Posted tagged ‘recession’

The Madness of a Lost Society

December 1, 2010

Video of the Day:

 

Bernanke’s Secret Plan To Raise Rates Too Late

November 4, 2009

Business Insider’s Henry Blodgett explains:

Explainer: Bernanke’s Secret Plan To Raise Rates Too Late (3 min):

Why is Ben Bernanke being so slow to start talking about raising rates, much less start raising them?  Because he has a secret plan that he can’t talk about.

What’s Ben’s secret plan?

Intentionally keep rates too low for too long, thus encouraging uncomfortably high inflation.

Why would Ben want that when he keeps talking about the importance of managing inflation?

Two reasons:

  • Faster economic growth, which leads to more jobs, fewer angry constituents, and a Congress that’s happier with Ben Bernanke
  • Faster erosion of the real value of our debts.  Consumers and the government are drowning under a massive debt load.  One way to make paying off this debt easier is to make the dollars it is denominated in worth less.  Bernanke will try to hasten this process as much as possible, taking it right to the point where our creditor China is mad as hell–but not quite to the point where China actually stops lending to us.

Click for video.

Constituents? Happier Congress? But I thought the whole argument against a full audit of the Fed is that it is supposed to be independent of politics. So which is it?

“Consumers and the government are drowning under a massive debt load. One way to make paying off this debt easier is to make the dollars it is denominated in worth less.”

That works for government and the biggest of the TBTF bankers (GS, JPM) because the dollars aren’t really devalued until they are released into the economy at large. By the time they reach the consumer, the prices of everything consumers might buy have already risen in response to the inflated money supply.

The Great Recession is Over!

October 29, 2009

celebrationThird quarter GDP is up 3.5%!

The media and the federal government today are reporting the Great Recession is over(maybe, sort of).

Never mind that the bulk of that growth came from Cash for Clunkers (which cost taxpayers $24,000 per vehicle). Never mind that the numbers of jobs “saved or created” by Obama’s stimulus was overstated by the White House. The recession is over!

More house buying credits for everyone! Even four-year olds! Go for it – the IRS doesn’t require you to prove you actually bought a house (shhhh).

And hey, while we’re at it – how about “free” health insurance for everybody! Read all about it here – only 1990 pages long!

So come on, people – let’s celebrate! The good times are rolling again!

Surprising Economic News

October 28, 2009

Consumer confidence falls to a 26-year low.

 New home sales fall in September.

 What’s that? You aren’t surprised? Yeah, me neither. But, apparently, these things were surprising to “economists” according to the linked articles.

 Further proof that Wall Street is completely disconnected from reality.

 Further proof that Keynesian economics is flat wrong (bet they weren’t surprised at the Mises Institute).

 Further proof that the sleeping giant is awakening – that the people are not believing what they hear about “green shoots”, “recession is over” and “jobless recovery” from politicians and pundits.

 The basic rules of economics are kind of like the laws of physics. No matter how much some “expert” might agrue otherwise, you cannot get rid of gravity by throwing things up in the air.

Bailout Tracker Update

September 7, 2009

pile-o-moneySo how much has the government’s intervention in the financial crisis costing us? According to CNN’s Bailout Tracker, the total amount committed to date is $11 Trillion, with $2.8 Trillion invested so far.

The list of recipients includes AIG, auto suppliers, automotive financing, Bear Stearns, Citigroup, Fannie Mae, Freddie Mac, Bank of America and numerous programs run by the Fed, Treasury and the federal government itself. The total cost to the FDIC alone is $35.5 Billion. See all the gory details here.

Updated Unemployment Rate

September 5, 2009

The latest report on the unemployment rate from the Bureau of Labor Statistics was released yesterday. If you’re into the “less bad” thing, then this report has some good news for you. Only 216,000 jobs were lost in August. The bad news all around, though, is that the official unemployment rate rose to 9.7 percent – the highest rate in 26 years.

Calculated Risk puts it in perspective saying, “The economy has lost almost 5.83 million jobs over the last year, and 6.93 million jobs during the 20 consecutive months of job losses.”

 But worse than that, the Associated Press reported last week that more than 1.3 million people will exhaust their unemployment benefits by the end of the year. The same report puts the number of unemployed at 14.5 million.

And all of the above is based on the official BLS numbers which we all know are only a fraction of the true unemployment numbers. In the real world, where most of us live, the actual rate of unemployment is now around 21 percent.

Visit ShadowStats.com

Courtesy of ShadowStats.com

Not surprisingly, then, government tax collection isn’t going so well.

withholding

And government spending? Like there’s no tomorrow…

spending

None of it bodes well for the immediate future.

“By the pricking of my thumbs, Something wicked this way comes.”
William Shakespeare, Macbeth Act 4, scene1

Delinquencies Hit Record High

August 20, 2009

AP reports record high mortgage delinquencies:

With the recession throwing thousands of people out of work daily, more than 13 percent of American homeowners with a mortgage have fallen behind on their payments or are in foreclosure.

