All the company reports and indices that I can recall seemed to reflect a theme of mining the inventory during Q3, and that would not be a positive for GDP. Of course it opens the opportunity for a greater bounceback in production for Q4, but that's a later story.
Don't know what imports/exports have done, but that has been the driving force in GDP this year to date, followed by Govt spending growth I think
GDP growth will definitely be sub 2.5%
Likely below 2%
Small chance of sub 1%
EHP, are you forecasting Q3 or 2010? I think 3% to 4% is very likely in Q3 (just the contribution to PCE will be 1.5% to 2.0%). Add in some net exports, some boost in a couple other areas - subtract out non-res structures ... I think 3%+ is likely in Q3
probably a stupid question, but did you update PCE from earlier in the year? The revisions were upward for PCE and downward for Govt transfers I think.
Still not sure where the expectation for a boom in inventory during Q3 came from. You even mentioned C4C which was a net drawdown of inventory
CalculatedRisk,
I was talking about Q3 2009. I will defer to you as I haven't looked at PCE, and am just speaking what comes to mind -- and my memory may be ill-informed.
I will concede that net export growth will be a big positive for the quarter. and I will take your word on PCE.
I just think the inventory adjustment could be negative for Q3
enough of naked 4 year old Cambodian boys (homage ot Nirvana's Nevermind) YouTube - JIM TV: Jim the Realtor Does Cambodia! (naked kids were not harmed or traded for during taping)
what about them ducks? you want more ducks caught up in a heard mentality?... kermit = ducks run one way. Elmo = ducks run the other... black swan event = ducks break out into pond?
or more dancing from the duke?
....................
not one mention of Frank Rich's column on Goldman, what gives?
on last thread. I repeat here because I did a lot of typing...
My last contract, well-paid y2k stuff, was with GE Capital. I worked with many Indians on that project, and was not impressed, but my sample was small. Nevertheless, after y2k, the big boss decided to outsource the entire division (car finance) to India. When it didn't work, he and the other bosses decided that the company should just close the entire division. I'm sure he got a favorable review and bonus for putting a few thousand people out of work.
Perhaps I am just a disgruntled worker bee, but my bosses, and THEIR bosses had no clue about what it took to do my job. Not just that they couldn't do it themselves, but they had no idea what it took to do the job well. Managers and Execs rise for reasons that have nothing to do with the actual work involved, in most cases. Management was not something I ever wanted to get involved in. I would have hated spending my time that way, and given the 'corporate culture' I wouldn't have fit in anyway. Until the time comes when programming productivity can accurately be measured (about the time pigs begin to sprout wings) management will make bad decisions and never be called to account for it.
Auto manufacturing set the dial for 12mn SAAR units in August when they turned those plants back on. They'll have an excess of 1mn units by year end if sales stay at 9mn units during that time. Which means either extended Christmas shutdowns, or the re-closing of some plants and forgetting about 15mn units within 1.5 more years. So that will be negative for Q1.
As for Q4, it will mostly be about what we don't see.
Govt transfer growth will be flat. Net exports will be flat to negative (I see.... central bank currency interventions... they're everywhere). Evidence of a H2 recovery will disappear, and firms will do a second wave of layoffs to get costs in line with current sales.
Credit is not growing (remember Feb 2010 CARD act as if you needed a reason at this time) so feel free to bet against the American consumer for a change.
Housing might face an onslaught of inventory according to soundbites from the banks who are promising to catch up on the accelerating backlog of delinquent mortgages. The wealth effect is still in play. Govt is not prepared at all to rush out a stimulus bill once all these negative stories take over. Add in the 800k+ jobs to be removed from employment by the BLS in January which will push unemployment over 10% even without further layoffs -- which apparently is a big psychological level for some analysts -- and we won't be any better off than 1 year prior. It'll be a nasty election year without a lot of confidence
and who knows what will happen in the stock market. Couldn't be much more favorable than it has been.
If the GDP clocks in strong numbers in Q3 and Q4, then the mid-to-long term part of the yield curve (5 years +) will explode, pushing up the mortgage rates and reducing the government's ability to continue stimulating the economy. And that is not mentioning the upward pressure on CPI due to falling USD.
That will have some consequences for GDP in 2010.
You can fool the natural process only so much and for so long.
Florida, California, Arizona, Nevada. Georgia, and others will be crippled still.
Migration is potentially a very big problem for FL, CA, AZ, NV. If bubble states get prolonged outward migration, prices just keep falling. CA is in an especially bad position. It has been losing people to migration for several years, and needs deep changes in government and regulation to get them back. We're not talking about tinkering here, we're talking about rewriting or deleting large sections of the code and regs. The only practical way I see to get there is to have a nonpartisan commission compare CA laws to other major states, and start deleting or changing provisions which only exist in CA. If TX, NY, FL, and IL don't need a provision, CA probably doesn't either. The only clear exception is some earthquake regulations.
