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RE: Is the Economy Really Recovering? - 10/14/2009 11:09:46 AM
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John_O
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quote:
ORIGINAL: GroupW
Of course, noone is really expecting significant tax increases until after the economy looks like it actually is recovering.
Tax increases start in 2010 as the President Bush tax cuts expire. This is in addition to any other increases which will be required to pay for the socialist programs being put into place now.
(We soooooo need a balanced budget ammendment)
quote:
At that point, our overall tax rates remain at a level that is not particularly disadvantageous for economic growth. Recent data suggests that marginal tax rates need to approach 60% before we hit the "prohibitive range" on the Laffer curve. For the most part, we're talking about tax rates that aren't that different from those in effect during the Clinton administration. Those rates were not punitive nor likely to perpetuate a recession.
Any tax rate above 23% is punitive. And that 23% should be ONLY in federal sales tax. Any tax on income is counterproductive.
_____________________________
Psalms 46:10 Be still, and know that I am God: I will be exalted among the heathen, I will be exalted in the earth.
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RE: Is the Economy Really Recovering? - 10/14/2009 11:13:50 AM
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John_O
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quote:
ORIGINAL: davemiller7
The article hit many good points but it left out the increased tax burden that will soon be put on Americans by the current bunch in Washington. That will keep the economy from recovering.
The article also doesn't account for the hundreds of thousands (millions?) of people who have run out of unemployment benefits, have taken part-time jobs, or have begun their own small businesses.
The unemployment rate here in NC, which used to have one of the lowest rates in the nation, is now well over ten per cent. And that also does not take into account those I listed above. Tobacco farming has been decimated, most textile plants are closed, and many prestigious high tech corporations have left the RTP or have severely cut back their work forces.
US Housing Market Could Take Double-Dip Down In 2010
Housing drives a vast part of our economy. And housing is not getting any better. Unemployed people cannot pay their mortages. and do not buy houses (or appliances, furniture etc)
We are in a world of hurt, and it's going to get worse before it gets better
_____________________________
Psalms 46:10 Be still, and know that I am God: I will be exalted among the heathen, I will be exalted in the earth.
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RE: Is the Economy Really Recovering? - 10/14/2009 11:56:20 AM
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GroupW
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quote:
ORIGINAL: John_O
quote:
ORIGINAL: GroupW
Of course, noone is really expecting significant tax increases until after the economy looks like it actually is recovering.
Tax increases start in 2010 as the President Bush tax cuts expire. This is in addition to any other increases which will be required to pay for the socialist programs being put into place now.
(We soooooo need a balanced budget ammendment)
quote:
At that point, our overall tax rates remain at a level that is not particularly disadvantageous for economic growth. Recent data suggests that marginal tax rates need to approach 60% before we hit the "prohibitive range" on the Laffer curve. For the most part, we're talking about tax rates that aren't that different from those in effect during the Clinton administration. Those rates were not punitive nor likely to perpetuate a recession.
Any tax rate above 23% is punitive. And that 23% should be ONLY in federal sales tax. Any tax on income is counterproductive.
1) They aren't planning to let all the tax cuts expire immediately until the recovery is further established.
2) You may feel that 23% is punitive (that's a matter of opinion), but in terms of incentive to work or invest re: the Laffer curve, it doesn't seem to be that detrimental to growth (statistical observation).
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/14/2009 12:02:02 PM
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GroupW
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quote:
ORIGINAL: John_O
quote:
ORIGINAL: davemiller7
The article hit many good points but it left out the increased tax burden that will soon be put on Americans by the current bunch in Washington. That will keep the economy from recovering.
The article also doesn't account for the hundreds of thousands (millions?) of people who have run out of unemployment benefits, have taken part-time jobs, or have begun their own small businesses.
The unemployment rate here in NC, which used to have one of the lowest rates in the nation, is now well over ten per cent. And that also does not take into account those I listed above. Tobacco farming has been decimated, most textile plants are closed, and many prestigious high tech corporations have left the RTP or have severely cut back their work forces.
