The FED-Head Chairman Ben Bernanke said it best when he said “like gold, U.S. dollars have value only to the extent that they are strictly limited in supply.”
While many individual consumers do indeed suffer from a shortage of dollars — as the posts here attest to — the exact opposite is true with many financial institutions and offshore entities — Hedge Funds, OPEC Sovereign Funds, Banks with access to the FED’s Discount Window, Central Banks around the world, and countries like China, Japan, Singapore, South Korea, and Taiwan, with their massive foreign currency reserves — much of those in U.S. dollars.
So what overall dollar scarcity is there today?
None.
Greenbacks are ubiquitous — like ChickenMan, they’re everywhere, they’re everywhere.
That’s one problem. Throwing such ‘easy-money’ dollars at the current domestic problems creates grievous problems for obtaining the imported goods we need to live on.
Iran has just decided to no longer accept dollars for its oil as of early 2008. Kuwait, an ally, has already dropped its currency’s peg to the U.S. dollar due to the high inflation that country has endured by keeping its peg to the Greenback up until now. Others will likely follow.
Why should a commodity-producing country part with for example its diminishing oil (or other asset) for paper money that can be created from “thin air”? Actually I’ll take that back — the FED doesn’t even need THIN AIR to create paper dollars (or equivalent electronic ones) for virtually NO COST.
Mr. Bernanke has said “the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost.” Ben Bernanke was speaking in 2002 in the context of fighting deflation.
The truth of that statement is nonetheless indisputable in one sense — the FED can indeed create such dollars with no immediate cost to itself. But is the truth of that statement unassailable in another sense? — Is there really “no cost” to society and to individual consumers — to those of us who do the “living” around here?
Paper money (or its electronic equivalent) is losing its purchasing worth. But there are other more insidious effects from such social manipulation, financial ‘experimentation’ and money-counterfeiting.
Back in the days when dollars were created in some more modest quantities and in some meaningful relation to the growth of real economic output, there was no significant inflation. But today most prices are rising. Especially for real assets like commodities that enable life to be lived.
Today we see the “credit crunch” seemingly brought under “control” by the FED’s ability to exchange ever-increasing amounts of its newly-printed dollars for some of the indeterminately-valued Wall Street-created financial “securities” (Mortgage-Backed Assets, etc.) held by “poor” banks and other financial institutions. The banks get the “cash” and the FED gets the “trash”.
That means WE get the “trash” because the FED is ‘socializing’ the costs of that financial trash. In the end, the taxpayer is on the hook for those trash securities assuming that the trash does not ever again turn to gold.
Of course the FED argues that this is for the good of society and all of us, its members. That to “do nothing” would lead to a worse outcome. Perhaps a severe economic contraction. In my opinion this amounts to “how do you want to take your poison?”
We never had to arrive at a point where the choice came down to this.
Mr. Bernanke in his remarkable 2002 speech (for a future FED chairman, that is) “Deflation: Making Sure ‘It’ Doesn’t Happen Here” said http://www.federalreserve.gov/BOARDDOCS/SPEECHES/2002/20021121/default.htm
“By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper-money system, a determined government can always generate higher spending and hence positive inflation.”
Ben Bernanke was talking about increasing aggregate demand by forcing individual people to spend their money or face the loss of the purchasing power of that money. He later would become the FED-Head. Welcome to Kafka’s world.
In circumstances where real economic output is not growing it does seem logical, in a Keynesian sense, to apply “stimulation” — given our current knowledge of how we think the economy is supposed to work. Our knowledge is paltry. We think we know more than the poor souls who had to endure the Great Depression — that we have learned from their ‘mistakes’. What hubris! What confusion!
We think that economic systems are something that “always and everywhere” can realistically be expected to respond favorably to such artificial monetary boosting — that in response to monetary “stimulation” also known as “giving the economy a jump-start” we should expect economic activity to pick up again, unemployment go down, and the band to start playing Happy Times Are Here Again.
As though the economy were just some automobile battery that had lost its charge because the lights were left on. Give me a break!
