News What is wrong with the US economy? Part 2

[turbo]

It appears that the next problem in the US economy is the wave of defaults and foreclosures on commercial property. I've already seen that locally. Some commercial properties are going for half their previous value.

Maine is a bit ahead of the curve, there. If you have enough money to start a business, you can find vacant commercial space anywhere. You can buy such properties for a song, or you can rent at VERY attractive rates.

Unfortunately, the only segment of the economy that has grown here in recent years is call-centers. The problem with those jobs is that they are portable. The people operating the call center lease some commercial space, wire it for lots of phones (overhead cable trays and drop lines to workstations) set up cubicles with PCs and hire some bodies. If it becomes financially advantageous to operate elsewhere, it is a simple matter to set up another call-center, get it running, and close the existing one. Local folks found that out when MBNA closed its huge call-center in the Belfast area, throwing thousands out of work. It's safer going to work for a company that has made a significant capital investment at a location, though even that is not a guarantee of stability. The businesses with the largest capital investments (pulp and paper mills) are shutting down production lines or shutting down the mills entirely due to poor market conditions and unpredictable costs of energy and materials.

Combine this with the shut-down of all but one of the states large sawmill operations, and the fate of land-owners, wood-harvesters, truckers, etc is clear. Bad times for years to come - it takes a long time to turn something this big around.

 

[Office_Shredder]

And letting people keep their own money instead of confiscating it is "government intervention"? Wow. Just wow.

Uh, yes? Changing the tax rate for the purpose of economic stimulation is in fact government intervention. Feel free to tell me how that's not true, or how cutting taxes for rich people to stimulate the economy isn't cutting taxes for rich people to stimulate the economy

 

[Al68]

Uh, yes? Changing the tax rate for the purpose of economic stimulation is in fact government intervention. Feel free to tell me how that's not true, or how cutting taxes for rich people to stimulate the economy isn't cutting taxes for rich people to stimulate the economy

I would never use the word intervention to mean a lack of or a reduction of a govt action. That's just not what the word means.

Tax cuts "stimulate" the economy in the same way that I could "stimulate" the population of flies in my house by swatting less of them. Would you say that the resulting flies in my house were caused by my "intervention" of swatting less of them? No, swatting less flies is a lack of intervention.

 

[Astronuc]

Dying of Consumption
http://www.nytimes.com/2008/11/28/opinion/28roach.html
Stephen S. Roach, NYTimes Op-Ed Contributor, Nov 28, 2008

It’s game over for the American consumer. Inflation-adjusted personal consumption expenditures are on track for rare back-to-back quarterly declines in the second half of 2008 at a 3.5 percent average annual rate. There are only four other instances since 1950 when real consumer demand has fallen for two quarters in a row. This is the first occasion when declines in both quarters will have exceeded 3 percent. The current consumption plunge is without precedent in the modern era.

The good news is that lines should be short for today’s “first shopping day” of the holiday season. The bad news is more daunting: rising unemployment, weakening incomes, falling home values, a declining stock market, record household debt and a horrific credit crunch. But there is a deeper, potentially positive, meaning to all this: Consumers are now abandoning the asset-dependent spending and saving strategies they embraced during the bubbles of the past dozen years and moving back to more prudent income-based lifestyles.

This is a painful but necessary adjustment. Since the mid-1990s, vigorous growth in American consumption has consistently outstripped subpar gains in household income. This led to a steady decline in personal saving. As a share of disposable income, the personal saving rate fell from 5.7 percent in early 1995 to nearly zero from 2005 to 2007.

In the days of frothy asset markets, American consumers had no compunction about squandering their savings and spending beyond their incomes. Appreciation of assets — equity portfolios and, especially, homes — was widely thought to be more than sufficient to make up the difference. But with most asset bubbles bursting, America’s 77 million baby boomers are suddenly facing a savings-short retirement.

Worse, millions of homeowners used their residences as collateral to take out home equity loans. According to Federal Reserve calculations, net equity extractions from United States homes rose from about 3 percent of disposable personal income in 2000 to nearly 9 percent in 2006. This newfound source of purchasing power was a key prop to the American consumption binge.

As a result, household debt hit a record 133 percent of disposable personal income by the end of 2007 — an enormous leap from average debt loads of 90 percent just a decade earlier.

These last two statements indicate an unsustainable situation.

So what's the solution?

Fix the wage crisis, help the big picture
http://marketplace.publicradio.org/display/web/2008/11/25/whats_the_fix_madrick/

Commentator Jeff Madrick says a lot of our economic problems root from a wage crisis that's been troubling the average worker for 35 years. He shares a list of solutions for our "What's the Fix" series.

Jeff Madrick: We've had a wage crisis in America for 35 years. One number tells it all: The typical man in his 30's today earns less after inflation than a man in his 30's did in the 1970's. The main reason typical family incomes have risen at all over the past 30 years is that women have gone to work.

The wage crisis is a big reason why Americans borrow so much. It's a big reason why rising health care costs are so painful, why a growing number of mortgages end in default. And it's a big reason why Americans want their taxes cut even more.

. . . .

Marketplace Series - "What's the fix?"
http://marketplace.publicradio.org/projects/project_display.php?proj_identifier=2008/10/24/whats_the_fix


Income growth a matter of perspective
http://marketplace.publicradio.org/display/web/2008/11/25/wolfers/

Steve Chiotakis: There are myriad of economic stimulus packages floating around Washington, and you'll likely hear about one issue in the debate: wage growth. But like everything else in D.C., there are two sides to the debate. The Democratic side -- wages are down for the poor and middle class. And the Republican side -- wages are up for the middle class. Who's right? Economist and commentator Justin Wolfers says it's all about the data.

--------------------------------------------------------------------------------

Justin Wolfers: The Republicans describe the income of the average person, and that average income has risen by 10 percent since the year 2000 -- which is an OK, if not stellar rate of progress.

The Democrats focus instead on the typical household. Think about lining up all the households from poorest to richest, and choose the income of the household in the middle.

Economists call this median household income. You might call it middle-class income. Unfortunately, the income of this middle household has fallen since 2000, and it is now about $50,000. It's pretty unusual for the living standards of the middle class to decline like this.

Now, you might have a different definition of the middle class. But I have sliced and diced the data, and unless you want to start counting millionaires, you can't escape the conclusion that the middle-class incomes have declined.