US Housing Market Could Take Double-Dip Down In 2010
Housing drives a vast part of our economy. And housing is not getting any better. Unemployed people cannot pay their mortages. and do not buy houses (or appliances, furniture etc)
We are in a world of hurt, and it's going to get worse before it gets better
Pretty much at every incipient recovery, there are folks who refuse to believe the data and forecast the double dip recession. The double dip is something that hasn't occurred very often. It occured in the Great Depression due to policy mistakes (we've learned a lot since then) and it occured in the late 70's/early 80s when it was intentionally induced to curtail inflation.
As I said before, housing is a lagging indicator (tells you where you've been but not where things are headed) but even now is actually establishing a more favorable trend. The opinion expressed in the article actually runs contrary to the data that are currently coming out.
Example: Consumer spending (excluding autos) rose 0.5% in today's report, stronger than the 0.2% level that was expected. Most of the data we see coming in are showing up stronger than expected. We seem to be having trouble believing that things are improving, which is fairly normal for an early stage recovery.
< Message edited by GroupW -- 10/14/2009 12:11:01 PM >
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/14/2009 12:16:01 PM
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John_O
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quote:
ORIGINAL: GroupW
quote:
ORIGINAL: John_O
US Housing Market Could Take Double-Dip Down In 2010
Housing drives a vast part of our economy. And housing is not getting any better. Unemployed people cannot pay their mortages. and do not buy houses (or appliances, furniture etc)
We are in a world of hurt, and it's going to get worse before it gets better
Pretty much at every incipient recovery, there are folks who refuse to believe the data and forecast the double dip recession. The double dip is something that hasn't occurred very often. It occured in the Great Depression due to policy mistakes (we've learned a lot since then) and it occured in the late 70's/early 80s when it was intentionally induced to curtail inflation.
And here we find our selves in circumstnaces similar to both. We are still making HUGE policy mistakes and likely will as those mistakes are the centerpiece of this administrations plan.
quote:
As I said before, housing is a lagging indicator (tells you where you've been but not where things are headed) but even now is actually establishing a more favorable trend. The opinion expressed in the article actually runs contrary to the data that are currently coming out.
The data are not looking at the full picture. Residential real estate will be weak for years. Especially with teh prime resets coming. Lots more foreclosures ahead (per NSADAQ). I hear rumblings that commercial real estate is also troubled and will be getting worse.
quote:
Example: Consumer spending (excluding autos) rose 0.5% in today's report, stronger than the 0.2% level that was expected. Most of the data we see coming in are showing up stronger than expected. We seem to be having trouble believing that things are improving, which is fairly normal for an early stage recovery.
Lots of people buying guns and stocking up while they still can.
Most retailers expect Christmas to be a very bad time. And Christmas is what keeps most of them afloat through the rest of the year.
With the economic weakness that we've been thrust into it's an awful time to be messing with yet another sector of the economy. Anything government does (expect cut taxes and get out of the way) will cause more harm than good.
_____________________________
Psalms 46:10 Be still, and know that I am God: I will be exalted among the heathen, I will be exalted in the earth.
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RE: Is the Economy Really Recovering? - 10/14/2009 12:35:55 PM
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GroupW
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The policy mistakes in question in the Great Depression were completely different. The government engaged in aggressively contractionary fiscal and monetary policy in the face of economic weakness. We know better than to try that again. Currently economic policy is expansionary and exactly correct, as long as the stimulus can be peeled back in a timely fashion. I don't think it's prudent to ignore expansionary monetary policy and pretend it has no impact. We know it works with a 6-18 month lag time, so right about now is when we should start seeing the impacts. The data coming out currently confirm that the historical timing seems to be about right. We can argue about whether or not the stimulus spending was the right thing to do, but in the scheme of things, it's just a nit.
There's no question that housing and commercial real estate will suffer for a long time to come, but AGAIN THOSE ARE LAGGING INDICATORS. They tell you where you have come from, but don't say a lick about where you're headed. Will they be a drag on the economy? Of course. Is it enough to keep the economy from growing? Not really.
I do commercial real estate debt/equity/structured finance for a living, so yes I'm aware that there are loads of problems headed our way in this sector. (In fact, we're betting on on it.) It's one of those things that everyone knows and is making plans for. Typically, commercial real estate runs on a 2-3 year lag versus the rest of the economy (again, the lagging indicator thing.)
