economic guru
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From Boise, Idaho, once unthinkable.
http://finance.yahoo.com/news/The-Crisis-Climbs-Over-the-bizwk-4197413221.html?x=0
From Chicago. Regional banks like Huntington, Fifth 3rd, US Bank are heavily exposed to commercial loans.
http://globaleconomicanalysis.blogspot.com/2010/08/commercial-real-estate-foreclosures-to.html
pedex
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first of all before you rely on GDP you better realize how its calculated and how that calculation has changed, same with unemployment and inflation..........all of which are significantly massaged and cooked these days compared to the last depression
today's GDP contains about $2.3 trillion worth of hedonic adjustments which means anytime you use debt to GDP ratio when compared to other nations you have to keep that in mind
unemployment for some reason the advertised and number that gets talked about is U-3 yet unemployment can increase while U-3 drops !! unemployment during the last depression was anyone under the age of 16 that was unemployed, think about that
CPI or core inflation which numerous things like SSI payouts are based on excludes energy and food and also receives hedonic adjustments
huge chunks of the Federal budget also aren't even on the budget, there's enormous amounts of off balance sheet debt there
when looking at and discussing the govt's econ numbers the methodology and history is important
Are we in for decades of rolling recessions or depressions until energy can't keep up with demand? yes we are and it probably won't even get that far. Just for the US to work off its debt back down to workable levels and get real unemployment free of embellishment back under 5% will take more than 20 years of non stop economic growth which can't happen simply due to our debt load alone. Not unless the US govt changes its policy and forecloses on the insolvent and follows US law which it has not been doing then the debt will have to be paid for. Japan took this same approach and have gone thru 20+ years of deflation and the debt just got bigger with no real progress towards a solution.
the US housing market is in a hopeless situation, take current inventory including REO's and divide it by sales rate and you are looking at 20 plus years to clear the inventory.......in an environment where housing values need to fall back to affordable levels which by itself puts almost every bank and municipality out of business in the process
this is why following the law and sound money management is so damn important or you make huge messes like this
economic guru
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If we go back to using the SGS unemployment figures that were used in 1994, the unemployment rate would be closer to 22% right now.
http://www.shadowstats.com/alternate_data/unemployment-charts
If the government doesn't like the answers, change the methodology, and change the formula and questions asked.
Problem solved.
gramarye
In Exile
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myliftkk wrote >>
Core_Models wrote >>
Well, I don't have all the economics background apparently within this thread, but if a Depression is a continued decrease in real GDP...we aren't in one. The last 3 quarters have all had increases in real GDP.By the textbook definition, right we're not in one. More concerning than a depression at least to some economists is the rising threat of deflation like that of Japan. Then on the other hand you've got the fiscal austerity bunch insisting on a double-down of economic pain to ward off what Krugman calls the invisible bond vigilantes.
Using the same ShadowStats Web site that EG used a few hours ago, you can note that inflation according to the previous methodology is actually substantially higher than inflation under the methodology that replaced it (i.e., the government switched to a methodology that reports lower inflation):
http://www.shadowstats.com/alternate_data/inflation-charts
FWIW. That's my first time actually using that site. It would posit the inflation rate at close to 8%.
I'm not sure what to think, both because my own experience is somewhere in between those two figures (I've seen an increase in my living expenses in the past year of more than 1%, but not exactly 8%) and because I have no way of knowing how representative my experience is.
As to whether we're looking at a permanent economic depression: I doubt that. However, we are likely to be facing structurally higher unemployment for the foreseeable future. Our entitlement state is growing to basically the level of many European economies that have suffered from chronically high unemployment (by our old standards) for more than a generation. That makes the cost of employing workers high. In addition, technological advances have continued to nudge productivity upward. The combination of the two means that employers will generally want to hire fairly few workers and then get high productivity out of them. The economy will be fairly good for those on the right side of that productivity gap.
manticore33
Delaware, OH
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Not to knock the "economic guru"...
But I find it interesting that he/she joined the same day as this thread and seems to have only posted in this thread.
From his/her profile:
economic guruMember Since
August 21, 2010 (2 days)
This thread was started to days ago...
Not saying that his/her arguments or points are not valid. However, it is something I notice and thought was an interesting coincidence. A true enthusiast about the economy? Poser trying to push an agenda? I really do not know... But it is less suspicious if you at least add an avatar. Or use a nickname that is something more than the "area in which you are alleging to have expertise." :)
artbomb112
The Heights
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I don't know guys.... I think I prefer the Jon Meyers random fun and adventure economic forecasting.
It's like betting on the return of Jesus. It could show up one day and we would just kick it in the teeth and call it a liar.
