation). Europe does a much more honest count. (Data available if queried)
Once again, Mr Krugman plays the big con. By pretending to query he validates a whole set of data that, if one took a more robust, folksy, honest style of cross-validation, say in the style of Studs Terkel or Walter Gunther, one would see it for the bs that it is and actually once one added back in a variety of adjustments, it would show a far more horrendous picture.
Not only is sk incomprehensible his/her link doesn't work. With bold assertions like these and insults to an honest critic like Krugman one would hope there was supporting data available.
Not only is sk incomprehensible his/her link doesn't work. With bold assertions like these and insults to an honest critic like Krugman one would hope there was supporting data available.
godihatejargon
You comprehend enough to respond. Cool. A start point is the high number of US humans in prison, who are NOT counted as unemployed, 2.5% million of them Bureau of Justice Statistics Prison Statistics.
What got your goat ? He's a buddy is he ? Lucky him. Er.. maybe its the fact that these pseudo-liberal scams get exposed and you feel queasy ?
As regards the link, well its to avoid disruptive behavior at my site which is actually all about predictive analytics - very modern math - that I've pulled it. But thank you for trying to visit. If you are really interested in the esoterics of predicting weather using stochastic methods let me know. I'll give you the link.
i greatly admire krugman but the big con here is at work... unemployment metrics have been adjusted and make trend line comparisons overly optimistic per se... without the quality of employment (factoring in real wages, PPP, and health/retirement benefits) being considered, the graph becomes the big co
The reason that the decline in the employment/population ratio for the last two recessions started earlier and ended later, when compared to previous recessions, is due to the distortion in the CPI.
The BLS radically changed the method for calculating CPI in the early 80s, such as utilizing hedonic adjustments and substitutions. This has had the effect of understating CPI. Since CPI is subtracted from nominal GDP growth, this has the effect of "narrowing" the recession window.
I cannot stress this point enough:The CPI numbers published by the BLS do not reflect reality. The cost of living for the last few years has risen significantly more than the 3-4 percent per annum rate that is published by the BLS. Price inflation must be subtracted from nominal GDP growth.
Indeed, many people feel that the economy has been in recession for a while now. This is not a coincidence.
sk, "the big con" is just sloppy, not too careful or thoughtful...a cheap shot from someone who knows better.
Krugman is not lending credence to that unemployment rate that excludes "2.5%M" criminals...he's comparing figures gathered by the world's largest and arguably best labor statisticians over the last decade. [The BLS didn't include criminals then and it doesn't now.] He discovers the official recession in 2001 was not really 9 months short, but looking at the E/P ratio about twice that long in terms of employment.
You could exercise yourself if you must poke PK by drawing attention to the kind of jobs that grew out of that recession...(hundreds of thousands of RE jobs) that he ignores in order to make a smaller point: the recession is not likely going to be as short as some officials (BB seems to be one) think.
What happened to the printing press from Japan that was on high speed and printing off free money for everyone in the world; where did it go, where is the free money? I know that NAR wants 40 year mortgages with zero down, which is kinda like free money, but if we are to get a real fiscal stimulus package, it would include another tsunami wave of free (unlimited) Yen, 40 year loans, zero down, more of the no-doc, no-ask/no-tell mortgages and free SUVs with every SIV and or CDO, and toss in a golden parachutes and AAA ratings with no government oversight, regulation, rules, conditions or verification of any collateral, cause we need to get this all out in the open and have the integrity and honesty to admit that we will forgive debt and we will be brothers and sisters in arms and connect our vision of prosperity to the generations in the future who will pay for that which we have received.
Amen & God Bless America, & Paulson & Bernanke, Cheney, Bush, The Senate, Congress, DOL, DOJ, SEC, FBI, NAR, BOJ, C, FNM, MCO and the thousands of little banks that make up the heart and soul of all the land developers and lenders that help make The American Dream a Global commodity...
Anecdotally, using a nice suburban house as an ATM means one spouse can take some time out of the workforce and do good, unpaying things in the community -- why go back to work? Would this explain the decline in population-work ratio?
This feeds back into real estate of course. The reasonable multiple of income that the house market must return to (and maybe overshoot on the downside) will be multiplying a lower income number. Add in shrinkage of Baby Boomer households (Quote from OC realtor several days ago: "Baby boomers are done buying.") and this just goes on and on. Glad WaMu thinks their "prime" loans are ok! They were qualified on the teaser rates, for god's sake, if they were qualified at all.
Krugman isn't using the unemployment numbers (which are indeed less accurate/comprehensive than the comparable European stats). He is using the ratio of exployed workers versus total population.
I'm not sure how the graph is being construed to have any relevance to CPI, GDP, wages, or Mom's apple pie recipe. It's a chart of one statistic. If you want to tell a story about how the middle class is being pinched by declining real wages, reductions in benefits, and declining employment, then I hope you have 3 graphs to show me (real median wages, Percentage of workers covered by employer benefits, and labor force participation), not some one chart with some problematic aggregation/conflation of several statistics you came up with on your own.
In any case the reason Krugman is using the statistic and chart to point out that is takes some time for employment to recover after a recession has officially ended. Indeed, we still had't completely recovered from the last one when the participation ratio started back down.
Anyone paying attention to Florida and the liquidity problem which has morphed into some new magic thing? I dont understand this and wonder if anyone can explain what happened:
Re: BlackRock is the New York-based investment firm overseeing investments on an interim basis while the SBA conducts a formal evaluation to appoint a permanent fund manager.
"We are pleased with the improved liquidity we've been able to achieve this month, and will release new liquidity rules -- an increase from the current 15 percent to close to 40 percent -- during the week of January 14," he said. "We are very focused on rebuilding investor confidence in the fund."
What are "new liquidity rules" ? Do they just make these up as needed, or do they pay off a rating agency and underwriter or is it more complicated? Any thoughts on that?
Seeking Aplha reports that CME housing futures currently predict that the Case-Shiller HPI will bottom in November 2010 at 21% below peak. That seems to suggest that housing prices would bottom at the level prevailing in early 2004, at which time the price/rental ratio was about 1.2 - well above the historical average. Is my logic flawed or this bottom call unrealistic? Shouldn't prices fall a lot more than that to revert to mean?
I'd check those futures in about 3 months after the index has caught up with the end of the year drop. Case/schiller is only showing up to October and the Alt-A/Jumbo blowup was just filtering in.
Actually there seem to me to be two OT main points implied here. First, this "recovery" has had the lowest rate of job creation in the post-war period. Which explains why voters have been so dissatisfied and uneasy to a large extent. If you look at new job creation this is consistent with CR's analysis.
Second, if you take 150K jobs/month as the "figure of merit" for breakeven then net net we haven't really made any progress since 1980 and cumulatively are still about 2.5M+ jobs "in the hole". This last recovery was weak and non-organic, the Fed is forecasting weak growth thru '10 and that plus this assessment indicates that it will be a long, slow and painful psudeo-recovery AT BEST. For some graphics using standard BLS (who indeed are very good at their jobs and who's data is readily applicable and interpretable when you look at trends and patterns, e.g. YOY% changes) try a not to aged post: http://tinyurl.com/2rno9w
Believe it supports CR's assessment using a different but complementary take on employment.
More snaky smarmy spin from Ben and the MOT. The assumption was several short month ago that recession was remote. Then , it went to subcrime only. Then contagion control. Then it went to subprime fallout into the real economy- credit crunch. Then suddenly bank insolvency appeared. Then it went to real slower growth worldwide. Now its recognition of a recession and lo and behold ; don't worry as it will only be short. Buy this latest lot and you do deserve to suffer.
They were spinning and lying then as they are now. This recession will end up making the '81-82 deal look tame by comparison and a lot more harmful. Its awful effects (forget the textbook based academic drivvle being spewed out)on average families will not begin to subside for at least 2 years - end 2009 at the very earliest.
Ben's assumption also is that the dollar remains a currency of even minimal value. Well, he may be in for yet another surprise there as well, as it heads for peso status.
But hey, he's a smart guy right? he knows what he's doing.....
There is always a lag between the economy's upturned/downturn and employment. When an economy first starts turning down, employers first reduce overtime, then regular hours, and finally lay people off when they've been convinced business isn't getting better. Likewise, an upturn, first output is increased as business picks up. Next comes over time, finally come new employees.