I'll take the under on Q3 and Q4. Moreover, 2010 will be flat or negative.
Ignoring GDP (a dubious measure of economic well being), what is important to keep in mind is that we are impoverishing ourselves with debt in an idiotic atttempt to bailout fraud. No long term good will come of it. We impoverished ourselves with ponzi debt after the dot.CON bust and look at the results - a few became obscenely wealthy while the majority lost their homes, jobs and overall financial security.
Want proof of the ongoing impoverishment? In Q2, 2009, net national savings were negative 3%. Prior to the current calamity, we hadn't seen a negative print on national savings since the Great Depression.
Bernanke is a moron. More debt IS the problem, not the solution. Even worse, Bernanke & the Gov't are pushing CONsumption debt.
MrM
I think a double-dip is the best case scenario right now, although I'm very skeptical things will feel as rosy at year end as they do now and the NBER recession dating committee has obviously chosen to wait and see. So they might never call the end before the next dip down begins
Bill (& EHP) to chime in on the Inventory outlook:
A small caveat...got curious about Inventory myself and took a different angle. Ended up with five interesting charts so didn't want to create a bunch. Instead the spreadsheet is attached. It complements your findings but the I:S Ratio is an interesting question...business got caught so flat-footed it surged and has YET to get back down to trend.
If that's the case Inventory re-building is likely to be even weaker than you conclude.
BtW - the Sep. Conference Board survey found little inclination to hire or invest either.
**Greenspan Says U.S. Should Consider Breaking Up Large Banks **
??? No more big fee speaking engagements from the big banks?
Oct. 15 (Bloomberg) -- U.S. regulators should consider breaking up large financial institutions considered “too big to fail,” former Federal Reserve Chairman Alan Greenspan said.
Those banks have an implicit subsidy allowing them to borrow at lower cost because lenders believe the government will always step in to guarantee their obligations. That squeezes out competition and creates a danger to the financial system, Greenspan told the Council on Foreign Relations in New York.
“If they’re too big to fail, they’re too big,” Greenspan said today. “In 1911 we broke up Standard Oil -- so what happened? The individual parts became more valuable than the whole. Maybe that’s what we need to do.”
At one point, no bank was considered too big to fail, Greenspan said. That changed after the Treasury Department under then-Secretary Hank Paulson effectively nationalized Fannie Mae and Freddie Mac, and the Treasury and Fed bailed out Bear Stearns Cos. and American International Group Inc.
“It’s going to be very difficult to repair their credibility on that because when push came to shove, they didn’t stand up,” Greenspan said.
Fed officials have suggested imposing a tax or requiring higher capital ratios on larger banks to ensure the firms’ safety and reduce some of the competitive advantage from the implied subsidy. Greenspan said that won’t work.
“I don’t think merely raising the fees or capital on large institutions or taxing them is enough,” Greenspan said. “I think they’ll absorb that, they’ll work with that, and it’s totally inefficient and they’ll still be using the savings.”
‘Really Arbitrarily’
The former Fed chairman said while “just really arbitrarily breaking down organizations into various different sizes” goes against his philosophical leanings, something must be done to solve the too-big-to-fail issue.
“If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said.
“Failure is an integral part, a necessary part of a market system,” he said. “If you start focusing on those who should be shrinking, it undermines growing standards of living and can even bring them down.”
To contact the reporter on this story: Michael McKee in New York at mmckee@bloomberg.net; Scott Lanman in Washington at slanman@bloomberg.net
Last Updated: October 15, 2009 10:50 EDT
the NBER recession dating committee has obviously chosen to wait and see. So they might never call the end before the next dip down begins
This recession did not start with two consecutive quarters of negative GDP growth and it is unlikely to end with two consecutive quarters of positive GDP growth rate. I want to believe the NBER will wait for some signs of improvement (not just stabilization) of the labor market.
I think a double-dip is the best case scenario right now
I am not so sure , EHP. Psychological momentum is an economic driver to reckon with. If the economy starts going in the tailspin again, not only will people panic en mass, but it will be much more difficult for the government to implement any resuscitation measures.
A lot is riding on the government's credibility to be able to support and straighten up the crippled economy.
Management by and large, will do what is best for themselves, not what is good for the company, or even their division/group. This goes on until TSHTF. That happens seldom, and the slippery ones escape no matter what. Seen it happen too many times. Coming out of college , I was totally/utterly unaware of this phenomenon. I guess that is what is called experience
Any recovery that does not include California is doomed. They don't deserve it but there's no way to sustain even an "L" shaped recovery without addressing the Tarnished State.
