Is a Double Dip Recession Looming Due to Failing TARP Banks?

[haris123]

is it real? what do you think?

http://business.financialpost.com/2...recession-is-officially-coming-analyst-warns/

 

[WhoWee]

I think a double dip is likely - but I think it will be more of a slide than a sharp dip - there's a large G force down there.

Let's step back and look at this from a "current events" perspective. Specifically, did you notice the RE-EXTENSION of unemployment benefits was tabled at 13 months? Next, the extension of the Bush tax cuts (now labeled Obama tax cuts?) is for 24 months - basically bringing us to the doorstep of the 2012 election.

Now, take a look at jobs - over 400,000 new claims this week again?

Where is the price of oil this week - up or down? How about gasoline prices?

Next, what are the Government variables?
Will cap and trade be imposed - or will the EPA impose more restrictions on business?
How much US currency will ultimately be printed - what is the cap on Quantitative Easing initiatives?
How long will interest rates remain at all time lows?
How much more will the Government spend to bailout the states - as unfunded mandates such as Medicaid expand?

IMO - there is still too much uncertainty to expect a full recovery.
Also (IMO), I think too many people are becoming too comfortable with unemployment benefits, lowered expectations, and the thought of free health care. On the other hand, maybe the Federal Poverty Level will be lowered (based upon the growing majority of citizens in the category) accordingly just before the economy booms again.

Aside from my opinions, I see no indication that defense spending will increase, or real estate values will increase, or derivatives will be less of a risk, or millions of jobs will be created in the next 2 years.

Given all of this, I think the next recession will be deeper and much scarier than the first. However, I also think (once motivated) private capital will be much more effective at pulling us out - it just won't happen until the path is cleared of Government uncertainty.

 

[mugaliens]

Now, take a look at jobs - over 400,000 new claims this week again?

Where is the price of oil this week - up or down? How about gasoline prices?

Next, what are the Government variables?
Will cap and trade be imposed - or will the EPA impose more restrictions on business?
How much US currency will ultimately be printed - what is the cap on Quantitative Easing initiatives?
How long will interest rates remain at all time lows?
How much more will the Government spend to bailout the states - as unfunded mandates such as Medicaid expand?

The numbers are important, to be sure, but let's face it, whether or not people are spending what they earn is as much of a psycho-social phenomenon as it is a numbers game. Unemployment may have risen from 4% to 11%, but the other 89% retained their jobs, more than 80% at the same pay, yet they cut back, too.

I think part of the issue is that this isn't so much of a recession as it is a readjustment, a wake-up call that both the American people and to a lesser extent (because they were generally less effected) others around the world heard, and took heed. Most people finally started realizing they couldn't continue to live under a mountain of debt.

More importantly, they realized that it's as bad for a nation to do so as it is for an individual, and deficits and governmental debt not only cannot be allowed to continue, but must, absolutely, be reversed.

Consider:

1. If 10% of the GDP were used to pay off the government's debt, it would take 72 years to do it.

2. The average consumer is $10,000 in debt, and the GDP per capita is roughly $45,000 per year. If 10% of the GDP per capita is used to do the same, it would only take 2.6 years.

This puts things into perspective: Our government is so hugely in debt it will take 72 years to pay it off with 10%, while the individual would take only 2.6 years to pay it off.

This should raise warning flags, alarm bells, and all sorts of demands from citizens for our government to STOP increasing the national debt, and do everything they can to reverse it. Yet they just passed a spending measure which increased it even further (slaps forehead).

IMO - there is still too much uncertainty to expect a full recovery.

When politicians can't work their way through a simple balance sheet, I don't think "uncertainty" is the right word.

Also (IMO), I think too many people are becoming too comfortable with unemployment benefits, lowered expectations, and the thought of free health care.

This is one of the principle reasons why people aren't up in arms over what our elected representatives are doing to sink our country. The "well, if there's something in it for me..." mentality does a wonderful job of silencing much of the opposition.

Aside from my opinions, I see no indication that defense spending will increase, or real estate values will increase, or derivatives will be less of a risk, or millions of jobs will be created in the next 2 years.

An increase in military salaries was approved, despite the fact that it was higher than the 1.8% minimum required by law and based on a CPI change that was falsely claimed to be positive when it was actually negative. Meanwhile, COLA for DoD retirees was based on the correct CPI figure and kept at 0.0% for the second year in a row.

