25 Reasons We Will Not Have a Depression 86 comments
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One particularly vitriolic reader of my last article on The Distorted Shape of the Recovering Economy seemed to think I was predicting a doomsday scenario. I was not at all. Richard Duncan’s tentatively predicted Fall of Rome scenario is a true doomsday scenario, not mine.
My focus of late has been much more on the need for transparency and candor from our government on TARP I and II and the stimulus program results, as well as, more importantly, on getting the stimulus infrastructure program facilitated, expanded and working much better. The Administration needs to confess errors, fix them and get on with things.
Meanwhile, there are some signs of life in our economy and they should not be overlooked or ignored. I am not arguing we will have a robust recovery. I am arguing we will not have a depression and things will pick up, just more slowly than we would like and in the face of more risk, such as much higher oil prices, than we would like. Also, with more unemployment than we would prefer.
Consider these improvements:
-- The Baltic Dry Index is up
-- Multinationals and related companies are improving fast
-- The U.S. share of world GDP is staying about constant
-- With exceptions, the world economy is improving well
-- The rate of new jobless claims is dropping steadily
-- The housing market is tending to bottom
-- New housing starts are up in many areas
-- The U.S. private sector is slowly getting deleveraged
-- Oil prices could be a lot worse
-- Leading economic indicators (LEI)are on the rise
-- Soros and Buffett are buying, e.g., Wal-Mart (WMT)
-- U.S. exports are picking up
-- Big TARP banks are doing better
-- The velocity of money is improving
-- Inflation and deflation are under decent control
-- GDP growth, while small last quarter, was not negative
-- The dollar is not in freefall
-- Our debt-to-GDP ratio is not at all bad, contrary to popular belief
-- Most economists do not believe a depression is very likely
-- Price earnings ratios of large cap stocks are at a discount
-- We are economically better off than we were a year ago
-- Credit availabilty, while not good, is not frozen as it was
-- The retail sector is doing better, according to the NBER
-- Government will have paid-back TARP moneys to use soon
Without dwelling on or developing these points, but by simply listing them, I want to make clear that, in my view, we are not heading for a depression and we are not heading for a doomsday scenario. To be sure, we have buckets of trouble, but it is all in the framework of a slow, troubled recovery with excessive unemployment tenaciously hanging on.
With a good, cleaned-up and expanded infrastructure rebuilding program that is legally facilitated, made more labor intensive and well administered, we can attack the unemployment program directly and help improve our infrastructure for the future recovery at the same time.
We need to take heart, fix things and get busy.
Disclosures: none.
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This posting is a salutary antidote to the excessive pessimism often on display here. The challenges are daunting, but as you say, there is much to be done, and it's time to get on with it.
But that's the problem. The if. If the government gets its act together, things might get better. I hope they do, but confidence is somewhat shaken.
On the other hand, I suppose that sound politics would require the Administration to hold back so this long so that the majority of spending would hit in 2010. That would be prudent for a self serving leadership wanting to have an improving economy during the election season. After all, we can't start to early, keeping people from losing their jobs, if it might not help them get re-elected. We citizens need to get our priorities straight.
"Our debt-to-GDP ratio is not at all bad, contrary to popular belief"
For the moment, you are right. The last I heard from government is that the 2010 budget deficit is going to be $2 Trillion. Will that make any difference? And it appears that the 2011 deficit will likely exceed $1 Trillion. Will we still be okay then?
Look. I want the economy to recovery just as much as the next guy. And I have no idea if we are heading for another depression. I hope not. I can't imagine wanting a depression. But my opinion (and it is only an opinion) is that things look like they could either get worse or stay relatively bad for quite some time unless our leadership changes directions soon.
Trillions for Wall St.
Trillions for toxic asset purchases beyond TARP and direct bailouts, such as FRE and FNM.
Politically important failures generally bailed out such as GM and state and local governments, all of whom need extensive pruning. Actually, bankruptcy reorganization would bring about real reform.
Cap & Trade and Obamacare would burden a healthy economy, let alone ours now.
