steve graves

Economic Collapse Is Accelerating

All I have to say Jeff, is thank God for free speech. Keep balancing the mainstream media hype with logic; sooner or later the world's going to stop tapping its little red slippers together and catch up. Cheers -

This Recession Isn't Over: Now for the Hard Part

Great piece, fully concur. Considering that U.S. & E.U. consumer spending combined generates 27.5% of the global GDP, how can any meaningful global recovery possibly occur without them leading the way?

Savings rates in the U.S. are approaching the historical norm, where they will very likely remain (otherwise they wouldn't refer to it as a historical norm); consumer spending, as measured by PCE, has literally fallen off a cliff (again, by historical standards); consumer credit has finally begun to decrease after steadily rising for a generation, but this 'adjustment' has only proceeded to mid-2008 levels (which would imply it has a ways to go); unemployment in both the U.S. and the E.U. will almost certainly continue to rise for at least another year, after which 'jobless recoveries' seem very real possibilities. How then can a global recovery occur when the consumers who drive the global economy are no longer able or willing to fully participate? When consumers in the U.S. can no longer use their rising home equity as ATM machines (a little sleight of hand that made our GDP seem half-way respectable for half a dozen years, post 9/11)? Where will consumers borrow the virtual money they need in order to fuel our much anticipated economic recovery? And if not them, who? Short of handing out a billion VISA cards in China and India it's difficult to imagine the green shoots actually growing.

The Coming Economic Collapse, Part 1

Well said. The housing bubble unleashed the last gasps of a dying beast, basically. When you think that U.S. GDP would have been less than one percent since the 2000-2001 recession without such absurd and unprecedented levels of mortgage equity withdrawals, that personal consumption expenditures are plunging at rates not witnessed since the 1930s (the chart at the St. Louis Fed's website is scary as hell: research.stlouisfed.or...), that unemployment soared 4% in a single year (again, not since the 30s...), that commercial real estate's collapasing at warp speed and that our smoke and mirrors financial sector, such a large portion of our GDP, is in the process of imploding... well you begin to realize just how totally screwed we really are. This fall's stock market collapse will make last fall's look like a pinprick... 1929-2009 R.I.P.

The Coming Economic Nightmare: Part 1

Thanks Graham, for providing your usual voice of reason amidst all the BulliSh rhetoric. The disconnect between the Washington-Wall Street Complex and the unfiltered economic reality is truly amazing to behold. One wonders how long the shell game can be kept up before the wizard finally bares his arse...

Suburban Housing Markets Are Unsustainable (Part 2)

BRAVO! Easily the best piece I've ever read on Seeking Alpha, Jim; it's to Seeking Alpha what "Network" was to motion pictures! Being an avid reader of John Mauldin's weekly newsletter - it's free, everyone should read it - I'm always astounded that more of those self-proclaimed prognosticators out there (Jim Cramer, are you listening???) don't acknowledge the GDP/MEW charts (2000-2006) that he reprints occasionally. If you throw in the era of irrational equities exuberance of the 1990s, it becomes painfully evident that the U.S. hasn't had more than a blip of 2-3% GDP growth in well over a decade and a half. So where does that leave the Obama Administration's fantastical projections that we're going to enjoy 2-3% GDP growth by next year?! I don't know Jim, this country's so deep into denial that it's almost impossible to imagine our current trajectory not ending in disaster. And what really frightens me, as you point out, is that we're going to end up being a very angry nation with a very, very large army. What happens when a nation that spends more on its military than every other nation on Earth combined stubbornly denies reality for so freaking long that it's too late to salvage itself? Who's the evil empire going to be then, Mr. Bush? Spoken as Sarah Palin, who believes so fervently in the end times, anxiously awaits in the wings...

There's No Lying in Government Statistics: The Labor Market Is Still Down

That's too bad, Jeff. You missed an insightful analysis based upon some fairly intriguing facts, and judging from your usual intelligent commentary I'm guessing you don't generally miss one of those. Had you kept reading you would have quickly grasped Frankel's point that a closer, more thoughtful analysis of statistics helps to summon their real value. He blends statistics with common sense when he points out that during a recession, especially the longest recession since the 1930s, companies will first increase the hours of their existing workforce rather than hire any additional workers. Of course it seems obvious, but when Frankel points out that increases in aggregate weekly hours have coincided with the last two recoveries - granted, you had to read past the title if you hoped to get that far! - you start to realize just how illuminating this particular statistic might actually be. Not exactly a green shoot, but more interesting than most of that self-exuberant blather in this poster's humble opinion...

