Financial News

[southsider2k5]

LOL, come on Mike, you see one day like this as any indicator of any long term anything? You know better than that. The other day when we saw big jumps in stocks, big jumps in home sales, and a slight surprise better UE filings report, that didn't mean RECOVERY!!!! either.

 

I'm not convinced of a double-dip just yet. Wouldn't dismiss it either though.

 

This isn't just one day. Growth rates have been slipping, and being cut for more than a quarter now. We are starting to see the world economies, even mighty China slip back. When you are getting not just slow downs, but actual contractions in manufacturing, it is because the economies are by all likelihood already in contraction. The numbers will eventually bear this out.

[NorthSideSox72]

This isn't just one day. Growth rates have been slipping, and being cut for more than a quarter now. We are starting to see the world economies, even mighty China slip back. When you are getting not just slow downs, but actual contractions in manufacturing, it is because the economies are by all likelihood already in contraction. The numbers will eventually bear this out.

I understand all that, and Europe does scare me a bit. China scares me less, they could slow down a tick and it won't much matter for the US because of the direction of demand. May even help in a way. But what I have seen is that the original estimates for the US economy had predicted that 2nd half 2011 and going into 2012 was when they thought the recovery would really get going. Now, they think it is a year later. So the estimates between are showing growth, but much less of it, in the short run.

 

Just for the record though, I am not saying a double dip can't or won't happen. I am saying it is a % game, and I don't see that risk over 50% yet. Probably not 20% yet even.

 

[Balta1701]

I think I've been saying this for a while, but I might not have said it here.

 

A double-dip doesn't matter one iota. At this point, it's a technical issue whether we're at -0.5%, 0.5%, or 1.5%.

 

Even if we never hit the technical definition of a recession, we're still stuck with all the problems of 2008. We are still far below potential economic output, both as a nation and as a globe, and 1.5% growth, 2.5% growth, or 0.5% growth are all too little to get back to trend.

 

What would matter is if something major happened, like the Eurobust or Chinabust, that really sent things off on a much faster downward slope than -0.5% annualized growth for 2 straight quarters.

[southsider2k5]

How bad is it across the pond? 598 of the EuroStoxx 600 are down.

[StrangeSox]

But that can't be right... the stimulus worked!

 

If you want to say the stimulus failed, what can you say about austerity programs that aren't keeping things steady but actually driving everything down?

[southsider2k5]

I understand all that, and Europe does scare me a bit. China scares me less, they could slow down a tick and it won't much matter for the US because of the direction of demand. May even help in a way. But what I have seen is that the original estimates for the US economy had predicted that 2nd half 2011 and going into 2012 was when they thought the recovery would really get going. Now, they think it is a year later. So the estimates between are showing growth, but much less of it, in the short run.

 

Just for the record though, I am not saying a double dip can't or won't happen. I am saying it is a % game, and I don't see that risk over 50% yet. Probably not 20% yet even.

 

The problem is that the expectations have largely been wrong. We haven't been anywhere near projections, so they just keep getting lowered. I think the reality of what is going on is much worse than we see because of the inherent biases built into most of these numbers. Can you imagine what it takes for China to cut their official numbers? If the numbers in Europe are finally showing negative, it means they are in recession. The slashes in our growth tell me we are either in a now growth scenario, or are even negative at this point.

[southsider2k5]

If you want to say the stimulus failed, what can you say about austerity programs that aren't keeping things steady but actually driving everything down?

 

The fact that austerity is needed in Europe is the best possible lesson out there not to spend money like idiots. You might actually need that money later, like we do now.

[Balta1701]

I'd like to point out for the record that many places in Europe that are now trouble spots, including Spain, Italy, and Ireland, had budgets that were close to in balance or even budget surpluses at their national levels before 2008. So..."Spending money like idiots" simply can't be the problem...because people who came into this being supposedly good stewards are in just as much trouble as people who werent'.

 

They just had large bank-supported housing bubbles. When those collapsed, growth potential collapsed.