How can the typical household be suffering economic decline, while the average rose? It's simple arithmetic: if someone earns 20 times as much as you, the average income statistics give them 20 times greater weight than you. Since 2000, the average income of the bottom 99 percent of taxpayers fell, while the incomes of the richest 1 percent grew. But the richest 1 percent are 20 times richer. So their rising incomes largely offset the falling incomes elsewhere.

So it turns out that Republicans and Democrats are each telling the truth -- just different truths. Which truth you care about may depend on where you stand in the pecking order.

As long as real incomes of the majority decline, so will the economy.


More families turning to food banks
http://marketplace.publicradio.org/display/web/2008/11/28/mm_food_banks/

and

The Worst Is Yet To Come: Anonymous Banker Weighs In On The Coming Credit Card Debacle
http://executivesuite.blogs.nytimes.com/2008/11/25/the-worst-is-yet-to-come-anonymous-banker-weighs-in-on-the-coming-credit-card-debacle/
By Joe Nocera

A few weeks ago, I published an e-mail message sent to me from an executive who works in the banking industry — and had become disgusted by what he sees all around him. This weekend, that same banker sent me another e-mail message, which he has also agree to let me publish. It’s another wake-up call. Too bad nobody is listening.

Today, we are bailing out the banks because of their greedy and deceptive lending practices in the mortgage industry. But this is just the tip of the iceberg. More is coming, I’m sorry to say. Layoffs are being announced nationwide in the tens of thousands. As people begin to lose their jobs, they will not be able to pay their credit card bills either. And the banks will be back for more handouts.

I received a catalog today from Casual Living and in big bold print on the front page, it said “BUY NOW, PAY NOTHING”. Then in significantly smaller print underneath, it said, (until April). That mantra has been sung throughout the credit markets over the last 10 years. The banks waive a carrot in front of the consumer and reel them in and encourage them to go deeper and deeper into debt. They do this by prescreening customers through credit reporting agencies, mailing offers to apply, and to transfer balances at teaser rates or zero percent financing. They base it on credit score and not on capacity to repay. A good credit score does not equate to the ability to repay debt.

Over my career, I have seen thousands of consumers that have credit card lines in excess of their annual salaries. Some are sinking under their burden. Some have been fiscally responsible and have minimal amounts outstanding. My 21-year-old daughter, who’s in college, gets pre-approved offers all the time. She has no ability to repay debt, yet the offers flow in just the same. We all know how these lines are accumulated. The banks, in their infinite stupidity, keep upping credit lines because the customer pays the minimum payments on time. My daughter’s credit line started at $1,000 and has been increased over the last two years to $4,400. She has no increased earnings to support this. But the banks do it without asking. And without being asked. The banks reel in the consumer, charge interest rates higher than those charged by the mob, increase lines without the consumer asking and without their consent, and lure them into overextending. And we can count on the banks to act surprised when they aren’t paid back. Shame on them.

As a banker, let me describe what we do wrong when we accept and review an application for a credit card. First, we don’t verify income. The first ‘C’ of credit: Capacity to repay, is completely ignored by the banks, just as it was in when they approved subprime mortgages. Then we ask for “household income” — as if other parties in the household could be held responsible for that debt. They cannot. And since we don’t ask for any proof of income, the customer can throw out any number they think will work for them. Then we ask if they rent or own and how much they pay. If their name is not on the mortgage, they can state zero. If they pay $1,000 in rent, they can say $500. (Years ago we asked for a copy of the lease to verify this number.) And finally, we don’t ask how much of a credit line the consumer is looking for. The banker can’t even put that amount into the system. There isn’t any place on the application for that information. We simply put unverified information into a mindless computer and the computer gets the person’s credit score and grants them the biggest line that score and income (ha!) qualifies for.

. . . .

The previously published email

Peeking Under the Kimono: A Big Banker Speaks Out
http://executivesuite.blogs.nytimes.com/2008/10/30/peeking-under-the-kimono-a-big-banker-speaks-out/
By Joe Nocera
A banker at a large bank sent the following to Nocera.

I’m a 35-year veteran in the banking industry. And I’ve spent the better part of my career working for the big banks as a small business banker and credit underwriter. Small business lending, in industry terms, is defined as a business that has less than $20 million in revenue and that borrows less than $5 million. I’ve been a lender for most of those years and I’ve been appalled at the changes in the industry.

The government has already done plenty for the big banks. It needs to stop worrying about them now. Instead, it need to pump money into the local community banks because those are the bankers who understand their markets, and know the businesses in their markets. They lunch with small business owners at Rotary Clubs and Chamber meetings. They learn, first-hand, about their businesses and the challenges they face. They go to their stores and factories and “kick the boxes.” And most importantly, they learn about the ways in which those business owners are making the tough decisions in cutting back expenses to stay ahead of this economic crisis.

Big banks like the one I work for typically have an aversion to lending to companies whose sales and profitability trends are deteriorating, even in tough times like these. Thus, very credit-worthy businesses are having their lines cut back or closed down. Not only are banks not making new loans, they are systematically withdrawing from the loan commitments they already have in place.

. . . .

 

[russ_watters]

That statement on incomes is still misleading. Incomes have not "fallen since 2000", they fell for 4 years, then rose for 3 years. And didn't you read the source you quoted?

As long as real incomes of the majority decline, so will the economy.

"The majority" is not a term used there. The sound byte the democrats used is one data point representing the median. It doesn't tell you anything about the majority. In fact, since one person who has seen a large drop (say, due to unemployment) will skew the data downward, it is almost certain that "the majority" have seen an increase in income since 2000.

 

[russ_watters]

This will surprise a lot of people:

Early data show strong Black Friday

http://www.usatoday.com/money/industries/retail/2008-11-29-blackfriday-results_N.htm

 

[edward]

Commercial real estate is also facing a crisis.

Even as the holiday shopping season begins in full swing, the same events poisoning the housing market are now at work on commercial properties, and the bad news is trickling in. Malls from Michigan to Georgia are entering foreclosure.

Unlike home mortgages, businesses don't pay their loans over 30 years. Commercial mortgages are usually written for five, seven or 10 years with big payments due at the end. About $20 billion will be due next year, covering everything from office and condo complexes to hotels and malls.

The retail outlook is particularly bad. Circuit City and Linens 'n Things have sought bankruptcy protection. Home Depot, Sears, Ann Taylor and Foot Locker are closing stores.

Those retailers typically were paying rent that was expected to cover mortgage payments. When those $20 billion in mortgages come due next year — 2010 and 2011 totals are projected to be even higher — many property owners won't have the money.

http://www.msnbc.msn.com/id/27928745/

One large resort and two Malls are in trouble locally. The companies are unable to get financing to pay off the large balloon payments that are due.