Jim Hamilton's post, in particular, was eye opening: Econbrowser: No L
If 'merkin consumers binge on credit this xmas we could be in for another trip into bubble land. Sure maybe in the long-term its another dead cat bounce but then again one can argue that 2002-2007 was a dead cat bounce.
Wasn't the stimulus supposed to start kicking in about now? You know, all of those "shovel-ready" projects?
Also, I dozed off in front of the TV last night and woke to the annoying tones of Suze Orman. She did 15 minutes on the woman who made that "Debtor Revolt" video that went viral on YouTube. Really harped on it, and gave advice for people who wanted to emulate the woman's challenge to BofA - set up alternative credit lines in advance before your score gets trashed, for example.
It's going to be interesting to see if Suze Orman's leap onto this bandwagon leads to a widespread movement to blow off consumer debt. If Oprah joins in, this could get veeeeerry interresting. Timmay may be forced to nationalize one or two TV networks to counter the meme.
What about the GDP deflator? From what I heard the government measured CPI may be running a little hotter than expected, thereby somewhat offsetting that positive GDP.
We all know what this becomes, and the only way out of this
1. Domestic China-cheap labor
2. Extracting our remaining natural resource base as the currency devalues
Thats it. History OVER and OVER shows this formula. Read Connections by James Burke
Well, or a big old war. Which by the way, we have 25% of the manufacturing capacity that we did going into WW2.
In 2001 thru 2003, Bush tried to shock the eCONomy back to growth with massive tax cuts and spending plans. The gains were fleeting and the majority became poorer. In March 2008, Bush again pushed through a stimulus plan - it had little effect.
Obama is now taking on trillions in new debt and the fed is handing out trillions in federal reserve credit all to bailout tens of trillions in ponzi debt pushed into our eCONomy by venal bankers.
The periods of 1924-1929 and 1990-2008 should make it abundantly clear that pyramiding ponzi debt is completely inane. If countries and individuals could borrow and spend their way to propserity, there would be no poverty on this earth, there would be no recessions and every country and individual would be wealthy.
Reality will surface again, be it 2010, 2011..... Make no mistake, our massive debts must be reCONciled.
As commented yesterday, the failure of 3.5 million mortagees to pay on their mortgages makes up to $5 Billion available each month to spend elsewhere. Some of this is adding to PCE, at the expense of the current holder of the mortgage.
Guessing that about half of what isn't being paid on mortgages is being spent elsewhere, this would goose GDP by about 0.25%.
"I can't. It's the only way I can beat the "ignore" filter"
sigh. I was really hoping and trying to get out of the contracting / consulting business but it's just not going to happen. The paranoid and stupidity in regular companies is beyond my belief. so, fuck it. I'm interviewing for jobs in NJ next week. At least they're in the $150K pay range.
Amazing comment over at Baseline Scenario from someone calling themselves "Hillbilly Daryl". This will get you going.
Excellent article Simon.
Here’s some perspective on the outrageous oligarchs’ bounty enjoyed under the current reality at just one company-Goldman Sachs.
The 2009 Goldman Sachs BONUS POOL is $23 Billion. Not salaries and benfits, merely BONUSES. Goldman Sachs employs roughly 25,000 people worldwide.
How much is $23 Billion?
Below is a list of ALL 2009 expenditures by ALL government entities from ALL funding sources for ALL services in the following states. Meaning, ALL state, county, regional, and municipal government spending funded by ALL federal, state, county, and municipal funding sources. Includes costs for Pensions, healthcare, education, welfare, protection, transportation, general government, other spending, and interest.
In essence, the figures below represent the aggregate cost to run the below STATES and provide all services for their entire respective populations, for a YEAR, 2009.
Mississippi 2009 $30.2 Billion, 3,000,000 people
Iowa 2009 $26.2 Billion, 3,000,000 people
GOLDMAN BONUS 2009 $23.0 Billion, 25,000 people
Utah 2009 $23.0 Billion, 2,600,000 people
Nevada 2009 $22.3 Billion, 2,600,000 people
Kansas 2009 $22.2 Billion, 2,800,000 people
New Mexico 2009 $21.4 Billion, 2,000,000 people
Nebraska 2009 $20.1 Billion, 1,800,000 people
Arkansas 2009 $19.9 Billion, 2,900,000 people
Hawaii 2009 $14.4 Billion, 1,300,000 people
Alaska 2009 $13.4 Billion, 700,000 people
West Virginia 2009 $13.3 Billion, 1,800,000 people
Maine 2009 $11.0 Billion, 1,300,000 people
Idaho 2009 $10.9 Billion, 1,500,000 people
Rhode Island 2009 $10.7 Billion, 1,100,000 people
New Hampshire 2009 $ 9.9 Billion, 1,400,000 people
Delaware 2009 $ 9.4 Billion, 900,000 people
D.C. 2009 $ 9.0 Billion, 500,000 people
Wyoming 2009 $ 8.3 Billion, 500,000 people
Montana 2009 $ 8.2 Billion, 1,000,000 people
Vermont 2009 $ 6.5 Billion, 600,000 people
South Dakota 2009 $ 6.2 Billion, 800,000 people
North Dakota 2009 $ 5.6 Billion, 600,000 people
The 2009 Goldman Sachs’ bonus pool of $23 Billion, by itself, would rank as the 30th largest aggregate state expenditure in the United States in 2009, if Goldman were a state. Goldman Sachs’ bonus pool of $23 Billion is as large, or much larger in many cases, than the 2009 aggregate expenditures of 20 states.
