The Fed Does See Those Green Shoots 7 comments
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As a number of news outlets are currently pointing out, the minutes from the Federal Reserve's June meeting don't exactly portray a Federal Open Market Committee enthralled by the strength of the imminent recovery. We get this, for example:
Most participants saw the economy as still quite weak and vulnerable to further adverse shocks... Although financial market conditions had improved, credit was still quite tight in many sectors.
But there are some clear and positive signals in the report. Have a gander at this, for instance:
The staff projected that real GDP would decline at a substantially slower rate in the second quarter than it had in the first quarter and then increase in the second half of 2009, though less rapidly than potential output. The staff also revised up its projection for the increase in real GDP in 2010, to a pace above the growth rate of potential GDP. As a consequence, the staff projected that the unemployment rate would rise further in 2009 but would edge down in 2010. Meanwhile, the staff forecast for inflation was marked up...
Looking ahead to 2011 and 2012, the staff anticipated that financial markets and institutions would continue to recuperate, monetary policy would remain stimulative, fiscal stimulus would be fading, and inflation expectations would be relatively well anchored. Under such conditions, the staff projected that real GDP would expand at a rate well above that of its potential, that the unemployment rate would decline significantly, and that overall and core personal consumption expenditures inflation would stay low.
Forget rosy scenario, this is like very-best-case-scenario-imaginable territory. Is this realistic? It's difficult to say, but it's also very difficult to imagine the mechanisms that bring this about—or that between now and 2012 the economy can avoid any problematic shocks. For instance, if growth does indeed return this quickly and strongly, what happens to global oil prices?
But two things are clear. Officials facing a re-election campaign in 2010 are praying that the Fed is right to see falling unemployment in 2010. And it is nice to be seeing organizations revising their forecasts upward these days, rather than sharply downward, as was until recently the norm.
This article originally appeared on The Economist.com
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The IEA indicated in it's report recently that several new Saudi Arabia's would need to be found and developed over the next few years to maintain similar supplies at present, albeit at higher prices, but massive investment would be needed to pay for it.
Even more recently they have confirmed that the investment is not happening with current low oil prices, and shortages and a price spike are built in, although name 2014 as the likeliest starting date.
The article would appear to be well founded then.
What would cause a recovery, and if it did start, how could it be maintained since oil prices must inevitably rocket if it did.
1) Housing will deteriorate at a slower rate going forward, and banks will repossess over a two day period rather than expect you to move out on the same day, which gives you more time to find a suitable and large enough trash can for you and your family to live in.
2) Jobs will be lost more slowly and you won't be told you've lost yours until friday afternoon, so you'll have the whole weekend to get over it.
3) Consumer spending will decrease at a reduced rate until it hits zero, after which no further lessening will be experienced.
4) You will soon no longer need to spend your dollar bills on matches or a lighter, as you'll be able to light your cigarette directly with the dollar bill, as it's value will be equivalent to one match (lit of course).
5) Taxes will not rise to pay for universal healthcare: only those with cash or insurance will be permitted medical attention.
Gee ... we've got a great government. With them looking after me, why should I worry about some little ol' recession.
Each of the 5 Bear market bottoms this century were made at a GAAP PE under 10.
The stock market is the only thing seemingly better since March, so it's no wonder the Government is spending so much of our money to keep it propped up. It won't work.