 

[Art]

This will surprise a lot of people: http://www.usatoday.com/money/industries/retail/2008-11-29-blackfriday-results_N.htm

So the fundamentals of the economy are still strong?

 

[mgb_phys]

So the fundamentals of the economy are still strong?

Yes, the trouble is that the fundementals are buy now, worry about credit card later!

 

[mheslep]

Apologies if this has already been posted. Its extraordinary. Video of Peter Schiffs comments over 2006/07.

...But as far as I can tell, Mr. Schiff wasn't guessing. He knew...

Note that a couple of months ago when gold was just over a $1000, people should invest in gold and Schiff said on CNN it was going to several thousand as the US economy tanked. It is now at $816. Also Schiff has been predicting this crash since 2002 when the Dow was at ~8000, and kept doing so while the Dow climbed to ~14000.
5:00 -
http://www.youtube.com/watch?v=drJ6QxSO5gw&feature=related

 

[mheslep]

Income growth a matter of perspective
http://marketplace.publicradio.org/display/web/2008/11/25/wolfers/...

'Distortion' would more aptly replace 'perspective' in that NPR piece.

I'd like to see 'household' income completely banned from the economic lexicon, henceforth replaced with per capita income, as 'household's very across, well, almost everything.

https://www.amazon.com/gp/sitbv3/reader?asin=0465003494&pageID=S03U&checkSum=nefgtWl2vEehNJUfOXYp0a9lSVRiIZT5iujeReo8Zy8="&tag=pfamazon01-20, Thomas Sowell:

It is an undisputed fact that the average real income ... of American households rose by only 6 percent over the entire period from 1969 to 1996. ... But it is equally undisputed that the average real income per person in the United States rose by 51 percent over that very same period. How can both of these statistics be true? ...
...
Differences in household size are very substantial from one income level to another. U.S. Census data show 39 million people living in households whose incomes are in the bottom 20 percent of household incomes and 64 million people living in households in the top 20 percent. Under these circumstances, measuring income inequality or income rises and falls by households can lead to completely different results from measuring the same things with data on individuals. Comparing households of highly varying sizes can mean comparing apples and oranges. Not only do households differ greatly in the numbers of people per household at different income levels, the number of working people differ even more widely.

In the year 2000, the top 20 percent of households by income contained 19 million heads of households who worked, compared to fewer than 8 million heads of households who worked in the bottom 20 percent of the households. These differences are even more extreme when comparing people who work full-time and year-round. There are nearly six times as many such people in the top 20 percent of households as in the bottom 20 percent. Even the top five percent of households by income had more heads of household who worked full-time for 50 or more weeks a year than did the bottom 20 percent...

There was a time when it was meaningful to speak of the "the idle rich" and the "toiling poor" but that time has long past. Most households in the bottom 20 percent by income do not have any full-time, year-round worker and 56 percent of these households do not have anyone working even part time. Some of these low-income households contain single mothers on welfare and their children. Some such households consists of retirees living on Social Security or others who are not working, or who are working sporadically part time because of disabilities or for other reasons.
...
Most statistics on income inequality are very misleading in yet another way. These statistics almost invariably leave out money received as transfers from the government in various programs for low-income people which provide benefits of substantial value for which the recipients pay nothing. Since people in the bottom 20 percent of income recipients receive more than two-thirds of their income from transfer payments, leaving those cash payments out of the statistics greatly exaggerates their poverty -- and leaving out in-kind transfers as well, such as subsidized housing, distorts their situation even more. In 2001, for example, cash and in-kind transfers together accounted for 77.8 percent of the economic resources of people in the bottom 20 percent.

 

[russ_watters]

So the fundamentals of the economy are still strong?

Gee, could that post be any more useless?

 

[russ_watters]

'Distortion' would more aptly replace 'perspective' in that NPR piece.

I'd like to see 'household' income completely banned from the economic lexicon, henceforth replaced with per capita income, as 'household's very across, well, almost everything.

https://www.amazon.com/gp/sitbv3/reader?asin=0465003494&pageID=S03U&checkSum=nefgtWl2vEehNJUfOXYp0a9lSVRiIZT5iujeReo8Zy8="&tag=pfamazon01-20, Thomas Sowell:

D'oh - I keep forgetting about the shrinking household size thing and the distribution of single and double income households. Very good points.

[edit] I'm curious as to why the census bureau doesn't break up individual incomes into fifths like they do for household incomes. It makes it harder to interpret the data when everyone gets so lumped together. That's why I use the household tables instead of the individual tables.

 

[OmCheeto]

Note that a couple of months ago when gold was just over a $1000, people should invest in gold and Schiff said on CNN it was going to several thousand as the US economy tanked. It is now at $816.

Perhaps he has a lot of gold. Maybe if the price goes way up he'll be rich.
I believe I was trying to imply that I trust his analysis. I never said anything about him not being human.

I suppose the lust for gold is such an old tradition, one shouldn't worry too much about it's value going down. Until of course, people figure out it's really just a pretty, shiny metal, with little real value. (Outside of electronics, space helmet visors, dental crowns, and O₂ sensors.)

Also Schiff has been predicting this crash since 2002 when the Dow was at ~8000, and kept doing so while the Dow climbed to ~14000.
5:00 -
http://www.youtube.com/watch?v=drJ6QxSO5gw&feature=related

Makes one wonder how the crash would have been different had it happened in 2002-3.

 

[Jimmy Snyder]

Makes one wonder how the crash would have been different had it happened in 2002-3.

The Dow would have crashed from ~8000 to ~8500. Some crash.

 

[Office_Shredder]

If the crash was in 2002... didn't we have a crash in 2002? What happened to the dot com bust?

 

[turbo]

Manufacturing index hits 26-year low.

http://news.yahoo.com/s/ap/20081201/ap_on_bi_ge/economy_manufacturing;_ylt=Avuf97.LKfDr2kHRhCCPdSKs0NUE

 

[Astronuc]

Manufacturing index hits 26-year low.

http://news.yahoo.com/s/ap/20081201/ap_on_bi_ge/economy_manufacturing;_ylt=Avuf97.LKfDr2kHRhCCPdSKs0NUE

This is one of the main reasons that the Dow and NASDAQ dropped more than 4% in the first hour of trading.

Oct. construction spending down 1.2%, which was more than expected, and this is another reason.