Big Banks in Trouble: Huge Mortgage Write-Downs Seem Inevitable

No, apparently you should take the reading comprehension class that you're referring to because I was directly referencing the following quote (from you):

"The housing market will bottom when people stop losing their jobs which should be coming in the not too distant future."

You're saying that people will stop losing their jobs in the not too distant future - or is my comprehension off? Is there some dark subtle twist between the lines that I'm missing? Does 'the not-too-distant future' not mean that it will happen soon? Actually I think I understood perfectly well, and as I've said your statement is incorrect based upon the following logic:

1.) Job losses continue for about a year even after a recession is officially over.
2.) This one ain't over, officially or otherwise.
3.) And it's is worse than anything we've seen in a long time because it is deeply rooted in our financial system, which means that its ill effects (based upon history, statistics, etc.) will be deeper and longer lasting than your normal, run of the mill recession.

In other words jobs losses will continue for the foreseeable future. There, does that about clear it up?


On Jun 23 05:11 PM Milkweed wrote:

> I see we have another candidate for reading comprehension class.
> Steve G. I did not say the recession was over. It might be, then
> again it may take a little longer but it will end. It's already been
> one of the historically longest so that would rule it out as average
> in duration and it's one of the most severe so that would rule out
> average magnitude. What does this have to do with the fact that it
> will end?

Housing Conversation Needs a Dose of Reality

Excellent post and comment - but definitely way too sane for the mainstream media! As an Obama supporter I have been sorely disappointed by his Geithnerian approach to resolving this massive mess. During the election Obama spoke often about the need for a reality check; now all he seems to be able to do is tap his little red slippers together and pray for a return to the good ole days. As if encouraging consumers to borrow and spend yet again is the solution to a crisis caused by too much borrowing and spending in the first place. Doesn't exactly inspire confidence.


On Mar 22 10:15 AM The Mad Hedge Fund Trader wrote:

> Certainly this has become a political whipping boy. I am more convinced
> than ever that real estate has another 25% to fall, and best case,
> it is dead money for another five to ten years. The New York Times
> produced some insightful data on inflation adjusted home prices for
> the last 120 years, which baselines at a $100,000 for a single family
> home in 1890. Few people realize how superheated the recent real
> estate bubble really got. Past bubbles very consistently peaked at
> $125,000 in 1896, 1979, and 1989. This last one peaked at $205,000
> in 2005, almost double the previous record highs. And while we have
> dropped 34% since then, to $135,000, we haven’t even fallen to the
> past all time highs yet. If you look at historical lows, my call
> for a further 25% slump looks positively bullish. We saw lows consistently
> around $66,000 in 1920, 1932, and 1942. Postwar lows came in at $105,000
> in 1976, 1983, and 1996. These figures suggest the best case low
> is down a further 28%, and the worst case is down another 51%. I
> think I’ll go find something else to trade.

San Francisco Fed's Dreary Outlook

Nice contribution, Adam. I personally can't believe that more of the focus is not on consumer spending because that, perhaps more than any other factor, is what makes this "recession" unique. The last time consumer spending plunged (not counting the war, rationing, etc.) they called it a depression, which puts us in a bit of a catch-22. With consumer spending generating 70 percent of our GDP it's obviously the only real path to recovery, but with unemployment rising at truly historic rates (4+% year-over-year) the only way for consumers to spend more is to borrow their way more deeply into debt. The cure has become the disease...

We're in a Pattern of Increasingly Longer Employment Recoveries

Tack,

Subsidizing unemployment, right or wrong, is the only thing preventing outright revolution. Concluding that unemployment compensation is the cause of rising unemployment - i.e., ignoring all other factors that are obviously at work in this dynamic - is like proclaiming that law enforcement is what causes crime. Might sound witty booming off the floor of the senate but it's still bad logic.

