News What are the potential impacts of public confidence on the economy's recovery?

[CRGreathouse]

Versions of graphs already posted

mheslep, do you have one that shows debt as a percentage of GDP?

OmCheeto, do you have one that shows which party controlled Congress?

 

[mheslep]

mheslep, do you have one that shows debt as a percentage of GDP?...

http://www.cbo.gov/ftpdocs/110xx/doc11014/Testimony_Frontmatter_Senate.shtml

Those accumulating deficits will push federal debt held by the public to significantly higher levels. At the end of 2009, debt held by the public was $7.5 trillion, or 53 percent of GDP; by the end of 2020, debt is projected to climb to $15 trillion, or 67 percent of GDP. With such a large increase in debt, plus an expected increase in interest rates as the economic recovery strengthens, interest payments on the debt are poised to skyrocket.

While the CBO has the debt up 2.3X in absolute terms from 2008 ($6T) to 2019 (14.2T) in accordance with the graph I referenced in https://www.physicsforums.com/showpost.php?p=2586793&postcount=241", they also forecast GDP will increase $14T to $22T, resulting in this

http://www.cbo.gov/ftpdocs/110xx/doc11014/MainText_HseVersion.28.1.2.png

I'm good with plotting debt as a % GDP for the past. The problem with using the ratio into the future is the mismatch in uncertainties. The spending on entitlements is very likely to occur in my view, as spending is under the control of the government. GDP, on the other hand, is not under the control of the government.

 

[Ivan Seeking]

I'm good with plotting debt as a % GDP for the past. The problem with using the ratio into the future is the mismatch in uncertainties. The spending on entitlements is very likely to occur in my view, as spending is under the control of the government. GDP, on the other hand, is not under the control of the government.

That may be, but but the CBO was clearly comfortable making the prediction of 60+%. At the end of WWII, we stood at 122%. So much for the "never been here before" nonsense from the right.

 

[OmCheeto]

mheslep, do you have one that shows debt as a percentage of GDP?

OmCheeto, do you have one that shows which party controlled Congress?

Gulp. mheslep beat me to the graph competition...

http://uspolitics.about.com/od/usgovernment/l/bl_party_division_2.htm"
Orange(congress) and green(president) low are Democrat, high is Republican.

There seems to be no correspondence between added debt load and congressional control.

I'm afraid I'm either a paranoid schizophrenic, ie, the Republicrats have been controlling my mind for the past 50 years, or, we just live in a very dynamic world.

I still think we are our own worst enemy. Who can't afford an additional 3%?

As as moderate democrat, I do give kudos to the Pubs for not letting us become France.

Can't believe I said that. We do like your statue, we do like your statue. :)

 

[CRGreathouse]

Thank you both, OmCheeto and mheslep; these graphs were helpful for me.

I still think we are our own worst enemy. Who can't afford an additional 3%?

Once there was concern that there would not be enough low-risk paper around if the US government paid down its debt. I don't think that's a problem at present.

So assuming it is not (a proposition I would be glad to hear arguments on, either way), why would it be beneficial except in the short term for the US government to run large debts? I understand the "we must stop the Axis powers"-type emergency spending, as well as the Keynesian "we must pump money into the sagging economy"-type spending. But supposing that neither applies (surely not the former, and with good fortune not the latter, at least soon enough), I don't see why debt would be preferred.

 

[mheslep]

That may be, but but the CBO was clearly comfortable making the prediction of 60+%. ...

Yes. <shrug>

 

[Ivan Seeking]

Today the Dow is at 11,100+. As the crisis unfolded, we dropped from I think about 14,400, to 6500, with the low in March of '09. The market has recovered about 60% of the losses. Does anyone know how much wealth has been created by the market since we hit bottom, in dollars?

 

[mheslep]

Today the Dow is at 11,100+. As the crisis unfolded, we dropped from I think about 14,400, to 6500, with the low in March of '09. The market has recovered about 60% of the losses. Does anyone know how much wealth has been created by the market since we hit bottom, in dollars?

http://www.wilshire.com/Indexes/Broad/Wilshire5000/Characteristics.html" , world wide market capitalization of all publicly traded companies was ~$50 trillion in 2007, probably peaked at $55-60 trillion in 2008.

 

[Astronuc]

One of every five men 25 to 54 isn't working.

http://finance.yahoo.com/career-work/article/109471/meet-the-unemployable-man

Even more alarming, the jobs that many of these men, or those like them, once had in construction, factories and offices aren't coming back. "A good guess…is that when the economy recovers five years from now, one in six men who are 25 to 54 will not be working," Lawrence Summers, the president's economic adviser, said the other day.

This is not one of the many things that can be blamed on subprime lending, inept regulators or Goldman Sachs. "The Great Recession has reinforced prevailing labor market trends that were under way long before the recession," David Autor, a Massachusetts Institute of Technology economist, observed in a recent paper commissioned by two Democratic-leaning think tanks, the Center for American Progress and the Hamilton Project.
. . . .

