Recession

[msj]

OK..we will put you down for June 2008 as the beginning of the "recession". But please note that current economic metrics do not support such a conclusion...officially.

Same old, same old.

Official recessions are always declared after the fact. In some cases we don't know just how bad it was until many years later (the 2001 recession) for example.

The 2 consecutive official "rule" is BS. While real GDP is a major factor it is not the only factor and an "official" recession has been called without 2 quarters of negative growth (since the official declaration is more complicated that that - see numerous pages above for links).

Now, lets put up a couple of links although, no doubt, you won't bother to read them:

Update and Summary: Economic Activity Measures

Monthly GDP

But, let's face reality, the real reason you prefer denial is due to politics. An official recession would be blamed (rightly or wrongly) on the republicans and George Bush.

The problem is, no matter how much republicans protest that the recession isn't "official" most people do blame Bush.

[bush_cheney2004]

....But, let's face reality, the real reason you prefer denial is due to politics. An official recession would be blamed (rightly or wrongly) on the republicans and George Bush.

The problem is, no matter how much republicans protest that the recession isn't "official" most people do blame Bush.

I think you have it backwards....you desperately want it to be an official recession so it can be blamed on Bush. Lacking this, you continue to morph the technical definition. It is what it is....and so far, it's not a recession.

At least have the chutzpah to name the month when the "recession" started.

P.S. 1Q 2008 GDP has been upgraded to 1.0% from 0.9%....but I'm sure the population grew too...LOL!

Edited June 27, 2008 by bush_cheney2004

[Topaz]

I think you have it backwards....you desperately want it to be an official recession so it can be blamed on Bush. Lacking this, you continue to morph the technical definition. It is what it is....and so far, it's not a recession.

At least have the chutzpah to name the month when the "recession" started.

P.S. 1Q 2008 GDP has been upgraded to 1.0% from 0.9%....but I'm sure the population grew too...LOL!

[/quote

After Bush took over, wasn't there a recession at first? Seems like he's leaving like he came him recession and getting Israel to invade Iran all before leaves office.

[msj]

I think you have it backwards....you desperately want it to be an official recession so it can be blamed on Bush. Lacking this, you continue to morph the technical definition. It is what it is....and so far, it's not a recession.

At least have the chutzpah to name the month when the "recession" started.

P.S. 1Q 2008 GDP has been upgraded to 1.0% from 0.9%....but I'm sure the population grew too...LOL!

I'm not the one who is blaming Bush.

You need to learn the difference between a person presenting an opinion as opposed to presenting other people's opinions.

As for the upgrade to GDP - there will continue to be revisions years into the future.

If you bothered to click on the monthly GDP data (which itself will no doubt change in coming months/years) then you will see that the trend is down.

Just because you cherry pick a convenient 3 month period does not change that downward trend.

It is the trend that ultimately will lead the NBER to conclude a recession started sometime this year (my guess being Feb 2008), with the bottom being hit later this year or perhaps 2009.

If the NBER used calendar year quarters as the basis of calling a recession then they would never claim a recession finished in November, 2001 like they did for the last recession. They would have claimed it as December, 2001 since that would have been the end of the calendar quarter.

But that's the point - the economy is clearly slowing and it is only a matter of time before we get the official recession call. But to the people losing their jobs and losing their houses, well, they will probably blame the Republicans.

[bush_cheney2004]

....But that's the point - the economy is clearly slowing and it is only a matter of time before we get the official recession call. But to the people losing their jobs and losing their houses, well, they will probably blame the Republicans.

Correct...that is the point...there is no recession (yet).

[eyeball]

According to news on CBC this AM the US stock market is in bear mode with the underlying cause being a recession.

In the meantime what about the elephant in the economy, China? Gasoline is half the price on the street as it is in North America. Government subsidies are expected to end after the Olympics and will be maintained until then to ensure there is stability in the population leading up to the games. Inflation is apparently running about 8% there now and its reasonable to conclude that when reality hits China inflation will climb dramatically.

China is truely living in la la land right now. The market for oil is being artificially distorted by China's unsustainable demand and politicians in the west are completely mum about it. If anyone here suggests we subsidize gasoline there are immediate howls of outrage amidst grave fears about the impact to the economy. Why are western governments not doing anything to force China to stop screwing with the market then? We are paying for China's delusions about stability and world prestige at our gas pumps. Why are our governments so intent on carrying a torch for China? For the benefit of the stock market or oil companies perhaps? The corrupt political shortsightedness of governments everywhere will be the ruin of us all.