I am interested in knowing from which statistic on unemployment Krugman is relying. I would hazard a guess that it is the establishment survey, rather than the household survey. If so, that would explain at least part of his findings. The establishment survey, because of its birth/death assumption, underestimates job loss at the beginning of a recession, as well as job gains at the beginning of a recovery.
Our current data illustrates this. The household survey has resulted in the unemployment rate going from 4.4% to 5% in the last year. Meanwhile, the establishment survey showed a net new job gain of 1.3 million in the last year. In times of relative equilibrium in the economy, trust the establishment survey; times like now, look to the household survey.
I cannot recommend strongly enough the article by Megan McArdle in this month's Atlantic on the effect aging boomers are having and will continue to have on virtually every aspect of life. She makes the point that economic growth is largely a function of labor force growth and productivity increases. As the population ages, the labor force will inevitably stop growing and perhaps even shrink. As more of those working are involved in caring for the elderly, productivity gains will be dampened, since technology can't really shorten the time needed to feed or bathe an older person.
One option is simply to make our peace with a slower growing economy. McArdle constructs her article around a vist to her family in Newark, NY, near Buffalo. She points out, rightly, that depite the fact that that area has been depressed for decades, life for those left behind there is actually quite pleasant. I live in upstate NY, though a much less depressed part of it, and would second that idea. Booming areas are often traffic-choked over-priced hells compared to areas with stable populations where you can get most anywhere in 10-15 minutes and you don't experience wild booms and equally wild busts. Climate change is already mitigating the sting of winter. In 20 years upstate NY may have the climate of Maryland today, and then they will be quite bearable.
The other option is to open up to significantly higher immigration. As long as it is done through legal means, this can work as well. Although some will cry about competing with such an influx of labor, I maintain that we are competing with that labor anyway in the world market. Furthermore, immigrants found businesses (at a higher rate than native-born citizens, particularly if you choose them well) and hire both fellow immigrants and native-born workers. This influx of immigrants, mostly younger, would keep Social Security solvent and fill up the excess housing inventory rather quickly.
Those, it seems to me are the choices. The credit crisis (and the war, Allen) will pass, but demographics will live on. I'd be interested in people's thoughts on this.
Hi
Brian
When an economy first starts turning down, employers first reduce overtime, then regular hours, and finally lay people off when they've been convinced business isn't getting better.
My employeer is starting the 1st part now, 30% will become part time with no benfits. Good call, the others not count are everyone in the trades from across the border that have now gone home and in Calif. I'm sure that's a pretty large number.
jo6pac
The civilian participation rate in the U.S. may have reached a permanent peak of around 67% or so. It is possible we will not see that rate again in our lifetimes, and the long-term average going forward may be closer to 60-62%.
But there is another secular trend that could have an even greater drag on GDP trend growth. That is the necessity to rebuild U.S. personal savings in an era of slower growth and tigher credit. If the personal savings rate over the next 10-20 years goes from basically zero back up to about 5% or so (replenishing the reservoir), we could be looking at long-term U.S. GDP trend growth of about zero to 1% annually.
It's hard to know if Bernanke can't see this or just can't say it. Maybe Fed actions going forward will tell.
On a further note, GE just reported a very nice Q4, as did Johnson Controls GE's infrastructure division is doing great and they are hiring hundreds of engineers. China, India etc. have long-term plans (something the US doesn't seem to know about) to become world powers. While their growth may slow as a result of a US recession, they are not going to let that stand in the way of their objective.
Perhaps we are seeing a shift of capital from non-productive sectors like housing and its associated financial shenanigans into sectors that actually produce things. If so, then this episode will be a long-term positive. You heard it here first.
There are 2 aspects of the "jobless growth" recovery that are important IMO.
1) this last recovery led to significant increase in GDP, but it was concentrated at the top. a lot of corporations made record earnings, yet decided NOT to rehire... instead record bonuses to executives and outsourcing. Thus, I would argue this was a really lean recovery in terms of job growth. Not sure if this means the corps are running lean and will have little in the way of cuts or not though.
2) part of the lack of job growth related to GDP can be summed up in the TYPE of buisnesses that have thrived. Some of the new "big" businesses need very few employees compared to traditional big business. For example: Skype employes only a few hundred employees I would guess, whereas their competitor AT&T employs 10's of thousands. or contrast google to another ad-sponsored business like TV...
google employs just over 10k people I think. How many does NBC-Universal employ? way more than that. not to mention the ancillary employment (writers, actors, support staff, "hollywood" etc)
anyway, we've had a structural change where larger GDP can come from fewer people, and that GDP is concentrated with fewer people as well. This contributes to the jobless recovery.
going forward, I'm not sure if that will translate into lower job losses or not.
This looks a bit like the whatchamacallit of small differences. If Krugman is right about the duration of the slowdown, Bernanke is still right in urging Congress to adopt policies that will take effect very quickly. There is time to do more later. There is no guarantee that more will be done, of course, but as a tactical matter, getting in the way a boost in the next 12 months is a mistake.
There is a very good chance that Krugman have fundamentally different views of the right approach to policy. Krugman's best known thinking about recent economic cycles is pure reflationism. Bernanke is in charge of keeping inflation contained over the medium and long-term. That difference, however, matters most at toward the other end of this process, and that is where Krugman puts his focus. Right now, we just need to get this crate off the ground.
I learned on Larry Kudlow the other night (first time I watched) that "poor and middle class people use most of a tax rebate to pay down credit cards. We should give a tax refund to the rich. At least they spend it."
I also learned that educated people who make data based analyses that lead them to believe the US economy may be heading to a recession can be summarily dismissed as "Recessionistas".
Larry Kudlow did not mention the cummulative federal, states and municipal debt and budgetary trends. Therefore, those must be irrelevant.
There are structural problems today that must be fixed. Prices of homes are way out the historical range, personal debt and credit card debt are not in sustainable ranges, home equity is gone, we have not yet made structural adjustments to the new level of energy prices, middle class purchasing power has shifted relative to wealthier classes. My feeling is that these will be corrected by force of reality - either quickly and painfully in 2 or 3 years or slowly in painfully in 8 to 10 years. I think a short term stimulus like a tax rebate moves the solution from short term to long term, but I don't see any way that it fundamentally addresses any of those problems.
Those, it seems to me are the choices. The credit crisis (and the war, Allen) will pass, but demographics will live on. I'd be interested in people's thoughts on this.
Aheadofthecurve,
In addition to the decline in the civilian participation rate (Baby Boomers, etc.) and an increase in the personal savings rate, a third factor that favors slower long-term U.S. GDP growth is the need to replenish public coffers with higher taxes and lower govt. spending. Winding down the Iraq/Afghanistan wars will help (and create a multi-year drag on GDP), but it will take much more. Govt. will have to shrink while all types of govt. revenues, from tolls to payroll taxes, will have to rise.
I had a interesting conversation with a cousin over the holidays. His corp just moved a huge mfg operation back from China. The bad news in this ?? They took a extensive assembly line and fully automated it including most warehousing functions. I understood they ran the line only 6-8 hrs a day with 10 people and produced what damn near 120 used to. He told me they could almost TRIPLE output by hiring another 10-15 people. If they economy slows??? You just run the line less hours...
The fun of automation as computing power gets cheaper and cheaper.
agreed. I often watch "modern marvels" and am constantly amazed at how few people man some of the largest plants in our country. Sometimes it's as few as 5-10 people who man a factory that makes 10's of thousands of "product" per day.
what comes to mind is how few people it takes to run a twinkie factory!
an a side note: it is also one of the reasons that our mass outsourcing can be such a problem. Because once we lose the information on how to run a big operation it takes a LONGGG time to re-learn said information.
I've long thought that one of the many reasons that China allows us to trade with them with despite the huge imbalances is that we've basically given them decades of industrial information.
Shoot...One of the wildest things mentioned to me about moving the operation back...Steel was actually cheaper in the US !!! Also the logistics of moving short inventory/quick turn items to points in the country where needed.
One point I would make, the employment population ratio fell a great deal after the peak 2000, but that peak was at a really absurd time. Between the general business boom, the dot-com boom, the wider tech-boom, and all the hiring to fix feared Y2K bugs, anyone who knew how to plug in a PC was guaranteed employment. My brother is a network engineer and he was getting a couple calls a week from headhunters. Then a year or two later, he was happy to have a job.