But then, the economic base of US consumerism is and has been steadily eroding.


http://www.nytimes.com/2010/05/07/business/07evict.html

Nearly four million households nationwide are severely delinquent on their mortgages, the biggest backlog since the housing crisis began. As more and more of the homes edge toward repossession — a record quarter of a million were seized by lenders in the first three months of this year — agents like Mr. Laubinger are trying to coax people out.

 

[OmCheeto]

But at least the graph is still going in the right direction:

[PLAIN]http://my.barackobama.com/page/smartproxy/www.barackobama.com/images/issues/economy/chart-480w-jobs-20100507.jpg

Haha! I just did the math. If the graph continues linearly, we'll have zero unemployment by October of next year.

Ah! Hahahahaha!

I think i have too much fun with graphs.

Someone might want to check my math and numbers.
These are just rough guestimates, so NO nit-picking!
Jan 2, 2009 -> 750,000 job losses a month, unemployment at 12.8 million
Apr 2, 2010 -> 290,000 job gains a month
m=2284
b=-750,000
y=mx+b, where y is employment change per month and x is days since Jan 2, 2009

 

[OmCheeto]

On the other hand, the 18% gain in my stocks as of last Monday, is all gone.

Mon Tue Wed Thur Fri

At this rate, my entire portfolio will be at zero in 27 days.

Graphs suck...

 

[Astronuc]

Unemployment Pushes Workers Into Early Retirement
http://www.npr.org/templates/story/story.php?storyId=126314707

For some older Americans who lost jobs in the Great Recession, Social Security is filling the void left when unemployment benefits run out.

The Social Security Administration had predicted there would be a 15 percent increase in retirement applications last year as baby boomers reached retirement age. Instead, the increase was 20 percent.

"That's a significant amount," says Jason Fichtner, chief economist at the Social Security Administration.

Filing For Early Retirement

Fichtner says you might expect fewer people to retire early after the beating so many 401(k)s took when the markets crashed.

"But we also see that there are those people who at age 62 or 63 might have lost their jobs and find it harder to find new employment and decide to take retirement benefits earlier," says Fichtner. "On net, there seems to be more people filing for early benefits than delaying."
. . . .

A financial advisor informed me that she and others are expecting another dip or crash in five years. I would expect it sooner. The only reason that the economy 'recovered' is the Federal spending. Take away the $1.6 trillion deficit, and there is no recovery. Chronic deficit spending is not a viable plan.

For Baby Boomers, The Job Market's Even Worse
http://www.npr.org/templates/story/story.php?storyId=126426518

May 2, 2010 During this recession, the unemployment rate hit the highest level ever recorded in the post-World War II era for workers 55 and older. Many are giving up, declaring themselves retired and collecting Social Security. That could make things tough for the federal budget.
. . . .
For many baby boomers, the labor market remains especially tough. In this recession, the unemployment rate for people 55 and older hit 7.2 percent, the highest level ever recorded in the post-World War II era for workers in this age group.

Although the jobless rate is lower for older workers than the overall population, the duration of unemployment is much longer. Among unemployed people over age 55, the average length of time out of work exceeds 35 weeks. For unemployed workers who are 25 to 54 years old, the time out of work averages just over 30 weeks.

 

[russ_watters]

A financial advisor informed me that she and others are expecting another dip or crash in five years. I would expect it sooner. The only reason that the economy 'recovered' is the Federal spending. Take away the $1.6 trillion deficit, and there is no recovery. Chronic deficit spending is not a viable plan.

You guys are talking about different things. The country tends to have recessions every 6-10 years except in the case of a double-dip recession, which follows closely after the previous recession and is closely related to it. Your advisor is talking about the next recession in the cycle, you're talking about a double-dip.

I would tend to agree that a double-dip is a significant possibility. Logic would dictate that the current level of deficit spending can't be sustained, but fiscal policy isn't necessarily based on logic, so it is tough to know for sure if we'll see major drops in federal aid in the next year. If we do see a drop in federal aid, I think there is a decent probability of a double-dip. If federal aid keeps getting boosted/extended, we'll just see a worse recession when the next one comes in 5-9 years. That's 5-9 instead of 6-10 because we've probably been out of official "recession" for about a year unless the definition gets changed again. Either way, the NBER hasn't made its announcement yet.

 

[Astronuc]

You guys are talking about different things. The country tends to have recessions every 6-10 years except in the case of a double-dip recession, which follows closely after the previous recession and is closely related to it. Your advisor is talking about the next recession in the cycle, you're talking about a double-dip.

I would tend to agree that a double-dip is a significant possibility. Logic would dictate that the current level of deficit spending can't be sustained, but fiscal policy isn't necessarily based on logic, so it is tough to know for sure if we'll see major drops in federal aid in the next year. If we do see a drop in federal aid, I think there is a decent probability of a double-dip. If federal aid keeps getting boosted/extended, we'll just see a worse recession when the next one comes in 5-9 years. That's 5-9 instead of 6-10 because we've probably been out of official "recession" for about a year unless the definition gets changed again. Either way, the NBER hasn't made its announcement yet.

