by ilene - February 14th, 2011 11:46 am
Excellent article comparing current situation with lead up to the Great Depression. Well worth reading. – Ilene
Courtesy of Jim Quinn at The Burning Platform
by ilene - December 5th, 2010 6:48 pm
PIMCO’s Bill Gross’ monthly letter for December is out and it speaks to a lot of themes FMMF has been touching on for years – a very nice read for those of you not familiar with his work. I also embedded a video of an appearance of his yesterday on CNBC.
Full letter below – hit fullscreen to make it easy to read
Some key points:
- The global
economyis suffering from a lack of aggregate demand. With insufficient demand, nations compete furiously for their share of the diminishing growth pie.
- In the U.S. and Euroland, many policies only temporarily bolster consumption while failing to address the fundamental problem of developed economies: Job growth is moving inexorably to developing economies because they are more competitive.
- Unless developed economies learn to compete the old-fashioned way – by making more goods and making them better – the smart money will continue to move offshore to Asia, Brazil and their developing economy counterparts, both in asset and in currency space.
Two ways the U.S. can address this – the hard (but long term healthy) way or the easy (but long term unhealthy) way. You can guess which way we will ultimately go….
The right way:
- The constructive way is to stop making paper and start making things. Replace subprimes, and yes, Treasury bonds with American cars, steel, iPads, airplanes, corn – whatever the world wants that
Is America In Decline? 24 Statistics About The United States Economy That Are Almost Too Embarrassing To Admit
by ilene - October 13th, 2010 8:18 pm
Is America In Decline? 24 Statistics About The United States Economy That Are Almost Too Embarrassing To Admit
Does anyone really want to hear that America is in decline? For decades, most of us have been raised to believe that the United States is "number one" and that anyone who doubts that fact is a "gloom and doomer" that should just pack up and move to "Russia" or "Iraq" or some other country where things are not nearly as good. But does it do us or future generations any good to ignore the very serious signs of trouble that are erupting all around us?
The truth is that it is about time to wake up and admit how much trouble we are actually in. The U.S. government is absolutely drowning in debt. The entire society is absolutely drowning in debt. We are being slaughtered in the arena of world trade, and every single month tens of billions of dollars (along with large numbers of factories and jobs) leave our shores for good. Our infrastructure is failing, our kids are less educated and our incomes are going down. We have serious, serious problems. At one time, the U.S. economy was so dominant that it was not even worth talking about who was in second place. That is no longer the case in 2010. Our forefathers handed us the greatest economic machine in history and we have allowed it to fall apart right in front of our eyes. A national economic crisis of historic proportions is getting worse with each passing month, and yet most of our leaders seem to be asleep at the switch.
So is American in decline? Well, read the statistics below and decide for yourself. The reality is that when you start connecting the dots it gets really hard to deny what is going on.
by ilene - October 7th, 2010 4:38 am
Courtesy of Charles Hugh Smith, Of Two Minds
The keys to launching a renaissance in manufacturing and industry in the U.S. are not just financial.
Given the widespread angst over the dwindling role of manufacture and industry in the U.S. economy, you’d think commentators and pundits might actually know something about manufacturing. Remarkably, they don’t.
I see precious little evidence that anyone on either side of the issue--those bemoaning the loss of industry, and those who brush aside the whithering as a positive consequence of globalization, wage arbitrage and free capital flows--has ever worked in a factory or even toured factories in various countries to see for themselves.
The standard-issue pundit/academic may well have glanced through the viewing window at some high-tech factory with robots and workers in clean jumpsuits, and this one slice of manufacturing colored their scanty experience: this must represent all factories nowadays.
Only it isn’t so.
Others (again, with no direct experience with manufacturing) are quick to point out the huge wage differential between Chinese workers (who have received substantial raises in previous years) and U.S. workers and pronounce the eventual death of all U.S.-based manufacturing just on the basis of wage arbitrage.
It isn’t that simple. And what exactly is that wage differential? Few note that the dorms and food services provided to workers at large-scale factories in China are subsidized and thus constitute an additional "wage."
Today we look at issues which rarely if ever see the light of day in the mainstream media.
I happened to see two video clips filmed inside Japanese and German factories on TV recently, on the Japanese English-language channel NHK and on the German English-language channel DW.
As we all know, Japan and Germany are the world’s powerhouse exporters of advanced machine tools and other high-technology equipment and goods.
In the Japanese plastics factory in Nagano Prefecture, neatly uniformed workers were shown cleaning plastic parts by hand.
In the German packaging factory, neatly uniformed workers were shown guiding cardboard boxes onto a conveyor by hand.
To the observer who knows something about either nation, both personally and as a mercantilist culture/economy, there is a wealth of information in these two short videos.
1. A staggering amount of "manufacturing" in advanced mercantilist economies still involves human labor.
2. Factory work is respected and not denigrated culturally.
by ilene - September 10th, 2010 1:30 am
It’s a STRUCTURAL problem not a CYCLICAL problem!
It’s a DEMAND problem not a SUPPLY problem!