I don't predict my future by watching the news. I'd rather just get to work. Most of the stories I have ever seen about a recession or depression seem to be solved by people getting to work and doing things rather than watching a TV or a ticker.
artbomb112
The Heights
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Ok... that was intended as humorous.. not hostile.
myliftkk
Columbus, OH
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gramarye wrote >>
myliftkk wrote >>
Core_Models wrote >>
Well, I don't have all the economics background apparently within this thread, but if a Depression is a continued decrease in real GDP...we aren't in one. The last 3 quarters have all had increases in real GDP.By the textbook definition, right we're not in one. More concerning than a depression at least to some economists is the rising threat of deflation like that of Japan. Then on the other hand you've got the fiscal austerity bunch insisting on a double-down of economic pain to ward off what Krugman calls the invisible bond vigilantes.
Using the same ShadowStats Web site that EG used a few hours ago, you can note that inflation according to the previous methodology is actually substantially higher than inflation under the methodology that replaced it (i.e., the government switched to a methodology that reports lower inflation):
http://www.shadowstats.com/alternate_data/inflation-charts
FWIW. That's my first time actually using that site. It would posit the inflation rate at close to 8%.
I'm not sure what to think, both because my own experience is somewhere in between those two figures (I've seen an increase in my living expenses in the past year of more than 1%, but not exactly 8%) and because I have no way of knowing how representative my experience is.
As to whether we're looking at a permanent economic depression: I doubt that. However, we are likely to be facing structurally higher unemployment for the foreseeable future. Our entitlement state is growing to basically the level of many European economies that have suffered from chronically high unemployment (by our old standards) for more than a generation. That makes the cost of employing workers high. In addition, technological advances have continued to nudge productivity upward. The combination of the two means that employers will generally want to hire fairly few workers and then get high productivity out of them. The economy will be fairly good for those on the right side of that productivity gap.
The BLS made two fairly substantial changes in how inflation is tracked, one was introducing substitution into the basket of goods/services that BLS tracks, and the other decoupling the basket from food/energy rates. While I appreciated what the SGS attempts to do, it appears that they're bit of a "gold standard" bunch over and I think they try to pin the blame on a non-gold backed currency more than anything else.
Take medical services inflation, which is probably a, if not the, key contributor to inflation in recent years. While the costs of delivering medical services have gone up, it's far more sensible to blame the utter lack of transparency in the medical market for allowing the players to easily raise costs with little blowback to their business model. Our corp, for example, can raise prices on the order of 5-10% a year, year over year, with little if any negative impact from market forces or consumers.
Actually, by the standards the government uses to tie increases in benefits to inflation (at least the SSA), if a broader measure of inflation is running noticeably higher than the figure the SSA uses to bump up SSA benefits, that entitlement is getting quite a bit cheaper over time.
myliftkk
Columbus, OH
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Tenzo wrote >>
Regional banks like Huntington, Fifth 3rd, US Bank are heavily exposed to commercial loans.
Banks are making loans to businesses!?
When will the insanity stop!?
It's referring to commercial real estate loans, which IIRC typically have to be rolled over and refinanced at 5 year intervals.
Via Seeking Alpha:As you can see above in the video, the commercial securitization market has just about disappeared. There were only $17 billion in commercial seceritizations done from 2008-2010 versus a whopping $602 billion fom 2005-2007
Based on Rechler's calculations 65% of the loans are about to mature.
As Rechler explains, most commercial loans come to duration in 5 years. Some need to be rolled over in as little as 1-2 years.
Based on the numbers above, this means about $400 billion in commercial loans needs to be rolled from 2010-2012. This total could be a little higher if some of the 2004 loans are included.
The issue we have here is the properties included in these securitizations are worth way less today then they were when they were securitized in 2005-2007.
This is a huge problem because the banks will not roll over the loans because the commercial property values have collapsed since the paper was written.
As a result, they will demand cash from the developers before they allow them to roll over the debt, and there is no way that the developers have the billions of dollars that are needed in order to make up the difference.
Tenzo
Chicago Lakeshore
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economic guru wrote >>
If we go back to using the SGS unemployment figures that were used in 1994, the unemployment rate would be closer to 22% right now.
http://www.shadowstats.com/alternate_data/unemployment-charts
If the government doesn't like the answers, change the methodology, and change the formula and questions asked.
Problem solved.
I don't suppose you could use a citation that didn't have the words 'shadow government" or "overthrow the government" or "government conspiracy"
Because if you are just going to pull from any site, I can go publish that you wear purple poka dot pantaloons on my dogs website.
Now be honest with me, are you just trolling here?
rustbelt
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I don't think it's controversial to say we're in horrible economic times & it looks like it will only get worse for years to come. I don't believe our current economic problems are a temporary blip that can be (relatively) quickly overcome. On the contrary, I think we're facing a particularly inconvenient convergence of factors at exactly the wrong time.