I believe she was referring to the second dip of the current economic cycle, i.e., double dip, or dip related to the recent down turn. I'm not sure the economy has 'recovered'. More likely it temporarily stopped plummeting.

I don't think the NBER or any other federal institution is going to say - Ah, we're going to have another downturn (or severe downturn). They would be blamed for a self-fulfilling prophesy. I'm sure those involved would rather wait and let it happen, and then claim, as wallstreeters (e.g., Jimmy Cayne) recently did, it was those 'market forces'.

Cayne Blames Market Forces for Bear Stearns Collapse
http://www.businessweek.com/news/2010-05-05/cayne-blames-market-forces-for-bear-stearns-collapse-update2-.html

 

[OmCheeto]

Today the Dow is at 11,100+. As the crisis unfolded, we dropped from I think about 14,400, to 6500, with the low in March of '09. The market has recovered about 60% of the losses. Does anyone know how much wealth has been created by the market since we hit bottom, in dollars?

And today it sits at 10,380.
I was curious when the http://www.investopedia.com/terms/p/profittaking.asp" was going to start.
Still though, there are a lot of bargains out there.
I'm still bullish.

Cayne Blames Market Forces for Bear Stearns Collapse
http://www.businessweek.com/news/2010-05-05/cayne-blames-market-forces-for-bear-stearns-collapse-update2-.html

Can anyone explain the following to me:

Alan Schwartz, who succeeded Cayne as CEO and negotiated Bear Stearns’s fire sale to JPMorgan, agreed with Cayne that there were “some very unnatural trades” by investors betting against the firm. When Bear Stearns’s shares were trading for about $75, there were requests for options to buy them at $20, Cayne told the commission.

Does this mean that "those with best perception" knew the stock wasn't worth $75?

And is there a listing of "requests for options to buy" somewhere? That would really come in handy knowing what insiders think stock prices should be.

Versus the computers of course:

http://cnmnewsnetwork.com/112459/accenture-stock-nyse-acn-01-glitch-and-canceled-trades/"
Accenture Stock: NYSE:.ACN $.01 Glitch and Canceled Trades.
Yesterday we reported about an unprecedented 1,000 point drop in the stock market. The cause was a trading error that sent the whole system in a tail spin. Because of the glitch, Accenture stock dropped to less than a penny a share.

How much less? One-one hundredth of a penny. That means that a relatively small investment in the company at the time of the drop would yield millions of profit.

$1800 invested would have yielded $720,000,000.
In just a few minutes.

My commodities brokerage buddy said Thursday afternoon that the "fat finger" incident might taint the average persons perception of the market, and he predicted the market would go down again on Friday because of it.
He also mentioned that the 1000 drop corresponded to a financial loss greater than the debt of the nation of Greece.
I found that somewhat amusing, if not totally ironic, given the live coverage analysis of the cause.

 

[russ_watters]

I believe she was referring to the second dip of the current economic cycle, i.e., double dip, or dip related to the recent down turn. I'm not sure the economy has 'recovered'. More likely it temporarily stopped plummeting.

I'm just saying, a "second dip" comes a lot sooner than 5 years later.

From the wiki on it:

A W-shaped recession or "double dip" recession, occurs when the economy has a recession, emerges from the recession with a short period of growth, but quickly falls back into recession.

The Early 1980s recession in the United States is cited as an example of a W-shaped recession. The National Bureau of Economic Research considers two recessions to have occurred in the early 1980s.[4] The economy fell into recession from January 1980 to July 1980, shrinking at an 8 percent annual rate from April to June of 1980. The economy then entered a quick period of growth, and in the first three months of 1981 grew at an 8.4 percent annual rate. As the Federal Reserve under Paul Volcker raised interest rates to fight inflation, the economy dipped back into recession (hence, the "double dip") from July 1981 to November 1982. The economy then entered a period of mostly robust growth for the rest of the decade.

http://en.wikipedia.org/wiki/Recession_shapes#W-shaped_recession

So using the older definition of "recession" being two consecutive quarters of negative GDP growth, there was a 12 month growth period between the two dips of this archetypical example.

In my previous post I said "...unless the definition gets changed again..." because it seems like the definition is shifting to be one of a misery index based definition instead of a GDP based definition, which can shift the start date in one direction or the other depending on what the leading or lagging indicators do. Because unemployment is (usually) a lagging indicator and remains high even as the GDP is growing, the NBER may choose to say we're still in a recession, particularly if we have a second "dip". To the average American, the economy still "feels" bad and it doesn't make a lot of sense to people to say the economy is in an expansion period when they still think it feels like a "recession" - even if that's just because they don't understand the definition.

I don't think the NBER or any other federal institution is going to say - Ah, we're going to have another downturn (or severe downturn). They would be blamed for a self-fulfilling prophesy.

That's not what I meant. I meant by the standard definition, we've been out of the recession for something like a year, but the NBER may be holding back on its announcement that the recession is over because either they are waiting for another dip or because they are shifting the definition.