Anyways, leave out that boom and the ratio may have just plateaued, rather than peaked.
Chris,
10 years ago I was auditing Mfg companies. In the US and Western Europe, I was surprised at these big plants with half empty parking lots. I guess those parking lots are 3/4 empty now?
One incredibly well run company would pay 20% of first year savings on any ideas from employees. One employee designed a tool that replaced 5 workers. In this case it was good news because they were taking so much marketshare from overseas, that the 5 others were quickly absorbed elsewhere. Of course at the macro level, someone lost their job.
OT
I spoke with a friend of mine in DC. Hadn't spoken to her in a while and she told me that she was looking to buy a place. I told her that I thought that was an incredibly bad idea at this time (usual reasons foreclosures, ARM resets, etc.)...She is
I've been coming here a while and even posted a few times. But what I was hoping for would be a link to a particularly good article I could send to her to try to convince her that she should seriously consider waiting at least another year (probably 2, 3 or 4 would be better)...
the high number of US humans in prison, who are NOT counted as unemployed, 2.5% million of them
With all due respect, some percentage of those prisoners are employed. I can think of several examples...
The local state prison (males, 18-24, medium security) sends out work crews daily that do various tasks in the community (lawn care at the courthouse, sorting recyclables, road repair, trash pickup, etc)
Federal prisons have work programs internallly (iirc, furniture for government offices, some clothing, etc).
Prisoners who are near release date from the BOP are sent to special facilities where they can check-out, do a days work, then return for the night. I call this one a half-way house.
They are not all employed, but a sizable number are doing work that would have to be done by someone else if the prisoners were not doing it.
Long time reader, first time poster; renter unwilling to pull the trigger three years ago because the value just didn't seem to be there. Three kids later, I'm sure hoping i can find a value soon....
I'm not nearly as wonky on these topics as a lot of these posters, but I finally got a chance to see a snippet of BB's testimony late last night. Scared the crap out of me - is it just me, or did he age ten years since this summer? He seemed to have a quaver in his voice and looked like he was self medicating the night before he arrived on the hill.
Here's my guess about the markets and the economy. We are entering a recession and the market will go down another 10-20% in the first quarter. During election years, the stock market almost always recovers during the fall and economic indicators will be looking up some by then. However, the first year of the presidential cycle is usually the worst for the stock market, and it's the time when the Fed is unlikely to help. I think that we may then start another leg down in 2009, especially since foreclosures will still be increasing, unemployment and commercial RE may still be bad. Perhaps worries about inflation and energy will come to the fore again next year. Just a guess, in part based on the presidential cycle in the economy and stock market.
using a nice suburban house as an ATM means one spouse can take some time out of the workforce ... Would this explain the decline in population-work ratio?
Not just the wife.
Well known in silicon valley that older progarmers don't die they just become landlords if they have mutltiple dwellings or they live of the house if they don't.
When the money runs out 9so far it did not) sell the house and move to the foothills.
Through the quarter-century in which China has been opening to world trade, Chinese leaders have deliberately held down living standards for their own people and propped them up in the United States. This is the real meaning of the vast trade surplus$1.4 trillion and counting, going up by about $1 billion per daythat the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) Peoples Republic of China. Like so many imbalances in economics, this one cant go on indefinitely, and therefore wont. But the way it endssuddenly versus gradually, for predictable reasons versus during a panicwill make an enormous difference to the U.S. and Chinese economies over the next few years, to say nothing of bystanders in Europe and elsewhere.
Any economist will say that Americans have been living better than they shouldwhich is by definition the case when a nations total consumption is greater than its total production, as Americas now is.
Without Chinas billion dollars a day, the United States could not keep its economy stable or spare the dollar from collapse.
Would the Chinese use that weapon? The reasonable answer is no, because they would wound themselves grievously, too. Their years of national savings are held in the same dollars that would be ruined; in a panic, theyd get only a small share out before the value fell. Besides, their factories depend on customers with dollars to spend.
But that reassuring answer is actually frightening. Lawrence Summers calls todays arrangement the balance of financial terror, and says that it is flawed in the same way that the mutually assured destruction of the Cold War era was. That doctrine held that neither the United States nor the Soviet Union would dare use its nuclear weapons against the other, since it would be destroyed in return. With allowances for hyperbole, something similar applies to the dollar standoff. China cant afford to stop feeding dollars to Americans, because Chinas own dollar holdings would be devastated if it did. As long as that logic holds, the system works. As soon as it doesnt, we have a big problem.
What might poke a giant hole in that logic? Not necessarily a titanic struggle over the future of Taiwan. A simple mistake, for one thing. Another speech by Cheng Siweiperhaps in response to a provocation by Lou Dobbs. A rumor that the oil economies are moving out of dollars for good, setting their prices in euros. Leaked suggestions that the Chinese government is hoping to buy Intel, leading to angry denunciations on the Capitol floor, leading to news that the Chinese will sit out the next Treasury auction. As many world tragedies have been caused by miscalculation as b
What might poke a giant hole in that logic? Not necessarily a titanic struggle over the future of Taiwan. A simple mistake, for one thing. Another speech by Cheng Siweiperhaps in response to a provocation by Lou Dobbs. A rumor that the oil economies are moving out of dollars for good, setting their prices in euros. Leaked suggestions that the Chinese government is hoping to buy Intel, leading to angry denunciations on the Capitol floor, leading to news that the Chinese will sit out the next Treasury auction. As many world tragedies have been caused by miscalculation as by malice.
Well, to jump to a totally unrelated subject,anybody gonna watch Barrett Jackson on Speed channel this weekend ?? The last couple of years 60's muscle cars have been bought at, frankly, insane prices. People who follow cars closely can probably relate it to the Ferrari bubble in the late 80's. I am going to guess some of the HELOC/house atm money is leaving the market.
Some cars I am following closely.
1967 Shelby AC Cobra on Sat. One sold last year for 430k.
Couple of Boss 429's on Sat. 100 point concours cars brought 250k plus last year. See where these end up this year.
Frankly all the clone cars/boss/hemi/ss big blocks need to fall into the 20-40k range cause they ain't original cars. Last year damn near all were 6 figures...
Oh well,its supposed to rain here in Florida Saturday so might as well stay inside...
so inflation was bad because of wage/price spirals. what will happen with deflation? will we have wage/price spirals downwards?
were the Japanese known as 'savers' prior to their deflationary period from the 80's onwards? or did that come because they saw the economic writing on the wall, as well as were induced to 'why buy now what you can buy tomorrow for cheaper' ?
and finally, doesn't it make SOME rational economic sense to borrow and negative real interest rates to consume today? and then to leverage the "AAA" rating of the US Gov to borrow at the lowest, most negative real interest rates and feed in through the economy?
dc-As far as I recall, the Japanese saved large percentages of their incomes well before the 1990s, probably back to the late 1940s at least. Might have something to do with having your country devastated and occupied. The Germans save quite a bit too, while the Brits are deeper in debt than the Yanks.
This isn't necessarily Bernanke saying that a recession is guarenteed to be short, its him (THANK GOD) slamming the door on extending bush tax cuts or other such crap in the name of stimulus, and making sure that if it IS short, that whatever stimulus doesn't cause inflation problems (it could alwasy be reapplied if a recession proves longer).
Catching exerpts on the News Hour, he was very clear about targeting towards the poor or middle class or on business spending (write off equipment purchases immediately), which would actually do something in the short term, while that tax cuts for the rich would have almost no stimulative effect.
Far better than Greenspan, who couldn't say "Two plus two equals four" without a massive dose of equivocating.
MBIA Expresses surpise
ARMONK, N.Y.--(BUSINESS WIRE)--MBIA Inc. (NYSE: MBI - News) announced that Moodys Investors Service yesterday placed the Aaa insurance financial strength ratings of MBIA Insurance Corporation (MBIA or the Insurance Company) and its insurance affiliates, the Aa2 ratings of its newly issued Surplus Notes, and the Aa3 ratings of the junior obligations of the Insurance Company and the senior debt of MBIA Inc. on review for possible downgrade.
MBIA said that it was surprised by Moodys action in light of the rating agencys recent public statements on the Companys capital plan and last weeks Aa2 rating of the Surplus Notes. MBIA reaffirms its intention to continue working towards stabilizing its Triple-A ratings from all three rating agencies and addressing Moodys remaining concerns.