There are several reasons why we're at this stage but, as a nation, we seem totally unequipped - politically, socially, economically - to deal with what is & will continue to be the new economic reality.
One of the major problems is our economic woes & downward trends have been slowly developing over a few decades -- the infamous frog in a boiling pan of water analogy.
Just in Ohio, the demise of cities like Youngstown, Dayton, Akron, Canton, etc should have been like canaries in the coalmine. However, for the most part, we chose to ignore what got us in those fixes & successfully adapt to new circumstances & we continue to pay the price.
There needs to be a fundamental shift in attitude & a recognition the 21st century United States will look much different than the 20th century one.
I don't hold out much hope our growing idiocracy is up to the task. Our next test in Ohio will be trying to plug the estimated $8 billion dollar gap in the next budget.
(Oh, and since when does someone joining a message board to start a conversation constitute something to be suspicious of or "trolling"? Is there a secret handshake some of us are unaware of?)
economic guru
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The title of the thread is " Will the economic recession turn into a permanent depression "
The poster is asking for opinions and information, one can presume.
You allege that I may be for some sort of an agenda ?
I'm not offering or promoting any sort of investment advice, nor will I.
The numbers are what they are, I'm not inventing them and I'm not making them up. Perhaps when you have attained a PHD in economics you can enlighten us with your wisdom. Until then you can forget the conspiracy theories.
We are headed for some very bad times, there is no way around it. All previous recessions have been induced by inflation, and the federal reserve raising interest rates to tamp it down. Once inflation has been tamped down, they lowered them and growth has resumed.
The FED rates have been at ZERO for nearly two years now, it hasn't worked. There are no rabbits in the hat left.
manticore33 wrote >>
Not to knock the "economic guru"...
But I find it interesting that he/she joined the same day as this thread and seems to have only posted in this thread.
From his/her profile:
economic guru
Member Since
August 21, 2010 (2 days)
This thread was started to days ago...
Not saying that his/her arguments or points are not valid. However, it is something I notice and thought was an interesting coincidence. A true enthusiast about the economy? Poser trying to push an agenda? I really do not know... But it is less suspicious if you at least add an avatar. Or use a nickname that is something more than the "area in which you are alleging to have expertise." :)
economic guru
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Existing home sales plummet 27%.
Mortgage rates at historic lows and people are not buying.
economic guru
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The ones that add nothing to the conversation are the trolls.
They lack the intelligence and can only accuse people.
rustbelt wrote >>
I don't think it's controversial to say we're in horrible economic times & it looks like it will only get worse for years to come. I don't believe our current economic problems are a temporary blip that can be (relatively) quickly overcome. On the contrary, I think we're facing a particularly inconvenient convergence of factors at exactly the wrong time.
There are several reasons why we're at this stage but, as a nation, we seem totally unequipped - politically, socially, economically - to deal with what is & will continue to be the new economic reality.
One of the major problems is our economic woes & downward trends have been slowly developing over a few decades -- the infamous frog in a boiling pan of water analogy.
Just in Ohio, the demise of cities like Youngstown, Dayton, Akron, Canton, etc should have been like canaries in the coalmine. However, for the most part, we chose to ignore what got us in those fixes & successfully adapt to new circumstances & we continue to pay the price.
There needs to be a fundamental shift in attitude & a recognition the 21st century United States will look much different than the 20th century one.
I don't hold out much hope our growing idiocracy is up to the task. Our next test in Ohio will be trying to plug the estimated $8 billion dollar gap in the next budget.
(Oh, and since when does someone joining a message board to start a conversation constitute something to be suspicious of or "trolling"? Is there a secret handshake some of us are unaware of?)
hugh59
Aboard the ultimate power in Olde Towne East
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econJoe wrote >>
I don't think anyone has actually answered why this is happening, except the person with all the charts above who said it was about debt.
Economists know to an extent what is dragging on GDP growth in the United States, but they don't all agree on what problems to address first.
Americans are not in a position to forward the global recovery because they are trying to deleverage themselves (pay down debts). The countries who experienced current account surpluses (and, ergo, financial account deficits [i.e. they bought financial assets]) over the last fifteen years are in a good position to give rise to new consumers who are less leveraged. China, among them, has tried to maintain its pre-recession position though of growing by exporting. The Chinese government needs to focus on providing the social safety nets that Western countries provide their citizens, so its citizens can consume more without the worry of saving for personal crises. Currently, Chinese consumers are saving around 30% of their incomes, which is a very troublesome level of saving. As well, the Chinese government needs to stop pegging its exchange rate because, while long-term the real exchange rate adjusts to manipulation, the long term could take a very long time and a lot of suffering on the part of other countries' peoples.