Given all of this, I think the next recession will be deeper and much scarier than the first.

If we bankrupt our government, economic terms like "recession" will no longer be the appropriate ones describing the results.

However, I also think (once motivated) private capital will be much more effective at pulling us out - it just won't happen until the path is cleared of Government uncertainty.

Again, I think "uncertainty" is the wrong term to use, here.

 

[OmCheeto]

is it real? what do you think?

http://business.financialpost.com/2...recession-is-officially-coming-analyst-warns/

hmmmm... Why are you quoting an article from June?

http://business.financialpost.com/2...recession-is-officially-coming-analyst-warns/
U.S. double-dip recession is officially coming, analyst warns
June 29, 2010

The latest analysis:

http://money.usnews.com/money/blogs/flowchart/2010/12/15/why-a-double-dip-recession-hasnt-happened"
By Rick Newman
December 15, 2010

...But those concerns have slowly faded, with economists now increasingly convinced that the recovery, however weak, is here to stay. Here's why the outlook has brightened.

Nothing terrible has happened.

Corporate profits have exploded.

The private sector has started to recover.

Exports are strong.

Washington has done the bare minimum.

It's bad enough that people believe the Chicken Littles of today, but retro-doomsayers?

 

[russ_watters]

hmmmm... Why are you quoting an article from June?

It's bad enough that people believe the Chicken Littles of today, but retro-doomsayers?

Heh - that explains a lot. I was going to say that 6 months ago I thought it was a significant possibility, but now I'm thinking no.

 

[WhoWee]

It's bad enough that people believe the Chicken Littles of today, but retro-doomsayers?

I guess my hand is raised as a "Chicken Little"?

But, I just don't recognize any indicators sufficient to overcome the uncertainty and negatives - do you? Specifically, what do you think will pull us out of this recession and prevent a second?

 

[Office_Shredder]

I guess my hand is raised as a "Chicken Little"?

But, I just don't recognize any indicators sufficient to overcome the uncertainty and negatives - do you? Specifically, what do you think will pull us out of this recession and prevent a second?

If you never get out of a recession, then you can't have a second one.

 

[WhoWee]

If you never get out of a recession, then you can't have a second one.

My initial post described the possibility that we won't recover fully - just continue to slide into a deeper one.

 

[mheslep]

Heh - that explains a lot. I was going to say that 6 months ago I thought it was a significant possibility, but now I'm thinking no.

Agreed, now that the tax increases were voted down.

 

[OmCheeto]

I guess my hand is raised as a "Chicken Little"?

But, I just don't recognize any indicators sufficient to overcome the uncertainty and negatives - do you? Specifically, what do you think will pull us out of this recession and prevent a second?

Economics is a social science. Economies ebb and flow on the fears and desires of several billion people. Listening to business people should alleviate most peoples fears. Listening to hysteria and lies will only keep them afraid. And fear is only going to make people hide money under their mattresses. And hiding money under their mattresses is bad for the economy. Fuzzyfelt said so, and I trust her.

Sep 13, 2010
I’ve seen sentiment turn sour in the last three months or so, generally in the media. I don’t see that in our businesses. I see we’re employing more people than a month ago, two months ago.

http://www.bloomberg.com/news/2010-09-13/buffett-rules-out-double-dip-u-s-recession-says-berkshire-units-growing.html"

If you never get out of a recession, then you can't have a second one.

Are you implying that we are still in a recession? The recession ended 18 months ago.

http://community.nasdaq.com/News/2010-12/industrialstrength-picks-from-the-gurus.aspx?storyid=49758
12/17/2010
As the U.S.'s recovery from the "Great Recession" has progressed, one big driver of the turnaround has been the industrial and manufacturing arena. Industrial production rose in November by 0.4%, according to a new Federal Reserve report, marking the 15th time in 17 months that production has increased. And since bottoming in July 2009, the manufacturing sector has expanded for 16 straight months, according to the Institute for Supply Management.

As a result, industrial and manufacturing stocks -- which were hammered during the recession and bear market -- have outpaced the broader market since the March 2009 low. But, just as there's still slack in U.S. production, so too are there still bargains in the industrial and manufacturing areas. And, with government stimulus continuing to flow into the economy, consumers regaining some of their confidence, and companies having cut a lot of fat during the downturn, some of these stocks are in good position to continue rebounding.