Look for a double dip(or maybe more) recession that will drag on for some time(years). This country currently has little value add to the rest of the world. The only thing we have been good at lately is consumption. Consumption fueled by credit. The rest of the world is actively cutting up our cards. We may once again have to stop bullying everyone for their lunch, and start being a contributing member of the world society and it's going to take time to develop something(s) that the rest of the world will be interested in buying.
Referencing the Employment-Population historical chart in this post
In 1975 the Equal Credit Opportunity Act was passed. Among other reforms, it required that the earnings of both spouses be considered by a lender to determine the amount of mortgage that the couple was eligible for. Up to that time, lenders normally discounted the earnings of the wife in anticipation of her leaving the workforce to raise a family. This event triggered increased competition for home purchases, and initiated a demand that started to drive up prices.
Once the prices started climbing, other couples increasingly found it necessary for both spouses to work in order to compete for a home. Note on this graph how the Employment-Population ratio started to trend upward in the mid 1970s.
But now we are seeing that most of the couples who had this option have already done so; and as a result this curve is flattening out indicating we have reached a limit from this driving source.
The graying of the country is likely to continue to apply pressure to bring this ratio down in the future.
PS Its interesting that we are being told, on the one hand, that we will have to work to an older age than in the past (quite reasonable considering life-span increases) and on the other hand companies are often encouraging early retirement.
Cobra - I haven't gone to the big auction yet, but did hit a couple of the smaller ones around town this week. Top of the line stuff seems down a little, but the knockoffs and not so collectable stuff are way down. Saw one car where the auctioneer tried to start budding at $6000, and the car ended up selling for $2500. Some of them were so cheap I considered an impulse buy. The only thing that stopped me is that it will be even cheaper next year.
Personal anectdote: this is a horrible time to be a headhunter. I'm back to the 1979 and 1990 imbalance: excess candidates and search assignment drought. It's been worsening since last summer with no sign of a turn around.
2016 should be a pretty good year, but I'll be nailing the plywood on the windows long before.
I was so going to suggest pushing the $8k into the tulip market.
Everyone knows that tulips only ever go up!
(Actually, to maximize return, you want to get into indexed tulip futures. More bang for your buck.)
Bernanke's point was expressed poorly, but it is sound. And Krugan's criticism of it is much more beside the point than factually wrong.
Monetary policy operates with a lag and therefore must be based on forecasts. Inevitably, such forecasts occasionally go awry. For example, six to twelve months ago, the Fed had what the Fed now recognizes as an overly upbeat view of demand growth prospects. So they implemented policy that has left us with insufficient demand in the economy RIGHT NOW. Therefore, they would like that missing demand to be restored with immediate fiscal stimulus.
But it makes no sense for them to ask for fiscal stimulus that would take effect in the intermediate to distant FUTURE.
Such fiscal stimulus might indeed prove valuable if the Fed were again to provide insufficient monetary stimulus in the immediate run. But there is no way that the Fed could know NOW that they were about to implement such a monetary policy error (again). If they knew, then they would change course, obviously.
Indeed, no central bank could ever have use for a far-dated fiscal stimulus unless it feared the arrival of liquidity trap, which would make monetary policy impotent. So for Krugman's point to be valid, he would have to establish that liquidity trap is likely.
Presumably, the odds of a liquidity trap are not really related to the historical path of the employment/population ratio. So that statistic is irrelevant to the debate at hand, even if it is properly measured, which I guess it is roughly.
If BB thinks we're going to come out of recession so fast that a stimulus package has to be quick else we'll already be back to growing the economy before it has effect, why do we need a stimulus package at all?
clearly this is a function of technology and globalization as companies scramble to secure profitability in an ever increasing margin pressure world...I think this is reflecte dint he increasing globalization and free trade backlash.
I learned on Larry Kudlow the other night (first time I watched) that "poor and middle class people use most of a tax rebate to pay down credit cards. We should give a tax refund to the rich. At least they spend it."
Has anyone actually ever learned anything by watching Kudlow, other than that Kudlow gives the GOP a free commercial for five hours a week?
Big ?
Shoot me an e-mail and I will send you a few of my strategy reports which address these questions (by the way same offer goes for any regular poster here). I write them monthly and they generally run 18-20 pages, lots of graphs, although you have probably seen many of them since CR is my #1 Graph source (closely followed by the St. Louis Fed)
Well, to jump to a totally unrelated subject,anybody gonna watch Barrett Jackson on Speed channel this weekend ?? The last couple of years 60's muscle cars have been bought at, frankly, insane prices. People who follow cars closely can probably relate it to the Ferrari bubble in the late 80's. I am going to guess some of the HELOC/house atm money is leaving the market.
Chris
Cobradriver | 01.18.08 - 9:35 am | #
I've been going for years and will be attending tomorrow.
B-J upped the price of tickets yet again to $60, from $50 last year. It's always packed though. I think he did it just as much for crowd control as the money.
It will be interesting to see if money is leaving the market. With as high as prices are they seem to be past even the richest of the HELOC crowd.
I think that we may then start another leg down in 2009, especially since foreclosures will still be increasing, unemployment and commercial RE may still be bad.Tactical Flashlights r c helicopter video game
bring on the free money! bring it!
wait, thats what got us into this mess....
my okie oil and gas buddies are doing well. pumping oil 60 bpd from a new well that took five days to drill at 50K a day. they say they are gonna keep on till they hit a dry one.
coasts versus flyover? I'm hoping that coastal contagion don't spread!
Well, having been layed off in 1986 and again in 2005 at age 53 after 37 years of loyal work at a salary that never exceeded $80,000 I have no comment.
The bummer for the EU, IF they are in a similar situation is their lack of a federal government mechanism for giving out free money. Actually maybe the EU is lucky to not have a bunch of shills getting ready to inject 'stimulus' into a geographically wide region. Spain is not Norway, and Sweden is not Romania. Here in the States, its similar where a broad brush approach is confused in effect at least.
He(Krugman) did use BLS unemployment numbers didn't he? I hate shits like him - he plays the big con, the Cramer and Kudlows of the world play the little con.
The picture of unemployment in this country is incredibly falsified( just like inflation). Europe does a much more honest count. (Data available if queried)
Once again, Mr Krugman plays the big con. By pretending to query he validates a whole set of data that, if one took a more robust, folksy, honest style of cross-validation, say in the style of Studs Terkel or Walter Gunther, one would see it for the bs that it is and actually once one added back in a variety of adjustments, it would show a far more horrendous picture.
I don't know why he does it. Actually, yes I do.
-K
Not only is sk incomprehensible his/her link doesn't work. With bold assertions like these and insults to an honest critic like Krugman one would hope there was supporting data available.
Not only is sk incomprehensible his/her link doesn't work. With bold assertions like these and insults to an honest critic like Krugman one would hope there was supporting data available.
godihatejargon
You comprehend enough to respond. Cool. A start point is the high number of US humans in prison, who are NOT counted as unemployed, 2.5% million of them
Bureau of Justice Statistics Prison Statistics.
For a US based comparative study check out the Boston Fed's paper:
http://www.bos.frb.org/economic/ppb/2006/ppb062.pdf
What got your goat ? He's a buddy is he ? Lucky him. Er.. maybe its the fact that these pseudo-liberal scams get exposed and you feel queasy ?
As regards the link, well its to avoid disruptive behavior at my site which is actually all about predictive analytics - very modern math - that I've pulled it. But thank you for trying to visit. If you are really interested in the esoterics of predicting weather using stochastic methods let me know. I'll give you the link.
-K
i greatly admire krugman but the big con here is at work... unemployment metrics have been adjusted and make trend line comparisons overly optimistic per se... without the quality of employment (factoring in real wages, PPP, and health/retirement benefits) being considered, the graph becomes the big co
The reason that the decline in the employment/population ratio for the last two recessions started earlier and ended later, when compared to previous recessions, is due to the distortion in the CPI.
The BLS radically changed the method for calculating CPI in the early 80s, such as utilizing hedonic adjustments and substitutions. This has had the effect of understating CPI. Since CPI is subtracted from nominal GDP growth, this has the effect of "narrowing" the recession window.
I cannot stress this point enough: The CPI numbers published by the BLS do not reflect reality. The cost of living for the last few years has risen significantly more than the 3-4 percent per annum rate that is published by the BLS. Price inflation must be subtracted from nominal GDP growth.