Again, nearly all the economic indicators that are LEADING indicators are pointing to positive GDP growth in the most recently ended quarter or in this current quarter.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/14/2009 12:44:04 PM
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GroupW
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BTW - Christmas retail sales are actually expected to be flat this year.
In terms of the recession ending, that's a good thing. If it's not getting worse, then we've turned the corner. This early in a recovery, one wouldn't expect huge improvements. Flat to a modest gain will suffice.
Also keep in mind that actual results coming in are beating expectations fairly consistently, so assuming this to be true it's logical to expect a modest bit of growth in Christmas sales. A few of the Wall St houses are actually increasing their estimates for retail sales this year based on recent improvements.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/14/2009 12:44:27 PM
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John_O
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While lookinig for data on housing starts and mortgage applications as lagging or leading indicators I came across this article.
Leading Economic Indicator Isn't Indicating the Real Recovery
Discusses how the fed insertion of huge amounts of liquidity (printing fiat money) has skewed the indicators. Great article to read.
Bottom line? We are in a world of hurt and it's going to get worse before it gets better. Read the comments to teh article also. One point made is that we have been living beyond our means for so long and it is now time to pay the piper. Figure up to 10 years of recession until we can get the economy balanced again
_____________________________
Psalms 46:10 Be still, and know that I am God: I will be exalted among the heathen, I will be exalted in the earth.
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RE: Is the Economy Really Recovering? - 10/14/2009 1:13:00 PM
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GroupW
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Interesting article. The issues I see with it are two fold.
First, there can be long lag times between when the coincident indicators (CEI) and the leading indicators (LEI) actually show their inflection points. For example, the LEI actually peaked around March of '06 while the CEI didn't confirm the change until around November of '07. Given that we're only a maximum of 3 months or so into the current recovery, I'd be freakishly shocked if we were seeing the CEI turning right now. To some degree, the author is worried about not seeing something that he shouldn't be seeing for a while yet.
Second issue would be an underlying bias toward a rational expectations/strict monetarist economic point of view. Generally, a more nuanced approach that acknowledges that people are imperfect forecasters has better empirical support and frankly just works better. People of that school of thought will likely miss turning points at a bottom of a recession.
It seems that the author assumes that "this time it will be different" which is always a bit dangerous. He's assuming that the normal relationship between money, economic activity, and the leading indicator set won't hold. I don't think that's a safe bet. He doesn't adequately explain why the historical relationships should break down.
Interesting and challenging article though. Thanks.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/14/2009 5:02:12 PM
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John_O
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quote:
ORIGINAL: GroupW
It seems that the author assumes that "this time it will be different" which is always a bit dangerous. He's assuming that the normal relationship between money, economic activity, and the leading indicator set won't hold. I don't think that's a safe bet. He doesn't adequately explain why the historical relationships should break down.
This time will be different. In the previous times we didn't have a government actively trying to force socialism down our throats by destroying our economy. (Well, under roosevelt we had a little of that but no where near what we are facing now. Under carter we just had gross incompetance)
_____________________________
Psalms 46:10 Be still, and know that I am God: I will be exalted among the heathen, I will be exalted in the earth.
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RE: Is the Economy Really Recovering? - 10/14/2009 5:54:16 PM
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GroupW
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Everytime someone has said "this time it's different" it just hasn't turned out well. The odds are against it. Like it says in Ecclesiastes, "There is nothing new under the sun. What has been will be again. What has been will be done again."
Also note that several countries are reporting postive GDP growth. Generally, it looks like the global economy has already turned postive. Australia is even starting to raise its interest rates.
The US isn't an island - what happens globally eventually comes here.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/14/2009 7:18:44 PM
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GregandJenny
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quote:
Bottom line? We are in a world of hurt and it's going to get worse before it gets better. Read the comments to teh article also. One point made is that we have been living beyond our means for so long and it is now time to pay the piper. Figure up to 10 years of recession until we can get the economy balanced again
I think this is a good point. One of the reasons we are gonna be slow to recover is because people are still paying for things they no longer have. For instance as the credit card companies raise rates and cut limits, people are having to come up with that money and reduce or simply cancel spending on things they don't need. As people loose jobs or get reduction in hours or pay cuts that will have a direct impact on bankruptcies. people simply can't pay. Also with the housing market, that's a whole nother ball of wax imo. At the end of the day somebody's going to have to lose money on the homes and just suck it up. Some of these homes were never worth the money they were paid for with.