The record-high numbers published Thursday by the Mortgage Bankers Association are being driven by borrowers with traditional fixed-rate mortgages, rather than the shady subprime loans with adjustable rates that kicked off the mortgage crisis. As of June, more than 4 percent of all borrowers were in foreclosure while about 9 percent had missed at least one payment.

And the layoffs keep coming. Lockheed Martin Corp. said this week it’s handing out about 800 pink slips in its space systems division, and audio conferencing company Polycom Inc. said it will cut about 80 positions.

New jobless claims rose last week to a seasonally adjusted 576,000, the Labor Department said Thursday. While the recession, measured by the nation’s total economic output, is likely over, most economists expect layoffs and foreclosure to keep rising for many months as companies remain in cost-cutting mode.

“Their confidence has been shattered,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight. “They are going to be very conservative. They don’t want to be blind sided by a false dawn economy.”

Continue reading…

But the visual at ZeroHedge makes it all so painfully clear:

delinquent

But recovery is just around the corner. Can’t you see the green shoots and glimmers?

Social Security crunch coming fast

August 18, 2009

From MSN Money (emphasis added):

house_ablaze

By Bill Fleckenstein

The debate over health care has captured everyone’s attention, but it appears the next big government program that needs to be addressed will be Social Security. That’s the focus of the July 30 article “The next great bailout: Social Security” by Allan Sloan, Fortune’s senior editor at large.

Those who’ve been paying attention have long known there is no money in the Social Security Trust Fund — it’s all been spent. Thus, former Vice President Al Gore’s famous assessment that Social Security receipts should be placed in a “lockbox” was actually correct.  

Given that so few people really understand the Ponzi nature of the current Social Security financing scheme — created in 1983 by a commission chaired by none other than the world’s greatest serial blower of bubbles, Alan Greenspan — I decided to reprise Sloan’s article. (The Social Security problem is especially important because it likely will put additional pressure on the dollar and on bonds, and exacerbate the funding crisis down the road.)

The story begins: “In Washington these days, the only topics of discussion seem to be how many trillions to throw at health care and the recession, and whom on Wall Street to pillory next. But watch out. Lurking just below the surface is a bailout candidate that may soon emerge like the great white shark in ‘Jaws‘: Social Security.

Perhaps as early as this year, Social Security, at $680 billion the nation’s biggest social program, will be transformed from an operation that’s helped finance the rest of the government for 25 years into a cash drain that will need money from the Treasury. In other words, a bailout.

Continue reading…

US Deficit Over $1 Trillion for the First Time Ever

July 13, 2009

debt_star1

AP WASHINGTON – Nine months into the fiscal year, the federal deficit has topped $1 trillion for the first time.

The imbalance is intensifying fears about higher interest rates and inflation, and already pressuring the value of the dollar. There’s also concern about trying to reverse the deficit — by reducing government spending or raising taxes — in the midst of a harsh recession.

The Treasury Department said Monday that the deficit in June totaled $94.3 billion, pushing the total since the budget year started in October to nearly $1.1 trillion.

The deficit has been propelled by the huge sum the government has spent to combat the recession and financial crisis, combined with a sharp decline in tax revenues. Paying for wars in Iraq and Afghanistan also is a major factor.

The country’s soaring deficits are making Chinese and other foreign buyers of U.S. debt nervous, which could make them reluctant lenders down the road. It could force the Treasury Department to pay higher interest rates to make U.S. debt attractive longer-term.

“These are mind boggling numbers,” said Sung Won Sohn, an economist at the Smith School of Business at California State University. “Our foreign investors from China and elsewhere are starting to have concerns about not only the value of the dollar but how safe their investments will be in the long run.”

Government spending is on the rise to address the worst financial crisis since the Great Depression and an unemployment rate that has climbed to 9.5 percent.

Congress already approved a $700 billion financial bailout and a $787 billion economic stimulus package to try and jump-start a recovery, and there is growing talk among some Obama administration officials that a second round of stimulus may be necessary.

This has many Republicans and deficit hawks worried that the U.S. could be setting itself up for more financial pain down the road if interest rates and inflation surge. They also are raising alarms about additional spending the administration is proposing, including its plan to reform health care.

President Barack Obama and other administration officials, including Treasury Secretary Timothy Geithner, have said the U.S. is committed to bringing down the deficits once the country has emerged from the current recession and financial crisis.

As if a deficit of more than $1 Trillion wasn’t bad enough, “Debt Day” (the point in the fiscal year when government spending exceeds revenue) was less than three months ago. Zero to -1 Trillion in less than three months.