U.S. Economy - The Government Has Made Things Worse

I think you're right, the government in hyper-Keynesian mode bailing out Wall Street and everyone else (except of course the actual taxpayers who perhaps need it most) is not the wisest path to take.

Your tacit suggestion that there is somehow a far easier way out of this crisis, however, seems a bit suspect. After all, this crisis is decades in the making - debt of all denominations steadily rising, a pair of bubbles artificially inflating what would otherwise have been a stagnating GDP, the cancerous growth of finance over manufacturing, etc. - which would seem to imply that the solution to this crisis, no matter which path we choose (Keynesian, supply-side, etc.), cannot possibly be swift or easy.

While I find two trillion dollar deficits sickening, I'm not convinced that in the long run (say twenty years) their impact is going to be that much different from a more hands-off approach that would let the chips fall where they may. Liberal economists argue that the second approach would result in even larger decreases in tax revenues, ultimately creating deficits every bit as high as the Keynesian approach. As in, we're damned if we do, damned if we don't. And while I disagree with them I have yet to read an analysis that necessarily disproves them.

I guess my point is, I'd like to see the evidence that supports your conclusion that "the depth of this recession would have been significantly less if the government hadn't done its damage too." You hang that statement out there as if it proves itself simply because you believe it. I'm personally inclined to believe you're correct, but it might be more interesting if you actually offered facts to support your hypothesis rather than mere ideological posturing.

Unemployment Data: Are We Really Seeing an Improvement?

Thanks for keeping it sane, Kid. When I saw the headline describing how the number of continuing claims had "plunged" I almost choked on my oatmeal. I couldn't believe they had the audacity to even print that, but of course the audacity of hope pales in comparison to the audacity of delusion. The green shoots propaganda machine seems to be operating according to the rules of creation science; start with a belief, then selectively interpret the "facts" in order to make it seem true. Ah, if only wishing made it so...

The Worst Case Scenario (Someone Has to Say It)

First, the bad news: It's relatively safe to say that you will not be enjoying that high-priced consulting gig (the one you were going to get because your predictions were so incredibly on the mark).

The good news, however, is that you probably have a heckuva screenwriting career out here in Hollywood if you should decide to go for it. Attend a few seminars, read some of those forumlaic screenplay structure books, pump out a few drafts and you never know. Nobody loves doom and gloom better than Hollywood, and no one seems to eat it up better than U.S. audiences (could be wish fulfillment, perhaps).

All that nonsense being said, it is nice to see someone actually pointing out the fact that a simple return to the good old ways (i.e., borrowing endlessly to consume needlessly) is not very likely (even if it were somehow desirable). If I read another article about how we're going to return to 3% GDP growth by mid-2010, I think I'll choke; the U.S. hasn't had actual 3% GDP growth (subtract MEWs, financial tomfoolery, dot com bubbles, etc.) in nearly two decades - and now we think they're somehow right around the corner?! That kind of kind exaggeration makes yours seem downright unimaginative. So keep it up, Jake. It was fun to read; turn it into a movie and you've got something.

We're Living Through the Best of Times

John,

You two should write a book - sort of a Socratic dialogue. Maybe you could even throw in a wacky Keynesian (Krugman?) for balance (not to mention comic relief).

Bottom line is the future is very likely somewhere in the gray areas between your two insightful visions. The U.S. has obviously been living on borrowed time (i.e., steadily rising debt) since the 70s and we are in the midst of the inevitable reckoning. Will everything crash down around us and go up in flames? Probably not; on the other hand, our Phoenix act - if indeed there is one - will be arduous and excruciatingly drawn out. When half your economy is derived from military spending, health care and finance your best days may very well be behind you. Time, as always, will tell.

At any rate, thanks for all of your great contributions over the years, John. It's folks like you who make free speech actually mean something.

SG

Too Early for the Fed to Stop Purchasing U.S. Treasuries?

How can you claim that the Fed's purchase of Treasuries "seems not to have any positive impact on the yield curve"? Just because bond yields have risen doesn't imply that their efforts have had no effect; who's to say that yields wouldn't be considerably higher if the Fed hadn't increased demand by purchasing $260 billion worth over the last several months? On the contrary, isn't it logical to suspect that these purchases have indeed propped up prices up and held yields lower than they otherwise would have been? Isn't that simply how the law of supply and demand works?