In some situations nothing could be less effective than goosing the economy. We may be in such a quandary today. The only outlet for more paper money is in price inflation. Almost all things are going up in nominal money terms. Of course most goods and services are not really going up in absolute cost terms — as say measured by traditional commodity money like gold. Instead the paper dollars these goods are measured in are going down in value. There will nevertheless always be some goods and services that go up in price at least partly due to true scarcity. Some portion of the rise in oil prices for example is not due to only weakness in the dollar — some can be explained by the Peak Oil phenomenon. Same goes for some part of the price inflation for food.
The old Keynesian theory of monetary stimulation suggests that when you pump more paper money into the economic system, you thereby stimulate more demand and thus more economic growth and employment.
But today, momentarily at least, we have reached a plateau of real economic output. Economic output in real terms (not measured “nominally” in depreciating paper money terms) is likely to be inhibited for some time. It will likely even contract in real terms year over year.
The reason for this sad state of affairs is that the economic system is thermodynamically “exhausted”. That is to say, too many uneconomic decisions have been made in the bubble-economies that we have had to endure during the last decade and more. These “malinvestments” will be partially or wholly disinvested and liquidated in one way or another. These include housing of course but there are many others, including careers in brokerage financing and investment banking among others.
But then that is the nature of artificially induced bubbles — they falsely encourage us to make the wrong decisions — decisions that are not wrong inside the bubble but prove to be horribly wrong once the bubble implodes.
Such adjustments are painful — and would never have been necessary other than for the fact that we ran our money system so cavalierly.
Sadly, the coming adjustment-period will not only hurt those who made “poor” choices (as encouraged by the false hopes of funny-money) but even those who had made their choices in non-bubble times. This is because as the distortions caused by such artificially-induced activity are “unwound” during the implosive “corrective” times they can bring down otherwise sound investments as well. We can see, as an example, that all housing values are coming down, not only for those homes purchased during the artificially-created financial bubble.
Say you opened a pedicure shop during the bubble. Now consumers are cutting out their discretionary expenditures. Now your little shop is not viable. But as consumers cut back even more, the pedicure shop across town, open for 4 decades, also becomes nonviable.
From the Washington Post on May 1, 2008 — http://www.washingtonpost.com/wp-dyn/content/article/2008/04/30/AR2008043003575_2.html?wpisrc=newsletter&wpisrc=newsletter&sid=ST2008050100090
— “In Kokomo, Ind., last week, Kathy Spier said the rising cost of gas is to blame for the 50 percent drop-off in sales at her three exotic lingerie stores. ‘They don’t have extra money to spend on frivolous things,’ she said.”
This is the snowball effect. It does not discriminate between those who made “poor” choices and those who made “wise” choices — it paints us all with the same brush. We will all be potentially hurt.
What is happening today is not an outcome that was intentionally foisted upon us by some world-wide conspiracy. But even if it had been wrought by terrorists the result could not have been much worse. The American dollar may be on the first leg of a journey to give up its hard-won and long term status as the world’s reserve currency of choice.
Any money added by the FED will go right to causing price inflation in most goods and services. Only those that are really discretionary — like that second cup at Starbucks or like LASIK eye surgery, like foreign vacations, and like pet and human grooming amongst many others — may begin to go down in price, at least initially. These services will likely drop in price due to demand for them falling off a cliff and due to the suddenly oversupplied marketplace forcing their purveyors to desperately compete for the remaining customers.
The reason for this price drop — as the FED tries to artificially induce demand via money supply pump-priming, and as it thus forces prices up for core needs (food and energy) — is that people will have less money to spend for other needs and wants.
We know many incomes in real terms are static or falling. So with every newly printed paper dollar forcing prices up for core needs, the FED basically ensures that the average person, whose income is static, will have less money left over to spend on those other needs and wants. What better formulation for having the FED force overall economic growth down and force unemployment up via its own actions?
It’s ironic — as it creates more paper money, praying that people will take on more personal debt based on the issuance of such “new” money, the FED auto-magically creates a recession or worse.
Instead of inducing growth, it induces the diminishment of personal wealth (especially as those few dollars you do have become even less valuable in real terms). Proverbially, the FED is between “a rock and a hard place.”