But wait - it gets even better!

Credit card industry may cut $2 trillion of lines: analyst
http://news.yahoo.com/s/nm/20081201/bs_nm/us_finance_research_oppenheimer

(Reuters) – The U.S. credit card industry may pull back well over $2 trillion of lines over the next 18 months due to risk aversion and regulatory changes, leading to sharp declines in consumer spending, prominent banking analyst Meredith Whitney said.

The credit card is the second key source of consumer liquidity, the first being jobs, the Oppenheimer & Co analyst noted.

"In other words, we expect available consumer liquidity in the form or credit-card lines to decline by 45 percent."

Bank of America Corp, Citigroup Inc and JPMorgan Chase & Co represent over half of the estimated U.S. card outstandings as of September 30, and each company has discussed reducing card exposure or slowing growth, Whitney said.

A consolidated U.S. lending market that is pulling back on credit is also posing a risk to the overall consumer liquidity, Whitney said.

Mortgages and credit cards are now dominated by five players who are all pulling back liquidity, making reductions in consumer liquidity seem unavoidable, she said.

That will have a significant impact of the purchasing power of many Americans, but this is necessary in order to significantly reduce the number of consumers who are over-leveraged. However, that will surely have a cascading effect in the retail sector and will add to reduced tax revenues for states and local governments.

 

[turbo]

According to Construction Data New England, housing starts in southern Maine (the most populous area of the state) are down from an average of 2100-2200 (years 2000 through 2005) to 1599 (2006), to 1293 (2007), to 841 (2008). Our housing industry has pretty much collapsed. It's a bad time to be a carpenter, operate a lumber-yard, operate a sawmill, or to be employed in the timber industry in general (harvesting, scaling, trucking, etc). People like my uncle (commercial and residential heating and refrigeration business owner) still get trouble calls, repairs, etc, but the collapse of the housing industry is pinching them badly, since there are few new installations to be made. A good friend of mine runs a small truck dealership. He buys used tractor-trailer rigs, rebuilds them (often transforming them from one use to another) and sells them. It's a buyer's market, with so many owner-operators failing right now, but he can't sell a truck to save his soul. His wife used to run his office - she is now working full-time at the local hospital.

 

[OmCheeto]

If the crash was in 2002... didn't we have a crash in 2002? What happened to the dot com bust?

Ok. You caught me. But like politics, I haven't followed the market in 30 years.
The DJIA dropped from about 11,000 to 8,500(-23%) between '01 and '03, but went back to 10,500 in '04.
Not quite the level of the current crash: 14,000 to 8,500(-40%)
Does anyone think we'll get back to at least 13,000 by this time next year?

Credit card industry may cut $2 trillion of lines: analyst
http://news.yahoo.com/s/nm/20081201/bs_nm/us_finance_research_oppenheimer
That will have a significant impact of the purchasing power of many Americans, ...

How am I going to buy my cigarettes and beer?

 

[Astronuc]

Panel says US has been in recession since Dec. '07
http://news.yahoo.com/s/ap/20081201/ap_on_bi_ge/recession

WASHINGTON – The U.S. economy has been in a recession since December 2007, the National Bureau of Economic Research said Monday.

The NBER — a private, nonprofit research organization — said its group of academic economists who determine business cycles met and decided that the U.S. recession began last December.

The White House commented on the news that a second downturn has officially begun on President George W. Bush's watch without ever actually using the word "recession," a term the president and his aides have repeatedly avoided. Instead, spokesman Tony Fratto remarked upon the fact that NBER "determines the start and end dates of business cycles."

It seemed obvious at the time.

 

[edward]

I like this simple visual of the collateralized debt obligations. I have a feeling the investment banks doing business with the second tier of derivative managers are getting the bail out money.

http://infosthetics.com/archives/2008/10/visual_explanation_of_collateralized_debt_obligations.html

 

[Astronuc]

If the crash was in 2002... didn't we have a crash in 2002? What happened to the dot com bust?

It wasn't considered a crash in the sense that there was an abrupt sell off, but the tech sector and NASDAQ subsequently lost a lot of value.

Consider this history.

Jan 03, 2000 3882.62
Mar 06, 2000 5058.62
Jan 01, 2001 2407.65 Down more than 50% from its high 9 months earlier
Mar 26, 2001 1840.26 Down about 64% from its high.
Sep 17, 2001 1423.19 Down about 72% from its high.
Sep 30, 2002 1139.90 Down about 78% from its high.
Dec 31, 2002 1335.51

There were intermittent recoveries during the gradual decline between Mar 06, 2000 and Sep 30, 2002. All markets took big hits surrounding the attacks on Sep 11, 2001. A slow and sustained recovery began Oct 1, 2002 and continued into 2003. Slow recovery from Jan, 2003 throught Oct 29, 2007 (NASDAQ composite 2810.38, which just about doubled in value), but now:

Oct 01, 2008 2069.40
Dec 01, 2008 ~1440.00 Down about 48% since it's relative high October 2007.

This is a good chart to play with.
http://finance.yahoo.com/echarts?s=%5EIXIC

or Summary Page
http://finance.yahoo.com/q?s=^IXIC

and the Dow
http://finance.yahoo.com/q?s=^DJI

----------------
For now, the crash is not abrupt, and the economy is not totaled. On the other hand, it's not just a fenderbender either. It's more like a chain reaction collision, and there are some severe injuries in addition to minor injuries. For some it's a temporary setback, but for others it's more severe, and some will not recover their losses, particularly those close to retirement or those beyond 50 who had much of their investments in the equities markets.

One big problem facing the recovery is the potential rise in oil and gas as the economy rebounds, and if the price of oil moves toward $75/bbl, that will have an adverse impact on the recovery.

 

[Astronuc]

Another Bearish (or bloody) day in the equity markets.

The Dow 30 pretty much lost all the gains from last week! Just before the bell, the Dow 30 were down 7.5% below 8200. Perhaps it will rebound somewhat during the week, but it seems the markets are just going to be volatile until the economy stabilizes.

Elsewhere I heard speculation that the US economy will shed another 1 million jobs between Nov and end of 1Q 2009. The 4th quarter GDP is expected to fall at a -4% annual rate. I guess we will see in January.

 

[Proton Soup]

the thing about the DOW, look at it on the max timeline. the growth appears exponential since about 1980. Yahoo even charts it on a logarithmic axis. are we at the point now where if the market were to only grow linearly, that would be considered a failure? how are we supposed to sustain that, short of just printing huge piles of dollars?