Goldman Sachs’ 2009 bonus pool of $23 Billion, enjoyed by AT MOST 25,000 people is the exact amount expended by all governments in in the state of Utah in 2009 to provide all services to its 2,600,000 people, for one full year. Parsed another way, the Goldman Sachs $23 Billion 2009 bonus pool could single handedly fund the entirety of all government expenditures in the three states of Montana, Vermont, and Wyoming required to provide all services to their collective 2,100,000 citizens in 2009. The Goldman Sachs $23 Billion 2009 bonus pool could literally fund all government expenditures for all services for all 600,000 people in the state of North Dakota for FOUR YEARS, and still leave $600,000,000 in spending money…..
Obscene doesn’t even begin to describe the situation.
A debtor revolt could have some very far reaching implications. However, it's not the credit cards which banks should be worried about, their balances aren't that large in aggregate. A similar protest by car owners would be somewhat pointless, because most of them have cars worth similar amounts to their loans early on, and far less as they approach the end of financing.
The debtor revolts which could cause very large problems are in single family homes, commercial developments.
There is a different debtor revolt on credit cards which could cause problems. It's not failure to pay, it's failure to use. If their usage drops way down, with people paying in other ways, the merchant fees would also drop. All this without anyone taking a hit on their credit score.
I would like to see a calculation showing what you could afford with the bonuses of banks who are losing money. I'll bet the pool is just as large, though spread among a number of firms.
"There is a different debtor revolt on credit cards which could cause problems. It's not failure to pay, it's failure to use. If their usage drops way down, with people paying in other ways, the merchant fees would also drop. All this without anyone taking a hit on their credit score. "
Actually, right this second, the banks would love this suggestion - they need to cut more lines of credit to raise capital, and non-users are the first ones they cut. As long as you are making your minimum payments, they don't have to recognize you as deliquent. Longer term, it is a bad thing for the banks, but they are trying to repair capital these next few quarters.
.
Alternative homesteading. Could be fun, if the chemistry is there, if the place is organized, safe, non-toxic, has basic services, and is suitable for families with children.
Who knew "It Takes a Village" would have such a literal interpretation.
We spent a couple days scouting the river after that amazing fleet enema disguised as a storm, earlier in the week. There were piles of driftwood about 10 feet above the still raging rubicon, including thousands of coaster-sized giant sequoia pieces of bark and hundreds of 2-3 foot diameter tree trunks, and everything inbetween. Usually alongside the river is a warren of spider webs and misc ground insects, but after the day of reckoning, they were no more. Squeaky clean exploration possibilities like this are few and far between.
“If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said."
Is a form of state capitalism beginning to take shape in the US, with the difference that the State doesn't reap the profits? We could combine the inefficiency of socialism with the moral pathology of corrupted capitalism if we're not careful.
really?
All the company reports and indices that I can recall seemed to reflect a theme of mining the inventory during Q3, and that would not be a positive for GDP. Of course it opens the opportunity for a greater bounceback in production for Q4, but that's a later story.
Don't know what imports/exports have done, but that has been the driving force in GDP this year to date, followed by Govt spending growth I think
GDP growth will definitely be sub 2.5%
Likely below 2%
Small chance of sub 1%
EHP, are you forecasting Q3 or 2010? I think 3% to 4% is very likely in Q3 (just the contribution to PCE will be 1.5% to 2.0%). Add in some net exports, some boost in a couple other areas - subtract out non-res structures ... I think 3%+ is likely in Q3
best wishes
probably a stupid question, but did you update PCE from earlier in the year? The revisions were upward for PCE and downward for Govt transfers I think.
Still not sure where the expectation for a boom in inventory during Q3 came from. You even mentioned C4C which was a net drawdown of inventory
CalculatedRisk wrote:
no sweat, if that's what they want it to be
ACCOUNTABILITY
Definition
The quality or state of being accountable; especially: an obligation or willingness to accept responsibility or to account for one's actions.