When one reads Ben Bernanke’s 2002 speech one is struck by how closely some of the current policy formulations at the FED correspond to those writings. That speech illuminates in my opinion a lot of his current thinking and action — more even that what his testimony today does.
You can make out the policy levers that the FED is pulling on today, even though these are not (yet) deflationary times, given that his speech was intended for such eventualities.
Again IMHO the FED is making a huge mistake. The FED is seemingly ignoring what many observers (especially in the so-called Austrian School of Economics) see as THE PROBLEM.
This concerns the indiscriminate and overwhelmingly large misdirected and maladjusted investments made over the last 30 years. There malinvestments were based on at least 3 decades of relatively so-called Easy Money. Just read Doug Noland’s comments each week at the Prudent Bear. His comments are usually in the last few pages of what is 12 or so pages of facts and figures.
The Big Mistake that the FED is making is based on ONE assumption. This assumption is that Monetary Policy today can (as heretofore) be implemented with NO REGARD to the currently-arrived-at Maladjusted (and very ILL) Configuration of the Economy. There seems to be no concern for that possibility.
The FED thinks and acts as though it is dealing with a run-of-the-mill economic slowdown. Most of the people writing their posts here know in their bones that this not true. We all HOPE it is run-of-the-mill — but we FEEL differently — as though this were a fin-de-siècle, an end of a cycle. It may be that the FED knows but does not want to panic anyone.
The FED is not infallible — acknowledging the true difficulty of the upcoming “fording of the river” will bring more smart people to the fore, to help the FED, and all of us.
It is just that this MALADJUSTED CONFIGURATION if acknowledged in time, might potentially change all of the FED’s actions. If it knew that its one-dimensional analysis of a multidimensional situation was no longer appropriate, it could take steps to reanalyze and reformulate.
The FED is like a doctor who upon examining the patient decides that the patient’s problems are caused by poor nutrition. The doctor reformulates the diet of the patient. In reality the patient is undergoing multiple organ failure, and this is cascading through the body. The FED’s analysis is woefully inadequate because the paradigm that the FED is using is inadequate and formulaic and obsolete.
I leave you with Mr. Noland’s words:
http://www.prudentbear.com/index.php/CreditBubbleBulletinHome
“Will policymaking succeed over the intermediate- and long-term? Not a chance. Policymakers do today retain capacity to convince the marketplace of their power to inflate the value of debt securities and asset prices more generally. But reflationary polices and other assurances will not rescue the system, specifically because there is today nothing to stem the ongoing distortions to the underlying real economy.”
The problem with most of the people in this state is that there is a long overdue restructuring of the value of certain occupations that has occurred because of the competitive environment. If you think you are going to get paid $64.00 an hour including benefits to sweep floors for GM, those days are gone. Your going to get paid for your skills from now on, so I suggest you get some. I am in industrial sales in Michigan and Northwest Ohio and business is not that bad. It is actually quite good. More of my customers are shipping overseas business because of the value of the dollar. China is raising prices on a lot of their goods by 20-40% so I have a fighting chance against the imports again because csutomers are coming back to US manufacturers. I feel for some people that are hurting and it is tough to take pay cuts. Unfortunately we have the village idiots running the state as well as our largest city who we keep re-electing for some unknown reason so I am afraid if your looking for any forward thinking on solving our states issues, your on your own. But on the flip side when I see polls of people living in this state that statistics show that only 25% of the people think a college education is needed to succeed then I understand why we are where we are. All I can say is it’s like the bumper sticker says “reality sucks”.
Bad news is good news because Fed will cut interest rate. Good news is good news because Fed’s cut worked. Welcome to new LaLa Land…
Whoo Hoo! were heading for
100% Employment Soon…
The only problem is we’ll
only be working 4 days a
week, earning less per hour, and paying more for everything… Not really
an improvement from what I
see…
Where is this mysterious growth coming from in the 3rd Quarter that these “experts” keep spouting? Mind you these are the same “experts” who repeatedly said “subrpime problems are contained!” until it became so evident that problems had spread across the economy that they could no longer in good conscious spout that nonesense anymore…so it will be with these same “experts” saying the economy has bottomed, and will return to growth in the 3rd Quarter, until it too becomes so evident that they will backtrack on this as well. Then the word play games will commense again with…”3rd Quarter growth is “Less Worse Than Expected!”
