Morici: Depression or Recession

Peter Morici, an oft-quoted economist at the University of Maryland, says the November jobs reports represents "wholesale capitulation" in the economy and says the threat of a widespread depression is "now real and present." Some lowlights:

The economy has shed 1.9 million jobs since December, as the full weight of the banking crisis, trade deficit with China and burdens imposed by high-priced imported oil are bearing down on manufacturing, construction and the broader economy with unrelenting pressure.

Unemployment increased to 6.7 percent in November; however, factoring in discouraged workers, unemployment is closer to 8.7percent. Add workers in part time positions that cannot find full time employment and the hidden unemployment rate is nearly 13 percent.

For the record, the highest jobless rate in the post-war era was 10.8 percent in the '82 recession. So how to fix it? Morici says a giant infrastructure stimulus package is key to reviving growth right now, but that's just the tip of the iceberg. Fixing the broken banking system, cutting our foreign energy bill and aggressive moves on righting the trade imbalance with China (remember that?) including a tax on dollar-yuan transactions will all be required to keep us out of a long period of economic stagnation or, at worst, a depression.

Of those, we're working on the first, the Obama Administration has its eye on the second (though falling oil prices could put energy plans on the backburner), but are we past the point of fixing the third? I wonder if we're really willing to stir up trade conflicts with China in what would essentially be an attempt to bring factory jobs back to America? If so, the consequences for trade would be negative, and the long-term fallout could be faster inflation when an economic recovery kicks in thanks to higher prices for Chinese goods. Those possibilities are worth worrying about later, but when we're dropping more than half a million jobs in a month the argument for doing something to stop the bleeding becomes undeniably more appealing.

Comments

[sickofthehype:]

Love it. I agree, THE END OF THE WORLD WILL HAPPEN BY NEXT WEEK, UNLESS!!!!! Unless the next 'bail out' is approved of course. Oh, and then we'll throw in millions in B.S. prior to the approval, just for grins - and a few kickbacks.

No accountability. Pathetic. That goes for our government, AND our mainstream media.


On Dec 05 02:20 PM Tony Petroski wrote:

> Journalists of the world: Please start using a new word to describe
> what might happen that is worse than "Depression" as your ability
> to rouse a jaded public is rapidly waning. How about: "Immolation?"...
> as in: "A super-big infrastructure program and a political realignment
> is necessary by Monday to stave off Immolation."

2008 Dec 06 12:16 AM

[sickofthehype:]

That's a good sign that people are over it.
The market shrugged it off and ended with a nice gain.

Bad day for OJ though.


On Dec 05 08:10 PM investor88 wrote:

> The fundamental picture is not good with increasing unemployment.
> Yet the stock market rallied quite fiercely today, maybe one of those
> bear rallies to Jan 2009 to Dow 10k who knows?
>
> Longer term Dow 6-7k still possible maybe sometime next year.

2008 Dec 06 12:20 AM

[TimR:]

Yes, it was a very bad unemployment number, but there have been other very bad numbers. Was the deep recession of 1974-75 a depression? Maybe it was.

As bas as things are, it seems that this hyperbole and hysteria is just making things worse. What will happen when the GDP number for the fourth quarter is released in January? And the unemployment rate for December? There won't be any words left - just endless screaming, shrieking and caterwauling.

This is a painful period for most of us, but if we give up hope as so many of these articles suggest, then there cannot be any way out.

2008 Dec 06 12:44 AM

[You're Kidding:]

smarty_pants said:

If you really want to help the US economy to recover you should be campaigning to remove those gub'mint costs [child labor, environment, minimum wages and medical insurance ] so US businesses can compete effectively and begin to rebuild our manufacturing base
----------------------...

Hey smarty_pants, do you care about anything but money? Do you have any feelings at all for human beings not as well off as you?

I'd like to see you and your kids work at slave wages with no medical insurance, in a toxic environment for year, you heartlesss sscumbag. I think maybe even you might learn something from that experience. On second thought, you're probably as stupid as you sound, so you probably wouldn't learn a thing.

Never mind.

2008 Dec 06 07:20 AM

[John Lounsbury:]

The article states "falling oil prices could put energy plans on the backburner".

Unfortunately, this may be true. Our society is living hand to mouth, borrowing everything possible for instant gratification and complaining about everyone's greed and selfishness but our own. Of course we won't think about $4.00 gasoline when the price is $1.75 or less, even though the $4.00 was only 3-4 months ago. Eat, drink and be merry for tomorrow we may die.

