Investors now have to gauge not only the reality of economic data, but its predictable willful misrepresentation by the press. We therefore have to speculate not only on underlying conditions, but on the effectiveness of the effort to scupper Main Street confidence.
More – “The prophets of recessionary doom, such as former Fed Chairman Alan Greenspan, Republican adviser Martin Feldstein, ex-Democratic Treasury Secretary Lawrence Summers, and bond-maven Bill Gross have been proven wrong once again.”
sarge here, 1ST TIME IN MAYBE A HERE AYE? damn flamin gas bag kanukistani website still ‘goin strong’ speaking fer sask…a bit of a provoncial backwayter, aye?. economy is boomin here in the old US of A. or not. miss kate must not know anyone in the home construction or realty biz shit sucks here in americA
Kate, have you not been following Calculated Risk? The U.S. economy is anything BUT sound and governments around the world are panicking because the worldwide economy has mostly been propped up by American consumers. Now that they no longer have equity in their homes to borrow against… Trouble on the horizon for sure.
As bad the as the main-stream press is, the financial press is worse. Not only are they in indentured servitude to their sponsors, they wouldn’t know a good (or bad) time to invest if it bit them on the arse.
Much of the financial press appears to be about breathlessly hawking the Next Big Thing. Best thing anyone could do is ignore the whole bloody lot them and go read an annual resport or two.
Ya know sarge, if this place bothers you so much, I am sure you could get a nice group hug, or is that grope, over at KOS.
Well, if all this Greenspan hysteria about a depression due to mismanagement if credit and currency inflation, then the Fed will gladly let the House banking committee do the gold reserve audit and the M3 report they have been denied for the past 6 years….obviously the Fed and it’s private investors have nothing to hide from congress…so let’s dispel all these myths of impending economic collapse due to monetary.credit malfesance.
http://tinyurl.com/fl9ur
Oh no, nothing to see here…things are good on the credit bubble…all is well..ignore that little man behind the green curtain.
Shall we hold our breath waiting for the Fed to open it’s books so we can discover the true value of the dollar????
What a bunch of manufactured crap. Unfortunately perception, and in this case, the housing market hysteria is distorting and may yet drag down the whole US economy. The uninformed stupidity and panic in this one sector is spreading like cancer and unfortunately in financial markets perception rules.
This sector represents less than 10% of the entire US economy and the doom and gloomers may yet stampede the economy into a run on the bank. The financial lemmings in the press will be looking for the nearest cliff to jump off simply because no one had the guts, balls or tits to put things in the proper perspective.
Even in this day and age perception is the bases for financial markets, not facts and reason.
Let’s hope that a lesson is learned (again) that lending money to sub prime borrowers is not so good for the real estate business.
Other than that, 2008 is lookin’ good! Cheers all!
I’m sorry, but do you people who believe the US economy is in fine shape actually *READ* any government statistics? The following are all undisputable facts, easily checked via Google:
1 – The price of oil is over $95 US today, which is up from $60 at the end of last year. 50% rise in energy costs is no cause for concern?
2 – The US dollar index has fallen from 120 in 2002 to under 78 today. That means total US wealth, as measured in dollars, has fallen by 40% in the last five years. Not worried yet?
3 – I’m watching CNBC as I write this. Earlier today, they showed a chart showing that housing prices in the 20 largest US markets are down by over 6% this year, and the rate of decline is increasing. Miami down 12%, San Diego down 11%, etc. What this means is American consumers, who have been taking money out of their homes via (tax deductible) second and third mortgages, aren’t going to be able to keep this up. With consumer spending representing over 2/3 of the US economy, you’re not worried?
4 – The Fed has been pumping liquidity into the market via $20-30 billion auctions of bills “until they’re not needed anymore”. Increasing the supply of US dollars, and holding interest rates down, is not going to support the value of the US dollar in either the long or short term. BTW, gold is back over $825/oz, up from $600 at the beginning of this year.
5 – Oh, and food prices. All you farmers out there in SDA land must have some first hand experience with the rise in the prices of wheat, corn, beans, etc. The estimates that I’ve seen are that raw food prices are up 16% year over year. That’s going to trickle down to the consumer as well. Still think everything’s fine?