No, the NBER doesn't make predictions, only judgements about where we've been (on this issue anyway).

 

[Astronuc]

Ordinarily I would agree Russ, but we are in extraordinary times where the US government has undertaken a massive intervention, and just this weekend, the EU has undertaken a similar massive intervention. I these two interventions as simply shifting responsibility for debt, which could blow up in the next few years unless appropriate measures, e.g., reduced borrowing, increased taxation, etc are implemented.

EU creates $1 trillion package to save euro
http://news.yahoo.com/s/ap/20100510/ap_on_bi_ge/eu_europe_financial_crisis

Greek Debt Woes Ripple Outward, From Asia to U.S.
http://www.nytimes.com/2010/05/09/business/global/09ripple.html

Markets Welcome E.U. Rescue Package
http://www.nytimes.com/2010/05/11/business/global/11euro.html

This action introduces yet another nonlinearity and obfuscates the effect/responsibility of 'market forces', which now include actions of regulators.

And why should we trust those who are responsible for 'regulation of commerce'?

Congressional Hypocrites Were Betting Against Stocks As Country Collapsed
http://finance.yahoo.com/tech-ticker/article/477789/Congressional-Hypocrites-Were-Betting-Against-Stocks-As-Country-Collapsed
Provided by The Business Inisder, May 4, 2010:

Remember all that scorn in Congress about evil shortsellers betting against America and bringing the country down?

Well, it turns out Congress-people did it, too. And they used derivatives to do it, which they now say they abhor.

(For the record, we have no problem with shortselling or derivatives, and we find the routine scapegoating of both after market crashes ludicrous. But if you're going to complain about how awful shortselling is and how evil and venal people are for doing it, you should probably abstain from the practice yourself.

And, yes, most of the folks here were just betting against stocks, not actually selling stocks short. But it's the same idea. To use their own tortured, populist logic, they were betting against the country and their 401k-holding constituents!)

Jason Zweig, Tom McGinty, and Brody Mullins in the WSJ:

Congress Refuses to Outlaw Insider Trading For Lawmakers
http://finance.yahoo.com/tech-ticker/article/478701/Congress-Refuses-to-Outlaw-Insider-Trading-For-Lawmakers

Even a cynic can find Washington's hypocrisy shocking at times. The Wall Street Journal reports today a House bill that would force lawmakers to make greater disclosures on financial transactions and disallow them from trading on nonpublic information is going nowhere fast.

That's right. Members of Congress are currently allowed to profit on insider trading!

The bill, which has been languishing in the House for four years, would require elected officials "to make their financial transactions public within 90 days of a purchase or sale" and "prohibit lawmakers from trading in financial markets based on nonpublic information they learn on the job," the WSJ reports.

Those responsible for 'regulating the game' are in the game for personal benefit.

I'd like to see public disclosure of Congress people who benefitted from betting against the markets.

 

[mheslep]

Government owned Fannie Mae announced today it will need another http://money.cnn.com/2010/05/10/news/economy/fannie_earnings/" in bailout, to follow last week's Freddie Mac announcement of another $10 billion. The total now since the federal government seized the quasi-governmental pair is $145 billion, and will continue to grow as far as I can tell.

During the recent Goldman Sachs show trials in Congress the NYT and Washington Post carried the story day after day on the front page, though Goldman now owes the government ~nothing. On today's Fannie announcement the front page of at least WaPo contains no mention of the continued bailout. It is no surprise then that the phttp://banking.senate.gov/public/_files/ChairmansMark31510AYO10306_xmlFinancialReformLegislationBill.pdf" contains no reference what so ever on Fannie/Freddie, despite numerous Republican calls to include a resolution plan.

 

[Astronuc]

Interesting thought.

In Greek Crisis, Some See Parallels to U.S. Debt Woes
http://www.nytimes.com/2010/05/12/business/economy/12leonhardt.html

. . . Yet in the back of your mind comes a nagging question: how different, really, is the United States?

The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece’s debt, by comparison, equals about 115 percent of its G.D.P. today.

The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.
. . . .

At present, there does not appear to be any plans to eliminate the chronic deficits and reduce the debt. That would require significant cuts in spending and/or significant increases in taxation. It would help if the US reduced it's trade deficit(s).

Instead, the can is kicked down the road.

 

[mheslep]

Interesting thought.

In Greek Crisis, Some See Parallels to U.S. Debt Woes
http://www.nytimes.com/2010/05/12/business/economy/12leonhardt.html

At present, there does not appear to be any plans to eliminate the chronic deficits and reduce the debt. That would require significant cuts in spending and/or significant increases in taxation. It would help if the US reduced it's trade deficit(s).

The latter is essentially unrelated to the former government spending deficit problem. Not that it's a recommended way to go but profligate government money printing and spending tends to deflate the currency, increasing exports which reduces trade deficits. Germany, for instance, enjoys these benefits now, thanks to drunken spending by its southern neighbors which depresses the Euro below where it would be, which is one reason Germany is a top exporter (1st or 2nd?). If Germany fell back to the DM it would quickly collapse its exports by making them much more expensive.