CalculatedRisk,
I was talking about Q3 2009. I will defer to you as I haven't looked at PCE, and am just speaking what comes to mind -- and my memory may be ill-informed.
I will concede that net export growth will be a big positive for the quarter. and I will take your word on PCE.
I just think the inventory adjustment could be negative for Q3
EvilHenryPaulson wrote:
And as some here reported first hand as well as anecdotally, those cars will have one more run then shut the plants.
Profitable too, no retooling or make ready.
Not good really, is it?
Inventory adjustment will be a positive in q3
I would bet quite a princely sum on that
I'm guessing q3 GDP +3.8%
Wanted: 15 million easily trainable, highly paying new jobs and within one year. Other than that everything looks really peachy....
So the green shoots are coming.
For most of the country, I tend to agree with CR's forecast, but a bunch of states will still be in the depths of crisis.
Florida, California, Arizona, Nevada. Georgia, and others will be crippled still.
It is ironic, that the rest of the country will recover well before the "engines of the economy" that were overdriven in the bubble.
But overall, I still see very slow growth in aggregate.
This weekend has seen some screaming deals for me on craigslist. A whole lot of broke going on.
Someday this war's gonna end...
EHP, maybe on inventory - it is the hardest number to guess. But if it is negative that means Q4 and Q1 will get the temporary boost.
The pickup in industrial production is usually a clue about inventories, exports and consumption. The increase is going somewhere ...
best wishes
enough of naked 4 year old Cambodian boys (homage ot Nirvana's Nevermind)
YouTube - JIM TV: Jim the Realtor Does Cambodia! (naked kids were not harmed or traded for during taping)
what about them ducks? you want more ducks caught up in a heard mentality?... kermit = ducks run one way. Elmo = ducks run the other... black swan event = ducks break out into pond?
or more dancing from the duke?
....................
not one mention of Frank Rich's column on Goldman, what gives?
Here is ISM inventories chart
http://1.bp.blogspot.com/_4uLKe3-OTf4/Sp1OQ3IWLrI/AAAAAAAAANk/NVHRFkNEazw/s1600-h/ism_neworders_v_inventory.gif
and quick link ISM - ISM Report - November 2009 Non-Manufacturing ISM Report On Business®
ISM - ISM Report - November 2009 Manufacturing ISM Report On Business®
Inventories should be subtracting from growth St. Louis Fed: Series: CIVA, Corporate Inventory Valuation Adjustment
Govt transfers will still be increasing from Q2 to Q3
Exports might be the biggest boost again
As for investment in software & equipment, St. Louis Fed: Series: NRIPDCA, Real Private Nonresidential Investment: Equipment and Software
Did back2school trump businesses canceling licenses, and the undercutting of prices in equipment?
This GDP report will be PCE+Govt+Net Exports vs Everything else. 2.5% GDP is the maximum in my opinion. If we hit that figure, the employment reports would have been at or above positive job growth by now. They aren't, which is further support to all the indices and corporate reports that indicate shrinking inventories.
My last contract, well-paid y2k stuff, was with GE Capital. I worked with many Indians on that project, and was not impressed, but my sample was small. Nevertheless, after y2k, the big boss decided to outsource the entire division (car finance) to India. When it didn't work, he and the other bosses decided that the company should just close the entire division. I'm sure he got a favorable review and bonus for putting a few thousand people out of work.
Perhaps I am just a disgruntled worker bee, but my bosses, and THEIR bosses had no clue about what it took to do my job. Not just that they couldn't do it themselves, but they had no idea what it took to do the job well. Managers and Execs rise for reasons that have nothing to do with the actual work involved, in most cases. Management was not something I ever wanted to get involved in. I would have hated spending my time that way, and given the 'corporate culture' I wouldn't have fit in anyway. Until the time comes when programming productivity can accurately be measured (about the time pigs begin to sprout wings) management will make bad decisions and never be called to account for it.
/end of rant
Increase in Q3 GDP = multiplier effect of government spending. Call it a gross oversimplification but don't ignore the implications.
Auto manufacturing set the dial for 12mn SAAR units in August when they turned those plants back on. They'll have an excess of 1mn units by year end if sales stay at 9mn units during that time. Which means either extended Christmas shutdowns, or the re-closing of some plants and forgetting about 15mn units within 1.5 more years. So that will be negative for Q1.
As for Q4, it will mostly be about what we don't see.
Govt transfer growth will be flat. Net exports will be flat to negative (I see.... central bank currency interventions... they're everywhere). Evidence of a H2 recovery will disappear, and firms will do a second wave of layoffs to get costs in line with current sales.
Credit is not growing (remember Feb 2010 CARD act as if you needed a reason at this time) so feel free to bet against the American consumer for a change.