[StrangeSox]

The fact that austerity is needed in Europe is the best possible lesson out there not to spend money like idiots. You might actually need that money later, like we do now.

 

The fact that austerity is prolonging and worsening a recession going on 4 years now and that every person crying about "bond vigilantes!" has been dead wrong is the best possible lesson we can learn. The second best lesson is to not spend like idiots on unnecessary tax cuts and wars.

[Balta1701]

The fact that austerity is prolonging and worsening a recession going on 4 years now and that every person crying about "bond vigilantes!" has been dead wrong is the best possible lesson we can learn. The second best lesson is to not spend like idiots on unnecessary tax cuts and wars.

Although you can certainly say Greece did this...a lot of the countries in the worst trouble did no such thing. They just had big time housing bubbles that imploded.

[southsider2k5]

The fact that austerity is prolonging and worsening a recession going on 4 years now and that every person crying about "bond vigilantes!" has been dead wrong is the best possible lesson we can learn. The second best lesson is to not spend like idiots on unnecessary tax cuts and wars.

 

Blaming austerity is silly. It acts like there is some magic money ferry out there to deliver the money to save everyone. The economies are collapsing because their levels of spending are unsustainable. They have to cut spending. There isn't a choice.

[NorthSideSox72]

The problem is that the expectations have largely been wrong. We haven't been anywhere near projections, so they just keep getting lowered. I think the reality of what is going on is much worse than we see because of the inherent biases built into most of these numbers. Can you imagine what it takes for China to cut their official numbers? If the numbers in Europe are finally showing negative, it means they are in recession. The slashes in our growth tell me we are either in a now growth scenario, or are even negative at this point.

 

I am less concerned about a US double dip, than I am about multiple more years of stagnation and small growth. I think we ended up hitting so many landmines in 2008-2010, in so many sectors, that it is awfully hard to clear from all of that. And with the fact that our debt load is scary, and the tea partiers want to massively cut government NOW, we are in an even worse position to get out of it. But that is not the same as a second recession.

 

I'd like to point out for the record that many places in Europe that are now trouble spots, including Spain, Italy, and Ireland, had budgets that were close to in balance or even budget surpluses at their national levels before 2008. So..."Spending money like idiots" simply can't be the problem...because people who came into this being supposedly good stewards are in just as much trouble as people who werent'.

 

They just had large bank-supported housing bubbles. When those collapsed, growth potential collapsed.

 

Now this is just cherry picking at its finest. Italy, for example, has a debt load roughly 600% of its GDP. Here in the US we are freaking out about approaching 100%. Those countries in Europe were indeed spending like idiots for a great period of time, and now they have even less room - far, far less room - to maneuver than the US does.

 

[Balta1701]

Now this is just cherry picking at its finest. Italy, for example, has a debt load roughly 600% of its GDP. Here in the US we are freaking out about approaching 100%. Those countries in Europe were indeed spending like idiots for a great period of time, and now they have even less room - far, far less room - to maneuver than the US does.

This stat is simply off by a factor of 5.

[StrangeSox]

Blaming austerity is silly. It acts like there is some magic money ferry out there to deliver the money to save everyone. The economies are collapsing because their levels of spending are unsustainable. They have to cut spending. There isn't a choice.

 

Most of these economies were fine before wall street's money-making schemes imploded. Since then, revenues have fallen and social safety net spending has shot up to keep people from starving.

 

Meanwhile, we have trillions in idle capital and tens of millions of people unemployed, yet the problem is too much spending and we need to cut, cut, cut. That's a sure-fire plan to get the capital utilized again.

[Balta1701]

I'll also add that in 2006-2007, Italy had a large budget surplus, which only collapsed when their economy collapsed.

 

Their debt to GDP ratio was going down in the 2000's while the U.S's was going up.

 

Their biggest problem is that the economy supporting their debt has completely collapsed.

[southsider2k5]

Most of these economies were fine before wall street's money-making schemes imploded. Since then, revenues have fallen and social safety net spending has shot up to keep people from starving.