 

[OmCheeto]

The latest graph is in:

Oh drats. What's this:

http://www.bls.gov/news.release/empsit.nr0.htm" -- MAY 2010

Total nonfarm payroll employment grew by 431,000 in May, reflecting
the hiring of 411,000 temporary employees to work on Census 2010, the
U.S. Bureau of Labor Statistics reported today. Private-sector employment
changed little (+41,000). Manufacturing, temporary help services,
and mining added jobs, while construction employment declined.
The unemployment rate edged down to 9.7 percent.

hmmm... Maybe we could put the ex-census workers to work cleaning up the gulf coast, along with an extra 200,000 unemployed. That'll keep the graph rolling.

 

[Astronuc]

Stock futures little changed as investors enter new trading week tentatively
http://finance.yahoo.com/news/Stock-futures-little-changed-apf-569925346.html

The absence of big moves comes after major indexes plummeted more than 3 percent Friday. Investors sold stocks following the Labor Department's monthly employment report that showed a lack of hiring by private employers in May. The weak report calls into question the strength of a domestic economic recovery.

The Dow Jones industrial average fell 323 points Friday to close below 10,000 and at its lowest level since February.

There are few domestic economic reports due out early this week that could ease the concern brought on by the jobs report, so investors could turn their attention elsewhere for the next few days. That means the health of Europe's economy could again become the focus of traders and the Gulf of Mexico oil spill will also likely garner attention.

European markets fell Monday as investors remain concerned about the health of the continent's economy and the euro hit a new four-year low. The euro dropped as low as $1.1878 before rebounding to $1.1974.

Hungary's government backed off statements it made last week that it was facing a similar debt crisis to Greece. Budget-cutting measures aimed at containing mounting debt could slow or upend an economic recovery in Europe.

. . . .

Of course, there are bargains - if one has the money.

World stocks hit by fears over US jobs, Hungary
http://finance.yahoo.com/news/World-stocks-hit-by-fears-apf-1358102161.html

 

[mheslep]

Oh drats. What's this:
hmmm... Maybe we could put the ex-census workers to work cleaning up the gulf coast, along with an extra 200,000 unemployed. That'll keep the graph rolling.

400,000 are government hires?

 

[turbo]

http://www.esa.doc.gov/02182010.pdf Check Page 1.

 

[Astronuc]

Sign of things to come.
http://news.yahoo.com/s/ap/20100711/ap_on_bi_ge/as_china_debt_ratings
Chinese credit firm says US worse risk than China

BEIJING – A Chinese firm that aims to compete with Western rating agencies declared Washington a worse credit risk than Beijing in its first report on government debt Sunday amid efforts by China to boost its influence in global markets.

Dagong International Credit Rating Co.'s verdict was a break with Moody's, Standard & Poors and Fitch, which say U.S. government debt is the world's safest. Dagong said it rated Washington below China and 11 other countries such as Switzerland and Australia due to high debt and slow growth. It warned the U.S. is among countries that might face rising borrowing costs and risks of default.
. . . .
Dagong, founded in 1994 to rate Chinese corporate debt, says it is privately owned and pledges to make its judgments impartially. But in a sign of official support, its announcement Sunday took place at the headquarters of the Xinhua News Agency, the ruling Communist Party's main propaganda outlet.

Dagong's chairman, Guan Jianzhong, said the current Western-led rating system is to blame for the global crisis and Europe's debt woes. He said it "provides the wrong credit-rating information" and fails to reflect changing conditions.

"Dagong wants to make realistic and fair ratings," he said.

Beijing has more than $900 billion invested in U.S. Treasury debt and has appealed to Washington to avoid hurting the value of the dollar or China's holdings as it spends heavily on its stimulus.
. . . .

Meanwhile the exports dropped slightly in April, 2010 and the trade deficit increased slightly to ~$40.3 billion. So the US economy is bleeding about $500 billion/yr, and the federal debt and interest to service it continues to grow.

It would seem that the US economy is simply growing by adding debt.

 

[CRGreathouse]

That report is propaganda only. The fact that it seems accurate is probably just coincidental.

 

[brainstorm]

Some optimists predict a 'V-shaped' recession, which is apparently fairly typical of recessions over the past several decades. Others are predicting a 'W-shaped' recession, and the middl peak may be lower than the outer ends.

Your assuming that recovery is always good. It may be that prolonged recession is exactly what is needed to stimulate people to adjust their economic activities to less profit-oriented ones. It may be that the profit-orientation causes by economic expansion is actually the cause of inflation, inefficiency, and cultural obfuscation of economic rationality. Give rationality a little while to set in and you may find that the resulting economy is relatively bubble-proof and thus recession-resistant.

edit: and btw I don't mean the rationality of making as much profit as possible by any means, because that fails during recession. I mean the rationality of making wise consumption choices and investment/production plans that maximize efficiency of resources, including labor and distribution, to provide maximum value for minimum cost to the largest number of people - to mitigate poverty - i.e. the real point of a capitalist economy (not elevating elitism to the highest level possible).