It was only a couple of years ago that there was little public support evident for raising mileage standards for American cars. Last summer, with high gas prices, many were blaming the government for lack of high mileage cars. Will public support for gas misers remain in the coming months if gasoline reamins under $2?

When I was growing up (I was born in 1936) my parents not only talked to me about saving for a rainy day, but were obviously doing that themselves. I tried to pass that value on to my children (born late 60's and early 70's). I learned from them that their school friends (whose parents were mostly 10 or more years younger than me) didn't have the same perspective on the use of money. I don't think that the subsequent generations have gotten that philosophy either. We now have a populace that largely borrows to play in the sun and then has nothing for a rainy day except debt. But of course, they wail that the rainy day wouldn't have come if others had not been greedy.

By the way, the philosophy rubbed off on my three children. They are all low debt, high net worth people.

Back to the bottom line: energy. This is not just important to our economy - it IS our future economy. If we do not develop and implement low cost, renewable energy, which is produced free of the competitive pricing pressures of today, we will become a second tier economy. Instead of maintaining our standard of living while Chindia and others raise theirs, we will lose wealth and others will pass us.

We just came through a little shower of an energy price spike. The energy cloud has passed by, but major storms are forming over the horizon. Now is the time to build the storm shelter. Waiting to start when the next (and proably much bigger storm) is upon us does not make sense.

2008 Dec 06 11:06 AM

[harry a:]

Good comments! Did No one else ever read the ant & grasshopper or the three little pigs fables to their kids? Or maybe we should read them to congress? Economics 101 for everyone First: Don't spend more than you make/have. second: Save for the future emergencies.

On Dec 06 07:20 AM You're Kidding wrote:

> smarty_pants said:
>
> If you really want to help the US economy to recover you should be
> campaigning to remove those gub'mint costs [child labor, environment,
> minimum wages and medical insurance ] so US businesses can compete
> effectively and begin to rebuild our manufacturing base
> ----------------------...
>
> Hey smarty_pants, do you care about anything but money? Do you have
> any feelings at all for human beings not as well off as you?
>
> I'd like to see you and your kids work at slave wages with no medical
> insurance, in a toxic environment for year, you heartlesss sscumbag.
> I think maybe even you might learn something from that experience.
> On second thought, you're probably as stupid as you sound, so you
> probably wouldn't learn a thing.
>
> Never mind.
>
>

2008 Dec 06 01:30 PM

[jrheintz:]

jloundsbury59, no wonder you sound so logical and full of common sense, you are 8 years older than I.

Unfortunatly few on this planet remotly think along these lines, there thinking is "better get it before its all gone".

Their realislation of that rainy day does not appear, if at all, just before
thought of retiremnet shows up, then it way to late.

Our major problem is to-days students 40% beleive its ok to cheat, steal or any other dishonest method of getting ahead.
This is apparent in our finacial problem we are facing to-day.
Just ask Barney Frank.

Anyway you hit the ball right on the mark.



On Dec 06 11:06 AM jlounsbury59 wrote:

> The article states "falling oil prices could put energy plans on
> the backburner".
>
> Unfortunately, this may be true. Our society is living hand to mouth,
> borrowing everything possible for instant gratification and complaining
> about everyone's greed and selfishness but our own. Of course we
> won't think about $4.00 gasoline when the price is $1.75 or less,
> even though the $4.00 was only 3-4 months ago. Eat, drink and be
> merry for tomorrow we may die.
>
> It was only a couple of years ago that there was little public support
> evident for raising mileage standards for American cars. Last summer,
> with high gas prices, many were blaming the government for lack of
> high mileage cars. Will public support for gas misers remain in the
> coming months if gasoline reamins under $2?
>
> When I was growing up (I was born in 1936) my parents not only talked
> to me about saving for a rainy day, but were obviously doing that
> themselves. I tried to pass that value on to my children (born late
> 60's and early 70's). I learned from them that their school friends
> (whose parents were mostly 10 or more years younger than me) didn't
> have the same perspective on the use of money. I don't think that
> the subsequent generations have gotten that philosophy either. We
> now have a populace that largely borrows to play in the sun and then
> has nothing for a rainy day except debt. But of course, they wail
> that the rainy day wouldn't have come if others had not been greedy.
>
>
> By the way, the philosophy rubbed off on my three children. They
> are all low debt, high net worth people.
>
> Back to the bottom line: energy. This is not just important to our
> economy - it IS our future economy. If we do not develop and implement
> low cost, renewable energy, which is produced free of the competitive
> pricing pressures of today, we will become a second tier economy.
> Instead of maintaining our standard of living while Chindia and others
> raise theirs, we will lose wealth and others will pass us.
>
> We just came through a little shower of an energy price spike. The
> energy cloud has passed by, but major storms are forming over the
> horizon. Now is the time to build the storm shelter. Waiting to start
> when the next (and proably much bigger storm) is upon us does not
> make sense.