 

Meanwhile, we have trillions in idle capital and tens of millions of people unemployed, yet the problem is too much spending and we need to cut, cut, cut. That's a sure-fire plan to get the capital utilized again.

 

"safety net" spending had shot up long before the economic collapse. Taking more money from the few people who are able to do the hiring isn't going to fix the economy. All it will do is accelerate layoffs, because it isn't going to support new spending, it will just stop cuts from happening, or make the cuts smaller.

 

Again, this is a huge statement for the need of responsible government. If the need arises for government cuts when there is a major recession, that means government is too big to sustain. We expect banks to be able to support their debt levels just in case things go bad, yet the government has no such requirements. they aren't even required to follow their own rules for accounting or capital, or anything else. All this is doing is exposing the dangers of having the government being a central pillar of the economy.

[StrangeSox]

The "need" for the US government to make cuts during a major recession is because political ideologues are exploiting a situation in order to enact their decades-long policies of shrinking government no matter what.

 

Having only a "few people who are able to do the hiring" is a problem in and of itself, as is the fact that they are sitting on enormous piles of cash and not hiring.

[southsider2k5]

The "need" for the US government to make cuts during a major recession is because political ideologues are exploiting a situation in order to enact their decades-long policies of shrinking government no matter what.

 

Having only a "few people who are able to do the hiring" is a problem in and of itself, as is the fact that they are sitting on enormous piles of cash and not hiring.

 

With the recession, it has been proved without a doubt that the influence and need of government is too big in this economy. We can't even manage a recession without needing hundreds of billions in extra spending, let alone a major recession. That all by itself tells me that there is truth in the statement for the need to cut. Then again, since our federal government hasn't actually cut anything of substance yet, austerity is red herring in the US.

[StrangeSox]

Please explain how it was proven "without a doubt" that the federal government was too big because the GDP output gap was several trillion dollars.

[Balta1701]

"safety net" spending had shot up long before the economic collapse.

What all are we including in "Safety net" spending?

 

Medicaid + Unemployment insurance + food stamps + housing programs + all of that is broken out by the CBO. Here's what they look like.

 

Are we talking about Social Security? Because by law, that stays flat, except for the projected rise over the next 30 years due to the Baby Boom. It's actually decreased as a fraction of GDP since 1980.

 

The only thing which can reasonably be labeled as safety net spending which shot up before the collapse was Medicare. That of course is due to health care spending growing at 10% a year, and the 2002 Medicare insurance company bailout and prescription drug bill. But...we just passed a set of $500 billion in Medicare cuts over the next decade, and if you believe the CBO...the cuts were large enough to bring Medicare very close to long-term balance.

[NorthSideSox72]

This stat is simply off by a factor of 5.

I could swear I read an article just yesterday, that I now cannot find, I think on CNNFN, saying the total debt for Italy was about 1.3T Euro, and their economy was worth about 18% of that amount. And now, Google and CNN can't find it. I'm not going insane, I swear.

 

[southsider2k5]

Please explain how it was proven "without a doubt" that the federal government was too big because the GDP output gap was several trillion dollars.

 

If economy is so dependent on government, that it is going to collapse without it, government is too big.

[StrangeSox]

If economy is so dependent on government, that it is going to collapse without it, government is too big.

 

I hope you realize that this makes no sense at all. The private banking and finance sector collapse, not the government spending.

 

Any economy will collapse without a government, by the way. That's pretty universal.

[southsider2k5]

I could swear I read an article just yesterday, that I now cannot find, I think on CNNFN, saying the total debt for Italy was about 1.3T Euro, and their economy was worth about 18% of that amount. And now, Google and CNN can't find it. I'm not going insane, I swear.

This article gives 3.1:1 at the end of 10

 

http://au.news.yahoo.com/thewest/a/-/newsh...alian-downgrade

[StrangeSox]

Seriously, the government could be 5% of GDP, and if the GDP output gap still falls by $5T dollars, you still need $5T of stimulative spending to make up that gap. That doesn't tell you a single thing about the size of government.