 

[Ivan Seeking]

Sign of things to come.
http://news.yahoo.com/s/ap/20100711/ap_on_bi_ge/as_china_debt_ratings
Chinese credit firm says US worse risk than China

A Chinese credit firm. Hmmmm, now what could be the problem with that?

Meanwhile the exports dropped slightly in April, 2010 and the trade deficit increased slightly to ~$40.3 billion. So the US economy is bleeding about $500 billion/yr, and the federal debt and interest to service it continues to grow.

It would seem that the US economy is simply growing by adding debt.

Actually, the gdp is growing in spite of our trade deficit, over half of which is due to oil imports.

 

[OmCheeto]

A Chinese credit firm. Hmmmm, now what could be the problem with that?

Like we should trust any credit rating firms anymore?

http://www.moneyweek.com/investments/stock-markets/the-great-credit-rating-scandal.aspx"
Feb 06, 2008

It is also perhaps the culmination of the long process of loss of integrity that we have outlined. From acting in their first two decades as the investor’s friend, the credit rating agencies had become thoroughly corrupted by the peak of the bubble in 2007.

 

[mheslep]

Actually, the gdp is growing in spite of our trade deficit, over half of which is due to oil imports.

I think we should expect to see oil imports increase, especially middle eastern oil, given current policy: deep water drilling moratorium, and proposed bans or tariffs on Canadian tar sands oil.

 

[OmCheeto]

I think we should expect to see oil imports increase, especially middle eastern oil, given current policy: deep water drilling moratorium, and proposed bans or tariffs on Canadian tar sands oil.

Hudson: That's it man, game over man, game over! What the **** are we going to do now? What are we going to do?
Burke: Maybe we could build a fire, sing a couple of songs, huh? Why don't we try that?

Personally, I started investing* in MXWL & AONE in December.

*warning: I am an amateur investor
7/2/10: Maxwell Technologies Inc. Drops to 52-Week Low
7/14/10: A123 stocks down 59.41% since 1/1/10

 

[edward]

I think we should expect to see oil imports increase, especially middle eastern oil, given current policy: deep water drilling moratorium, and proposed bans or tariffs on Canadian tar sands oil.

Current policy?? Perhaps you would care to share a link on proposed Tar sands tariffs.
It would still be an imported source of oil.

Of the thousands of wells in the gulf the deep water moratorium has affected only 33 exploratory wells that I know of. And that isn't permanent.

Over 3,000 wells are still active in the gulf. That doesn't mean that they are owned by American companies. We import BP oil from the Gulf.

http://www.politicsdaily.com/2010/0...ls-court-rejects-moratorium-on-deep-sea-gulf/

 

[mheslep]

Current policy?? Perhaps you would care to share a link on proposed Tar sands tariffs.

http://blogs.forbes.com/investor/2010/07/14/liberal-california-politician-holding-oil-sands-hostage/

Henry Waxman, chairman of the House Energy and Commerce Committee, wrote lengthy letters on July 2 to Secretary of State Hilary Clinton and Elizabeth Orlando, the State Department's Keystone XL project manager, in which he vehemently opposes approval of TransCanada Corporation's application to move ahead with the construction of the Keystone XL pipeline.
...
In one swift move, Mr. Waxman has elevated the oil sands debate to a new level. It is one thing for the city of Bellingham, Washington to ban oil sands products from its municipal fleet. It's quite another for the chairman of a powerful House committee to declare war on one of Canada's most valuable resources.

It would still be an imported source of oil.

How would it get to the US?

Of the thousands of wells in the gulf the deep water moratorium has affected only 33 exploratory wells that I know of. And that isn't permanent.

Just as I don't know that the ban is permanent, you don't know that it will end up being temporary.

Over 3,000 wells are still active in the gulf. That doesn't mean that they are owned by American companies. We import BP oil from the Gulf.

Those 3,000 wells, at least the older ones don't produce like they used to. They new wells punch well above their weight in production, as we've unfortunately seen from the DeepWater well.

In addition to the deep water ban, Salazar reversed the opening of the other coastal areas for drilling. Then, I never expected the Obama administration to allow drilling outside the Gulf, and the earlier announcement was a political head fake in my view.

http://www.politicsdaily.com/2010/0...ls-court-rejects-moratorium-on-deep-sea-gulf/

Yep, and a couple days later:

Interior Secretary Ken Salazar reissued a moratorium on deepwater offshore drilling Monday, after the 5th U.S. Circuit Court of Appeals rejected the White House’s appeal of a lower court decision to halt the drilling ban.

http://www.politico.com/news/stories/0710/39612.html
I would have thought Salazar's reissue order yesterday illegal, given the earlier court order and inviting a contempt of court sanction, but I'm no lawyer.

 

[edward]

http://blogs.forbes.com/investor/2010/07/14/liberal-california-politician-holding-oil-sands-hostage/


How would it get to the US?

Here is the propsed route for the keystone pipeline.