6 – The believability of US government statistics is problematic at best. They don’t even publish M3 stats anymore, although independent agencies say it (the broadest measure of money supply) is growing by anywhere between 15-20%/year. Their CPI figures are a joke, as they don’t include “volatile” food and energy components, which we have seen have risen substantially. Many experts say that CPI on a representative basket of all goods and services, including oil, food, and health insurance, exceeds 5%, which means that, given a nominal 4.3% increase in GDP, the US is actually in recession right now. You continue to think everything’s rosy?
7 – Finally, despite all the “happy talk” about the subprime mess, there are millions of adjustable rate mortgages that are going to reset next year. Regardless of whether the government mitigates the rise, people are still going to be spending more on their mortgages than they are this year, which will again impact consumer spending.
I urge everyone to take some defensive steps with their portfolios; buy some gold, buy some oil, and buy some of the global multinationals (the IOO fund holds the 100 largest companies in the world); the US companies on the list, such as McD’s, Boeing, IBM, GE, MMM, etc., derive much of their revenue from overseas, where the falling dollar pumps up their US profits. I’d also recommend a cash component, so you have some powder when the buying opportunity we should get late in ’08 arrives.
We in Canada aren’t going to escape the fallout from the US slowdown. I’ve said it before: it’s a hard rain gonna fall.
Oh, and a PS: It’s a toss-up as to who is the more foolish, more jingoist financial pundit: CNN’s Lou Dobbs, or CNBC’s Larry Kudlow. They are both the type of simplistic moron who assumes that America will always lead the world economy. Guess what? The Euro zone already exceeds the US in GDP. The Sovereign Wealth Funds of China, the Arab states, and others (check out the archives at http://www.dailyreckoning.com for more about these) are spending billions to buy up US assets. The US is losing control of its own economy, and these two fools are whistling past the bank.
Count me in as someone expecting tough times in the future. Greenspan’s got a lot of nerve predicting bad times as he’s the guy that started the current mess. Whenever there was some kind of financial crisis anywhere in the world, you could count on him to put it out by dousing it with his monetary firehose. Everyone cheered him at the time, but he allowed the world of international finance to forget what risk is.
Now the world is swimming in so much easy money that there’s a shortage of safe places to invest it. That’s why burger flippers with two week’s seniority could find someone to lend them hundreds of thousands of dollars. Unfortunately, the problems with these types of loans are just the tip of the iceberg.
I’ve been amazed that the governments of the world have been able to keep things from ceasing up so far. But the methods they’ve been using are what got them into such trouble in the first place. Anything that can’t go on forever, eventually doesn’t.
Dollar Daze is a good blog for this topic.
There are a few thing to be worried about as regards the US economy, like the deficit spending of the current administration and the credit crunch. As for energy costs, while oil is very high in nominal terms, energy costs are much lower than they were 30 years ago as a percentage of GDP, which is why $95 oil hasn’t caused a recession on its own. Also, while everyone frets about oil prices, natural gas prices have fallen significantly, which makes heating, air conditioning and power generation cheaper.
This explains it all pretty clearly:
http://www.youtube.com/watch?v=SJ_qK4g6ntM
“What a bunch of manufactured crap. Unfortunately perception, and in this case, the housing market hysteria is distorting and may yet drag down the whole US economy. The uninformed stupidity and panic in this one sector is spreading like cancer and unfortunately in financial markets perception rules.”
You are literally too stupid to live. I’m shocked you made it to adulthood without being hit by a car, because with a brain like yours, I could see you convincing yourself that there is no danger in being hit by a flying piece of metal.
It isn’t just the housing market. Americans – both individuals and government – are drunk on debt of all kinds.
To be sure, there is good debt that encourages good growth, but the kind of deficits we’ve seen over the past 20 years are unsustainable, and they’re finally coming home to roost.
No shock that rightwing goofballs yet again look to blame the press for reporting what is happening. You guys hate facts.
KeveinB “I urge everyone to take some defensive steps with their portfolios; buy some gold, buy some oil,..”
Could be a buy ‘high’, sell ‘low’ kinda strategy, eh ?
Makes one wonder if his ‘free’ advice on his other points is also worth zero 🙂
I will defer to the vote of the US stock markets which are UP for the year and are continuing in that direction. Productivity continues to grow at a fierce pace in the US and the devaluation of the dollar will rapidly create trade surplusses and pressure the EU and China to revalue their currencies.