2008 Dec 06 01:43 PM

[surgcare:]

To "You're Kidding " . Typical bleeding heart hypocritical left wing idiot . I 'm sure when you or your wife goes shopping you pay the highest price just because its made in america . I'm sure you never shop at walmart because they have the cheapest merchandise and I'm sure that you don't put your money or actions where your mouth is at by visiting some of these poor countries and actually doing something real to help truly poor people - no ,not your type , you expect someone else do it .

2008 Dec 06 01:53 PM

[Pauly B:]

With the amount of military China has amassed I would be more worried about internal political instability in that country than trade conflicts.

2008 Dec 06 02:13 PM

[Leser:]

The best comments, the ones to consider, are those which express ideas and avoid epithets. Name calling like "typical bleeding heart hypocritical left wing idiot" reduce a comment which otherwise might have some solid points, like yours, surgcare, to the category of blind ill-thought-out opposition. Successful argumentation is built by expressing opposing ideas, but respecting the right of the other individual to think.
Insulting others is probably the greatest weakness of these blogs in Seeking Aplha. Everyone has ideas of value, but by exercising scorn in our responses one to another we diminish the other person and ironically the value of our very argument to them is thereby ignored. One isn't going to consider the validity of another's opinion, if at the time of expressing an opposing argument the opposition is being insulted. We as problem solvers have to build each other up rather than belittle each other for having divergent views.



On Dec 06 01:53 PM surgcare wrote:

> To "You're Kidding " . Typical bleeding heart hypocritical left wing
> idiot . I 'm sure when you or your wife goes shopping you pay the
> highest price just because its made in america . I'm sure you never
> shop at walmart because they have the cheapest merchandise and I'm
> sure that you don't put your money or actions where your mouth is
> at by visiting some of these poor countries and actually doing something
> real to help truly poor people - no ,not your type , you expect someone
> else do it .

2008 Dec 06 02:43 PM

[Vienna:]

I live in Europe/Vienna. We have been having long debates on the pro and cons of government controlled health, pension systems and tax rates of 50%.

It was always mentioned that the US was absolutely against this and constant threats where posed if government interfered.

After many years many US industries are disappearing as Nr. 1 key players. Since I have been to the states a few times with automotive industry I know of the deep hearted reject of anything that has to do with socialism.

Well, here we have this system and I am grateful for it. The future will show how the US will continue to cope with globalization.

Here in Europe this system is working good for us, and we hope it will help us through the recession better than a free live and let die system.

Please - this is my personal remark, no need for anyone to call me something, as many people like to do if some other opinion does not equal theirs.

2008 Dec 06 02:51 PM

[woodsey:]

Right, Tony; "immolation" IS the correct word. If it hasn't happened yet the US Congress will see that it does.

2008 Dec 06 03:02 PM

[PainfullyAware:]

Hey "Your Kidding",

You obviously do not understand the role of government as laid out in the original mindset of the United States.

Government Is Force. It is a monopoly on the "Because I Say So,".

When you put Mandates at the Federal level you eliminate the possibility of change. The government does nothing well. Why do you think that all of our programs, that were initiated by the will of good intent, have failed so miserably in their intended purpose? If your answer is that "They have just not been managed efficiently." - then you are truly mentally minuscule. This view of government does not allow for the human failings nor for the inertia of bureaucracy; both of which can not be excised from the system. When you consolidate power you limit choice and degrade incentive for excellence.

You are making a hasty judgment about smarty_pants. This individual cares deeply for others or he would not spend the time he does in an attempt to educate the masses on reality. His delivery is a bit sharp at times, wreaking of disgust for a system that has been bastardized from its original intent, but none the less containing well thought out dialog.

Mandating Morality Never Works.

I agree with your premise of "Caring for others well being as the root of all good humanity." However, Good By Evil Means Is Still Evil.

In my opinion - No Social Well Being Programs Should Be Run By The Government. There is no incentive for the government to do a good job and thus the quality takes a dive.

I am not opposed to tax money being used, but Oversight and Retribution should be the only function of government in this arena. It must also be illegal for the institutions to pay lobbists. There must be no less than three entities doing the same function that receive funding and all must be a voluntary choice as to who an individual wants to use. (Voting With Dollars- the company that attracts the most members gets the most money)

Our system is currently in a state of disrepair, by all metrics, and government stands in the way of change. More laws and government restricts options and creative problem solving.