How much deeper in debt can we go? A lot deeper if the federal government insists on going through with Cap & Trade, Universal Health Care, and maybe – just maybe – another round of stimulus.

Shhh – you can almost hear the Chinese from here…Spend, baby, spend!

Economic Report Card: Fail, Fail, Fail, Fail

June 5, 2009

Fail, Fail, Fail, Fail
by Llewellyn H. Rockwell, Jr.

How about a bit of reality? Not the ridiculous promises from Washington, the absurd talk of “green shoots” while unemployment soars and investment falls, the silly guarantees that GM has a bright future even as its stock price falls to less than the price of a Snickers bar, the nonsense about how if we spend more and inflate more, recovery will come tomorrow morning.

The war on recession is a flop. Fail, fail, fail.

The full-scale war on recession began in January 2008. Unemployment was climbing and house prices were falling, and George Bush, whose entire persona was the war mode since 2001, decided he wouldn’t tolerate declining economic conditions.

That’s when the Fed started pushing down interest rates to ridiculous lows and started gunning the money supply as much as possible. Bush put on his solemn/determined face and started talking to the American people about how he was going to destroy this recession monster in its crib.

Now, there are things politicians can do in the face of trends they don’t like. If kids aren’t learning to read, bureaucrats can cobble together carrots and sticks and gin up the scores a bit for a while. They can have their hirelings shoot consumers of illegal substances and bomb foreigners who don’t love America. They can pass out goodies to friends and take them away from enemies. From time to time, they can experience moderate success in these actions.

But the economy? Now, here is a force too big even for the biggest government in the history of the world, which is the U.S. government. That’s because economic trends are embedded in the structure of the material world and operate according to laws akin to gravity. They are social laws, if you will, features of the world that operate in all times and all places, and they are generated by the implacable fact of scarcity and the need for a system of production and allocation.

In other words, economic trends are finally beyond the control of the political class. This is the great lesson that economics has been teaching for some 700 years, generation after generation.

As Bastiat wrote, economic laws “act on the same principle whether we take the case of a numerous agglomeration of men or of only two individuals, or even of a single individual condemned by circumstances to live in a state of isolation.”

They are unavoidable features of the world, ones which the political class is forever attempting to override. The economy had been on a false foundation for some years, and the housing sector in particular had become wildly overbuilt and rested on bad debt. What can politicians do about this? Absolutely nothing. Economic foundations are built by private investment. Government has no resources of its own to build a foundation. It can only rob people of their property and thereby divert resources from where they belong to where they ought not to be.

When prices of houses started falling, we began to see only the most conspicuous sign of the rot underneath it all. But the political class blamed the symptom instead of the disease, and started trying to prop up prices, which is probably the stupidest thing these birds could ever attempt. It is utterly futile to attempt to change the direction of prices. It is about as successful as attempting to replace the water in one ocean with another or rearranging the order of the planets. It is beyond their capacity.

Bastiat said of the attempts of his time: “Modern reformers! when I see you desiring to replace this admirable natural order by an arrangement of your own invention, there are two things (although they are in reality one and the same) that confound me – namely, your want of faith in Providence, and your faith in yourselves – your ignorance, and your presumption.”

It’s not just that the attempt to undo economic law doesn’t work. It ends up mucking up the system even more, and prolonging the suffering. That is precisely what has happened. There can be no question that we would have been out of this recession by now had the politicians not intervened. But an election was coming and Bush tried to rig the system. Not only that, but after seven years of ridiculous marauding around like King of the Universe, he was flush with power and arrogance.

Bush attempted to reverse the economic river by waging a war on recession, about which I was writing back in March 2008: “All this nonsense about digging ourselves out of recession through government intervention began with the New Deal. But here is the amazing fact: not once has this strategy worked.”

By the fall and winter, it became clear that the War on Recession was not working and the economy was sinking further. Rather than give up, Bush pushed so hard that he managed to throw us all in the arms of a socialist who knows nothing about economics and has surrounded himself with big shots who affirm him in his ignorance – people like Paul Krugman, who are wedded to antique mythologies about the glories of government power.

And so we live through it again. We see the fools trying this and that with our lives and liberty, promising glorious results around the corner. Well, by now, we’ve been around the corner, the next one and the next one, and it gets worse with each turn. These people are driving us right into the abyss, and let’s be clear that this is not the fault of private investors or savers or foreigners or stock jobbers. It is the fault of the managers of this recession: the government, whoever is or has been in charge, and the Fed that operates on government authority.

They are strangling free enterprise just as surely as a mugger chokes his victim, and with it the capacity for the American worker and producer to do the hard work of restoring prosperity.

We are a generation that proudly shows off its accomplishments in all areas of science, and we preen about our love of facts and our detachment from mythology. Yet our culture is imbued with the most ridiculous faith in government to turn stones into bread, to accomplish miracles with a printing press before our very eyes. This is the age of folly.

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