Of course the recession is over, Mr. Bernanke has said so. Mr. Bush also said that he was a leader during his 2000 campaign.
You should always believe the words and the facts & figures that the government says and publishes. Our government is truthful and honest just ask any Indian.
Those who do not learn from the past are doomed to repeat it.
Not so bad news != good news.
When the supposedly ‘good news’ reports cease coming with a multitude of qualifiers then they will actually have some meaningful value. There’s nothing left for the consumer to spend, we’re out. So the government is now giving me money to spend (tax rebates)! That reeks of desperation, both the rebates and the mania with which the talking heads try to put a positive spin on anything they can grab in any way they can think of to manipulate the info. Me? -I’m putting mine into savings ’cause this blue collar gal says that the emperor has no clothes.
I have confidence that the Commodity traders will snatch defeat from the Jaws of Victory.
Bad news? Increase Price of Oil..
Good News? Increase price of Oil…
For the majority of non-equity trading Americans they will continue to feel poor until food and fuel comes back to earth.
I agree with Mike from OR. This “bottom” is nothing more than a sorry cry to help stocks eek out a barely noticeable margin. Paul, you say there were fewer job losses than expected. Haha that means we are all OK? You’ve got to be kidding us.
Paul, whether it “bottomed’ or not … it really depends, which “downturn” or “slowdown” you are talking about ?
I know, media talked about some economic “boom” we had just a year ago or so. Somehow, I missed it.
I have not seen any improvement since 2001. In my company, we did not see any bonuses or raises for all these years.
They seem to save every dollar, no free lunches or anything like that we had in 90’s, laying off people little by little every year.
Not much different with my friends or people I know.
Most of them who lost their jobs in 2001 – 2002 never found equivalent positions (as far as pay and benefits).
Yes, I still have a job and we are doing relatively OK. We have no dept and cut our expenses.
So, what “bottom” do you expect and where do you see the growth after that ? Where will it come from ?
I suspect, that all that talk from different “experts” just to find fresh meat for the stock market pyramid. No, thanks. I’ll pass.
If it’s getting better, why is the Fed increasing the TAF and expanding the collateral they take in the TSLF? If the credit crunch is over, why would the Fed do this?
I agree with most of the posts. Especially with Sybil in Santa Rosa, CA and with James in Detroit MI.
James writes that his non-discretionary expenses “have taken an additional $500/mth bite out of my household budget over the past year.”
Sybil says that “I am STILL going to cut my expenses”. And that “Economic problems decades in the making are [supposedly] over because numbers over the course of less than a month look ‘less bad’.” She is not “buying it”.
This just shows what Ben Bernanke, the FED-Head, is up against. There is a lot of pain out there. People are not going to spend at the individual level like they used to, no matter what.
Many consumers are just plain “tapped out”. And consumers for all intents and purposes ARE the economy. They account for over 70% of all economic activity.
In the article, Joe Balestrino, fixed income market strategist, says:
“We’ve been gradually coming to the conclusion that the economy is in a bottoming phase. The data has [sic] been weak but not as bad as expected. That’s a good scenario and we’re feeling better.”
Some “bottoming phase”.
I am all for people feeling optimistic. It is easier to live life that way, rather than becoming morose and depressed. And it is more productive.
(And I can’t blame CNN for reporting the news as then auto-magically becoming the REASON for that news.)
But let’s stay real. If we fool ourselves into thinking the worst is over, we may be in for a rude awakening.
On CNN I recently saw a person moving out of their 4-year old home in the Southwest, maybe in Phoenix. She had not done any of the “bad things” that people are being blamed for, like taking out a mortgage she could not afford. But she was a casualty of the fallout from other people who had done such things. And of a Federal Reserve that had kept interest rates artificially low for way too long, leading to people making the wrong spending decisions.