Housing might face an onslaught of inventory according to soundbites from the banks who are promising to catch up on the accelerating backlog of delinquent mortgages. The wealth effect is still in play. Govt is not prepared at all to rush out a stimulus bill once all these negative stories take over. Add in the 800k+ jobs to be removed from employment by the BLS in January which will push unemployment over 10% even without further layoffs -- which apparently is a big psychological level for some analysts -- and we won't be any better off than 1 year prior. It'll be a nasty election year without a lot of confidence
and who knows what will happen in the stock market. Couldn't be much more favorable than it has been.
aClem wrote:
nice typing
If the GDP clocks in strong numbers in Q3 and Q4, then the mid-to-long term part of the yield curve (5 years +) will explode, pushing up the mortgage rates and reducing the government's ability to continue stimulating the economy. And that is not mentioning the upward pressure on CPI due to falling USD.
That will have some consequences for GDP in 2010.
You can fool the natural process only so much and for so long.
gotta go
but if anyone knows of evidence to show inventories grew in Q3, would you please correct me?
Citizen AllenM wrote:
Migration is potentially a very big problem for FL, CA, AZ, NV. If bubble states get prolonged outward migration, prices just keep falling. CA is in an especially bad position. It has been losing people to migration for several years, and needs deep changes in government and regulation to get them back. We're not talking about tinkering here, we're talking about rewriting or deleting large sections of the code and regs. The only practical way I see to get there is to have a nonpartisan commission compare CA laws to other major states, and start deleting or changing provisions which only exist in CA. If TX, NY, FL, and IL don't need a provision, CA probably doesn't either. The only clear exception is some earthquake regulations.
I'll take the under on Q3 and Q4. Moreover, 2010 will be flat or negative.
Ignoring GDP (a dubious measure of economic well being), what is important to keep in mind is that we are impoverishing ourselves with debt in an idiotic atttempt to bailout fraud. No long term good will come of it. We impoverished ourselves with ponzi debt after the dot.CON bust and look at the results - a few became obscenely wealthy while the majority lost their homes, jobs and overall financial security.
Want proof of the ongoing impoverishment? In Q2, 2009, net national savings were negative 3%. Prior to the current calamity, we hadn't seen a negative print on national savings since the Great Depression.
Bernanke is a moron. More debt IS the problem, not the solution. Even worse, Bernanke & the Gov't are pushing CONsumption debt.
CONsumption debt is the road to poverty.
MrM
I think a double-dip is the best case scenario right now, although I'm very skeptical things will feel as rosy at year end as they do now and the NBER recession dating committee has obviously chosen to wait and see. So they might never call the end before the next dip down begins
Bill (& EHP) to chime in on the Inventory outlook:
A small caveat...got curious about Inventory myself and took a different angle. Ended up with five interesting charts so didn't want to create a bunch. Instead the spreadsheet is attached. It complements your findings but the I:S Ratio is an interesting question...business got caught so flat-footed it surged and has YET to get back down to trend.
If that's the case Inventory re-building is likely to be even weaker than you conclude.
BtW - the Sep. Conference Board survey found little inclination to hire or invest either.
**Greenspan Says U.S. Should Consider Breaking Up Large Banks **
??? No more big fee speaking engagements from the big banks?
the NBER recession dating committee has obviously chosen to wait and see. So they might never call the end before the next dip down begins
This recession did not start with two consecutive quarters of negative GDP growth and it is unlikely to end with two consecutive quarters of positive GDP growth rate. I want to believe the NBER will wait for some signs of improvement (not just stabilization) of the labor market.
I think a double-dip is the best case scenario right now
I am not so sure , EHP. Psychological momentum is an economic driver to reckon with. If the economy starts going in the tailspin again, not only will people panic en mass, but it will be much more difficult for the government to implement any resuscitation measures.
A lot is riding on the government's credibility to be able to support and straighten up the crippled economy.
Management by and large, will do what is best for themselves, not what is good for the company, or even their division/group. This goes on until TSHTF. That happens seldom, and the slippery ones escape no matter what. Seen it happen too many times. Coming out of college , I was totally/utterly unaware of this phenomenon. I guess that is what is called experience
"On the plus side, exports might continue to provide a boost (an export led recovery?)"
Seriously, what else can it be?
Any recovery that does not include California is doomed. They don't deserve it but there's no way to sustain even an "L" shaped recovery without addressing the Tarnished State.
translation - CR predicts a dead-cat bounce in GDP
Jim Hamilton's post, in particular, was eye opening: Econbrowser: No L
If 'merkin consumers binge on credit this xmas we could be in for another trip into bubble land. Sure maybe in the long-term its another dead cat bounce but then again one can argue that 2002-2007 was a dead cat bounce.
yuan wrote:
Lillian Jackson Braun's latest novel: "The Cat Who Bounced Twice."