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RE: Is the Economy Really Recovering? - 10/14/2009 10:08:48 PM
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GregandJenny
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quote:
Yep the democrats will destroy the economy once again. Just like they've done before.
As conservative as I am John, I don't think this is really the issue. Until folks stop making it a side issue we may have to face this again .
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It does not have to be well with my circumstance to be well with my soul!
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RE: Is the Economy Really Recovering? - 10/14/2009 11:23:52 PM
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GroupW
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John-
All I can tell you is that the vast majority of our data that normally point out the direction of where the economy is headed are flashing a mild green at the moment. Home prices are stabilizing (the old OFHEO index is actually increasing), new delinquencies are showing signs of hitting a peak, retail sales are increasing, the inventory to sales ratio is hitting a point where businesses will have to start increasing production again just to meet existing sales levels.
Clearly, not everything is rosy. The velocity of money (the rate at which our monetary base - currency and bank reserves - gets converted into real spendable money) needs to improve, and there are certainly headwinds associated with a worrisomely high level of both private and public debt.
Still, 80% of business economists agree with me (latest Blue Chip survey results), and they are generally not an optimistic crowd. I think they've predicted 10 of the last 7 recessions. 
I also think you may have the impact a bit backwards as far as the impact of the global recovery here in the US. While debt will be a drag on the economy for a good number of years, one would expect that to be more of a long term phenomenon. In the shorter term, the impact of growth globally is likely to overpower the debt impacts.
You also need to keep in mind that there is good debt and bad debt. A fair portion of our recent debt growth is indeed "bad debt" - it's related to funding of deficit spending and entitlement programs that weren't funded when they were instituted. A very large bit however is "good debt" - debt we've issued to buy high quality mortgage bonds (1.25 trillion or so), stabilize the banking system ($750 billion), and buy commercial paper and other investments. That debt was used to inject liquidity into a failing monetary system and is backed by investments. We'll most likely turn a good sized profit on those dollars, and the debt automatically gets paid down as those investments mature or get sold. That's the least worrisome debt as it's the easiest to repay. The overall debt story, while not good at all, is not as bad as some folks want to believe.
I'm confident enough in my opinion on this issue to be willing to bet you a $5 starbucks card that we turn in positive GDP growth this quarter (Q4).
BT
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/14/2009 11:37:54 PM
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Peloton
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From where I live the recession is on. Bakersfield has one of the highest foreclosure rates in the country. We are still experiencing defaults like crazy, but now it is the expensive homes that the once well to do are walking away from, and living in the smaller home they purchased before the economy turned. The largest credit union is seeing a large volume of new car keys just being turned in. Layoffs are rampant in industries that once seemed protected. The commercial real estate sector is now experiencing huge vacancies even though our city is rated very highly for new start ups.
Where I work, we are getting ready now for 2010. Management is planning now for possible layoffs of well trained, highly skilled diesel engine technicians and certified, highly skilled power generation technicians. In 2010 the new diesel engines are being introduced with all the latest emissions equipment, but who can afford it?
The government seem to favor printing money to cover our debts and our lawmakers enjoy spending money our generations will be trying to pay off. When the anointed one completes the take over of Amerika, what difference will a recovery make anyway?
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RE: Is the Economy Really Recovering? - 10/15/2009 12:45:45 AM
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GroupW
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Unfortunately, you folks in that area have been hit about the hardest, with possibly only a few towns in Michigan or a few other places in CA. The bad news is that you folks will likely suffer longer and deeper than the rest of us. Wish I had better news for you.
You mention what is actually (and counterintuitively) one of the bright spots. Commercial real estate vacancies will likely not be as bad as in recessions past as new construction never really boomed as much as in prior cycles. The new supply has been kept in relatively decent balance. The real problem in CRE is plain old overleveraging. Plus retail is getting creamed pretty badly - we were overbuilt in the retail sector.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/15/2009 2:32:50 AM
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rockominal
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quote:
ORIGINAL: John_O
Tax increases start in 2010 as the President Bush tax cuts expire. This is in addition to any other increases which will be required to pay for the socialist programs being put into place now.