 

[quadraphonics]

Panel says US has been in recession since Dec. '07
http://news.yahoo.com/s/ap/20081201/ap_on_bi_ge/recession
It seemed obvious at the time.

Maybe someone should go back through this thread and count how many times jimmysnyder expressed confidence that the US economy was not in recession since last December??

 

[mheslep]

the thing about the DOW, look at it on the max timeline. the growth appears exponential since about 1980. Yahoo even charts it on a logarithmic axis. are we at the point now where if the market were to only grow linearly, that would be considered a failure? how are we supposed to sustain that, short of just printing huge piles of dollars?

I don't immediately know why a small exponential growth can not continue far into the future. Economic growth does not necessarily require increased physical resource use. Continually increasing productivity of services could do it in theory. For instance, what is the upper limit on lines of code, or whatever measure that innovation morphs that metric into?

 

[mheslep]

Maybe someone should go back through this thread and count how many times jimmysnyder expressed confidence that the US economy was not in recession since last December??

Zero.

 

[Proton Soup]

I don't immediately know why a small exponential growth can not continue far into the future. Economic growth does not necessarily require increased physical resource use. Continually increasing productivity of services could do it in theory. For instance, what is the upper limit on lines of code, or whatever measure that innovation morphs that metric into?

well, have we really increased productivity that much, or have we just changed metrics? if we've changed metrics, then much of the panic is out of proportion.

 

[mgb_phys]

It's hard to measure productivity in terms of simple GDP. Especially in technology.
As things get cheaper to make - making them has less value and so productivity goes down (unless you can sell them for the same amount!) The only solution is to convince people to buy bigger and better versions of the same thing - if this spiral stops it's a recession.
But if that means you can only afford to buy the same size car, LCD TV or CPU as last year then should you worry?

 

[Office_Shredder]

Ok. You caught me. But like politics, I haven't followed the market in 30 years.
The DJIA dropped from about 11,000 to 8,500(-23%) between '01 and '03, but went back to 10,500 in '04.
Not quite the level of the current crash: 14,000 to 8,500(-40%)
Does anyone think we'll get back to at least 13,000 by this time next year?

Who knows? On the other hand, the NASDAQ tanked 80% during the dot com bust and is still only at half the level it was at the (admittedly artificial) high around 2000 (but who's to say the previous stock market value wasn't artificial too?)

 

[Proton Soup]

well, have we really increased productivity that much, or have we just changed metrics? if we've changed metrics, then much of the panic is out of proportion.

and the other thing that occurred to me, later... is ca. 1980 when many companies stopped paying dividends?

 

[Gokul43201]

Maybe someone should go back through this thread and count how many times jimmysnyder expressed confidence that the US economy was not in recession since last December??

Zero.

These don't count?

Some posts, in reverse chronological order:

What a difference a word makes. Mr. Volker knows that the nber decides when recessions begin and end, not former Fed chiefs. The nber has not. Don't give up hope though.

Technically, we're in a recession when the nber says we're in a recession. The nber has not said that we're in a recession. So technically, we're not now in a recession. Don't give up hope though.

Hopes for a recession were dealt a very hard blow today.
...
I don't know how these things work, but I doubt the NBER is going to declare a recession with a negative 1.9% decrease. Don't give up hope though, the previously reported 0.6% increase in the last quarter of 2007 has been revised to a positive 0.2% decrease.

Hopes that the US economy was in recession were dealt a setback today when the Commerce department issued a revision to the 1st quarter GDP numbers. Optimists were looking forward to the revised numbers to wipe the excreme?t-devouring grin off my ugly face. Too bad. Don't give up hope though.

Another beautiful theory destroyed by an ugly fact.

Frankel cautions against giving up hope.

Frankel is a member of the NBER Business Cycle Dating Committee. These are the people that meet after every recession to let you know that there had been one. One of the things they look for is two consecutive quarters of negative GDP growth. However, that is not the only criterion they look at, so keep your fingers crossed. On the down side, I doubt that they will declare one when we haven't even had one quarter of negative GDP growth. When they finally give into popular opinion they will have lost all purpose in life.

There is no recession.

Here's a new definition of recession: When a president and chief investment officer at an advisory says that "employment is clearly staying more solid than a recession would indicate", then it's not a recession.

OK, so far I'm argumentative, insubstantiative, insecure, wrong, and shouldn't bother replying at all. But at least I'm not daft. Only my arguments are. And even that is under review. But we are not in a recession. Don't give up hope though.

I decline to agree that I am daft. Thanks for the suggestion anyway. When the NBER says we were in a recession, you can gloat all you want. To me you all sound like Hillary.

Here is yet another definition of recession:
When the current president of the NBER says unequivocably back in March that we are in a recession, even though in May he said unequivocably we are not in a recession.
...
Actually, the definition of a recession is when the NBER says we are in a recession. They haven't. We aren't. Don't give up hope though.

More like 232 years according to the mood of this thread. But only in eastern Kentucky. The rest of the country doesn't have the recession it needs. Don't give up hope though.

As long as we are willing to rely on opinions and not facts we are in a recession of a non-economic sort.

Hopes that the US was in a recession were dealt a setback today.

GDP was up in the first quarter 2008

A recession is defined as two consecutive quarters of negative growth in GDP. We haven't had a negative quarter since December 2001. Egad pessimists, what does the economy have to do before you'll admit we aren't in a recession? If you're not optimistic, you haven't been paying attention.

 

[mheslep]

These don't count?

Some posts, in reverse chronological order:

Nope. The point, as JS made repeatedly, was that a recession is declared by the NBER and not another. Other people are free to point to economic down/up turns, observe the various economic indicators and comment thereon as they see fit. They do not get to declare a recession, period.

 

[Astronuc]

The Dow 30 components have been changed as some fall out (stock price collapses, e.g. AIG) and others take their place. The Dow is supposed to represent the broader market.

Some companies cut back on or eliminated dividends in the 80's and 90's, particularly those in the NASDAQ, but they did not necessarily reinvest in the companies as much as they filled the pockets of management. One can check the dividends for any company through their filings with the SEC or go on-line.

Now these companies do have the option of declaring one-time or special dividends, or do a cash distribution to shareholders, and some have done so. One has to be holding the shares at the time of the declaration to benefit.

 

[Gokul43201]

Nope. The point, as JS made repeatedly, was that a recession is declared by the NBER and not another. Other people are free to point to economic down/up turns, observe the various economic indicators and comment thereon as they see fit. They do not get to declare a recession, period.

