Via Captain Capitalism;
The always thoughtful Maxed Out Mama has been on a “road trip” ;
What this looks like on the ground is that housing seems generally on a downward trend, but the real change is what is happening in stores. The contrast between parking lots filled with very nice large vehicles and customers sifting carefully through aisles is quite remarkable. Food pricing, especially, seems to be bonking around like a ping-pong ball. This is a sign of very severe inflation moving through the system. No matter what happens, in normal times you just will not see prices for frozen food items doubling in a matter of a month or two, but that is what I saw in several stores. The best run seem to be trying to keep something on sale, and I noticed a real shift in brand shelving, especially on frozen items.
One of the big surprises was in Bucks County, PA, which borders Mercer County in NJ. In the slightly outlying portions of Bucks, a whole lot of small commercial property (storefronts and land) was on sale. A lot of empty stores. Closed or closing dealerships. Big price drops on services, such as labor at auto dealerships and office visits for some medical providers.
[…]
Up and down the East Coast, restaurants seemed to be feeling the pressure. Fast food restaurants are definitely moving more towards more low-price options on menus. There is some competition emerging in gas prices at concentrations of gas stations. I talked to what looked like senior staff members when I could, and they confirmed that business wasn’t great. At banks in off hours, you get kidnapped and dragged into offices if you walk in and ask a teller about CD rates! I started wondering if some of those branches had installed a silent alarm system for sales prospects. It’s difficult to escape.
I usually try to buy a lot of the local newspapers. There’s a lot of personal stuff for sale. More houses for sale, obviously. Less jobs, relatively. Construction equipment, trucks, boats, campers.
Georgia, aside from being on fire (literally, not metaphorically), seems to be relatively prosperous. There is an awful lot of building still going on in these southern states. When it will stop I don’t know. It is possible that the relatively healthy looking Georgia might in part be due to a Florida exodus. Nonetheless, the car dealerships still look pushed. I drove around Valdosta (close to Florida border in central GA) this weekend, and wasn’t all that surprised to see a 72 month 0% APR financing sign up on a Chevrolet dealership.
Overall, I was surprised to see more rural areas areas looking healthier than I suspected and more urban/wealthier areas looking more pressured than I expected. Is this a sign of extreme overleverage among the higher income brackets? I don’t know, but I am beginning to suspect it.
And this warning from Jeremy Grantham;
“…the man Dick Cheney, plus a lot of other rich people, trusts with his money. Grantham, chairman of Boston firm Grantham Mayo Van Otterloo, has been a voice of caution for years. But he has upped his concerns in his latest letter to shareholders. Grantham says we are now seeing the first worldwide bubble in history covering all asset classes.
Everything is in bubble territory, he says.
Everything.
Given the schemes being hatched under climate change hysteria, I was tempted to title this post “Recession To The Rescue”. A natural downturn in the economy may be the best hope we have to wrestle the fate of our long term economic fortunes from the politically motivated media whores and crazy people currently driving the news cycle. Of coiurse, that’s easy for me to say – my home is paid for.
ET
What you were talking about regarding a shift in the type of energy being used to power economies I have been wondering if that is not moral suasion coming out to slow the growth Oil consumption. After the Oil shocks of the 1970s it was consumer driven folks had to line up to buy a gallon of gas and the price was so draconian that it moved North America to much smaller cars for almost 2 decades. Oil comsumption in US went flat for almost 20 years.
I don’t believe it is a shift in the type of energy use although solar may have enough economies of scale to offset some oil and coal consumption but technology and public perception may do significantly more to slow the growth of oil consumption.
Its the players that is throwing me off.
Penny said:
were using their homes as ATM machines, cashing in on their appreciation by refinancing and buying stuff
What an absolutely perfect description. Penny that is what I call word smithing. It is a magnificent descripition.
Hah. maybe one day I will slow down enough to actually spell some of the words correctly.
As Mark Twain commented upon reading his obituary, we might apply to the US economy:
“The reports of my demise are greatly exaggerated!”
The tax cuts were not deep enough and spending doesn’t fall into line that quickly, inflation, etc. etc. to have such a big effect as claimed for those cuts.
Ted, the tax cuts followed Reagans seismic cuts, followed by a Clinton who couldn’t raise taxes with a Republican congress. Bush has been a bigger spender. Corporate tax rates went from 39% in 2000 to 15% in 2007. And….