I wonder what will happen when the biggest consumers and producers in the world both fall flat on their asses at the same time? If it takes years to acknowledge a recession how long does it take to notice that a global depression could be on the horizon? I bet mushroom clouds would probably be a good indicator.

Edited June 28, 2008 by eyeball

[msj]

According to news on CBC this AM the US stock market is in bear mode with the underlying cause being a recession.

In the meantime what about the elephant in the economy, China? Gasoline is half the price on the street as it is in North America. Government subsidies are expected to end after the Olympics and will be maintained until then to ensure there is stability in the population leading up to the games. Inflation is apparently running about 8% there now and its reasonable to conclude that when reality hits China inflation will climb dramatically.

China is truely living in la la land right now. The market for oil is being artificially distorted by China's unsustainable demand and politicians in the west are completely mum about it. If anyone here suggests we subsidize gasoline there are immediate howls of outrage amidst grave fears about the impact to the economy. Why are western governments not doing anything to force China to stop screwing with the market then? We are paying for China's delusions about stability and world prestige at our gas pumps. Why are our governments so intent on carrying a torch for China? For the benefit of the stock market or oil companies perhaps? The corrupt political shortsightedness of governments everywhere will be the ruin of us all.

I wonder what will happen when the biggest consumers and producers in the world both fall flat on their asses at the same time? If it takes years to acknowledge a recession how long does it take to notice that a global depression could be on the horizon? I bet mushroom clouds would probably be a good indicator.

Good points.

The US, however, isn't much different - more sophisticated, yes, but not necessarily any better.

I mean, does anyone really believe that they are favoring a "strong dollar" policy? Or at least believe in a consistent strong dollar policy?

Oh, but the US does have a different policy towards China as compared to the oil producing countries in the Middle East: in China a hard currency peg is bad, but in the Middle East it is good.

You see, if the US could bend China and the Middle East to their way of thinking then China's exports (or US imports of Chinese goods) would be more expensive (thereby making US manufacturing more competitive) while oil prices would decrease thanks to the ME keeping the currency pegs.

China isn't the only country who want to have their cake and eat it too.

Edited June 28, 2008 by msj

[msj]

Over the years I have heard how "resilient" the US economy is. How good the Americans are at facing any recession head on to deal with the trouble, fix it, and get the economy growing again.

For the past several years this view has been challenged by reality.

Whether it is ordinary people who have too much personality to waste on the fine details of why government produced statistics are flawed, or a MSM that is unable to be anything but the incessantly perky cheerleader no matter if her team is winning or losing, many people are starting to see just how much America has changed from resiliency to making excuses.

The latest hit comes from some technical accounting rules but Barry Ritholtz sums up nicely in this link: Same As It Ever Was.

You see, those persnickety bean counters forced banks and brokers to actually write down paper for which there was no market.

Therein lies the foible of Schwartzman's Folly, for if you own marketable securities for which there is no market, then by definition, these are not really marketable securities.

How then to price all of this paper on the books? Why, just rely on the people who bought them in the first place! Never mind that they don't understand what they own, they failed to do their due diligence before buying this garbage in the first place. Do not acknowledge these folks have an enormous personal incentives NOT to mark this junk down.

That's the thing about mark-to-market: when everything is going up it's great; but when everything stops going up and starts going down, well, then it's time to blame the accounting rules!

See original article here.

[msj]

CEO Economic Update has an interesting post about the 6 months in a row of job losses and some historical context:

Employment report screams recession

There has been a handful of times when the unemployment rate has risen during an expansion. Each of those times unemployment would rise by 0.5% or less. Each of the last 10 times unemployment has risen by 0.6% the U.S. has been in a recession. Currently unemployment is up 1.1% nearly double the threshold. Again the discussion should be over.

A few misguided economists cling to the fact that 5.5% unemployment doesn't seem bad.