With the housing collapse she had lost what had been a very good job in a related industry (probably mortgage financing-related from what I could infer).
We are still in the “cutting-back” phase. There is still economic contraction going on. We don’t know how long it could continue. It will feed on itself. As Paul R. La Monica writes “we may stumble across it for awhile”. I would add “QUITE awhile”.
When the actions of Sybil in Santa Rosa and James in Detroit are multiplied by those of thousands of other people these actions turn into a feedback loop that gets more powerful over time. More people cut back as they or their neighbors lose jobs, and sell assets. The Feds and the FED (Federal Reserve) are trying to short-circuit this feedback loop by throwing money at the problem — a problem that Sybil rightly points out has been decades in the making.
I would go further and say throwing money at the “problem” is like pouring gasoline on a fire to put out the fire.
Listen, the world is not going the end. But it never had to go down this path. It was a path we collectively chose. Or that our leaders chose for us.
More and more people like Sybil will “stash their cash”. At least if after their bills and rising prices, they have any spare “cash to stash”.
That’s it. Blame Bush for all your problems. This country needs a big dose of self responsibility. If your life sucks, it’s your fault not, Big Oil, Bush, the war, etc. Stop whinning and do something about it. Hate your job…go back to school. Hate being in debt…stop buying things you can’t afford.
No politician ever did anything for me or you, so stoping thinking they are going to “change” anything and make your life better. Wake up!
There hasn’t been a single good news lately. That the job loss is not what is expected is not a good news – it just reflects the fact that at least for a month Wall Street has been successful in managing expectations. Think about what was necessary to “get” reality to reconcile with Wall Street’s overly optimistic expectations – over 200 bps of rate cuts, a Bear Stearns bail-out and the Fed “buying” over 300 bn of mortgage paper from the banks. What would it take a couple of months down the road when housing erosion accelerates and the real economy misbehaves again? What happens in 4-5 months when the TAF matures? But it is not the stock market’s fault, it is all a result of incompetent management by the Fed. What scares me the most is that we have become arrogant enough to think that we can alter the course of the real economy and prevent recessions from ever happening again. Greenspan did it in 2002, now Bernanke is following suit without at all thinking about the consequences of his actions, which are considerably more far reaching than just the effect on commodity prices, soaring inflation and the debasement of the USD. The real problem is that after learning how serious the consumer credit problem has become Fed continues to believe we are in just for a moderate slowdown and tries to cure the credit crisis through re-inflation of the credit bubble. This recession is necessary to correct the excesses of the last bubble as well as about 20 years of expansion in consumer credit, which is now obviously unsustainable. How are we going to have real adjustments – such as reduction in the number of US banks and weeding out of reckless lenders and underperformers – if the Fed can’t let a single bank fail? How is the US consumer going to get the opportunity to retrench, accumulate savings and restore his previous levels of financial stability when all the eyes are turned on when banks can start lending again? How can housing prices adjust setting the stage for an economically viable mortgage credit market, if our government continuously signals its desire to print and borrow any amount of money in order to socialize losses? This is a philosophy of preventing even a mild recession at all cost, which can only lead to a financial collapse in the future. Infalting prices to support the imaginary wealth that miraculously appeared during the housing bubble only makes the consumer more leveraged and vulnerable going forward. Maybe G/B succeeded twice but the next downturn will be a disaster and we don’t have to wait for it another 5 years; plus the time in between will be characterized at best by suppressed growth and more likely by stagflation. Instead, there is a much better alternative: take the pain now resulting in moderate contraction of the economy but deploy resources to address the real problem that this recession signals: that of dispoportionate income distribution and erosion of the US middle class. You want the US consumer to consume more. Then pay him more. Give him a bigger share of the alleged productivity increases that we have been registering over the past 2 decades. Base consumption on income not on credit and leverage. Stop abusing the rights endowed upon us by virtue of being able to print the reserve currency of the world. In fact preserve that right because if you lose it there goes the “American standard” of life. As a result of the G/B efforts over the last 5 years real income for the American middle class has been falling and that income inequality is reminiscent of the days before the Great Depression. While we are at it and since the bulls have been so interested in silver linings lately, there is a “silver” lining in todays report as well: personal income increased less than expected and since no one in his right mind should believe the government measures of inflation, that means simply real personal income FELL. so real income fell and real consumption fell but less than real income so the consumer borrowed more – BORROWED MORE – in our current situation. It is hard to see how the principles of reason and logic warrant any kind of optimistic outlook, but, who knows, maybe the market is right…for now at least.