As for what the American government can do, the Federal government can borrow more money to do another round of stimulus spending. Most economists agreed that the first stimulus bill was not big enough. The recession has caused an output gap of about $2 trillion, yet the stimulus bill was about one-fourth of that (or one-third if you count tax cuts as stimulus spending). Right now, there is too much saving going on in the world and not enough spending. Private investment is not nearly enough to soak up all the saving, so saved money is just sitting around. The government can borrow that money and spend it. This is what post-Depression macroeconomics is all about, yet Republicans have rejected it over deficit concerns. The truth is that fiscal austerity in a depressed economy actually reduces short- and long-term tax revenues. In a depressed economy, greater fiscal support is a boon to tax revenues.
I think it's pretty obvious that there are a lot of events culminating into the current economic situation. And it takes more than a message board post to explain it. This is material and data that economists digest everyday for years to understand.
Okay, people are not spending their money so the government is going to spend it for them by borrowing, spending, and using future tax revenues to pay off the borrowing (or rely on inflation to reduce the value of the debt). Problem is, we need more than just spending...we need investing. And, do you really think the government is going to make better choices about how to spend your money than you will?
economic guru
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That is the political fight going on in DC right now. The feds can use huge incentives to push economic investment in certain directions using private sector capital, and in other instances the feds have to be the direct investor.
hugh59 wrote >>
econJoe wrote >>
I don't think anyone has actually answered why this is happening, except the person with all the charts above who said it was about debt.
Economists know to an extent what is dragging on GDP growth in the United States, but they don't all agree on what problems to address first.
Americans are not in a position to forward the global recovery because they are trying to deleverage themselves (pay down debts). The countries who experienced current account surpluses (and, ergo, financial account deficits [i.e. they bought financial assets]) over the last fifteen years are in a good position to give rise to new consumers who are less leveraged. China, among them, has tried to maintain its pre-recession position though of growing by exporting. The Chinese government needs to focus on providing the social safety nets that Western countries provide their citizens, so its citizens can consume more without the worry of saving for personal crises. Currently, Chinese consumers are saving around 30% of their incomes, which is a very troublesome level of saving. As well, the Chinese government needs to stop pegging its exchange rate because, while long-term the real exchange rate adjusts to manipulation, the long term could take a very long time and a lot of suffering on the part of other countries' peoples.
As for what the American government can do, the Federal government can borrow more money to do another round of stimulus spending. Most economists agreed that the first stimulus bill was not big enough. The recession has caused an output gap of about $2 trillion, yet the stimulus bill was about one-fourth of that (or one-third if you count tax cuts as stimulus spending). Right now, there is too much saving going on in the world and not enough spending. Private investment is not nearly enough to soak up all the saving, so saved money is just sitting around. The government can borrow that money and spend it. This is what post-Depression macroeconomics is all about, yet Republicans have rejected it over deficit concerns. The truth is that fiscal austerity in a depressed economy actually reduces short- and long-term tax revenues. In a depressed economy, greater fiscal support is a boon to tax revenues.
I think it's pretty obvious that there are a lot of events culminating into the current economic situation. And it takes more than a message board post to explain it. This is material and data that economists digest everyday for years to understand.Okay, people are not spending their money so the government is going to spend it for them by borrowing, spending, and using future tax revenues to pay off the borrowing (or rely on inflation to reduce the value of the debt). Problem is, we need more than just spending...we need investing. And, do you really think the government is going to make better choices about how to spend your money than you will?
rus
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Kinda related:
The nation doesn’t have to wait for the Obama experiment to finish to learn the outcome. Such experiments have been running over decades at the state level. Even before Obama was born, some states were applying the Obama rule of “spend, even if it means higher taxes, and you will grow.†Others operated on the philosophy that less government, even perhaps in times of trouble, served their residents better.J. Scott Moody of Public Choice Analytics, a New Hampshire public policy consultant who specializes in cross-state analysis, ran his own experiment. Moody compared Maine, a state that more than 60 years ago embarked on one path, with New Hampshire, which went a different route. Like the president, Moody favors an emphasis on the household pocketbook. He therefore spends time looking at per capita personal income of individuals.
The result? Decade in, decade out, New Hampshire’s economy grew faster than Maine’s, so that the Granite State surpassed the Pine Tree State in 1984 and today boasts an output that is 20 percent bigger. Maine’s recessions and double dips were worse than New Hampshire’s. Eventually New Hampshire also won the population contest, passing Maine, in part thanks to migration. Last month, joblessness was 8.1 percent in Maine, better than Ohio but still bad, and 5.8 percent in New Hampshire.What about that family pocketbook that the White House highlights? Bureau of Economic Analysis data show average per capita income for Maine in 2009 was $36,745, a bit more than Ohio. In New Hampshire that number was $42,831, eighth highest in the nation.
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