Interesting that the title protagonists are oriental.
Wasn't the stimulus supposed to start kicking in about now? You know, all of those "shovel-ready" projects?
Also, I dozed off in front of the TV last night and woke to the annoying tones of Suze Orman. She did 15 minutes on the woman who made that "Debtor Revolt" video that went viral on YouTube. Really harped on it, and gave advice for people who wanted to emulate the woman's challenge to BofA - set up alternative credit lines in advance before your score gets trashed, for example.
It's going to be interesting to see if Suze Orman's leap onto this bandwagon leads to a widespread movement to blow off consumer debt. If Oprah joins in, this could get veeeeerry interresting. Timmay may be forced to nationalize one or two TV networks to counter the meme.
CR,
What about the GDP deflator? From what I heard the government measured CPI may be running a little hotter than expected, thereby somewhat offsetting that positive GDP.
We all know what this becomes, and the only way out of this
1. Domestic China-cheap labor
2. Extracting our remaining natural resource base as the currency devalues
Thats it. History OVER and OVER shows this formula. Read Connections by James Burke
Well, or a big old war. Which by the way, we have 25% of the manufacturing capacity that we did going into WW2.
Ah, hell with it.
"but if anyone knows of evidence to show inventories grew in Q3, would you please correct me?"
Inventories of DC lobbyists grew significantly in Q3.
Travesty of Treasury wrote:
won't work.
Driving down wages will dry up consumer demand, leading to net fall in sales and more layoffs.
Tariffs but everybody is brain-washed into associating "tariff" to "nigger" or "child molester", that it's not likely to happen.
You assume I meant by design you curmudgeon.
I refer to these things happening by default.
You of all people should know better, sheesh.
stop changing your name then.
In 2001 thru 2003, Bush tried to shock the eCONomy back to growth with massive tax cuts and spending plans. The gains were fleeting and the majority became poorer. In March 2008, Bush again pushed through a stimulus plan - it had little effect.
Obama is now taking on trillions in new debt and the fed is handing out trillions in federal reserve credit all to bailout tens of trillions in ponzi debt pushed into our eCONomy by venal bankers.
The periods of 1924-1929 and 1990-2008 should make it abundantly clear that pyramiding ponzi debt is completely inane. If countries and individuals could borrow and spend their way to propserity, there would be no poverty on this earth, there would be no recessions and every country and individual would be wealthy.
Reality will surface again, be it 2010, 2011..... Make no mistake, our massive debts must be reCONciled.
Sorry.
It's your old friend Senorito American Mugabe, from the Haloscan days.
Been away for a while. Wife said doomer porn was getting to me. Oh well, like most addictions, recidivism is high.
As commented yesterday, the failure of 3.5 million mortagees to pay on their mortgages makes up to $5 Billion available each month to spend elsewhere. Some of this is adding to PCE, at the expense of the current holder of the mortgage.
Guessing that about half of what isn't being paid on mortgages is being spent elsewhere, this would goose GDP by about 0.25%.
"I can't. It's the only way I can beat the "ignore" filter"
sigh. I was really hoping and trying to get out of the contracting / consulting business but it's just not going to happen. The paranoid and stupidity in regular companies is beyond my belief. so, fuck it. I'm interviewing for jobs in NJ next week. At least they're in the $150K pay range.
,rads,
I am back from the forest for the trees, and will now dwell on the financial disease.
Juvenal Delinquent wrote:
Did you preposition telemarking supplies just off the trail to the Crystal Caves in anticipation of coming events?
Amazing comment over at Baseline Scenario from someone calling themselves "Hillbilly Daryl". This will get you going.
Excellent article Simon.
Here’s some perspective on the outrageous oligarchs’ bounty enjoyed under the current reality at just one company-Goldman Sachs.
The 2009 Goldman Sachs BONUS POOL is $23 Billion. Not salaries and benfits, merely BONUSES. Goldman Sachs employs roughly 25,000 people worldwide.
How much is $23 Billion?
Below is a list of ALL 2009 expenditures by ALL government entities from ALL funding sources for ALL services in the following states. Meaning, ALL state, county, regional, and municipal government spending funded by ALL federal, state, county, and municipal funding sources. Includes costs for Pensions, healthcare, education, welfare, protection, transportation, general government, other spending, and interest.
In essence, the figures below represent the aggregate cost to run the below STATES and provide all services for their entire respective populations, for a YEAR, 2009.