In Canada the pipeline will extend approximately 327 miles from Hardisty, Alberta southeast through Saskatchewan before entering the United States in Morgan, Montana, where it will continue on southeast for 836 miles through South Dakota and Nebraska. In Steele City, Nebraska the pipeline will connect to the 296-mile long Keystone Pipeline before resuming in Cushing Oklahoma, where it will continue on to its final destination at existing terminals in Nederland, Texas.

http://www.earthworksaction.org/KeystoneXLpipeline.cfm

Emphasis mine. I can see where some Americans might not want a Trans USA Canadian owned Pipeline. That would lock us into importing from Canada.

Bear in mind we were talking about the economy and the cost of imports.

 

[russ_watters]

Emphasis mine. I can see where some Americans might not want a Trans USA Canadian owned Pipeline. That would lock us into importing from Canada.

Who are these people? You? Because I can't imagine why anyone would prefer importing oil from the Middle East over importing it from Canada.

 

[edward]

Who are these people? You? Because I can't imagine why anyone would prefer importing oil from the Middle East over importing it from Canada.

I misspoke. I would have to agree that importing the oil from Canada wouldn't be a problem for me. The pipeline would be a problem for a lot of people. A Canadian owned Trans America pipe line just doesn't sound right to us old geezers.

Even an American owned pipeline moving Canadian oil is going to see a lot of opposition from the tree huggers.

Most likely none of this will happen in a manner timely enough to effect the economy for many years.

 

[russ_watters]

Yes, I can certainly see nimbys and tree huggers opposing an oil pipeline - any oil pipeline - but that's not the same as an objection based on locking us into importing from Canada. You made it sound like people would object to importing oil from Canada.

 

[edward]

Yes, I can certainly see nimbys and tree huggers opposing an oil pipeline - any oil pipeline - but that's not the same as an objection based on locking us into importing from Canada. You made it sound like people would object to importing oil from Canada.

Sorry about that I should clarify. It isn't just oil from Canada it is tar sand oil that many people are opposed to. But that gets into green house gases and that is for another thread.

Major oil companies such as Shell are also coming under shareholder pressure to pull out of the Canadian projects. Earlier this year, Shell announced it was scaling back its expansion plans for the tar sands after a revolt by shareholders. Producing oil from the Alberta tar sands causes up to five times more greenhouse gas emissions than conventional crude oil, according to the campaign group Greenpeace.

http://www.guardian.co.uk/business/2010/feb/14/canada-china-investment-oil-sands

Ironically now China is showing an interest in Canada's tar sands oil.

 

[Astronuc]

Lenders may foreclose on more than 1 million homes this year http://news.yahoo.com/s/ynewspoint/20100715/ts_ynewspoint/ynewspoint_ts3125

Economic woes may force more than 1 million American households to lose their homes this year.

Nearly 528,000 homes were foreclosed in the first six months of 2010. As lenders work through a huge backlog of borrowers behind on their mortgages, even more home repossessions could occur before the end of the year.

According to RealtyTrac, Inc., a foreclosure listing service, the number of households facing foreclosure in the first half of the year climbed 8 percent when compared to the same time frame last year. In June, 1 in every 411 households received a foreclosure filing.

The fastest growing group of foreclosures involved homeowners with good credit who took out conventional fixed-rate loans. Many of these borrowers have fallen behind in their mortgages due to unemployment or reduced income.
. . . .

So much for the recovery.

 

[brainstorm]

Lenders may foreclose on more than 1 million homes this year http://news.yahoo.com/s/ynewspoint/20100715/ts_ynewspoint/ynewspoint_ts3125
So much for the recovery.

Foreclosure is a mechanism in the eventual price-adjustments that will lead to true recovery by resetting the real-estate markets. The annoying thing about them is that people's credit gets destroyed, their families get destabilized, they become cynical and lose faith in economic growth generally, etc.

Ultimately, unless people go crazy and start destroying property in some kind of war or civil unrest, the housing will still be there to move into after foreclosure. So the people getting evicted from their houses will eventually probably end up in another foreclosure (or even the same one maybe) for a lower price.

It would save a lot of hassle and headaches if government or banks generally would agree to simply start discounting mortgages across the board until foreclosures were minimized, but that would eliminate the moral hazard of buying a house on credit, which would lead people to borrow as much money as they possibly could thinking that they would eventually not have to pay it back anyway.

I suspect that such lack of moral hazard in borrowing has been around for a while, prior to the real-estate burst even - and that this general belief in the economy as a vehicle for perpetual growth that individuals could just ride like surfing a wave, was in large part responsible for the eventual crash. Responsibility and caution in borrowing and spending is what keeps inflation in check. Without it, people just jump on whatever bandwagon they think is going to appreciate the fastest and spend money like "there's always going to be more where that came from."

How are people supposed to recover from the level of entitlement and material dependency that comes from an economy like that? There may be people who suffer for the rest of their lives because they grew accustomed to levels of spending and consumption that were unsustainable to start with. The economy could completely recover to a level where they have plenty to eat and a roof over their heads and all the media access they want but they will never again feel economically satisfied because of what they were led to believe was economically achievable decades ago.