Upcoming CRE and alt-A massive defaults looming.
Public pensions are absurdly underfunded and overpromised.
Since there is nobody in charge addressing these and numerous other imbalances and abusive maladies in our economy and society, the game is extend and pretend via exploding debt and hope nothing on your list implodes or explodes.
I fail to take much solace in this picture even if it's somewhat dormant for now.
That says it all (to me). If ever a bunch of useless, (always 100% incorrect.. Ah-em.so called "professional") individuals ever existed it's the denizens of this profession. But, it's not all their fault, they.. "have".. to believe the data fed to them by the government. Anyone with half a brain, could figure out, that's blatantly untrue. For example look at the happy face they put on the unemployment numbers...duh!..It's above 10%!.....No kidding!....How about double that! How about the off-balance sheet numbers..It goes on ,and on..there's no credibility left. The Belt-way crowd (both sides) no longer represent the american people, they always sell out to the lobby- pimps who will give the biggest contribution.
But, you/they are right we're not "going" to have a depression...We are "now" in a inflationary depression mostly hidden by the gov.PPT (plunge protection team) who are manipulating the markets with their friends at goldman sac's...also known as Gov'mentSachs.
gato
It only takes one black swan event, such as
1)another domestic terror attack.
2)mutated H1N1 becomes virulent pandemic, killing tens of thousands; economy grinds to halt.
3)Ukraine defaults on its debt, setting off a chain reaction across EU, and the world.
4)Military coup in Pakistan backed by ISI, and Pakistani Taleban. Middle East descends into chaos. Oil spikes.
5)foreign agents trigger epic unwinding of USD short positions [see article:
www.marketwatch.com/st... ]
Printed money explains all of them my friend...
The definition of a depression will be different but it will be a depression for the middle class as their wages become a disproportionately small percentage of GDP over time & their buying power diminished...
Its a depression, but not defined in GDP terms.
usdebtclock.org
Which is fashionable; seeing as we are only now exiting a trough season for these resets, it has faded from their consciousness.
Dorm, don't need a black swan, all the pieces are not only already in place (in mortgages alone), but irreparable. It is a falling safe.
You mentioned the credit availability. However, you seem to have completely neglected to mention that small to medium businesses actually have much lower credit availability now. In fact it has been going consistently down hill. I would point out the CIT situation (bankruptcy) as a good indicator of this. Only the larger companies are getting good access to credit. This situation is likely to make itself more prominently known in the near future. Many have been talking about the severe problems in commercial real estate. We are likely to see this get much worse before it gets better. The US economy relies on small and medium businesses. Many of the jobs are there. If they cannot get money, they cannot recover. They cannot produce jobs. The economy cannot recover.
I could go on. There is some merit to your article, but overall it is much too much like syrupy rhetoric than a well researched article. I hope your readers will be doing their own research.
The above is English, no?
So thank your government for the money, but they must keep on printing otherwise everyone will fall off a cliff.
The remedy at the moment is playing for time, keeping up the spin and just hope that the inevitable will be postponed a bit longer.
Sorry Kimball, your moment of truth will come when the denial is over and you stare the debt problem right in the face.
No Job. No Money. No Health Insurance. No Honey. American Dream vanishes. Higher Taxes and Hidden Fees. More Foreclosures.
On Nov 20 11:53 PM Mayascribe wrote:
> Swash and Mark: Both good summaries. You know my position, that
> all that is being done by our government is only delaying the inevitable.
> For the most part, I like what the author writes. But maybe he should
> take a 5 minute gander at this site:
>
> www.usdebtclock.org
I do know that the consumer is not the answer to the recovery.
Does anyone but me notice that economists are ignoring the velocity of money? Flat BECAUSE THE BANKS ARE SITTING ON THE MONEY and each time the money does go around the "circle" more and more taxing authorities take a bigger piece through hidden fee's (LEARNED FROM THE AIRLINES?)
Optimism is nice but facts are real! Be afraid be very afraid!!!!!!