Indeed, many people feel that the economy has been in recession for a while now. This is not a coincidence.
Using John Williams' data for GPD annual growth
will solve this employment/population ratio "conundrum".
sk, "the big con" is just sloppy, not too careful or thoughtful...a cheap shot from someone who knows better.
Krugman is not lending credence to that unemployment rate that excludes "2.5%M" criminals...he's comparing figures gathered by the world's largest and arguably best labor statisticians over the last decade. [The BLS didn't include criminals then and it doesn't now.] He discovers the official recession in 2001 was not really 9 months short, but looking at the E/P ratio about twice that long in terms of employment.
You could exercise yourself if you must poke PK by drawing attention to the kind of jobs that grew out of that recession...(hundreds of thousands of RE jobs) that he ignores in order to make a smaller point: the recession is not likely going to be as short as some officials (BB seems to be one) think.
I recently looked at records of a home in the Ca Sierra Nevada foothills. quite remote location
sold 96 $89K
Sold 12/02 $120K
Top Zillow estimate (mid 2005) at $374K
It is now in forclosure:
Loan amount $404K
current market value estiamted in $220K
PS I don't know what the LTV was at time of loan but let me guess it was a conservative 80% so home was appriased at $500K.
so when you read all those bank with low LTV on their books keep this in mind...
What happened to the printing press from Japan that was on high speed and printing off free money for everyone in the world; where did it go, where is the free money? I know that NAR wants 40 year mortgages with zero down, which is kinda like free money, but if we are to get a real fiscal stimulus package, it would include another tsunami wave of free (unlimited) Yen, 40 year loans, zero down, more of the no-doc, no-ask/no-tell mortgages and free SUVs with every SIV and or CDO, and toss in a golden parachutes and AAA ratings with no government oversight, regulation, rules, conditions or verification of any collateral, cause we need to get this all out in the open and have the integrity and honesty to admit that we will forgive debt and we will be brothers and sisters in arms and connect our vision of prosperity to the generations in the future who will pay for that which we have received.
Amen & God Bless America, & Paulson & Bernanke, Cheney, Bush, The Senate, Congress, DOL, DOJ, SEC, FBI, NAR, BOJ, C, FNM, MCO and the thousands of little banks that make up the heart and soul of all the land developers and lenders that help make The American Dream a Global commodity...
Anecdotally, using a nice suburban house as an ATM means one spouse can take some time out of the workforce and do good, unpaying things in the community -- why go back to work? Would this explain the decline in population-work ratio?
This feeds back into real estate of course. The reasonable multiple of income that the house market must return to (and maybe overshoot on the downside) will be multiplying a lower income number. Add in shrinkage of Baby Boomer households (Quote from OC realtor several days ago: "Baby boomers are done buying.") and this just goes on and on. Glad WaMu thinks their "prime" loans are ok! They were qualified on the teaser rates, for god's sake, if they were qualified at all.
Krugman isn't using the unemployment numbers (which are indeed less accurate/comprehensive than the comparable European stats). He is using the ratio of exployed workers versus total population.
I'm not sure how the graph is being construed to have any relevance to CPI, GDP, wages, or Mom's apple pie recipe. It's a chart of one statistic. If you want to tell a story about how the middle class is being pinched by declining real wages, reductions in benefits, and declining employment, then I hope you have 3 graphs to show me (real median wages, Percentage of workers covered by employer benefits, and labor force participation), not some one chart with some problematic aggregation/conflation of several statistics you came up with on your own.
In any case the reason Krugman is using the statistic and chart to point out that is takes some time for employment to recover after a recession has officially ended. Indeed, we still had't completely recovered from the last one when the participation ratio started back down.
Hey Tanta & CR, et al,
Anyone paying attention to Florida and the liquidity problem which has morphed into some new magic thing? I dont understand this and wonder if anyone can explain what happened:
Re: BlackRock is the New York-based investment firm overseeing investments on an interim basis while the SBA conducts a formal evaluation to appoint a permanent fund manager.
"We are pleased with the improved liquidity we've been able to achieve this month, and will release new liquidity rules -- an increase from the current 15 percent to close to 40 percent -- during the week of January 14," he said. "We are very focused on rebuilding investor confidence in the fund."
Seeking Aplha reports that CME housing futures currently predict that the Case-Shiller HPI will bottom in November 2010 at 21% below peak. That seems to suggest that housing prices would bottom at the level prevailing in early 2004, at which time the price/rental ratio was about 1.2 - well above the historical average. Is my logic flawed or this bottom call unrealistic? Shouldn't prices fall a lot more than that to revert to mean?
Housing Prices Expected to Bottom in 2010, 21% Off '06 Highs -- Seeking Alpha
I'd check those futures in about 3 months after the index has caught up with the end of the year drop. Case/schiller is only showing up to October and the Alt-A/Jumbo blowup was just filtering in.
You can get an idea for November here:
Historical Data
Radarlogic tries to post daily matched pair data (2 months delayed) and so they are bit ahead of the Case/Schiller releases.
Actually there seem to me to be two OT main points implied here. First, this "recovery" has had the lowest rate of job creation in the post-war period. Which explains why voters have been so dissatisfied and uneasy to a large extent. If you look at new job creation this is consistent with CR's analysis.
Second, if you take 150K jobs/month as the "figure of merit" for breakeven then net net we haven't really made any progress since 1980 and cumulatively are still about 2.5M+ jobs "in the hole". This last recovery was weak and non-organic, the Fed is forecasting weak growth thru '10 and that plus this assessment indicates that it will be a long, slow and painful psudeo-recovery AT BEST. For some graphics using standard BLS (who indeed are very good at their jobs and who's data is readily applicable and interpretable when you look at trends and patterns, e.g. YOY% changes) try a not to aged post: http://tinyurl.com/2rno9w
Believe it supports CR's assessment using a different but complementary take on employment.
More snaky smarmy spin from Ben and the MOT. The assumption was several short month ago that recession was remote. Then , it went to subcrime only. Then contagion control. Then it went to subprime fallout into the real economy- credit crunch. Then suddenly bank insolvency appeared. Then it went to real slower growth worldwide. Now its recognition of a recession and lo and behold ; don't worry as it will only be short. Buy this latest lot and you do deserve to suffer.
They were spinning and lying then as they are now. This recession will end up making the '81-82 deal look tame by comparison and a lot more harmful. Its awful effects (forget the textbook based academic drivvle being spewed out)on average families will not begin to subside for at least 2 years - end 2009 at the very earliest.
Ben's assumption also is that the dollar remains a currency of even minimal value. Well, he may be in for yet another surprise there as well, as it heads for peso status.
But hey, he's a smart guy right? he knows what he's doing.....
There is always a lag between the economy's upturned/downturn and employment. When an economy first starts turning down, employers first reduce overtime, then regular hours, and finally lay people off when they've been convinced business isn't getting better. Likewise, an upturn, first output is increased as business picks up. Next comes over time, finally come new employees.
I am interested in knowing from which statistic on unemployment Krugman is relying. I would hazard a guess that it is the establishment survey, rather than the household survey. If so, that would explain at least part of his findings. The establishment survey, because of its birth/death assumption, underestimates job loss at the beginning of a recession, as well as job gains at the beginning of a recovery.
Our current data illustrates this. The household survey has resulted in the unemployment rate going from 4.4% to 5% in the last year. Meanwhile, the establishment survey showed a net new job gain of 1.3 million in the last year. In times of relative equilibrium in the economy, trust the establishment survey; times like now, look to the household survey.
I cannot recommend strongly enough the article by Megan McArdle in this month's Atlantic on the effect aging boomers are having and will continue to have on virtually every aspect of life. She makes the point that economic growth is largely a function of labor force growth and productivity increases. As the population ages, the labor force will inevitably stop growing and perhaps even shrink. As more of those working are involved in caring for the elderly, productivity gains will be dampened, since technology can't really shorten the time needed to feed or bathe an older person.
One option is simply to make our peace with a slower growing economy. McArdle constructs her article around a vist to her family in Newark, NY, near Buffalo. She points out, rightly, that depite the fact that that area has been depressed for decades, life for those left behind there is actually quite pleasant. I live in upstate NY, though a much less depressed part of it, and would second that idea. Booming areas are often traffic-choked over-priced hells compared to areas with stable populations where you can get most anywhere in 10-15 minutes and you don't experience wild booms and equally wild busts. Climate change is already mitigating the sting of winter. In 20 years upstate NY may have the climate of Maryland today, and then they will be quite bearable.