 

[Phrak]

If I go to the Economic Cycle Recovery Institute (ECRI) website I get Weekly Leading Index (WLI) figures in the 120 to 126 range from last August to December, this month, yet the graph supplied in the article has no deviations outside the range of -30 to +30 over the past 40 years. Why is this? Am I looking at the wrong index?

 

[OmCheeto]

If I go to the Economic Cycle Recovery Institute (ECRI) website I get Weekly Leading Index (WLI) figures in the 120 to 126 range from last August to December, this month, yet the graph supplied in the article has no deviations outside the range of -30 to +30 over the past 40 years. Why is this? Am I looking at the wrong index?

Without a link, I don't know what you are talking about. I read the following in regards to the ECRI:

http://www.businessinsider.com/forget-the-double-dip-ecri-says-america-is-experiencing-a-revival-in-growth-2010-12"
Dec. 2, 2010
...

What that means is we can finally put the fears of a double-dip recession to bed, says Economic Cycle Research Institute co-founder Lakshman Achuthan.

“In October we were able to rule out this double-dip nightmare scenario,” he says. “We are able to see very clearly, with a good deal of conviction, a revival in growth,” he tells Aaron and Dan in this clip.

The improvements are widespread, Achuthan says.

* Profit growth and productivity are on the rise. Achuthan says that leads to more hiring and capital investment in equipment.

* Housing has stabilized. The outlook may not be rosy, but “it’s not falling off a new cliff,” which means it’s not a drag.

* Cheap capital as a result of low interest rates. The private sector continues to create jobs.

* Pent-up demand. Thanks to the jump in jobs, people are less afraid of losing their positions, Achuthan suggests. And after two years of saving and worrying, consumers have “frugality fatigue” which is beginning to show in the improvements in holiday shopping data.

ps. And I'm assuming you typed in the name wrong as your post is the only hit in google.
Unless of course you whipped up your own Economic Cycle Recovery Institute sometime this morning.

ECRI may refer to:

* European Commission against Racism and Intolerance
* European Credit Research Institute
* Economic Cycle Research Institute
* ECRI Institute (formerly the Emergency Care Research Institute)

 

[Phrak]

Without a link, I don't know what you are talking about. I read the following in regards to the ECRI:[...]

Substitute "recovery" with "research". My error.

These http://www.businesscycle.com/" seem to be the right folks referred to in the article.

Under RESOURCES, then WLI is an excel spread sheet.

 

[WhoWee]

This indicates that "Main St" is still in trouble.

http://www.howestreet.com/articles/index.php?article_id=15506
"The Wall Street Journal reports 98 shaky TARP recipients are on the verge of failure as bad loans pile up. Please consider Bailed-Out Banks Slip Toward Failure

Nearly 100 U.S. banks that got bailout funds from the federal government show signs they are in jeopardy of failing.

The troubled banks identified by the Journal all have either a Tier 1 capital ratio under the "well-capitalized" 6% level; both a total risk-based capital ratio of under the "well-capitalized" 10% threshold and nonperforming loans of over 10% of their portfolio; or a regulatory order requiring the bank to monitor or boost its capital.

A Federal Deposit Insurance Corp. spokesman declined to comment on the Journal's analysis, which also calculated that 814 of the nation's 7,760 banks and savings institutions are troubled according to these standards, up from 729 at the end of the second quarter. The FDIC's official list of problem banks, which uses different criteria from the Journal's analysis, includes 860 financial institutions. The banks aren't publicly identified.

One example of a TARP recipient in deep trouble: closely held Legacy Bank of Milwaukee. José Mantilla, Legacy's president and chief executive, said the bank lends to an underserved, lower-income customer base.

As Legacy Bank careens towards failure, it appears its customer base was not "underserved" but rather "overserved".

Most of these failures will be relatively small ones. The median TARP infusion for the 98 banks was $10 million. The grand total of the 98 banks was about $4.2 billion. In contrast the first 8 large recipients received a total of $125 billion, now repaid.

Commercial real estate loans gone sour are at the heart of many small bank failures. One consequence of these failures is the too big to fail banks keep getting bigger"

The "too big to fail banks" would be the "Wall St" component.