(We soooooo need a balanced budget ammendment)
I didn't mean to plagiarize a list of what you just said, but to me, it's like the calm before the storm. Liberals give this imported socialist a credit card, carte blanche, and it's like waiting to see what's gonna happen. In the meantime liberals "rest" on some sort of economic euphoria that doesn't even exist. Just part of that list being, new social programs, bailouts, farm subsidies, corporate-welfare for “fixing the infrastructure,” subsidies for healthcare, grants to create “green jobs,” foreign aid programs, education subsidies, and countless other forms of unconstitutional spending. The blogger I was referring to said defense spending might more or less be the same because of Afghanistan. I thought of that as well but in a different way. In other words, in my opinion, Soetoro and his lib followers have yet another escape clause in regards to defense spending. Like you said, with 2010 in mind, I don't think he is going to "put out" much in regards to what the generals need or want. At the end of the day, the escape clause will be, and is, "we should have gone into Afghanistan to begin with because we can't afford it now (parenthetically)." Ergo, again, it's Bush's fault.
Whatever is right or wrong with capitalism, on thing is for sure. How can you have an incentive for profit when this imported hack president says something like :
quote:
ORIGINAL: Barry Soetoro
"If we do not fix our health care system, America may go the way of GM..."
Can you imagine? Competitors from around the world as well as enemies of the United States of America must have been laughing at that. Go the way of GM? What's the flippin' point of companies doing any form of advertising whatsoever? It all is pointless endeavor. Just go crawl in a hole and die.
That's something your enemy and competition would say; not the President of the United States of America! I don't know if anyone besides me caught that coming out of his mouth including Hannity or Limbaugh. I absolutely couldn't believe it. I guess it's because there's so much vomit spewed out of the collective mouths of liberals that nobody notices.
As far as free trade practices and illegal immigration, the blogger guy said nothing will change much there, which makes sense. As far as the part about predatory trade practices by China, where is the surprise there? It reminds me of what a guy in the military told me when he was in indonesia or Phillipines, or some far east place somewhere's. "Money doesn't just talk. It jumps up off the table and flashes like a bright neon sign with a loud siren blaring behind it."
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I might tell you the truth, or something pretty close to it. Jesus says, "I Am the Truth."
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RE: Is the Economy Really Recovering? - 10/15/2009 7:50:17 AM
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John_O
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quote:
ORIGINAL: GregandJenny
quote:
Yep the democrats will destroy the economy once again. Just like they've done before.
As conservative as I am John, I don't think this is really the issue. Until folks stop making it a side issue we may have to face this again .
The USA as a country and as individuals is deeply in debt. Spending money we do not have as a country and as individuals has gotten us into this mess. Continuing to spend money we don't have will only deepen and prolong the agony until we get this debt paid off.
The democrats have (for the last 40 years or so) always been tax and spend. Taxes depress the economy and spending money we don't have increases the debt (which depresses the economy).
Socializing large segments of the economy only destroys those segments. Socialism does not work.
Until the democrats stop being liberal we will have to face this same issue again and again and again every time they gain enough power in the government to implement their policies.
It's kind of like the movie "Lake Placid" We can kill all the giant alligators we like but that crazy woman who lives on the lake keeps breeding and feeding more.
_____________________________
Psalms 46:10 Be still, and know that I am God: I will be exalted among the heathen, I will be exalted in the earth.
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RE: Is the Economy Really Recovering? - 10/15/2009 8:03:36 AM
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John_O
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quote:
ORIGINAL: GroupW
John-
All I can tell you is that the vast majority of our data that normally point out the direction of where the economy is headed are flashing a mild green at the moment. Home prices are stabilizing (the old OFHEO index is actually increasing), new delinquencies are showing signs of hitting a peak, retail sales are increasing, the inventory to sales ratio is hitting a point where businesses will have to start increasing production again just to meet existing sales levels.
This is true if sales figures remain stable. I don't expect them to. Far too many people still losing their jobs and others (such as myself and most folks I know) hunkering down and conserving capital until things get better. Unemployed people do not buy things. (unless they are really stupid, butthat's part of what got us into this mess. Spending money we don't have)
quote:
I also think you may have the impact a bit backwards as far as the impact of the global recovery here in the US. While debt will be a drag on the economy for a good number of years, one would expect that to be more of a long term phenomenon. In the shorter term, the impact of growth globally is likely to overpower the debt impacts.