I gave President Barrack Obama six months to roll-out his doomed Keynesian policies, twelve months to discover they were flawed and eighteen months to realize that the solution to America’s problems must lie within a different economic framework. I had hoped by the end of twenty-four months to see new policies closer to an Austrian economic philosophy emerge. I was wrong.
Though, even the Wall Street Journal recently featured an article on the re-emergence of the Austrian School of Economic philosophy, it would appear that President Obama’s administration still neither gets it, nor I am afraid ever will. Key defections by his leading economic advisors, talk of the need for QE II and a Stimulus II, and a political collapse in public confidence suggests a growing awareness that Keynesian policies are not working, as many predicted they wouldn’t. Obama’s exciting rhetoric of Hope and Change has left myself and the majority of recent polled Americans disillusioned and disappointed. What I see the administration failing to grasp is twofold:
I-America has a Structural problem, not a cyclical business cycle problem. Though the cyclical business cycle was greatly worsened by the financial crisis, I would argue that the structural problem facing the US is actually a contributor to what caused the financial crisis.
by ilene - September 8th, 2010 9:54 pm
Here are the key takeaways from the Fed’s Beige Book:
- Reports from the twelve Federal
ReserveDistricts suggested continued growth in national economic activity during the reporting period of mid-July through the end of August, but with widespread signs of a deceleration compared with preceding periods.
spendingappeared to increase on balance despite continued consumer caution that limited nonessential purchases, while activity in the travel and tourism sector picked up relative to seasonal norms.
- Reports on manufacturing activity pointed to further expansion, although the pace of growth eased according to several Districts.
- Home sales slowed further following an initial drop after the expiration of the homebuyer tax credit at the end of June, prompting a slowdown in construction activity as well.
- Demand for commercial real estate remained quite weak but showed signs of stabilization in some areas.
- Reports from financial institutions pointed to generally stable or slightly lower loan demand and noted some modest improvements in credit quality.
- Upward price pressures remained quite limited for most categories of final goods and services, despite higher prices for selected commodities such as grains and some industrial materials. Wage pressures also were limited, although a few Districts noted increased upward pressures in a narrow set of sectors experiencing a mismatch between job requirements and applicant skills.
In sum, slow growth, increased downside risk, low inflation. Read the full report here.
by ilene - September 6th, 2010 8:22 pm
Courtesy of Michael Panzner of Financial Armageddon
Reports like those that follow help make it clear that the problems we face are structural rather than cyclical. Myriad bad policies and a distorted sense of economic reality — no doubt fed by ruthlessly self-interested corporate and political interests — encouraged large numbers of Americans to acquire knowledge, skills, and perspectives that are really only relevant in an easy-money-fueled economy.
Once the bubble bursts, however, they are as unprepared for changing times as a proverbial fish out of water. And yet, we still have a growing chorus of mindless Keynesians, ivory tower economists, Wall Street strategists, and assorted other pseudo-experts pushing for more stimulus, more borrowing, more tax cuts — more of the hair of the dog that bit us to begin with.
If government is going to do anything at all — which seems inevitable, like it or not — wouldn’t it be better if the those in charge focused on telling people the cold, hard truth about where things stand; directed efforts towards helping Americans adjust to a new operating environment, instead of the one that is not coming back; and, rejigged policy incentives — like those that favor borrowing and homeownership — in ways that might prove more beneficial in the long run?
Oh well, we can only dream.
"U.S. Jobless Rate Hints at Permanent Shift" (The Globe and Mail)
As the United States continues its battle with high unemployment, policy makers are confronting a troubling question: What if they’ve been taking the wrong approach to fixing the ailing job market?
Some prominent economists and policy makers are…suggesting the real problem isn’t lack of consumer spending – it’s that the unemployed don’t have the right skills to fill the jobs that are open.
These people are now theorizing that the financial crisis has altered the structure of the U.S. labour market, perhaps permanently.
If they’re right, the Obama administration and the Federal Reserve will need to change their approach to increasing employment because their current one, which is aimed at stoking spending, could end up exacerbating the conditions that led to the financial crisis.
Raghuram Rajan, a professor at the University of Chicago’s Booth School of Business, argues the U.S.’s high unemployment rate is the result of structural changes rather than a cyclical downturn in demand. He reasons the U.S. housing bubble
by ilene - September 3rd, 2010 1:55 am
Courtesy of Michael Snyder at Economic Collapse
When you mention the word "globalism" to most people, they think of something that is going to happen someday in the future. But the truth is that globalism is already here. At this point we essentially already have a one world economy. Goods and services flow across national borders more freely today than at any other point in human history. A major economic event on one side of the world instantly affects financial markets on the other side of the world. Labor has become a truly global commodity. You can go to the exact same fast food restaurant or buy the exact same iPod on six different continents. A whole host of international trade agreements are making national borders economically irrelevant.
Today our "big box" stores and shopping malls are jammed full with products that have been made overseas and it is becoming increasingly difficult to find American-made products. The reality is that it has now become undeniable that globalism has arrived and we are now part of a world economy that is integrating at lightning speed. Unfortunately, all of this globalism has created some very clear winners and losers. But most middle class Americans are in such a deep sleep that they don’t even realize that they are the losers.