I believe that people are generally good and will solve their own problems by consensus. However when things are moved to the Federal level consensus becomes the whim of the few and not the many.

When you consolidate power you allow evil a place to covet and seek. Any law or regulation that is not viewed from the point of "What could the devil do with this." will inadvertently yield unintended consequences that may not be so easily reversed. Power given is not so easily taken back.

To Assume Benevolence Is Foolish.




On Dec 06 07:20 AM You're Kidding wrote:

> smarty_pants said:
>
> If you really want to help the US economy to recover you should be
> campaigning to remove those gub'mint costs [child labor, environment,
> minimum wages and medical insurance ] so US businesses can compete
> effectively and begin to rebuild our manufacturing base
> ----------------------...
>
> Hey smarty_pants, do you care about anything but money? Do you have
> any feelings at all for human beings not as well off as you?
>
> I'd like to see you and your kids work at slave wages with no medical
> insurance, in a toxic environment for year, you heartlesss sscumbag.
> I think maybe even you might learn something from that experience.
> On second thought, you're probably as stupid as you sound, so you
> probably wouldn't learn a thing.
>
> Never mind.
>
>

2008 Dec 06 04:24 PM

[goldstriker:]

Anytime that government takes over anything, it goes downhill, and it cost alot more for the thrill ride down.

We need to place tariffs on Chinese goods to compensate for the wage difference. How can we, in America, compete with 52 cents an hour wages? Our country in inundated with junk, dangerous toys, pharmasuticals, etc. Why does German and English projucts cost more, or about the same as American goods? It's because we place tariffs on their goods.

On another note, why are bailing out some private companies and not others. Why are we bailing out any of them. If we loan the billions that the UAW and auto mnfgs. want, will they not lay anyone off. or still go back to the assembly line producing millions of more cars and trucks that no one is buying? If all of the auto manufacturing companies in the world have had plummiting sales of over 35%, why in the world should we pay, with taxpayers money, to build more vehicles and to finance $70/hr jobs?

To dig our way out of this socialist direction, we will have to have a VAT (value added tax) like England and the rest of Europe. I am afraid that this is the end of a tried and true system that has produced us with the incredible lifestyle that we have enjoyed. But don't worry, our grandchildren and great grandchildren will inherit our new and prosperous sytem of debt. I hope that they will enjoy their new cardboard home as much as my dog does.

2008 Dec 06 05:07 PM

[Sailorman:]

You are right on on #3. There is no reason all people cannot enjoy a good standard of living and art the same time we save the world. We have to overcome religious zealots and greed first.


On Dec 05 04:07 PM CJJ wrote:

> Here it is again. A comment that says our standard of living should
> deteriorate because it is higher than other places in the world and
> we need to pay for the freewheeling past. HA. Can you believe we're
> in 2008 and everyone believes this garbage.
> Does anyone just realize that the US/Europe rose to prominence and
> a standard of living that makes everything expensive compared to
> other countries. Now China/India are growing their middle classes
> and doesn't their economy sound a lot like WWII and post WWII of
> the United States and Europe...Weird...
> The issues in the US/Europe are because of the higher standard of
> living. Of course goods from China, India, etc. are cheaper, because
> their labor is cheaper.
>
> Sooo the possible outcomes:
> 1.Isolationism - Silly, proven to fail throughout history.
> 2.Leveling - US/Europe standard of living goes down while China/India
> rises coming closer to equilibrium over the next 10-20-30 years.
> Unfortunately most people seem resigned that this is the medicine
> we need to all just lay back and take.
> 3.Global Rising - The world realizes that real growth will come from
> coordinated efforts where the standard of living for all people(not
> just US/Europe, China/India, but Africa/3rd World, etc). Forget these
> made up monetary systems now in place. Find an answer to clean energy,
> repair old infrastructure and build new where needed, advance healthcare,
> clean water, more food, and guess what...consumerism, ITS GREAT.
> At some point people have what they need to get buy and want to jazz
> up their life with some stuff.

2008 Dec 06 05:15 PM

[sylviechen:]

In the industrialized nations, the problem we face here is also visible.
To the point of lost manufacturing jobs, we should examine the Germans.
The produce high quality goods and technology, especially in solar.
Their employment is stable though historical unemployment is higher.
However, the government provides extensive support to those out of work.
Included is aggressive retraining to move workers into other industries.
While Germany still has to fix the East German labor problem, there's progress.

Why can't we make a high mileage, turbo diesel car like BMW?
Oh, forgot, the EPA won't allow that model as an import to the US.
Pathetic...