Mississippi 2009 $30.2 Billion, 3,000,000 people
Iowa 2009 $26.2 Billion, 3,000,000 people
GOLDMAN BONUS 2009 $23.0 Billion, 25,000 people
Utah 2009 $23.0 Billion, 2,600,000 people
Nevada 2009 $22.3 Billion, 2,600,000 people
Kansas 2009 $22.2 Billion, 2,800,000 people
New Mexico 2009 $21.4 Billion, 2,000,000 people
Nebraska 2009 $20.1 Billion, 1,800,000 people
Arkansas 2009 $19.9 Billion, 2,900,000 people
Hawaii 2009 $14.4 Billion, 1,300,000 people
Alaska 2009 $13.4 Billion, 700,000 people
West Virginia 2009 $13.3 Billion, 1,800,000 people
Maine 2009 $11.0 Billion, 1,300,000 people
Idaho 2009 $10.9 Billion, 1,500,000 people
Rhode Island 2009 $10.7 Billion, 1,100,000 people
New Hampshire 2009 $ 9.9 Billion, 1,400,000 people
Delaware 2009 $ 9.4 Billion, 900,000 people
D.C. 2009 $ 9.0 Billion, 500,000 people
Wyoming 2009 $ 8.3 Billion, 500,000 people
Montana 2009 $ 8.2 Billion, 1,000,000 people
Vermont 2009 $ 6.5 Billion, 600,000 people
South Dakota 2009 $ 6.2 Billion, 800,000 people
North Dakota 2009 $ 5.6 Billion, 600,000 people
The 2009 Goldman Sachs’ bonus pool of $23 Billion, by itself, would rank as the 30th largest aggregate state expenditure in the United States in 2009, if Goldman were a state. Goldman Sachs’ bonus pool of $23 Billion is as large, or much larger in many cases, than the 2009 aggregate expenditures of 20 states.
Goldman Sachs’ 2009 bonus pool of $23 Billion, enjoyed by AT MOST 25,000 people is the exact amount expended by all governments in in the state of Utah in 2009 to provide all services to its 2,600,000 people, for one full year. Parsed another way, the Goldman Sachs $23 Billion 2009 bonus pool could single handedly fund the entirety of all government expenditures in the three states of Montana, Vermont, and Wyoming required to provide all services to their collective 2,100,000 citizens in 2009. The Goldman Sachs $23 Billion 2009 bonus pool could literally fund all government expenditures for all services for all 600,000 people in the state of North Dakota for FOUR YEARS, and still leave $600,000,000 in spending money…..
Obscene doesn’t even begin to describe the situation.
A debtor revolt could have some very far reaching implications. However, it's not the credit cards which banks should be worried about, their balances aren't that large in aggregate. A similar protest by car owners would be somewhat pointless, because most of them have cars worth similar amounts to their loans early on, and far less as they approach the end of financing.
The debtor revolts which could cause very large problems are in single family homes, commercial developments.
There is a different debtor revolt on credit cards which could cause problems. It's not failure to pay, it's failure to use. If their usage drops way down, with people paying in other ways, the merchant fees would also drop. All this without anyone taking a hit on their credit score.
Travesty,
I would like to see a calculation showing what you could afford with the bonuses of banks who are losing money. I'll bet the pool is just as large, though spread among a number of firms.
"There is a different debtor revolt on credit cards which could cause problems. It's not failure to pay, it's failure to use. If their usage drops way down, with people paying in other ways, the merchant fees would also drop. All this without anyone taking a hit on their credit score. "
Actually, right this second, the banks would love this suggestion - they need to cut more lines of credit to raise capital, and non-users are the first ones they cut. As long as you are making your minimum payments, they don't have to recognize you as deliquent. Longer term, it is a bad thing for the banks, but they are trying to repair capital these next few quarters.
.
JD - Had you mentioned something earlier about checking out the new homeless communities?
Jesse sounds a little worried.
Outsider,
I'm gonna go check it out tomorrow or the next day. There's apparently around 300 folks there.
I'll let everybody know how it goes...
JD - Looking forward to hearing about that.
Alternative homesteading. Could be fun, if the chemistry is there, if the place is organized, safe, non-toxic, has basic services, and is suitable for families with children.
Who knew "It Takes a Village" would have such a literal interpretation.
,rad Dawgma,
We spent a couple days scouting the river after that amazing fleet enema disguised as a storm, earlier in the week. There were piles of driftwood about 10 feet above the still raging rubicon, including thousands of coaster-sized giant sequoia pieces of bark and hundreds of 2-3 foot diameter tree trunks, and everything inbetween. Usually alongside the river is a warren of spider webs and misc ground insects, but after the day of reckoning, they were no more. Squeaky clean exploration possibilities like this are few and far between.
You ain't kidding.
“If you don’t neutralize that, you’re going to get a moribund group of obsolescent institutions which will be a big drain on the savings of the society,” he said."
Is a form of state capitalism beginning to take shape in the US, with the difference that the State doesn't reap the profits? We could combine the inefficiency of socialism with the moral pathology of corrupted capitalism if we're not careful.