It took a year for our government and media to recognize that a recession was possibly occurring; yet it only takes one month of ‘not so bad’ job losses and a slight increase in consumer spending to say the worst is over? It is sad; turning the TV on provides a constant reminder that our government, and our President, are completely out of touch. I am 26 years old, am married, and am financially struggling to support myself during school. Making choices between buying gas or going grocery shopping has been a reality for 9 months now. I’m working hard to obtain the skills needed to become financially stable in this country, but job losses and other funding cuts will probably force me to become a destitute person who just so happens to have credentials after her name.
Obviously, the person who wrote that the economy is picking up has not been to Michigan. The reason it may look better statistically is that the thousands who have been on umemployment for a while have dropped off and are no longer counted. Last one out of Michigan, turn out the lights, please.
We cannot bulldoze our way through the fundamental mess the Bush administration has caused with false confidence or trumped up numbers.
Our economy is in deep, fundamental distress, in large part the fault of Bush’s clueless policies.
We’re on the tip of the iceberg and the iceberg is really, really big…
JOSE CANSECO (baseball star) lost his house to mortgage crisis JUST yesterday. Are we out of this “recession”? Think again. Even the rich are losing their houses.
All government statistics & figures are “Fraud” as like Bush/Cheney have done. The CPI has been altered to be foolish & gross brainwashing Fraud.
Get the US public to Spend-Spend-Spend !!! Why not the government does & goes incredibly in Debt.
A socety that is crashing rapidly.
If expectations are reduced far enough, non-disastrous news can look great. How much that is going on today is a matter of opinion. But here in the southern Appalachians, things are lousy economically. Period. If other geographic areaas are doing better, more power to them. But I just know what I am seeing and it is NOT encouraging. That’s as plain as I can say it.
The economy won’t flatten out until birds stop flying over oil reserves and taking a dump, which in turn raises the oil futures, which in turn raises gas prices by $.20 a week at the pump. America needs to regroup, QUICK.
Thank you CNN and the rest of the media for trying your best to put the US into a recession. Your doom and gloom headlines don’t seem to be panning out.
2 quarters of anemic growth at exactly the same rate indicates to me (and I’m no economist) that this thing (whatever you call it – recession or downturn) is starting slow and therefore will end slow? I’m thinking long and protracted as opposed to short and sweet.
All nice fuzzy numbers.
150,000 workers a month join the work force (so they say) and payrolls were cut by 20,000 and unemployment still went down. Why do you buy these numbers.
Or how about this trick – Economic problems decades in the making are over because numbers over the course of less then a month look “less bad”.
Here is THE trick. Go into the trenches and ask the medium American worker how his/her life is.
I am just not buying “it”. Work is still harder to find this year and that is without a raise in prices. Fuel is still up (a lot), food is still up (a lot), health care is out of my budget, most of the people I know are working less hours, no one has had a raise in a year, Taxes are up,
I’m not buying that the worse it over. But boy howdy a lot of folks would want me to believe it and spend any dollars I might stash.
Making reasonable preparations (as an individual) for a possible serious economic down turn is NOT what keeps stock prices up. Is not what keeps CEO bonuses up. Is not what keeps tax revenue up. Because reasonable preparations means pay debt, save some money, cut expenses, trim excess.
I don’t know about the rest of the nation, but the stock market can go as high as it wants and our government can feed me all the sweet silly numbers it wants, I am STILL going to cut my expenses.