 

[edward]

The foreclosed houses aren't selling. Banks are sitting on thousands of them.

BOA bought the old CountryWide mortgage company. Along with the mortgages they got a subsidiary of CountryWide.

This subsidiary, ReconTrust, is now handling the foreclosure process on all of the CountryWide delinquent properties.

The ReconTrust website is a good barometer of what is happening. They have an easy to use website to look up properties available and properties sold in 15 states. Look at properties sold and you will see that most of them didn't sell at auction. They are still owned by the trustee.

http://www.recontrust.com/

 

[turbo]

The GOP is holding up consideration of an emergency spending bill to extend unemployment benefits. The bill is projected to cost about $30B, and since the unemployed are pretty desperate for money, most of that outlay would be rolled right back into our local economies. Jon Kyl said on Fox news last Sunday that the bill shouldn't be brought to a vote because it would add to the deficit. Contrast this with his insistence that the Bush tax cuts for the wealthy be extended before they expire at the end of this year, with a projected deficit increase of ~$700B over 10 years. Hmm, that's some really peculiar thinking. A fast-acting stimulus bill to help the unemployed is too expensive, but tax cuts for people making over $250K have to be extended with no budget offsets. It appears that there will be no economic recovery on the horizon unless the Democrats can pick up a super-majority and override this kind of obstructionism. It seems that the GOP is happy to have our economy in a shambles going into the mid-terms.

 

[turbo]

The foreclosed houses aren't selling. Banks are sitting on thousands of them.

My old place finally sold. We paid ~$60K for it over 20 years ago, and sold it in 2006 for over $120K. The people that bought it were single-income home-schoolers and they defaulted pretty promptly. The bank finally unloaded the place for about $80K, so they took a pretty good bath on it.

 

[edward]

My old place finally sold. We paid ~$60K for it over 20 years ago, and sold it in 2006 for over $120K. The people that bought it were single-income home-schoolers and they defaulted pretty promptly. The bank finally unloaded the place for about $80K, so they took a pretty good bath on it.

That is typical. The banks are now pushing back the auction dates of many properties.

However, now that banks have so many foreclosures on their books, many foreclosure auctions are simply being postponed for no apparent reason. While more homeowners than ever are applying for assistance, even more sheriff sales are being delayed. In addition, lenders are often incompetent enough to proceed with a public auction of a home even if the borrowers are negotiating for a loan modification or other plan.

This indicates that the banks are voluntarily postponing some sheriff auctions in order to avoid having to declare the loans as losses and then declaring the properties as assets at their true market values. Banks have gotten away for years with overestimating values of homes in order to inflate the values of the loans on the properties and the securities made up of these mortgage debts.

http://ezinearticles.com/?Banks-Delaying-Foreclosure-Auctions-to-Prevent-Losses&id=3349766

I track a lot of local properties through the County assessors office and the ReconTrust web site. The banks are definitely now pushing back auction dates.

EDIT: I can see where this is going to leave another real estate hole for us to fall into at some point in the future.

 

[turbo]

The bank was pretty fortunate because the house is in a nice neighborhood, and didn't get raided, stripped of copper pipes, etc. To our north was the fire chief, across from him was the head of purchasing for the paper mill, directly across from us was VP and senior loan officer of the local savings bank, next to him was a very prominent commercial appraiser, and right beside us was a pair of school-teachers. Down at the end of the dead-end was a real harpy who would call the cops on a whim and poked her nose into everything. Definitely a great neighborhood for an abandoned property. Other foreclosed properties in that town did not fare as well. With lost jobs, low incomes, and high scrap prices, lots of places got damaged by thieves stripping out copper pipes and other valuables.

 

[mheslep]

Here is the propsed route for the keystone pipeline.

Yes, I understand, and my point was that Chairman Waxman intends to block it (insanely in my view) and not for any American xenophobic reasons. So, I'll say it again:

I think we should expect to see oil imports increase, especially middle eastern oil, given current [or pending] policy: deep water drilling moratorium, and proposed bans or tariffs on Canadian tar sands oil.

 

[OmCheeto]

The Senate just passed Wall Street reform. The bill will become law the moment President Obama signs it.

What will this do to the economic recovery?

 

[turbo]

What will this do to the economic recovery?

Precious little, I fear. I understand that there are some provisions for consumer-protection for borrowers and individual investors, but Wall Street will still continue business as usual.

 

[mheslep]

What will this do to the economic recovery?

Well the more direct question is what will it do to financial stability in the future? The answer, given 2500 pages of gimmicks and special interest insertions, I think, is who knows? Random crap shoot, thank you Congress.

 

[OmCheeto]

Well the more direct question is what will it do to financial stability in the future? The answer, given 2500 pages of gimmicks and special interest insertions, I think, is who knows? Random crap shoot, thank you Congress.

Anyone have a link to the bill?

I'll read it tomorrow though.

I'm off to sit in the river somewhere.

Too much seriousness can make you crazy.

Don't need that right now.