November 1948 the recession began with unemployment at 3.8%

July 1953 the recession began with unemployment at very good 2.6%

August 1957 the recession began with unemployment at 4.1%

April 1960 the recession began with unemployment at 5.2%

December 1969 the recession began with unemployment at a "good" 3.5%

November 1973 the recession began with unemployment at 4.8%

July 1990 the recession began at 5.5%

March 2001 the recession began with unemployment at 4.3%

8 of the last 10 recessions had unemployment at the current rate of unemployment or much, much better. Only 2 recessions had higher unemployment, so clearly the level of unemployment argument doesn't make any sense.

The sooner we face the reality we are in a recession the sooner we can get out of it.

[msj]

I didn't think the housing collapse would be this bad.

This could end up being a large taxpayer funded bail out in the making but $5 trillion does sound on the high side.

edited to add:

More likely the government would nationalize Fannie or Freddie and take the hit. Once it is up and running again the government would "denationalize" it by issuing public shares. So the true economic hit may not be bad over the course of many years.

Not that it wouldn't create some short term pain. In fact, it should create some short term pain if only to remove some of the moral hazard complacency inherent in the current system.

And as soon as I finish my edit this comes out:

Conservatorship for Fannie or Freddie?

Edited July 11, 2008 by msj

[bush_cheney2004]

This could end up being a large taxpayer funded bail out in the making but $5 trillion does sound on the high side.

No big deal...see Savings and Loan Crisis. Time to top that.

[msj]

No big deal...see Savings and Loan Crisis. Time to top that.

Funny how the last time something like this happened there was a recession, too.

Oh, right, but this "recession is mental."

Edited July 11, 2008 by msj

[bush_cheney2004]

Funny how the last time something like this happened there was a recession, too.

Oh, right, but this "recession is mental."

It is what it is....such comparisons are inconsequential....recession or not. I think a lot of it is just whining.

[msj]

It is what it is....such comparisons are inconsequential....recession or not. I think a lot of it is just whining.

It's deja vu all over again.

That type of thinking (i.e. ignore the economy) helped elect Bill Clinton in the 1990's.

Not that I want this thread to get too political, but denial and calling Americans hurt by the downturn "whiners" is not going to help the Republicans win any elections.

[bush_cheney2004]

Not that I want this thread to get too political, but denial and calling Americans hurt by the downturn "whiners" is not going to help the Republicans win any elections.

I don't really care either way....people who play the victim card too often are whiners. Better to channel the energy into more productive activity....and better choices. Believe it or not, there are actually some Americans who can manage their finances (and lives) quite well regardless of which party "wins any elections".

It is what it is.....deal with it.

[jdobbin]

Not that I want this thread to get too political, but denial and calling Americans hurt by the downturn "whiners" is not going to help the Republicans win any elections.

It is probably why McCain is in full retreat from one of his chief economic advisers.

[msj]

I don't really care either way....people who play the victim card too often are whiners. Better to channel the energy into more productive activity....and better choices. Believe it or not, there are actually some Americans who can manage their finances (and lives) quite well regardless of which party "wins any elections".

It is what it is.....deal with it.

Denying the existence of the economic problems IS the problem.

That is exactly what McCain's advisor has done: call people whiners rather than admit to the problem so that it can be dealt with.

Chasing fire after fire (Bear Stearns, Lehman, Fannie, Freddie) like the current administration is doing while calling those millions of Americans who have seen their house foreclosed upon in the past two years a bunch of whiners is not going to win votes.

That is political reality and the Republicans should stop the denial and accept that facts so they can choose a strategy that doesn't involve blaming the people who they want to vote for their candidate.

[bush_cheney2004]

Denying the existence of the economic problems IS the problem.

No, I don't think that cognizance of the "economic problems" sways matters either way. That's just politics.

That is exactly what McCain's advisor has done: call people whiners rather than admit to the problem so that it can be dealt with.

Of course...just like "truth commissions".

Chasing fire after fire (Bear Stearns, Lehman, Fannie, Freddie) like the current administration is doing while calling those millions of Americans who have seen their house foreclosed upon in the past two years a bunch of whiners is not going to win votes.

OK...maybe they are not whiners...but they are certainly fools for getting themselves upside down on their homes.

That is political reality and the Republicans should stop the denial and accept that facts so they can choose a strategy that doesn't involve blaming the people who they want to vote for their candidate.

And what strategy would that be? Remember 1984 when Fritz Mondale told voters what he was going to do?

Why do you care anyway?

[msj]

It is probably why McCain is in full retreat from one of his chief economic advisers.