For more, listen to this starting at 10:30:
(http://hughhewitt.townhall.com/MediaPlayer/AudioPlayer.aspx?ContentGuid=f44823dd-3a2c-4b83-a5db-1dfd998228d1)
Thanks John, it’s nice to know you are as intelligent as what you read. Is the government back to work tomorrow?
KeveinB “I urge everyone to take some defensive steps with their portfolios; buy some gold, buy some oil,..”
wait til the price falls to 1920’s level then sell sell sell
MORON
The US is not the only country that is increasing it’s money supply at double digit rates.
On the following website under the Global Economics heading is the money supply growth for various countries.
The US rate is for M2 because they stopped publishing M3 last year.
http://www.financialsense.com/economy/main.html
Why is this important?
The more money that is put into circulation by the various monetary authorities will cause prices to increase as there is more money chasing the same number of goods. This will also cause the value of current savings to decline.
While I get as weary as anyone with the negativism in the MSM, clearly we have not yet been able to abolish business cycles, no matter how much Alan “Dr. Bubbles” Greenspan tried with his pump-priming. Further, although Bubbles and his acolytes may think you can push on a string forever, eventually the economy chokes on too much credit and we are seeing signs of this all around us. The last recession ended in 2002, so we have had five great years since then. The US (and the Canadian) economy is about due for a correction and it would be no surprise at all if we had one in 2008. Yes, a presidential election year is an unusual time for a correction, but I’m just not sure it can be delayed much longer. Hopefully, it will not be too severe. Moreover, you can count on the resilience of the American economy to lead to a recovery.
And for those who doubt the veracity of official US Government inflation data; I think you are on to something. It is hard to imagine that you can have broad measures of money supply growing at 16% a year, and not have inflation that is well in excess of the official rate. Knowing that they now make all kinds of “hedonic” adjustments in the measurement of prices also leads to suspicion. Fortunately the world’s greatest economy manages to do just fine most of the time in spite of these meddlers.
Gord Tulk, exactly. A company that I started a little less than a year ago is manufacturing a product for the US housing market and our distribution Company is headquartered in the home of the “housing crisis” Florida. Business is so “bad” it looks like we will be setting up our main plant in Florida. After a rough time the locals soon figured out the “crisis” was a bunch of BS and its back to business. Productivity IS the key.
I recently read a book about France after the liberation (1945 to 1949). The ‘socialists’ did everything they could to interfere with the Marshall Plan. While French people suffered terribly from winter cold and hunger the left did everything they could to hold up supplies.
General destruction and economic chaos is always a socialist fundamental. They dream about it. It guides their thoughts and actions.
The “kids” moved (huge career opportunities) to San Francico (Bay Area) in September —- looking at houses. No bargains at all, prices holding steady.
He said “My previous impression of Americans was all wrong. They have recieved us well (both work place and street) and are helpfull, understanding and accomadating. I really don’t know where I got the wrong impression from.” Canadian Media ? “probably.”
KevinB said:
“I’m sorry, but do you people who believe the US economy is in fine shape actually *READ* any government statistics? The following are all undisputable facts, easily checked via Google:”
KevinB’s alter ego said:
“The believability of US government statistics is problematic at best.”
When you two figure out who is right, give us a call.
I myself am worried about tough times coming, but I don’t see it on the horizon just yet. After poking through the Federal Reserve’s list of releases, I found that:
– the M1 measure of the money supply dropped by 0.5 percent over the last twelve months. No reason for alarm here: M1 has been stagnant for a long time. (M1 in November 2004 was almost exactly the same amount as M1 in Novembers 2005, 2006 and 2007. If this stagnancy had deleterious economic consequences, we would have seen them in ’05 or ’06.)
– the M2 measure was up by 6.2 percent over the last 12 months. Annualized, M2 was up 5.2% over the last 6 months, and was up 4.7% over the last three months. This may be indicative of a slowdown, but it’s not that precipitous a drop. The annualized growth rate of M2 over the last reported month (November ’07) is 4.80%, slightly higher than the 4.7% annualized growth rate from September to November.