Slightly possible if the export growth is phenomenal. I don't expect that to really happen for years however. The USA is the largest consumer market and we are not able to consume (Without furthur mortgaging our future).
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You also need to keep in mind that there is good debt and bad debt.
Strongly disagree. Debt is a four letter word that should not be mentioned in polite company. And should never occur at a government level.
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A very large bit however is "good debt" - debt we've issued to buy high quality mortgage bonds (1.25 trillion or so)
There are no high quality mortgage bonds. At least not until the real estate market recovers (Maybe after the fall in 2010 when the primes reset)
quote:
stabilize the banking system ($750 billion)
$750B flushed right down the toilet. The banks are for the most part in exactly the same circumstances they were before. These bad mortgage loans are still out there and someone will have to eat those losses eventually. TARP did nothing to remove the toxic assets
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and buy commercial paper and other investments.
The governmenet has no constitutional authority to buy debt from the private sector. A criminal debt is not a good debt.
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I'm confident enough in my opinion on this issue to be willing to bet you a $5 starbucks card that we turn in positive GDP growth this quarter (Q4).
I don't patronize fourbucks. Besides being remarkably overpriced and far, far, too liberal for me to deal with (be not unequally yoked) I don't drink coffee and their hot chocolate is pitiful (someone bought me one once)
We might turn a small positive GDP this quarter. But that means nothing. The real estate crisis has still not been adressed and it will come back and bite us again. I expect the second dip to be deeper than the first.
_____________________________
Psalms 46:10 Be still, and know that I am God: I will be exalted among the heathen, I will be exalted in the earth.
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RE: Is the Economy Really Recovering? - 10/15/2009 8:54:30 AM
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John_O
Posts: 7808
Joined: 9/5/2006
Status: offline
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quote:
ORIGINAL: GroupW
You mention what is actually (and counterintuitively) one of the bright spots. Commercial real estate vacancies will likely not be as bad as in recessions past as new construction never really boomed as much as in prior cycles. The new supply has been kept in relatively decent balance. The real problem in CRE is plain old overleveraging. Plus retail is getting creamed pretty badly - we were overbuilt in the retail sector.
The lack of "new" commercial real estate again means nothing. Companies cannot expand when they cannot sell their products and people have no money to buy and no room to borrow. When you are unemployed (or under-employed) you don't buy stuff. The retail sector is getting creamed because people have no money (we've already spent it all and are now paying for stuff we no longer have).
(That is, I expect the contraction to be more severe than normal. so even with the lack of "new" space we'll still see more vacancies as more places will fold or contract)
Everyone is overleveraged and it will take a long time for us to dig our way out.
_____________________________
Psalms 46:10 Be still, and know that I am God: I will be exalted among the heathen, I will be exalted in the earth.
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RE: Is the Economy Really Recovering? - 10/15/2009 9:48:49 AM
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letusreason
Posts: 1157
Joined: 8/30/2008
Status: offline
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quote:
ORIGINAL: GroupW
Interesting article. The issues I see with it are two fold.
First, there can be long lag times between when the coincident indicators (CEI) and the leading indicators (LEI) actually show their inflection points. For example, the LEI actually peaked around March of '06 while the CEI didn't confirm the change until around November of '07. Given that we're only a maximum of 3 months or so into the current recovery, I'd be freakishly shocked if we were seeing the CEI turning right now. To some degree, the author is worried about not seeing something that he shouldn't be seeing for a while yet.
Second issue would be an underlying bias toward a rational expectations/strict monetarist economic point of view. Generally, a more nuanced approach that acknowledges that people are imperfect forecasters has better empirical support and frankly just works better. People of that school of thought will likely miss turning points at a bottom of a recession.
It seems that the author assumes that "this time it will be different" which is always a bit dangerous. He's assuming that the normal relationship between money, economic activity, and the leading indicator set won't hold. I don't think that's a safe bet. He doesn't adequately explain why the historical relationships should break down.
Sure it does:
"So we will see the elements of the leading indicators advance, but the stimulus will never be seen in the Coincident Economic Indicator as it creates no jobs."