The point that others made to JS was that the NBER only calls a recession several months after the fact. So, to speculate whether or not we are currently in a recession, you can not use the NBER's silence at that moment to pronounce, as jimmy did on May 22, that "there is no recession."

Furthermore, JS said a lot more that you claim he did. He expressed his own personal opinion of the economic situation.

From Jul 31: "...I doubt the NBER is going to declare a recession...".

And on May 29:"... I doubt that they will declare one when we haven't even had one quarter of negative GDP growth. When they finally give into popular opinion they will have lost all purpose in life."

I'm not sure what jimmy meant by that last sentence. Has the NBER now lost all purpose in life?

 

[quadraphonics]

Nope. The point, as JS made repeatedly, was that a recession is declared by the NBER and not another.

Actually, that was a point I made repeatedly, which was only accepted by JS after much argumentation.

Other people are free to point to economic down/up turns, observe the various economic indicators and comment thereon as they see fit.

Indeed, and that's why I asked for instances in which JS expressed confidence that we are not in recession (i.e., that NBER would not declare a recession to have been occurring at the date when the comment was made). Although, as Gokul's research shows, JS did indeed categorically declare that the US was not in recession, even after the issues relating to the NBER were brought up.

I'm just taking him up on his offer to let us gloat all we wanted once the NBER had ruled that a recession was in effect :] He went pretty far out on a limb on this issue, and said limb has now decisively broken off beneath him.

 

[Astronuc]

Americans' Food Stamp Use Nears All-Time High
http://www.washingtonpost.com/wp-dyn/content/article/2008/11/25/AR2008112502553.html
By Jane Black
Washington Post Staff Writer
Wednesday, November 26, 2008; Page A01

Fueled by rising unemployment and food prices, the number of Americans on food stamps is poised to exceed 30 million for the first time this month, surpassing the historic high set in 2005 after Hurricane Katrina.

The figures will put the spotlight on hunger when Congress begins deliberations on a new economic stimulus package, said legislators and anti-hunger advocates, predicting that any stimulus bill will include a boost in food stamp benefits. Advocates are also optimistic that President-elect Barack Obama, who made campaign promises to end childhood hunger and whose mother once briefly received food stamps, will make the issue a priority next year.

"We soon will have the most food stamps recipients in the history of our country," said Jim Weill, president of the Food Research and Action Center, a D.C.-based anti-hunger policy organization. "If the economic forecasts come true, we're likely to see the most hunger that we've seen since the 1981 recession and maybe since the 1960s, when these programs were established."

The Agriculture Department is set to release the new numbers as early as this week. Agency officials declined to confirm the figures but outlined them in a briefing last month for advocates and administrators of state food stamp programs. Breaking the symbolically important 30 million mark comes on the heels of government data showing that 11.9 million people went hungry in the United States at some point last year. That included nearly 700,000 children, up more than 50 percent from the year before.

Food pantries and other charitable organizations are also reporting an increase in demand from those in need. Visits to local pantries are up by 20 to 100 percent over the past six months, and calls to the Capital Area Food Bank's hunger hotline have jumped 248 percent. Most are from people who have never used food stamps or a pantry before, said Lynn Brantley, the organization's president and chief executive.

. . . . Although prices have fallen from the levels of this past spring, they remain high. In October, the consumer price index for food and beverages had jumped 6.1 percent over last year. Staples such as eggs and bread rose even faster.

For low-income families, who spend a higher percentage of their monthly budget on food, that rise has been particularly painful. Food stamp benefits are adjusted for inflation only once a year, and as of September, the maximum benefit fell $64 a month short of the cost of the thriftiest, USDA-established diet for a family of four. The annual adjustment in October of 8.5 percent largely brought the benefit in line with food costs again, but the Center on Budget and Policy Priorities, a nonpartisan policy group, estimates that if current inflation persists, by December benefits will again fail to match the cost of the thrifty food plan.

. . . .
The benefits, which average $109.93 a month ($3.66/day) per person, are based on a plan set by the government to represent a low-cost but nutritionally adequate diet. Participants apply locally to receive an electronic card that is used like an ATM card to buy food at most grocery stores and some farmers markets. The maximum benefit for a household of four is $588 a month ($147/mo per person, or ~$4.90/day per person).
. . . .

More families turning to food banks
http://marketplace.publicradio.org/display/web/2008/11/28/mm_food_banks/


When the Downturn Sailed Into Savannah
http://www.nytimes.com/2008/11/30/business/economy/30econ.html

“You are seeing a fairly widespread recession, with all major components of demand now in decline,” said Brian Sack, an economist in Washington for Macroeconomic Advisers L.L.C., a consulting and forecasting firm. It expects the gross domestic product to decline in the fourth quarter at an annual rate of 4 percent, down sharply from the contraction of 0.5 percent in the third quarter.
. . . .
No one has a greater stake in keeping the recession mild than Doug J. Marchand, executive director of the Georgia Ports Authority, which operates the port here, a mile upriver from the Atlantic Ocean. It is now the fifth-largest port on the East Coast, as measured by cargo tons; most cargo is shipped in huge steel containers.
. . . .
But the tonnage in those containers, rising at an annual rate of 10 percent or more annually through most of the last 20 years, has lately “flattened,” as Mr. Marchand put it, to almost no rise at all — the first time that has happened in his 13 years as port director.

That unanticipated slowdown caught Savannah off guard. The city has four million square feet of newly built, never-occupied warehouse space, intended primarily as temporary quarters for the growing flow of imports. Big as hangars, these buildings sit shuttered and alone in industrial parks sprouting weeds.
. . . .
And so it goes across the Savannah economy: falling retail sales, fewer hotel bookings, a canceled convention, layoffs at Memorial Hospital, an announcement late this month that Great Dane Trailers, a major manufacturer, would soon close its factory here, and weakened tourism in a city that over the last 15 years has built an industry out of visits to its historic downtown.
. . . .
The Savannah Economic Development Authority, having signed up $360 million in new investment last year, has commitments this year for only $33 million.

Stocks eye dour jobs, shopping data
http://news.yahoo.com/s/nm/20081130/bs_nm/us_column_stocks_outlook

The Standard & Poor's 500 Index had its best week since at least 1980 -- jumping 12 percent. That's a turnaround from the previous week, when the S&P had its lowest close since 1997. For the four-day week, the Dow Jones industrial average rose 9.7 percent and the Nasdaq Composite Index (.IXIC) surged 10.9 percent. The U.S. stock market was closed on Thursday for Thanksgiving.