The other option is to open up to significantly higher immigration. As long as it is done through legal means, this can work as well. Although some will cry about competing with such an influx of labor, I maintain that we are competing with that labor anyway in the world market. Furthermore, immigrants found businesses (at a higher rate than native-born citizens, particularly if you choose them well) and hire both fellow immigrants and native-born workers. This influx of immigrants, mostly younger, would keep Social Security solvent and fill up the excess housing inventory rather quickly.
Those, it seems to me are the choices. The credit crisis (and the war, Allen) will pass, but demographics will live on. I'd be interested in people's thoughts on this.
Hi
Brian
When an economy first starts turning down, employers first reduce overtime, then regular hours, and finally lay people off when they've been convinced business isn't getting better.
My employeer is starting the 1st part now, 30% will become part time with no benfits. Good call, the others not count are everyone in the trades from across the border that have now gone home and in Calif. I'm sure that's a pretty large number.
jo6pac
cal | 01.18.08 - 4:54 am |
Thanks!
CR,
The civilian participation rate in the U.S. may have reached a permanent peak of around 67% or so. It is possible we will not see that rate again in our lifetimes, and the long-term average going forward may be closer to 60-62%.
But there is another secular trend that could have an even greater drag on GDP trend growth. That is the necessity to rebuild U.S. personal savings in an era of slower growth and tigher credit. If the personal savings rate over the next 10-20 years goes from basically zero back up to about 5% or so (replenishing the reservoir), we could be looking at long-term U.S. GDP trend growth of about zero to 1% annually.
It's hard to know if Bernanke can't see this or just can't say it. Maybe Fed actions going forward will tell.
On a further note, GE just reported a very nice Q4, as did Johnson Controls GE's infrastructure division is doing great and they are hiring hundreds of engineers. China, India etc. have long-term plans (something the US doesn't seem to know about) to become world powers. While their growth may slow as a result of a US recession, they are not going to let that stand in the way of their objective.
Perhaps we are seeing a shift of capital from non-productive sectors like housing and its associated financial shenanigans into sectors that actually produce things. If so, then this episode will be a long-term positive. You heard it here first.
There are 2 aspects of the "jobless growth" recovery that are important IMO.
1) this last recovery led to significant increase in GDP, but it was concentrated at the top. a lot of corporations made record earnings, yet decided NOT to rehire... instead record bonuses to executives and outsourcing. Thus, I would argue this was a really lean recovery in terms of job growth. Not sure if this means the corps are running lean and will have little in the way of cuts or not though.
2) part of the lack of job growth related to GDP can be summed up in the TYPE of buisnesses that have thrived. Some of the new "big" businesses need very few employees compared to traditional big business. For example: Skype employes only a few hundred employees I would guess, whereas their competitor AT&T employs 10's of thousands. or contrast google to another ad-sponsored business like TV...
google employs just over 10k people I think. How many does NBC-Universal employ? way more than that. not to mention the ancillary employment (writers, actors, support staff, "hollywood" etc)
anyway, we've had a structural change where larger GDP can come from fewer people, and that GDP is concentrated with fewer people as well. This contributes to the jobless recovery.
going forward, I'm not sure if that will translate into lower job losses or not.
This looks a bit like the whatchamacallit of small differences. If Krugman is right about the duration of the slowdown, Bernanke is still right in urging Congress to adopt policies that will take effect very quickly. There is time to do more later. There is no guarantee that more will be done, of course, but as a tactical matter, getting in the way a boost in the next 12 months is a mistake.
There is a very good chance that Krugman have fundamentally different views of the right approach to policy. Krugman's best known thinking about recent economic cycles is pure reflationism. Bernanke is in charge of keeping inflation contained over the medium and long-term. That difference, however, matters most at toward the other end of this process, and that is where Krugman puts his focus. Right now, we just need to get this crate off the ground.
I learned on Larry Kudlow the other night (first time I watched) that "poor and middle class people use most of a tax rebate to pay down credit cards. We should give a tax refund to the rich. At least they spend it."
I also learned that educated people who make data based analyses that lead them to believe the US economy may be heading to a recession can be summarily dismissed as "Recessionistas".
Larry Kudlow did not mention the cummulative federal, states and municipal debt and budgetary trends. Therefore, those must be irrelevant.
There are structural problems today that must be fixed. Prices of homes are way out the historical range, personal debt and credit card debt are not in sustainable ranges, home equity is gone, we have not yet made structural adjustments to the new level of energy prices, middle class purchasing power has shifted relative to wealthier classes. My feeling is that these will be corrected by force of reality - either quickly and painfully in 2 or 3 years or slowly in painfully in 8 to 10 years. I think a short term stimulus like a tax rebate moves the solution from short term to long term, but I don't see any way that it fundamentally addresses any of those problems.
Aheadofthecurve,
In addition to the decline in the civilian participation rate (Baby Boomers, etc.) and an increase in the personal savings rate, a third factor that favors slower long-term U.S. GDP growth is the need to replenish public coffers with higher taxes and lower govt. spending. Winding down the Iraq/Afghanistan wars will help (and create a multi-year drag on GDP), but it will take much more. Govt. will have to shrink while all types of govt. revenues, from tolls to payroll taxes, will have to rise.
Yearning to Learn | 01.18.08 - 7:50 am |
I had a interesting conversation with a cousin over the holidays. His corp just moved a huge mfg operation back from China. The bad news in this ?? They took a extensive assembly line and fully automated it including most warehousing functions. I understood they ran the line only 6-8 hrs a day with 10 people and produced what damn near 120 used to. He told me they could almost TRIPLE output by hiring another 10-15 people. If they economy slows??? You just run the line less hours...
The fun of automation as computing power gets cheaper and cheaper.
Chris
Chris:
agreed. I often watch "modern marvels" and am constantly amazed at how few people man some of the largest plants in our country. Sometimes it's as few as 5-10 people who man a factory that makes 10's of thousands of "product" per day.
what comes to mind is how few people it takes to run a twinkie factory!
an a side note: it is also one of the reasons that our mass outsourcing can be such a problem. Because once we lose the information on how to run a big operation it takes a LONGGG time to re-learn said information.
I've long thought that one of the many reasons that China allows us to trade with them with despite the huge imbalances is that we've basically given them decades of industrial information.
and before conjure bag gets hungry...
I hadn't had a Twinkie in over 25 years. After the modern marvels episode I went out and bought one.
I hadn't realized how dense and buttery they were.
definitely not for me. But I'm sure Conjure could appreciate it, as a dessert of course after a good meal of Cheval a la francais.
ask not what your country can do for you, but what your country can do for wall street/walmart
Yearning to learn | 01.18.08 - 8:34 am |
Shoot...One of the wildest things mentioned to me about moving the operation back...Steel was actually cheaper in the US !!! Also the logistics of moving short inventory/quick turn items to points in the country where needed.
Chris
One point I would make, the employment population ratio fell a great deal after the peak 2000, but that peak was at a really absurd time. Between the general business boom, the dot-com boom, the wider tech-boom, and all the hiring to fix feared Y2K bugs, anyone who knew how to plug in a PC was guaranteed employment. My brother is a network engineer and he was getting a couple calls a week from headhunters. Then a year or two later, he was happy to have a job.
Anyways, leave out that boom and the ratio may have just plateaued, rather than peaked.
Chris,
10 years ago I was auditing Mfg companies. In the US and Western Europe, I was surprised at these big plants with half empty parking lots. I guess those parking lots are 3/4 empty now?
One incredibly well run company would pay 20% of first year savings on any ideas from employees. One employee designed a tool that replaced 5 workers. In this case it was good news because they were taking so much marketshare from overseas, that the 5 others were quickly absorbed elsewhere. Of course at the macro level, someone lost their job.
OT
I spoke with a friend of mine in DC. Hadn't spoken to her in a while and she told me that she was looking to buy a place. I told her that I thought that was an incredibly bad idea at this time (usual reasons foreclosures, ARM resets, etc.)...She is
I've been coming here a while and even posted a few times. But what I was hoping for would be a link to a particularly good article I could send to her to try to convince her that she should seriously consider waiting at least another year (probably 2, 3 or 4 would be better)...