"America has never faced a recession with housing price declines. The LEI totally ignores wealth because it has never been an issue."
NO END IN SIGHT
And..
"The question is whether we are at the bottom of the housing price decline. There is a pig’s breakfast of opinions."
So it would seem that your oppinion is just another entre on the pigs breakfast menu, no?
quote:
ORIGINAL: GroupW
Everytime someone has said "this time it's different" it just hasn't turned out well. The odds are against it. Like it says in Ecclesiastes, "There is nothing new under the sun. What has been will be again. What has been will be done again."
To extrapolate a verse in Ecclesiastes into an economic foretelling is more dangerous than the analysis that this time is different imo.
After all. Do you think the people in the stock market crash of 1928 were quoting that verse as the market went down farther and farther, saying " oh well nothing is new this is just a market correction it will go back up , what has been will be again" ??
Unless you can (with your apparanet economic training and education) provide similar instances where this time is exactly the same as all the others, I don't put any credence in your analysis.
< Message edited by letusreason -- 10/15/2009 10:39:53 AM >
_____________________________
Proverbs 16:2
All the ways of a man are clean in his own sight, But the LORD weighs the motives.
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RE: Is the Economy Really Recovering? - 10/15/2009 10:18:03 AM
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GroupW
Posts: 2533
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
Status: online
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quote:
ORIGINAL: John_O
The lack of "new" commercial real estate again means nothing.
LOL - you remember I do this for a living, right? One of the bright spots actually is the fact that we haven't engaged in the massive overbuilding of commercial real estate leading that we normally do in most boom times. While commercial banks and life insurance companies will definitely have credit issues on commercial real estate to deal with, those issues should be somewhat manageable given the lower level of excess supply.
On a few other comments, I think you are letting your politics dictate your math instead of the other way around. We both agree that debt levels are a problem and will be for the decade to come, but they are not fatal. To paraphrase Mark Twain, reports of the demise of the US economy are greatly exaggerated.
quote:
Far too many people still losing their jobs and others (such as myself and most folks I know) hunkering down and conserving capital until things get better.
This is actually normal at the beginning of a recovery. It's not unusual for the jobless rate to keep increasing at the beginning of a recovery. Also note that new jobless claims have been trending downward for months now and now are trending downward at 100,000 fewer claims per month or so. The rate of layoffs is clearly abating. That has to have an effect sooner or later. Not sure how many times it's appropriate to point this out but employment levels are a lagging indicator. That means employment tells you something about what GDP was doing a few months back but doesn't tell you anything about where it's headed.
The other very normal thing going on right now is the excessive pessimism that I see in your post and others. It's pretty normal at this point in a recession.
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Slightly possible if the export growth is phenomenal. I don't expect that to really happen for years however.
Export growth doesn't actually need to be phenomenal, it just needs to be above trend. China is under tremendous pressure to bring it's consumption and export relationships into better balance. That's just one big potential source of exportation for us. Add in a tremendous decline in energy prices (50% off peak levels), and our net export position ought to be substantially better in 2010.
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Debt is a four letter word that should not be mentioned in polite company. And should never occur at a government level.
There truly is "good debt". For example, when I graduated from grad school, I had $40k in student debt that took me about 5 years to pay off. Since it was instrumental in getting me into this business, that was a good investment. Debt that finances sound investment isn't necessarily bad.
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There are no high quality mortgage bonds. At least not until the real estate market recovers (Maybe after the fall in 2010 when the primes reset)
You remember I do this for a living, right? There not only ARE high quality bonds, I've actually created some of them myself, have bought them, and currently are looking at some for purchase in a fund that we're planning. There probably aren't many subprime issues that are quality (can't think of any, at least), but there are literally trillions of non-subprime high quality RMBS/CMBS to pick from.
Also, large sections of the housing market are actually recovering as we speak. Not that there aren't headwinds, but the free fall in residential 1-4 family housing is largely done (unless you live in Las Vegas or certain parts of CA & FL)
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$750B flushed right down the toilet. The banks are for the most part in exactly the same circumstances they were before. These bad mortgage loans are still out there and someone will have to eat those losses eventually. TARP did nothing to remove the toxic assets
Banks are not "in the same circumstances they were before". Quite the opposite. Banks are rapidly returning to profitability if you look at some of the recent earnings releases. Banks are paying back the TARP funds sooner than anticipated, and by most accounts the treasury will actually make a profit on the program or at a minimum come close to breaking even. Not that there arent' challenges to the sector, but it appears that most banks will be able to cover loss exposures. You will still see a lot of banks failing, but the threat to our monetary system has passed.