Still, steep losses among financial and automaker stocks made this [Nov] among the worst months for Wall Street since the October 1987 stock market crash. For November, the Dow fell 5.3 percent, the S&P 500 dropped 7.5 percent and the Nasdaq lost 10.8 percent.

Year to date, the Dow is down 33.4 percent, while the S&P 500 is off 39 percent and the Nasdaq is down 42.1 percent.
. . . .
U.S. payrolls probably shed 316,000 jobs in November, following October's drop of 240,000 jobs, according to economists polled by Reuters. The unemployment rate is seen rising to 6.8 percent in November from October's 6.5 percent.
. . . .

After 99 years, Woolworths goes bust [but not to worry - it's in the UK]
http://marketplace.publicradio.org/display/web/2008/11/27/woolworths/

Scott Jagow: More dire economic news from overseas. In Britain, more than 30,000 jobs are in jeopardy after a major retailing firm collapsed. That would be Woolworths -- the low-cost chain has gone bust after 99 years. From London, Stephen Beard reports.

--------------------------------------------------------------------------------

Stephen Beard: Woolworths, an off-shoot of the American five and dime stores, has over 800 shops in Britain. They all face closure. The company went bankrupt last night after its bankers pulled the plug.

The timing is unprecedented, with almost a month to go before Christmas. British consumers are famous for their prodigious levels of shopping throughout the festive season.

To pull the plug now shows how desperate for cash the banks have become, says analyst Robert Clark.

Robert Clark: The irony of it is with Woolworth that it actually makes money at Christmas -- it's the only time that it does make money. So it would probably have been profitable trading fully through Christmas.

Britain's Times newspaper had said Woolworths was in discussions with Hilco UK Limited, a firm that buys underperforming retail businesses and turns them around for profit. The sale price would be a nominal 1 pound ($1.50), according to the report. Hilco declined to comment.

In August, Woolworths rejected a 50 million pound offer for its retail division from Iceland Foods Ltd.


In the US, Harold's will be closing the doors of its 43 stores in 18 states and holding a giant liquidation sale.


Pilgrim's Pride files for bankruptcy protection (AP)
By EMILY FREDRIX, AP Food Industry Writer, MILWAUKEE
http://marketplace.publicradio.org/apheadline_detail.php?story_id=D94Q662O3&group=ap.online.headlines.business
Monday, December 1, 2008 05:35:14 PM PT

Pilgrim's Pride Corp. filed for Chapter 11 bankruptcy protection on Monday, hurt like other meat producers by volatile feed prices and slumping demand but also hobbled by an unmanageable debt load.

The Pittsburg, Texas-based company, the nation's largest chicken producer, sought protection in a filing with the U.S. Bankruptcy Court for the Northern District of Texas, saying that as of Sept. 27 it had $3.75 billion in assets and $2.72 billion in debts.

Pilgrim's Pride, which controls about 23 percent of the U.S. chicken market, will continue operating during the reorganization and will not liquidate its assets, spokesman Ray Atkinson said.
. . . .

And to top it off -

Saudi Arabia wants oil price at $75 a barrel
http://www.cnn.com/2008/BUSINESS/11/29/oil.saudi.arabia.opec.ap/index.html

CAIRO, Egypt (AP) -- Saudi Arabia said Saturday that it hoped to raise oil prices to $75 a barrel, but indicated that no measures would probably be taken until an OPEC meeting next month in Algeria.

Good thing that they are our friends.

 

[mheslep]

well, have we really increased productivity that much ...

Example: labor hours require to produce 100 bushels of wheat, US:
1830: 250-300 labor-hours (5 acres)
1890: 40-50 labor-hours (5 acres)
1930: 15-20 labor-hours (5 acres)
1955: 6 1/2 labor-hours (4 acres)
1965: 5 labor-hours (3 acres)
1975: 3-3/4 labor-hours (3 acres)
1987: 3 labor-hours (3 acres)
and last year, 2007, 100 bushels of wheat were grown organically on one acre.

So while the US population increased 25x, the labor productivity increased 300x plus.
http://www.agclassroom.org/gan/timeline/farm_tech.htm
http://www.montana.edu/cpa/news/nwview.php?article=5704

 

[Jimmy Snyder]

Today the NBER announced that we have been in recession since December of last year. I felt that even though things were bad, they weren't that bad. To those whose hopes were fulfilled, and who now gloat over my abject defeat, I offer no regrets, only my congratulations on your prescience. Go easy on me. After all, I had always encouraged you to keep on hoping.

 

[Jimmy Snyder]

Actually, that (a recession is declared by the NBER and not another) was a point I made repeatedly, which was only accepted by JS after much argumentation.

I don't recall that exchange. In post #490, page 31 of this thread:
https://www.physicsforums.com/showthread.php?t=130611"
I had indicated that I knew the definition. Did you convince me of it before or after post #490?

 

[turbo]

Today the NBER announced that we have been in recession since December of last year. I felt that even though things were bad, they weren't that bad. To those whose hopes were fulfilled, and who now gloat over my abject defeat, I offer no regrets, only my congratulations on your prescience. Go easy on me. After all, I had always encouraged you to keep on hoping.

Hi, Jimmy! Astronuc and I and others have been pointing out for a LONG time that our economy was in trouble and was in fact in recession. You gleefully denied that we were in recession (for what reason I do not know) and claimed that we "hoped" that the US was in recession in advance of the NBER pronouncement (ALWAYS made well after the fact!)

Welcome to the real world.

best regards...
Skip

 

[lisab]

Today the NBER announced that we have been in recession since December of last year. I felt that even though things were bad, they weren't that bad. To those whose hopes were fulfilled, and who now gloat over my abject defeat, I offer no regrets, only my congratulations on your prescience. Go easy on me. After all, I had always encouraged you to keep on hoping.

jimmy, although I never knew quite what your intent was in your posts, I always gave you the benefit of the doubt that your intent wasn't simply to be mean. I don't pick that up in any of your posts, ever.

But I don't think you ever saw the economy through my eyes. I work in a lab that serves the building industry. We've been in a recession for many, many months. But things have taken an ugly turn in the last few weeks, from bad to unprecidented. We're looking at a 50% cut in income in the next quarter - and possibly worse in the quarter after that. I expect to lose my job.

I just assumed you worked in a field that was more shielded from the storm than mine is.