The big story that the US press seems to have missed is the official statement from the head of the Bank Of England who came out and stated what most rational folks already knew; that the writedowns at the big banks are overestimated and the banks have been massively aggressive in over compensating for their bruised egos and we’re likely to see a few big swings teh other way as teh banks start to come out next quarter and say “hey, that protfolio wasn’t “worthless” after all, just worth less and we didn’t need to write it down by anywhere near that much”.
Paul, you are truly not serious….
We ONLY lost 20,000 jobs in April and this is good news? When you consider net additions to the workforce for the month the number is much higher.
The housing downturn is still in early stages, and credit card debt has been swept under the rug (but not for long!)
Maybe US-based corporations have seen the bottom, but for the average American worker, the downward spiral continues.
The economic disparity in this country is at the highest level seen since (dare I say) 1929.
I think the best-case scenario is that the Fed’s rate cuts have rebooted the economy back to where it was in the Greenspan post-9/11 days. That resulted in the housing bubble that triggered this problem in the first place, though in my opinion a stock market bubble is now forming. Meanwhile the Fed is almost out of ammunition (ie., rate cuts), and any future rate increases will exacerbate the debt. So you’re right, it’s not the end of the world — that’s been delayed so it can come back later as an even bigger debt. Stimulus package, Bear Stearns bailout, the money’s got to come from somewhere.
The economy is bottoming out but it is going to stay weak rather than immediately return to the housing boom. Inflation, stagnant wages, tighter credit, and falling housing prices will keep a lid on consumer spending. Regardless of the dollar’s rise, oil and gas prices will keep on rising with increased expected demand. Interest on the 10 year T-Bill will keep on rising too. Until something gives, the consumer is still suffering the loss of cash flow. If consumers finance an economic recovery with credit cards or other debt, we will repeat the slump we are now in…if not cause a worse downturn.
I think there are more write downs to be taken in the financial sector and other areas that we don’t know about yet.
Even if it has bottomed I don’t see it getting much better for a long time. Here in MI pay isn’t keeping up with inflation. Doubt it is anywhere in the country. Gasoline, food and natural gas (supposed to increase another 20-40% by years end), property taxes, health-car-home owners insurance, have taken a addition $500/mth bite out of my household budget over the past year. That would require 15% pay increase just to keep up. Many at the company I work for haven’t had raises in 4 years but “the Man” knows no one can protest cause there are very few manufacturing jobs available. I had to take a 25% pay CUT 2 years ago. A 40% (composite) pay cut and trying to live within my means!!!
Bottomed out? Actually I think we have been forced to accept a new lower std of living.
These numbers just don’t seem to ‘jive’ with reality…..at least where I live. I’m out of work (IT – Business Analysis). My neighbor across the street is laid-off (Banking – Finance). And another friend of mine has been out of work since last August (IT – Networking).
Also ALL JOBS ARE NOT CREATED EQUAL.
What matters is what kind of jobs are we losing (full-time, well-paying with benefits)as opposed to the jobs we are gaining (part-time, low-paying, no benefits).
I still find it humorous that everyone is talking about the ‘recession’. How we are in a ‘recession’, and how bad the ‘recession’ is. the last time I looked a Recession is 2 or more quarters of negative growth. Hmmm, since the last quarter of 2007 had 0.6% growth and the the first quarter of 2008 again had 0.6% growth, where is the recession? As I see it, we are in an economic slowdown, but we are still growing. And if we are to have a recession we will not know about it for 6 more months. I say we all just relax and wait 3 more months for 2nd quarter 2008 results to come in and laugh at ourselves when it is once again positive and all this ‘recession’ fear was unfounded. Oh and please can people stop calling this economic slowdown a recession, technically it is not.
Oh, no, not again!!
The economy only lost around 20,000 jobs. A statistical rounding error. Sounds cruel, doesn’t it? How many of the jobs created in the past year take the average Joe or Jane out of poverty and give him or her a shot at affording some resemblance of a social class? Ok, here’s simple math so even Bernanke and Bush can get it:
0 (funds) x -1 job= 0 income
0 (income) x -$9.7 trillion (sorry for the math)= 0 credibility
0 (credibility), by the transitive property,should= 0 (funds)
Hence, our paper is worth…um…wait,
(zero funds times negative…..)