– The “kicker” is the growth rate of the monetary base, the most direct indication of the Fed’s intentions to inflate. The “seasonally adjusted, break-adjusted monetary base” rose 2.20% from November 2006 to November 2007. Inference: the Fed currenly isn’t “pushing on a string” because it’s not pushing that hard at all. More interesting inference: the fact that the M2 money supply has grown at a greater rate than the monetary base indicates that there is no monetary deleveraging in the offing. So, there’s no cause for immediate worry.
– The only worrisome sign of any potential monetary deleveraging is found in the growth rate of consumer credit. Starting in September 2007, the annualized quarterly growth rate dropped sharply from the 4.5-to-6% growth seen since 2002 to 1.6% for September and 2.3% for October. The trouble is, the growth rate for August was an unusually high 10.1%. If those three months are treated as a quarter themselves, you get a growth rate of 4.60% annualized, near the bottom of the normal range for most of the decade. The third quarter (June to September of ’07) saw a 6.1% growth rate.
Conclusion? The shrinkage in growth of consumer credit isn’t leading to a deleveraging of the money supply. The slack’s been picked up elsewhere. “For now,” perhaps, but it still is.
These guys are just like the AGW Gloom & Doom guys. Found a new job, boys?
“General destruction and economic chaos is always a socialist fundamental. They dream about it. It guides their thoughts and actions.”
The French have an expression for this: “la politique du pire”. If you can talk up, or better yet, actively work toward making things worse, the socialists hope that the public will buy the snake oil they are selling. Terrorists like this strategy too.
ron in kelowna, and Free: the seven-figure portfolio I run for my extended family is up just under 20% this year. How’d you do? Oh, and since I keep a fair amount in T-bills, on a risk-adjusted basis, I did even better. We’ll check back in a year, shall we?
Chip, you’re correct. What I should have said was “do you read economic statistics”. I stand by my statement on government stats, specifically referring to CPI, nominal GDP growth, and the money supply. Other stats I quoted, such as the US dollar index, price of oil, gold, foodstuffs, housing prices, etc., are actually not compiled by the government, but by the private sector. For some nearly incomprehensible reason, I tend to trust those private sector figures more than the government’s.
Daniel Ryan: since you seem to want to discuss this at an intellectual, as opposed to name-calling, level, I want to point out some conflicting facts. When I visited the St. Louis Fed’s page, they showed MZM growing by over 14% from October 2006 to October 2007 – and that was before the Fed and other central banks started injecting reserves. “Helicopter Ben” has said the Fed will hold weekly auctions of $20-30 billion in short term credit facilities “for the foreseeable future”.
I’m not predicting an overnight crash; I think it’s going to be more of a long, slow grind as the US economy still tries to deal with its massive deficits and falling dollar. I also expect the US will recover, eventually. I’m just not prepared to say when.
If any of you were competent financial predictors, you would be too busy making money to have the time to comment on this site.
Stastics are a whore’s game. Trust your gut.
All the rest is bullshit.
Sarge — get 10 hours sleep, take a shower, refrain from drugs and walk outside to smell the fresh air. That’ll put you in the proper mood…
“And for those who doubt the veracity of official US Government inflation data; I think you are on to something.”
Looks a lot like the IPCC data to me: somewhat cooked.
Sarge — you will make more cents too! LOL
Right on rattfuc – hate your screen name by the way…
I must chuckel at the masochistic optomists who think riding a debt bubble by inflating M3 is any kind of “security”.
The Fed refused to submit M3 reports…institutional and personal credit default is in meltdown with no Fed bailouts for smaller players except to write down large institutional debt by inflating M3.
Not to worry…as long as there is perception that the dollar has value and that debt is retrievable…there is stability right…perceptions…all perceptions…and how are positive perceptions of an over inflated fiat credit/monetary system kept alive…well with massive amounts of BS
you’ll know thereis a recession when the government hands out LESS welfare cheques.
because it will mean that their revenues went down and they will force the freeloaders to go to work
C’mon guys.It took them longer then that to set up the Republic.I’m just happy that for the first time in a looooonnnggggg time,I can buy Yank greenbacks,sit back and look at them,and know that in 8 years,after the sheeples vote the leftards back in here,I’ll be rolling in it!
And it should only take about three months after that election when the horrid little Franklins are paying me at least a 30% increase in value.
I’m of the opinion that the entire “news” machinery of our Western nations, business news included, is run by people who think the only way they can make money is by creating an atmosphere of misery, fear and angst among their readers.