BTW, the president of my company has announced that the hit list will be announced on Jan 5th - sigh!

 

[quadraphonics]

I don't recall that exchange. In post #490, page 31 of this thread:
https://www.physicsforums.com/showthread.php?t=130611"
I had indicated that I knew the definition. Did you convince me of it before or after post #490?

It is true that you mentioned the NBER's arbitration role in that post, but the understanding evident in your subsequent comments was perverse to the point of either basic misapprehension or dishonesty. See post https://www.physicsforums.com/showpost.php?p=1737376&postcount=576", for example:

Actually, the definition of a recession is when the NBER says we are in a recession. They haven't. We aren't.

 

[Jimmy Snyder]

I always gave you the benefit of the doubt that your intent wasn't simply to be mean.

Thank you. The economy is not made of things, it is made of people. When the fabric of society is strong, the economy thrives. I have been a cheerleader for saying that we were not in recession. It was not merely to win an argument, but to have a real effect on peoples' attitudes. I still think that if I got one person to look to the future with hope, who otherwise would not have done so, then I had done my part to improve the economy. Aside from keeping my own spirits up, of course. The internet is famous for masking peoples' intents and many flame wars get started on that account. I hope you won't mistake my upbeat message for meanness, nor give into anyone else's call for hopelessness. I could easier ascribe meanness to their intents.

 

[Al68]

jimmy, although I never knew quite what your intent was in your posts, I always gave you the benefit of the doubt that your intent wasn't simply to be mean. I don't pick that up in any of your posts, ever.

But I don't think you ever saw the economy through my eyes. I work in a lab that serves the building industry. We've been in a recession for many, many months. But things have taken an ugly turn in the last few weeks, from bad to unprecidented. We're looking at a 50% cut in income in the next quarter - and possibly worse in the quarter after that. I expect to lose my job.

I just assumed you worked in a field that was more shielded from the storm than mine is.

BTW, the president of my company has announced that the hit list will be announced on Jan 5th - sigh!

Funny thing about the word "recession". It's definition depends on who's using the word. The only definition I know of that is objective is a drop in GDP for 2 consecutive quarters.

Of course that definition isn't useful at all for those that want to mislead the public. They would much prefer a subjective, variable definition.

Because anyone who claimed that the GDP dropped 2 consecutive quarters could just be called a liar outright. Of course, nobody is claiming that, they're just saying we're in a "recession", whose definition is whatever they think it should be at the time.

Well, any definition that's not objective and clear cannot possible be useful to me.

So, those that say we're in a recession, do you have a definition that is objective and concise enough for me to even be able to agree or disagree?

 

[Jimmy Snyder]

So, those that say we're in a recession, do you have a definition that is objective and concise enough for me to even be able to agree or disagree?

Yes and no. Many consider the NBER (National Bureau of Economic Research) as the arbiter of when recessions start and end. You could say that it is objective and concise in the sense that they make public their decision and when they do, you know what their decision is. However, they do not publish the exact criteria that they use. I'm pretty sure that they do not have a precise definition.

Yesterday the NBER announced that we have been in a recession since December of last year. msn.com ran the story with a headline that said something like "It's official, we're in a recession". That gives you an idea of how some people regard the NBER's judgement. None the less, there is a celebrity flavor to it all, the NBER is famous for being famous. Anyone who wants to can claim that we are not in a recession and if you do, a measure of your officialness will be the number of people who accept your announcement. As for myself, I accept the NBER's announcement.

 

[Astronuc]

Funny thing about the word "recession". It's definition depends on who's using the word. The only definition I know of that is objective is a drop in GDP for 2 consecutive quarters.

Of course that definition isn't useful at all for those that want to mislead the public. They would much prefer a subjective, variable definition.

Because anyone who claimed that the GDP dropped 2 consecutive quarters could just be called a liar outright. Of course, nobody is claiming that, they're just saying we're in a "recession", whose definition is whatever they think it should be at the time.

Well, any definition that's not objective and clear cannot possible be useful to me.

So, those that say we're in a recession, do you have a definition that is objective and concise enough for me to even be able to agree or disagree?

The 3Q08 GPD decline was revised from -0.3% to -0.5% (I believe that is an annual rate), but the 4Q08 is expected to have a more severe decline. One estimate puts it at -4% (annual rate), but we won't know until Jan or Feb 09.

However this has some insight - Officials Vow to Act Amid Signs of Long Recession
http://www.nytimes.com/2008/12/02/business/economy/02econ.html

and

All Recessions Not Created Equal (I would suggest downloading/saving the graphic)
http://www.nytimes.com/imagepages/2008/12/02/business/02econ.graphic.html

Two consecutive decline in GDP is just one definition of recession, and I think 3 quarters of negative growth (not consecutive) would be another definition, but then there are several components to consider of which GDP is one, as well as personal consumption, employment and housing prices. The decline in housing prices is perhaps the biggest problem in addition to credit defaults and bankruptcies, which have snowballed because of the derivatives (e.g. credit default swaps and securitized debt). The economy has been too highly leveraged (actually over-leveraged) for well over a year.


And as a reminder - please don't personalize disagreements, but be civil and address the comments. And no gloating.

 

[kronon]

Confirmation here of what many of us have been saying for while: Its all about politics. Bad quantitative models, 15 standard deviation events and restrained regulators are just local symptoms of an over-arching political policy.



WASHINGTON (AP) — The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

The administration's blind eye to the impending crisis is emblematic of its governing philosophy, which trusted market forces and discounted the value of government intervention in the economy. Its belief ironically has ushered in the most massive government intervention since the 1930s.

Many of the banks that fought to undermine the proposals by some regulators are now either out of business or accepting billions in federal aid to recover from a mortgage crisis they insisted would never come. Many executives remain in high-paying jobs, even after their assurances were proved false.



http://www.google.com/hostednews/ap/article/ALeqM5hTDPY8hFtJLxsv8i1Q7OvoRrlYrQD94PQ0JO0

 

[Jimmy Snyder]

Funny thing about the word "recession". It's definition depends on who's using the word. The only definition I know of that is objective is a drop in GDP for 2 consecutive quarters.

By the way, this is not the first time that NBER has declared a recession without a drop in GDP for 2 consecutive quarters. The GDP figures were much worse in the 2000 recession:

09/00 -0.5
12/00 +2.1
03/01 -0.5
06/01 +1.2
09/01 -1.4

compare to:

12/07 -0.2
03/08 +0.9
06/08 +2.8
09/08 -0.5