That's what happens when one substitutes insults for substance; which is not much of a surprise:

"What Kind of Economist is Phil Gramm?"

[msj]

Why do you care anyway?

Because I'm tired of ordinary people having to bail out sophisticated investors who should know better:

U.S. Taxpayer Bailout of China Over Fannie Mae

If China and Japan were dumb enough to invest in US agencies (and they were), then China and Japan should suffer the consequences, not US taxpayers.

Not that sleazy fraudsters in the US should be exempt from criticism, too but they have already been mentioned previously.

Edited to add:

Forgot to mention that willful deception and/or incompetence and/or bad information also bug me.

Best explained here:

The Government's Macroeconomic Series: X-Files, Dilbert, or Resource Constraints?

Or, is the model for explaining why macro data sometimes appear so counter to intuition best explained by willful deception (Iraq and WMDs), incompetence (the FEMA response to Katrina), or prosaic (resource constraints)?

Edited July 12, 2008 by msj

[bush_cheney2004]

Because I'm tired of ordinary people having to bail out sophisticated investors who should know better:

You must be joking....the US government (taxpayers) have been bailing out entire nations for years. What is so special about equally stupid investors?

Not that sleazy fraudsters in the US should be exempt from criticism, too but they have already been mentioned previously.

Again...so what? What criteria do you propose we use in this longstanding free-for-all? Even your average schmuck has his/her bank account and pension insured by the government.

Edited July 12, 2008 by bush_cheney2004

[msj]

You must be joking....the US government (taxpayers) have been bailing out entire nations for years. What is so special about equally stupid investors?

Again...so what? What criteria do you propose we use in this longstanding free-for-all? Even your average schmuck has his/her bank account and pension insured by the government.

Strange - you keep telling us how stupid people should pay for their foolishness. Then you turn around and justify the rip off of American taxpayers as something that they have been doing for years so they should just keep on paying.

An average schmuck may have his bank account and pension insured but he also pays taxes - but you seem to think that he should pay more in taxes to bail out these investors.

He is only a schmuck because he lives in a country where the politicians continue to sell out the taxpayers interests.

[bush_cheney2004]

Strange - you keep telling us how stupid people should pay for their foolishness. Then you turn around and justify the rip off of American taxpayers as something that they have been doing for years so they should just keep on paying.

It's not strange at all....why the hell would the government do what I want? People don't vote for me! We don't have a "Gun Registry" boondoggle, but plenty of others.

An average schmuck may have his bank account and pension insured but he also pays taxes - but you seem to think that he should pay more in taxes to bail out these investors.

Corporations and investors pay taxes too.

He is only a schmuck because he lives in a country where the politicians continue to sell out the taxpayers interests.

Nonsense.....the taxpayers are in line for the biggest entitlement programs of all...in perpetuity.

[GostHacked]

The World Bank, and the IMF are the reasons why a nation would/could get into debt. A nation wants to become a player in some fashion, or wants some cake. Now the only way to get some cake is to get a government in place with a monetary system that has a central bank. Once a national centralized bank is set up, the World Bank and IMF can give them a loan. The central bank is in most cases are privatized. So the nation uses this new loan to make improvements to the counrty, giving people cake. But since they may really not grasp the idea of money and economics on the whole, this opens things up to potential abuse, and in the end ... no cake.

For whatever reason this nation cannot pay off the loan or meet the terms of payment. The nation can default on the loan. What happens next? A total economic takeover of a nation because the nation was lent more money than it could pay back. Once you have the country economically, you have all the people and resources as well. So these investors at the World Bank and IMF are just as guilty or stupid as those finnanical institutions that lend more money to a couple buying a new house than what they can actually afford.

In the long run, the banks can stand to make even more money on a downturned housing market. Owning the property is just smart as having the money, a real physical asset.

People should pay for their foolishness. I learned my finnancial lessons the hard way. Now I am almost out of debt. But it will be some time before I can consider buying a house.

[bush_cheney2004]

...In the long run, the banks can stand to make even more money on a downturned housing market. Owning the property is just smart as having the money, a real physical asset.

In the short run, some banks won't survive to make even more money:

The federal government took control of Pasadena-based IndyMac Bank on Friday in what regulators called the second-largest bank failure in U.S. history.

http://www.latimes.com/business/la-fi-indy...0,6071779.story