Despite the charges of critics that the tax cuts enacted in 2001, 2003 and 2004 favored the “rich,” these cuts actually reduced the tax burden of low- and middle-income taxpayers and shifted the tax burden onto wealthier taxpayers. Tax Foundation economists estimate that for tax year 2004, a record 42.5 million Americans who filed a tax return (one-third of the 131 million returns filed last year) had no tax liability after they took advantage of their credits and deductions. Millions more paid next to nothing.
http://www.taxfoundation.org/news/show/542.html
Weren’t deep enough, Ted? Google is your friend too, if you’d use it.
When you unshackle people and business, economies are robust. The lesson never learned by lefties.
ET:
I am saying that is Ted’s thinking by the comment he left above.
ET: O/T a year or so you posted a ruling with regards to NL/Quebec boundary (map) dispute over at the Shotgun Blog that I have been searching for ever since and can’t find. Would you happen to know what I am talking about and do you still have that link? Would help me in a bunch of lingering debates I have with some NL nationalists. Thanks in advance.
Glenn
The tax cuts certainly help the economy as does a borrowing spree to fund a military economy.
One more comment to Ted. Borrowing spree? We aren’t a military economy by any measure of our GDP. It’s 4%. How is it borrowing if the revenues are there?
Ted, again, Google could be your friend and save you a lot of wasted effort if you would use it before you speak.
glenn – sorry, I did use to post over at The Shotgun, before it was effectively taken over by McGuire and his Epoch Times, but no longer.
I don’t recall the Quebec/NL boundary map; certainly, Quebec has always been unhappy about Labrador, considering it ‘theirs’.
By the way – with regard to my comment way above, I meant ‘result becoming the cause’…oh well.
Penny:
The US under Bush borrowed incredibly large amounts from the Chinese, mostly, and other foreign lenders. While the fiscal budget deficit that Bush created is shrinking, it is still a huge deficit and that means they have to borrow to fund their spending [FYI: “De-fi-cit” (dĕf’ĭ-sĭt) n. The amount by which a sum of money falls short of the required or expected amount; a shortage]. That means the debt increases. That is pretty simple math. [FYI: “Debt” (dĕt) n. An obligation or liability to pay or render something to someone else] That also doesn’t even begin to account for the still enormous trade deficit, mostly in China’s favour. (Word of warning to political and economic observers: we all know America’s economic supremacy was do in no small part to Europe’s credit needs; notice any parallels?)
And yes, penny, thanks for the slanted history lesson. Reagan cut taxes then raised them. Bush Sr raised taxes (did you forget about him?). Clinton cut taxes (did you forget about that?). Bush Jr. cut taxes. In a multi-trillion dollar economy and staggered tax cuts, yes, his tax cuts don’t have the degree of effect that you claim. They help, sure, a bit, but no where near enough to explain this economy. Like I said, in economies the size of the US and Canada, it takes a lot more to have that kind of impact, positive or negative. (Besides, your “stat” – record number didn’t pay taxes – doesn’t prove anything without knowing how many didn’t pay last year. Did the increase outpace the growth in population? Did the spread between rich and too-poor-to-pay taxes grow? You really need to take your partisan blinders off if you are going to get into the economic analysis business, penny. That’s the problem with the far right and far left: even data becomes a partisan tool to the exclusion of other data.)
Google can indeed be your friend, penny. Unfortunately, too many just use it to find information that supports their existing beliefs and far far too many Google addicts make the mistake of equating information with knowledge and understanding.
It is so gratifying to see such high quality comments on sda.
The topics on sda are many and varied. All very good, pertinet and relavent.
Periodicaly, a topic such as this is presented and very, very knowledgable people are ‘up and running’. Instantly. It is as if they are ‘idling’ in the back ground until the proper moment comes along. And then they write with such knowledge that one’s head spins.
And commenters are just a very small % of the people who are reading sda. Daily.
And, in the meantime, what is our beloved Canadian Media doing ?? Dunbing it down to a tabloid level.
No wonder the NYT, G&M et al are losing readership every year.
Ted, tax cuts or raises have some effects on economy, but do not themselves determine bust, boom, recession, bubble or depression. One of the great conceits of governments, left and right, is that they can manage the economy.
Governments can facilitate growth, or negatively distort economic activity, depending on what they do. But there are a host of other factors, far too dynamic for government to control, that ultimately determine economic trends;fiscal and monetary policy are given far too much credit or blame. People should educate themselves on this stuff, even at an intro level, because not to do so can be costly, both in terms of lost money and/or opportunity.