2008 Dec 06 08:26 PM

[young snowbird:]

We need to keep in mind that China holds billions, if not a Trillion dollars in US Debt instruments. They are on the top of the heap of the many foreign countries who act as big Bank investors of the US Treasury. We will not be able to put many restrictions on their goods without endangering our already precarious economy. We have over the years backed down on "getting tough on Human Rights abuses" in part, I'm sure, because we owe them so much money. They play by different rules than we do, or did. We'll have to play nice for many future years so they won't take their ball back (call our loans) and go home.

2008 Dec 07 02:17 AM

[Vienna:]

To the statement about governments not performing well:

US : Steel industry bust, Banks Bust, Automotive bust, publich transport ??

Should we not raise the question if they are really doing as well as they are always telling us.

To my opinion we have to choose between government that might not be so productive and qualitative, and the privates that obviously tend to end up bust due to greed.

I prefer less quality with less productivity - but not bust. The services the government provides here are quite good, and they have learned to work as something you call NPO in the states. Well if you have all of these NPO, why do you look at something that the government does as NPO as something so terrifying.

A few things in this direction which really makes us Europeans wonder and it even makes us smile a little:

. Politicians being paid by private corporations, and this funny fund raising, where the amount of money being donated is constantly presented as a guideline to success. In Europe we as tax payers and voters pay a certain amount to the parties. No private donations allowed.
. The constant presence of the same people and clans in Washington. The follower of Miss Bush is Miss Kennedy ???????????
. The rate of lobbying which is that obvious that we could cry (GM an public transport in LA, Bush and Oil, Weapons and Bush Senior's Carlyle)
. The ability to Vote Bush even a second time
. The system voting works - well it is inherited from 1820 or so, and we heard that after Bush victory even computers where installed
. The inability of private companies to introduce modern and effective systems. People keep on telling me about US productivity and technical advance and so, but driving through the states has given me a different picture. I could hold a long speech on how production lines at GM and Mercedes work.

Maybe there is always a good optimum between two extremes.

2008 Dec 07 03:19 AM

[AndyInGA:]

For those who favor free global trade, answer one question. How long can our economy sustain $800B a year trade deficit? Free trade is fine as long as other markets are as open as ours. Most of our trading partners who run large trade deficitis with us manage their own markets instead of keeping them open and free. The countries managing their markets and currencies are China, Korea, and Japan. The oil trade is controlled by cartel instead of free trade. We also need to fundamentally shift from consumption-based economy to production based. We are consuming at an alarming rate only on borrowed money.

2008 Dec 10 03:21 PM

[mwswi:]

I read a series of columns by Gabor Steingart on the German news source, Der Spiegel earlier in 2008. That lead me to purchase his book, "The War on Wealth." I agree that it is a worthwhile read and page 85 is spot-on with what is occurring at this moment in America. His series of graphic charts (PowerPoint-like) at the end of Chapter 5 was also thought provoking for me. In my opinion Gabor Steingart and Mohamed El-Erian (PIMCO CEO and Co-CIO) share many similar global viewpoints.


On Dec 05 02:55 PM mattupp wrote:

> Well, to curb our thirst for Chinese goods, we'd have to stop buying
> things a) from Wal Mart, Target, Kmart (are they STILL in business?),
> b) anything made of plastic, c) any toys with electronics or d) all
> of the above adn more.
>
> And it's not just China, although they are the biggest problem to
> our economy. Read a quick book called "War on Wealth" by Gabor Steingart
> to see how India & China are quickly accelerating their growth
> through an uneven playing field (uneven against the West).
>
> Simply put, if Wal Mart, et al, demanded more than the lowest price
> from their vendors and included workers rights in China/Far East,
> true environmental protection, basic health care coverage for the
> workers in both China/Far East AND the US, raised prices (YES, RAISED
> prices) to reflect the true cost of the goods being sold, then US
> made products would have a chance to compete for shelf space - since
> much of the price disparity can be attributed to the US laws on child
> labor, environment, minimum wages and medical insurance, which should
> be included in a product's price.
>
> I recall the news reports of local protest when Wal Mart wanted to
> open a store in small towns, feeling that it would drive out small
> independent "mom & pop" stores, but the bigger threat wasn't
> to the local retail sector, but to the larger national manufacturing
> sector. Wal Mart and other big box retailers always demands the
> lowest price possible and reaps the benefits, claiming that their
> customer demands the lowest price, but the true cost of the products
> are being borne by those shoppers through lost manufacturing jobs
> in their community and across the nation.

Feb 15 12:35 PM