I have to search HARD to find a story every day that isn’t about something that is, was or soon will be a crisis, or a heartbreak, or an atrocity. Actually the only place I can count on finding something “good” is Eureka Alert or Tom’s Hardware. Everything else is either bad, or commentary on something bad. Including SDA most of the time, which is not a criticism. Its the water we’re all swimming in.
Case in point here, look at the DOW/S&P500/NASDAQ since the friggin’ war started in 2001, you see a steady, beautiful upward slope. This year we had two corrections of about 10%, separated by a recovery of … about 10%. I’m looking for a continuation of this basic trend, because NOTHING HAS CHANGED.
Over this same period of time we have been bombarded by a relentless blast of bad news stories, as if the world were coming to an end every morning. Even though, as I said, nothing has changed.
Question to one and all: Does anybody out there think the current batch of woes, from the Sub-prime Mortgage “crisis” to the Falling Home Price “crisis” to the Liquidity Crunch “crisis” and the Triple Digit Oil Price “crisis”, is that bundle of financial misery going to cost as much as 9/11/2001? Or even as much as the Tech Bubble when it popped?
Doubt it, eh?
Guests on BNN doubt it too, these guys are expecting a slow-down at worst, and they are betting big friggin’ money on it. As well they might, because the US economy climbed out from under the 9/11 crash right smartly, didn’t it? Recovered from the Tech Bubble pop too? Uh huh.
But what do we keep seeing on network news, news papers, business news opinion pieces, and etc? RECESSION LOOMS. THE END IS NEAR. WE’RE ALL GONNA DIEEEEEE!!!!! They’re like a broken clock. Wait long enough and they’ll eventually be right.
Question the second, can you tell what time it is from a broken clock?
And people wonder why MSM share prices have been declining in a rising market. Its because they serve no useful purpose. They don’t add value to their reader’s lives, they take it away.
Its hard to make a living by removing value from your customers, I guess.
We are all going to die. Some of us will die quite painfully.
Hopefully, none of will die broke.
I can’t see how a continent that closes down much of its manufacturing and moves the work to China and India, drives its farmers into poverty and confuses reckless debt spending, speculation and bureaucratization with wealth generation can escape a reckoning.
Merry Christmas.
The great misrepresentation is that things are okay. The US is slowly loosing its place in the world and noone wants to talk about it.
Right now the economy seems okay, but only because its being propped up by mountains of debt politically motivated interest rates, and a rapid decline of the dollar.
Its like giving a cancer patient cocaine and saying that it cures there illness because they no longer feel the pain.
Some points to ponder
1. There is now no long term reason why someone in China (or Uganda) cannot make the same amount of money as an American. When the wages are equal, so will there share of oil, metals and rare earths. Since we are close to peak oil production of petroleum and many other base materials right now – this means that the US consumer will have to get along with dramatically less gas and metal (hello Smart Car- or electric scooter)
2. The US is ill-suited to face this new competition. The worker in China or Uganda is not burdened by the welfare state, lawyer culture, or bloated health care system and massive underfunded retirement plans.
2. The US is rapidly loosing its main economic edge – its technological superiority. China now produces more scientists and engineers than the US. (as does India). The US (and the West) got along for year where intelectual property was very expensive and raw materials were very cheap. This is about to reverse itself.
3. The present US president has taken on more debt than every other president combined.
The US consumer also carries record amounts of debt. The US has a NEGATIVE savings rate.
4. The US manufacturing base is rotting out.
5. Foreign companies have bought up huge chunks of the US economy. Much of it at a deep discount rate because Bush needs an artifical low dolar to hide the fact his country is falling apart.
In a few years, the US will have to pay the piper. Inflation created by low interest rates will force interest ratest to rise. Debt payments will skyrocket. The US will be forced to implement tax increases in the middle of a recession. The foreigners who hold all this debt (and have lost a bundle as the dollar fell) will loose interest in taking any more funny money. The dramatic rise in oil prices will force these guys with 2 hour commutes to abandon their homes.
And to top it all off, the social security and medicare systems will go broke.
Other Western countries will face the same problems, but they have been alot more responsible over the last 7 or so years.
The US has really been in a recession for years, they have just masked it with ooodles of debt and low interest rates.
Any moron can run an economy
Phantom,
a very good analysis and the last point you really nailed it.