Shamrock: Exactly!
Ted, facts don’t lie. 4% expediture on military of GDP, that’s not a military economy, your words. The personal income/corporate tax rates have been historically low to the point that 42.5 million Americans paid no federal taxes, and that is overrepresented with lower income people. Or do I have to Google that one for you too? It’s splitting hairs and irrelevant as to how we got there. And, what’s population increase got to do with anything? They are identified and accounted for by revenue or not every tax year. Citizens must file tax returns.
You can trace the trajectory of the stockmarket, homeownership, and tax cuts pretty easily and draw your own conclusions. Life with lower taxes has been pretty good for the vast majority of Americans.
No offense, Ted, but I don’t think you have a clue about economics.
ET “I wonder how much effect both the ‘economic tectonic shifts’ of globalization and the gradual transition from an oil based to other energy sources economy is having.”
I don’t imagine the latter is having any effect. Right now we’re just talking about it, the only people cashing in are agribusiness which are perpetuating a big con job with biofuels.
I’m not big on economics (which strikes me as one of the more unreliable of sciences) but there’s one thing that I haven’t heard mentioned that bears mentioning. We’re experiencing rapidly accelerating technological development. I suspect that might be more important than the nuances between one kind of political administration vs. another.
Shamrock,
I agree with your assesment regarding trends; however, I was around for NEP1. Now maybe there were additional factors at play as well (global recession?) I don’t know. I was too young and to busy trying to live off of 6 billable hours a month to give a rat’s…
“Governments can facilitate growth, or negatively distort economic activity, depending on what they do.”
Because of my history, that to me is an understatement.
As for tax cuts, the laffer curve is just that – a curve. The effect of a tax cut/increase is entirely dependant on where you are currently. If you’re out past the top peak on the curve, you increase gov’t receipts by lowing taxes. The curve in effect states that (starting at tax rate zero) you increase your overall tax revenue by raising taxes up to a point. After you reach that point, the negative effect on the economy of the tax outweighs the extra tax revenue per dollar of income being taxed.
Why point this out? Cause the idea that tax cuts help the economy is based on the idea that the tax rates we have now are on the bottom right area of the curve – past the efficient maximum level. Lower taxes and you go up and to the left towards the peak. In other words, although you are taking less per dollar of national income, you are increasing the number of those dollars to the point where receipts are up. The ONLY part of the curve we should be operating on is from the peak left. This is the efficient area of the curve. Everything to the right is inefficient.
Tax cuts alone are not responsible for the current economy. But they helped. Demand and growth in the BRIC countries for raw materials have turned Canada’s economy on full (too bad the gov’t has hoovered up every penny of the additional income over the last two decades.)
The idea we are in a bubble is dubious at best. Prices on equities are not out of line (especially given commodity demand from the BRIC countries.) Housing is declining in the US and will hopefully garner a soft landing (and the whole system has a stake in it given the consequences of sub-prime lending and high-ratio mortgages.)
Bonds may be headed lower – especially on the long end (I believe someone mentioned Bill Gross of PIMCO. Add Don Coxe and Arnott to the list of bears on the bond side.) The curve will most likely steepen on the long end (rather than the short) and quality spreads have to increase. As for short rates, China’s bankrolling of the dual trade deficits have kept the US economy rolling (and thus the rest of the world’s) and has kept the US dollar artificially high and the short rates artificially low. Treasuries are discount notes that are auctioned. With China such a big buyer, they have bid up the price of treasuries (thus lowering the yields thus effecting the short rates.) The low real rates in the US have had the effect of devaluing the US dollar which should reduce the trade deficits if it continues. I also believe that the US gov’t is not trying to stop the dollar devaluation to drive up US competitiveness.
Inflation is the key factor that will have to be watched. Inflation is now higher than the upper-band of the fed’s target zone. If it stays there, you may get further tightening. It’s creeping up here in Canada too.
That’s not advice though. Only a fool trades on the words of some crank who posts on the internet. Listening to what people have to say will often cause you to lose all your money. That’s especially true on the internet.
Jose,
Yes, economics is an unreliable science that uses barely understood variables studies by hacks on computers trying desperately to model the relationships between variables using computer models of dubious validity to try to predict the future and failing miserably at it.
Much like climate science.
Warwick: good points, well written.
I knew conservatives have it in them to be intelligent about the economy.
Penny: read and learn.
I can’t believe you called David Suzuki a media whore.
What does that make you?