CR, hopefully you're using adult population up to age 65.
the high number of US humans in prison, who are NOT counted as unemployed, 2.5% million of them
With all due respect, some percentage of those prisoners are employed. I can think of several examples...
The local state prison (males, 18-24, medium security) sends out work crews daily that do various tasks in the community (lawn care at the courthouse, sorting recyclables, road repair, trash pickup, etc)
Federal prisons have work programs internallly (iirc, furniture for government offices, some clothing, etc).
Prisoners who are near release date from the BOP are sent to special facilities where they can check-out, do a days work, then return for the night. I call this one a half-way house.
They are not all employed, but a sizable number are doing work that would have to be done by someone else if the prisoners were not doing it.
Long time reader, first time poster; renter unwilling to pull the trigger three years ago because the value just didn't seem to be there. Three kids later, I'm sure hoping i can find a value soon....
I'm not nearly as wonky on these topics as a lot of these posters, but I finally got a chance to see a snippet of BB's testimony late last night. Scared the crap out of me - is it just me, or did he age ten years since this summer? He seemed to have a quaver in his voice and looked like he was self medicating the night before he arrived on the hill.
Here's my guess about the markets and the economy. We are entering a recession and the market will go down another 10-20% in the first quarter. During election years, the stock market almost always recovers during the fall and economic indicators will be looking up some by then. However, the first year of the presidential cycle is usually the worst for the stock market, and it's the time when the Fed is unlikely to help. I think that we may then start another leg down in 2009, especially since foreclosures will still be increasing, unemployment and commercial RE may still be bad. Perhaps worries about inflation and energy will come to the fore again next year. Just a guess, in part based on the presidential cycle in the economy and stock market.
using a nice suburban house as an ATM means one spouse can take some time out of the workforce ... Would this explain the decline in population-work ratio?
Not just the wife.
Well known in silicon valley that older progarmers don't die they just become landlords if they have mutltiple dwellings or they live of the house if they don't.
When the money runs out 9so far it did not) sell the house and move to the foothills.
Big ?
If the idea is to scare the bejeezus out of her, then Paul Kasriel's a possible choice. How is she with graphs and charts?
http://web-xp2a-pws.ntrs.com/content//media/attachment/data/econ_research/0712/document/ec121707.pdf
There is no real comprehension of the depth of the problem that had not been recognized as of a couple of months ago.
$150-$200 billion per quarter needs to be replaced.
Where will it come from?
Certainly not with a one-time $200 check.
Looking at male aged 25 to 54 employment to population ratio will give a better and more objective view of the work market evolution.
Burnside,
Great article, but probably too technical for her.
I do appreciate the article...
Big ?
How about just asking her to compare the cost of renting vs. buying in your market?
Schnaps,
She used to own her own place but sold it in order to buy a place for her parents to live in Connecticut. She's been renting the last couple of years.
Really one of the nicest people I've ever had the pleasure of meeting...
The $1.4 Trillion Question (What will China do with their massive US dollar holdings?)
The $1.4 Trillion Question - The Atlantic
(January/February 2008)
Through the quarter-century in which China has been opening to world trade, Chinese leaders have deliberately held down living standards for their own people and propped them up in the United States. This is the real meaning of the vast trade surplus$1.4 trillion and counting, going up by about $1 billion per daythat the Chinese government has mostly parked in U.S. Treasury notes. In effect, every person in the (rich) United States has over the past 10 years or so borrowed about $4,000 from someone in the (poor) Peoples Republic of China. Like so many imbalances in economics, this one cant go on indefinitely, and therefore wont. But the way it endssuddenly versus gradually, for predictable reasons versus during a panicwill make an enormous difference to the U.S. and Chinese economies over the next few years, to say nothing of bystanders in Europe and elsewhere.
Any economist will say that Americans have been living better than they shouldwhich is by definition the case when a nations total consumption is greater than its total production, as Americas now is.
Without Chinas billion dollars a day, the United States could not keep its economy stable or spare the dollar from collapse.
Would the Chinese use that weapon? The reasonable answer is no, because they would wound themselves grievously, too. Their years of national savings are held in the same dollars that would be ruined; in a panic, theyd get only a small share out before the value fell. Besides, their factories depend on customers with dollars to spend.
But that reassuring answer is actually frightening. Lawrence Summers calls todays arrangement the balance of financial terror, and says that it is flawed in the same way that the mutually assured destruction of the Cold War era was. That doctrine held that neither the United States nor the Soviet Union would dare use its nuclear weapons against the other, since it would be destroyed in return. With allowances for hyperbole, something similar applies to the dollar standoff. China cant afford to stop feeding dollars to Americans, because Chinas own dollar holdings would be devastated if it did. As long as that logic holds, the system works. As soon as it doesnt, we have a big problem.
What might poke a giant hole in that logic? Not necessarily a titanic struggle over the future of Taiwan. A simple mistake, for one thing. Another speech by Cheng Siweiperhaps in response to a provocation by Lou Dobbs. A rumor that the oil economies are moving out of dollars for good, setting their prices in euros. Leaked suggestions that the Chinese government is hoping to buy Intel, leading to angry denunciations on the Capitol floor, leading to news that the Chinese will sit out the next Treasury auction. As many world tragedies have been caused by miscalculation as b
What might poke a giant hole in that logic? Not necessarily a titanic struggle over the future of Taiwan. A simple mistake, for one thing. Another speech by Cheng Siweiperhaps in response to a provocation by Lou Dobbs. A rumor that the oil economies are moving out of dollars for good, setting their prices in euros. Leaked suggestions that the Chinese government is hoping to buy Intel, leading to angry denunciations on the Capitol floor, leading to news that the Chinese will sit out the next Treasury auction. As many world tragedies have been caused by miscalculation as by malice.
Or pent-up political tensions, on all sides.
Well, to jump to a totally unrelated subject,anybody gonna watch Barrett Jackson on Speed channel this weekend ?? The last couple of years 60's muscle cars have been bought at, frankly, insane prices. People who follow cars closely can probably relate it to the Ferrari bubble in the late 80's. I am going to guess some of the HELOC/house atm money is leaving the market.
Some cars I am following closely.
1967 Shelby AC Cobra on Sat. One sold last year for 430k.
Couple of Boss 429's on Sat. 100 point concours cars brought 250k plus last year. See where these end up this year.
Frankly all the clone cars/boss/hemi/ss big blocks need to fall into the 20-40k range cause they ain't original cars. Last year damn near all were 6 figures...
Oh well,its supposed to rain here in Florida Saturday so might as well stay inside...
Chris
Sorry but I have to
NEW BUSH COINS (Change For The Better)
hahahahah!! Best dam thing i have seen in a while...to funny.
Commercial Mortgage Alert headline today:
Spreads Blow Out to Record as Woes Mount
"Benchmark triple-A paper of recent vintage traded yesterday at about 125 bp over swaps - about 30 bp wider than the previous week"
perhaps OT but:
so inflation was bad because of wage/price spirals. what will happen with deflation? will we have wage/price spirals downwards?
were the Japanese known as 'savers' prior to their deflationary period from the 80's onwards? or did that come because they saw the economic writing on the wall, as well as were induced to 'why buy now what you can buy tomorrow for cheaper' ?
and finally, doesn't it make SOME rational economic sense to borrow and negative real interest rates to consume today? and then to leverage the "AAA" rating of the US Gov to borrow at the lowest, most negative real interest rates and feed in through the economy?
dc-As far as I recall, the Japanese saved large percentages of their incomes well before the 1990s, probably back to the late 1940s at least. Might have something to do with having your country devastated and occupied. The Germans save quite a bit too, while the Brits are deeper in debt than the Yanks.
CMBX-NA-AAA 1 - Dont stop going up and up.
sk,
Only time for top of the post. But very well said. WillT, also excellent point.
Now off to the bit mines.
Cheers,
This isn't necessarily Bernanke saying that a recession is guarenteed to be short, its him (THANK GOD) slamming the door on extending bush tax cuts or other such crap in the name of stimulus, and making sure that if it IS short, that whatever stimulus doesn't cause inflation problems (it could alwasy be reapplied if a recession proves longer).
Catching exerpts on the News Hour, he was very clear about targeting towards the poor or middle class or on business spending (write off equipment purchases immediately), which would actually do something in the short term, while that tax cuts for the rich would have almost no stimulative effect.