Bull markets climb a wall of worry. Keep the bad news comming so the rest of us can buy cheap US stocks with our par CD$. For any of you financial gurus out there, can anyone tell me which industial nations have the highest debt as a % of GDP?. No its not the US, no their not second, not even third. Betting long term against the US economy has not produced very good results. Think a weak US$ is bad for exports? I am surprised all the postings here are mainly negative US economy.
Hey Mark…you talking about Canuckleheads or Yanks? Not much diff.Both are doing the same.
@KevinB:
I’m glad you answered. Sorry to say, but your statistic reinforces my overall point. If MZM is growing at an even faster rate than M2, then there is no credit deleveraging taking place. In fact, the opposite is taking place. Thus, there is no deflationary crisis on the horizon. The Fed isn’t pushing on that proverbial string because it doesn’t need to push all that much. In fact, the ‘string’ seems to be largely pushing itself still.
To move from the possible future to the recent past: “U.S. house prices drop by a record 6.7 per cent.”
But…But…But…
the American economy doesn’t matter
We are all DOOMED by GLOBAL WARMING!!!!
Chicken Littles everywhere…
SAD…SAD…SAD
When prices in stores are low, we load up the cart. Unfortunately, we like to but investments and real estate when prices are high; sell when low. The American economy is in better shape than most ordinary folks think. If the price of your new home has you depressed because you paid too much for it and bought it at the wrong time, cheer up and wait; you will need a place to live in 10 years when prices are back up; who cares? Corporate debt is low, profits and reserves low, unemployment low. Stop reading the MSM and cheer up.
‘I’m of the opinion that the entire “news” machinery of our Western nations, business news included, is run by people who think the only way they can make money is by creating an atmosphere of misery, fear and angst among their readers.’
-The Phantom @ 8:17
That’s pretty good Phantom. When I think about it, most of the media’s advertisers are selling junk food, pop entertainment, pop fashion, booze, vehicular status symbols, all comforting placeboes for people feeling ‘misery, fear and angst’.
So the communist revolution picks up another bunch of useful idiots: plastic media airheads parroting lefty propaganda and paranoia to make money for their advertisers.
you have to admit doom and gloom sells alot more newspapers than sweetness and light ever will.
Our [USA] GDP is greater than the EU combined. There are more home owners now than ever in the history of the nation. The “mortgage crisis” [in some states] is hardly a crisis, the vast majority of people are not defaulting on their loans. North America creates more millionaires and billionaires annually than the rest of the world combined. Our unemployment rate is the envy of the world; if you want to work there is a job for you. We have our problems but lets keep things in perspective.
“the doom and gloomers may yet stampede the economy into a run on the bank.”
On the run on banks …
If the average American get freaked out about the economy and they all decide to take all their money out of the banks. There should be no problem covering the average withdrawal amount of about $37.22 because most Americans haven’t saved any money.
They spent their money on wide screens TVs so they can see the doom an gloom in Hi Definition with Dolby Stereo sound.
On the high cost of oil …
If Americans stop driving around for fun and use their cars and trucks for transportation, the higher cost of gas will not matter to them.
If Americans put on a sweater and turn down their thermostat a few degrees, the higher cost of energy won’t matter much.
If Americans in summer turn off the air conditioner in summer, open a window and acclimatized themselves to warmer weather, the higher cost of energy won’t matter much.
If American stop eating all the fast pig food on large plates, they will save enough money so that the higher cost of bring everything to them won’t matter much.
If Americans start saving a bit of money and pay cash for all the useless stuff they cart home every week to amuse themselves they will have a lot more money to pay for energy.
On the economy …
If Americans do the above, there will be a slow down in the economy for a short time until the new reality of a more economical way of life takes hold, but that won’t matter much since everyone will soon be in a lot better shape and in more than one way.
On stupidity …
It is unlikely that any of the above will happen because most Americans are leading empty useless lives and will choose continue living stupidly and whining about it.
On politics …
Because Americans will likely choose stupidity over wisdom, they might elect a person who will promise to take a lot of their living costs off their shoulders to help accommodate the stupid way of life most will want to continue with so badly.
That means Hillary will likely become the next president of the United States of America and nothing will be more stupid, costly and punishing than that.
On Canada …
Ditto the above.