The sad truth is that as work has become a global commodity, middle class American workers have been placed in direct competition with the cheapest labor in the world. For years the U.S. economy was so strong that nobody really noticed that it was bleeding thousands of jobs every single month. But now that 14 million Americans are unemployed and the U.S. economy is literally hemorrhaging jobs people are starting to sit up and take notice.
Let’s take a look at one recent example. Ford Motor Company has just announced the closure of a facility that produces the Ford Ranger in St. Paul, Minnesota. Approximately 750 good paying jobs are going to be lost.
But isn’t Ford doing better these days?
Don’t people still need Ford Rangers?
Of course they do.
58 out of 58 Economists Overoptimistic on Philly Fed Manufacturing Estimate; Median Forecast +7 Actual Result -7.7, a “Veritable Disaster”
by ilene - August 19th, 2010 3:19 pm
58 out of 58 Economists Overoptimistic on Philly Fed Manufacturing Estimate; Median Forecast +7 Actual Result -7.7, a "Veritable Disaster"
Courtesy of Mish
They may call economics the "dismal science" but it would be hard pressed to find a more optimistic lot than economists, anywhere in private industry.
Fresh on the heels of a perfect 42 of 42 overoptimistic predictions on weekly claims (Please see Weekly Unemployment Claims Hit 500,000, Exceed Every Economist’s Estimate; No Lasting Improvement for 9 Months), a perfect 58 out of 58 Economists were overoptimistic regarding the Philly Fed Manufacturing survey.
Bloomberg reports Factories in Philadelphia Area Unexpectedly Shrink
Manufacturing in the Philadelphia region unexpectedly shrank in August for the first time in a year as orders and sales slumped, a sign factories are being hurt by the U.S. economic slowdown.
The Federal Reserve Bank of Philadelphia’s general economic index fell to minus 7.7 this month, the lowest reading since July 2009, from 5.1 in July. Readings less than zero signal contraction in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
Economists forecast the measure would rise to 7, according to the median of 58 projections in a Bloomberg News survey. Estimates ranged from minus 6 to 10.
The Philadelphia Fed’s survey was in sync with a report this week from the Fed Bank of New York. The bank’s so-called Empire State Index increased less than forecast, as orders and sales cooled.
Forecast for "More Modesty"!
“We expect the recovery that we’ve seen in our business to continue, but in a more moderate pace than we’ve experienced in the first half,” Chief Financial Officer Nicholas Fanandakis said on a conference call with analysts.
Fed policy makers last week voted to keep the benchmark interest rate at a record low and made their first attempt to shore up a recovery they said was likely to be “more modest” than earlier anticipated.
Philly Fed Business Outlook Survey
With that undoubtedly overoptimistic "modest recovery" out of the way, please consider actual results from the Philly Fed Business Outlook Survey.
Results from the Business Outlook Survey suggest that regional manufacturing activity weakened in August, after two months of slowing activity. Indexes for general activity, new orders, and shipments all registered negative readings this month.
Firms also reported declines in employment and work hours. The survey’s broad indicators
by ilene - August 18th, 2010 7:58 pm
Courtesy of PAUL CRAIG ROBERTS, writing at CounterPunch
On August 17, Bloomberg reported a US government release that industrial production rose twice as much as forecast, climbing 1 percent. Bloomberg interpreted this to mean that “increased business investment is propelling the gains in manufacturing, which accounts for 11 percent of the world’s largest economy.”
The stock market rose.
Let’s look at this through the lens of statistician John Williams of shadowstats.com.
Williams reports that “the primary driver of a 1.0% monthly gain in seasonally-adjusted July industrial production” was “warped seasonal factors” caused by “the irregular patterns in U.S. auto production in the last two years.” Industrial production “shrank by 1.0% before seasonal adjustments.”
If the government and Bloomberg had announced that industrial production fell by 1.0% in July, would the stock market have risen 104 points on August 17?
Notice that Bloomberg reports that manufacturing accounts for 11 percent of the US economy. I remember when manufacturing accounted for 18% of the US economy. The decline of 39% is due to jobs offshoring.
Think about that. Wall Street and shareholders and executives of transnational corporations have made billions by moving 39% of US manufacturing offshore to boost the GDP and employment of foreign countries, such as China, while impoverishing their former American work force. Congress and the economics profession have cheered this on as “the New Economy.”
Bought-and-paid-for-economists told us that “the new economy” would make us all rich, and so did the financial press. We were well rid, they claimed, of the “old” industries and manufactures, the departure of which destroyed the tax base of so many American cities and states and the livelihood of millions of Americans.
The bought-and-paid-for-economists got all the media forums for a decade. While they lied, the US economy died.
Now, back to statistical deception. On August 17 the census Bureau reported a small gain in July 2010 residential construction housing starts. More hope orchestrated. In fact, the “gain,” as John Williams reports, was due to a large downward revision” in June’s reporting. The reported July “gain” would “have been a contraction” without the downward revision in June’s “gain.”
So, the overestimate of June housing not only made June look good, but also the downward correction of the June number makes July look good, because starts rose above the corrected June number. The same manipulation is likely to…