Granted, a fair bit of the support for Fannie, Freddie, AIG and the car companies will be a loss but is expected to be significantly offset by profits elsewhere. Just on the MBS purchases, the government is financing themselves at between zero and 3% and investing in 5% MBS yields. That's good profit.
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The governmenet has no constitutional authority to buy debt from the private sector. A criminal debt is not a good debt.
That isn't particularly relevant to the discussion, but the argument has been attempted before and has not pursuaded many.
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We might turn a small positive GDP this quarter. But that means nothing. The real estate crisis has still not been adressed and it will come back and bite us again. I expect the second dip to be deeper than the first.
If you don't patronize starbucks, then you can pick the the food & beverage establishment of your choice. I'll wager you a $5 gift card at the establishment of your choice that you don't see negative growth in any quarter next year as well.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/15/2009 10:23:55 AM
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GroupW
Posts: 2533
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
Status: online
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quote:
ORIGINAL: letusreason
To extrapolate a verse in Ecclesiastes into an economic foretelling is more dangerous than the analysis that this time is different imo.
There are verses in the bible that I return to because they tell me something that works in a variety of ways and in nearly all situations. This would be one of those. It's there in the bible's wisdom literature because it tends to be true. A wise man would do well to consider it.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/15/2009 10:30:20 AM
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GroupW
Posts: 2533
Joined: 11/16/2007
From: Up in the hills of Colorado (very BIG hills...)
Status: online
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quote:
ORIGINAL: letusreason
So it would seem that your oppinion is just another entre on the pigs breakfast menu, no?
LOL - of course. Why do you think they call economics "the dismal science". Harry Truman got frustrated when all the economists he knew were telling him "one the one hand this should be true, but then on the other hand ....". He got mad and asked if anyone could find him a one-armed economist.
I happen to think that with nearly 10 years of studying this stuff that my opinion tends to carry a bit more substance and take comfort from the fact that 8 out of 10 business cycle economists agree with me.
_____________________________
“For every problem, there is a solution that is simple, elegant and wrong.” -H.L. Mencken
"Most people would rather die than think; in fact, they do so." -Bertrand Russell
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RE: Is the Economy Really Recovering? - 10/15/2009 10:41:09 AM
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letusreason
Posts: 1157
Joined: 8/30/2008
Status: offline
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quote:
ORIGINAL: GroupW
quote:
ORIGINAL: letusreason
To extrapolate a verse in Ecclesiastes into an economic foretelling is more dangerous than the analysis that this time is different imo.
There are verses in the bible that I return to because they tell me something that works in a variety of ways and in nearly all situations. This would be one of those. It's there in the bible's wisdom literature because it tends to be true. A wise man would do well to consider it.
But how do you take a verse in the bible (wrecklessly imo) that is meant in the broad sense and matter-of-factly apply it to a specific set of circumstances as if it will determine the outcome of the circumstances specifically?
quote:
ORIGINAL: GroupW
quote:
ORIGINAL: letusreason
So it would seem that your oppinion is just another entre on the pigs breakfast menu, no?
LOL - of course. Why do you think they call economics "the dismal science". Harry Truman got frustrated when all the economists he knew were telling him "one the one hand this should be true, but then on the other hand ....". He got mad and asked if anyone could find him a one-armed economist.
I happen to think that with nearly 10 years of studying this stuff that my opinion tends to carry a bit more substance and take comfort from the fact that 8 out of 10 business cycle economists agree with me.
fair enough and magnanimous of you to admit but you still did not accept the challenge of backing your oppinion up with a set of hard line predictors from the past indicating that this scenario is exactly like the past recoveries.
You claim that evidence stating it is different as wreckless and yet you provide no evidence of your own indicating how similar it is to others or how it is EXACTLY the same.
_____________________________
Proverbs 16:2
All the ways of a man are clean in his own sight, But the LORD weighs the motives.
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