Far better than Greenspan, who couldn't say "Two plus two equals four" without a massive dose of equivocating.
MBIA Expresses surpise
ARMONK, N.Y.--(BUSINESS WIRE)--MBIA Inc. (NYSE: MBI - News) announced that Moodys Investors Service yesterday placed the Aaa insurance financial strength ratings of MBIA Insurance Corporation (MBIA or the Insurance Company) and its insurance affiliates, the Aa2 ratings of its newly issued Surplus Notes, and the Aa3 ratings of the junior obligations of the Insurance Company and the senior debt of MBIA Inc. on review for possible downgrade.
MBIA said that it was surprised by Moodys action in light of the rating agencys recent public statements on the Companys capital plan and last weeks Aa2 rating of the Surplus Notes. MBIA reaffirms its intention to continue working towards stabilizing its Triple-A ratings from all three rating agencies and addressing Moodys remaining concerns.
Wow!!!
MBIA tanking!
Look for a double dip(or maybe more) recession that will drag on for some time(years). This country currently has little value add to the rest of the world. The only thing we have been good at lately is consumption. Consumption fueled by credit. The rest of the world is actively cutting up our cards. We may once again have to stop bullying everyone for their lunch, and start being a contributing member of the world society and it's going to take time to develop something(s) that the rest of the world will be interested in buying.
Oh, this stimulus package is going to work, all right.
consumers are already thinking of how to spend their gov't cheese as quickly and frivolously as possible
if anyone can name a better invention than cheese, i'll eat my hat.
Waaaaaaaaaaaaaaaaay off topic @Cobradriver re: muscle cars.
Just out of curiosity, how much would a 1937 Willys Coupe with a 1968 Corvette engine go for? Anything? Is this even desirable to the collectors?
BTW thanks for the live reports from Fla.
Bacon dreamz:
Birth control.
Shnaps - Did you notice at the bottom of that article, there's only one comment so far?
"Buy Euros."
snicker Bravo to whichever CR'er that must have been.
Bacon dreamz:
The Payment-Option ARM?
/ducks
I am going to spend my $800 eating at Ruby Tuesday to see if I can help to keep them afloat a little while longer.
Frankly, I will have to use it to make estimated tax payments from the gains on positions I closed out moving into cash.
" if anyone can name a better invention than cheese, i'll eat my hat."
Bacon.
Bush - $800/taxpayer CASH REBATE! GREAT! I can have it direct deposited in my trading account to buy index PUTs!
In a deep hole and asking for a bigger shovel so the country can dig deeper faster.
Referencing the Employment-Population historical chart in this post
In 1975 the Equal Credit Opportunity Act was passed. Among other reforms, it required that the earnings of both spouses be considered by a lender to determine the amount of mortgage that the couple was eligible for. Up to that time, lenders normally discounted the earnings of the wife in anticipation of her leaving the workforce to raise a family. This event triggered increased competition for home purchases, and initiated a demand that started to drive up prices.
Once the prices started climbing, other couples increasingly found it necessary for both spouses to work in order to compete for a home. Note on this graph how the Employment-Population ratio started to trend upward in the mid 1970s.
But now we are seeing that most of the couples who had this option have already done so; and as a result this curve is flattening out indicating we have reached a limit from this driving source.
The graying of the country is likely to continue to apply pressure to bring this ratio down in the future.
PS Its interesting that we are being told, on the one hand, that we will have to work to an older age than in the past (quite reasonable considering life-span increases) and on the other hand companies are often encouraging early retirement.
"Bush - $800/taxpayer CASH REBATE!"
Another toke from the bong. I guess this must be the election-year-bong.
I give up. I'll just keep working on my financial bunker.
"After the 2001 recession, the ration declined until almost 2003, and for many people it seemed like the recession lingered for couple years."
Correct. That was until the Fed then proceeded to blow the bubbles of all bubbles. This recession will be nothing like 2001.
Unless we can convince people to buy tulips, I don't see another bubble anywhere in the foreseeable future.
Dreams
Shrub is saying "people should use the money for , umm, paying higher gas costs."
What a maroon.
Cobra - I haven't gone to the big auction yet, but did hit a couple of the smaller ones around town this week. Top of the line stuff seems down a little, but the knockoffs and not so collectable stuff are way down. Saw one car where the auctioneer tried to start budding at $6000, and the car ended up selling for $2500. Some of them were so cheap I considered an impulse buy. The only thing that stopped me is that it will be even cheaper next year.
Personal anectdote: this is a horrible time to be a headhunter. I'm back to the 1979 and 1990 imbalance: excess candidates and search assignment drought. It's been worsening since last summer with no sign of a turn around.
2016 should be a pretty good year, but I'll be nailing the plywood on the windows long before.
Quincy K-
I was so going to suggest pushing the $8k into the tulip market.
Everyone knows that tulips only ever go up!
(Actually, to maximize return, you want to get into indexed tulip futures. More bang for your buck.)
threetorces:
Note, that Bush is suggesting $800, not 8K and I think that his proposal is on the high side of others.
Bernanke's point was expressed poorly, but it is sound. And Krugan's criticism of it is much more beside the point than factually wrong.
Monetary policy operates with a lag and therefore must be based on forecasts. Inevitably, such forecasts occasionally go awry. For example, six to twelve months ago, the Fed had what the Fed now recognizes as an overly upbeat view of demand growth prospects. So they implemented policy that has left us with insufficient demand in the economy RIGHT NOW. Therefore, they would like that missing demand to be restored with immediate fiscal stimulus.
But it makes no sense for them to ask for fiscal stimulus that would take effect in the intermediate to distant FUTURE.
Such fiscal stimulus might indeed prove valuable if the Fed were again to provide insufficient monetary stimulus in the immediate run. But there is no way that the Fed could know NOW that they were about to implement such a monetary policy error (again). If they knew, then they would change course, obviously.
Indeed, no central bank could ever have use for a far-dated fiscal stimulus unless it feared the arrival of liquidity trap, which would make monetary policy impotent. So for Krugman's point to be valid, he would have to establish that liquidity trap is likely.
Presumably, the odds of a liquidity trap are not really related to the historical path of the employment/population ratio. So that statistic is irrelevant to the debate at hand, even if it is properly measured, which I guess it is roughly.
If BB thinks we're going to come out of recession so fast that a stimulus package has to be quick else we'll already be back to growing the economy before it has effect, why do we need a stimulus package at all?
clearly this is a function of technology and globalization as companies scramble to secure profitability in an ever increasing margin pressure world...I think this is reflecte dint he increasing globalization and free trade backlash.
Bill,
He was going to leverage it up 10x via yen carry trade. It's the only way to make your $$ worth more.
--Wes
if anyone can name a better invention than cheese, i'll eat my hat.
bacon dreamz | 01.18.08 - 10:42 am | #
For beacon dreamz... tasty hats.
I learned on Larry Kudlow the other night (first time I watched) that "poor and middle class people use most of a tax rebate to pay down credit cards. We should give a tax refund to the rich. At least they spend it."
Has anyone actually ever learned anything by watching Kudlow, other than that Kudlow gives the GOP a free commercial for five hours a week?
Big ?
Shoot me an e-mail and I will send you a few of my strategy reports which address these questions (by the way same offer goes for any regular poster here). I write them monthly and they generally run 18-20 pages, lots of graphs, although you have probably seen many of them since CR is my #1 Graph source (closely followed by the St. Louis Fed)
Well, to jump to a totally unrelated subject,anybody gonna watch Barrett Jackson on Speed channel this weekend ?? The last couple of years 60's muscle cars have been bought at, frankly, insane prices. People who follow cars closely can probably relate it to the Ferrari bubble in the late 80's. I am going to guess some of the HELOC/house atm money is leaving the market.
Chris
Cobradriver | 01.18.08 - 9:35 am | #
I've been going for years and will be attending tomorrow.
B-J upped the price of tickets yet again to $60, from $50 last year. It's always packed though. I think he did it just as much for crowd control as the money.
It will be interesting to see if money is leaving the market. With as high as prices are they seem to be past even the richest of the HELOC crowd.
I think that we may then start another leg down in 2009, especially since foreclosures will still be increasing, unemployment and commercial RE may still be bad.Tactical Flashlights
r c helicopter
video game