There's quite a bit of the history included, but some of the main points are missed. The biggest point they missed is Peak Oil, that is, oil production isn't likely to increase further from here on out and is likely to decline rather rapidly. There have been many warnings from the academic and environmental side of things about the problem, but TPTB ignored those of us who presented the message. Now, we find ourselves confronted with a collapsing economy and the average man and woman wants a scapegoat to blame. Well, lets be sure that the blame is placed squarely on those responsible for this tragedy. I suggest that the politicians (especially the Republicans) and the executives from the automotive industry were criminally negligent in their blatant disregard for the facts. Off with their heads! Let them walk the plank! Better yet, take all their wealth and let them live under a bridge with the poor huddled masses.
Black_Dog...It is easy to play the blame game but 'the people' that you seem so anxious to let off the hook for ignoring the fact of PO were warned, and long ago, by President Jimmy Carter.
'The people' did what all people throughout history have done when they have been presented with access to excess...they took advantage of it. 'The people' of America have acted no differently than the citizens of Rome did...bread and circus. 'The people' took advantage of cheap energy to party hardy and spend their wealth on the most foolish extravagances.
I have absolutely no sympathy for 'the people' that are now anxious to point fingers at everyone except themselves. They have accumulated McMansions, SUVs, boats, airplanes, etc, all with money that they had not yet earned and did not posses. The money that 'the people' were spending was borrowed from foreigners to purchase toys on credit. The people are now being served the bill for their excess...it will be a whopper!
If the people were truly concerned about PO and their collective futures they had ample opportunity to show up at the poles and vote. The people had opportunity to save instead of spend. The people had opportunities to opt for more economical vehicles. The people had ample opportunity to pay attention to what was going on with their governance and demand change where needed...instead, the people opted to watch NASCAR, the NFL. The people opted to continuing to run up thier credit cards. The people continued to spend what they had not yet earned.
Of course the government and financial sectors are complicit but without consent of 'the people' the economic disaster we now face would not have occured.
I do not feel sorry for people that failed to act responsibly.
Perhaps before we declare economic collapse, there should be at least one quarter of negative growth. Not saying it isn't coming, but even a great depression is not societal collapse.
Mac, if you have access to Shadowstats.com it would be helpfull...I don't and am not going to pay the price for it. Ocassionally I get some Shadowstats info from other economic sights. The last stat I saw for M3 (calculated as it was before suspenion of publication by the Fed) was 18-23%, which would be about a doubling of the supply every 3 years.
As for the neg ratings...to hell with them. The damn rating system that they have created here is for beans. Only nitwits would use the ratings to downgrade a post for content and no one at the site is doing anything about misuse of the ratings. Maybe they are former government employees?
Maybe they are former government employees? BWHAHAHA ;}
"Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting."-shadowstats
You're right, the Fed is pushing inflation as hard as they can.
Then, after the election Obama's Volker jacks up rates to 10%
to bring the $ stability.
Dr Housing Bubble has taken the lead in predicting IMHO:
"
It must come as no surprise that prices are falling off a cliff both nationwide and in California. The reason California carries a lot of weight is that taken alone, California would be the world’s 8th largest economy. California is also the hub of the mortgage bubble. We earlier reported that prices in the golden state were off by 27 percent but have to update that since the C.A.R. recently came out saying the median price drop now stands at a stunning 35%! Given the $500 billion Option ARM implosion which will be one of the major stories in the second half, we can nearly predict the next few months.
Nationwide prices are down 15.2% which is the steepest drop ever. Even worse than the drop during the Great Depression because of the speed in which prices are correcting. What once seemed a mere impossibility, the forecasts for nationwide drops of 20 to 30 percent almost seem like foregone conclusions. We should be seeing 20 percent this year and if prices accelerate, who really knows. These forecasts were for bottoms in 2009 and 2010 at least if we are to look at futures markets but a 35% drop in California in one year is even shocking bears like myself. The ferocity of the correction is stunning."
Mc: His interesting comment is that even a guy like himself who predicted this is still shocked. IMO the same phenomenom will happen with oil supply and prices-it is very clear what is coming yet it will still be shocking to knowledgeable observers as we are all influenced by the MSM which plays into our desire to engage in wishful thinking.
It goes without saying that the home equity loan is going extinct. But how far down are we from 2004, when those loans pumped close to a trillion $ into the US economy? And what was the multiplier effect of each of those borrowed $ in further economic activity? If each loaned $ created $3 more in GNP that year, then won't we soon be seeing a $4 trillion reduction in the (inflation-adjusted) GNP? Is there any place left where we can (foolishly) make up the loss?
The damn rating system that they have created here is for beans.
I'm not sure what to make of it either, but I respect their desire to address the high number of comments.
I'd like us all to allow them some space for experimentation. If this doesn't work, they'll yank it and try something else. No need to be mean to people who are volunteering their time to give you a space to have your say.
It doesn't seem to have a very good track record of forecasting recession on its own.
Any other indicators one should be looking at?
Funnily enough, even LEI seems to indicate that US might not be heading into a recession, but in fact recovering (barring financial meltdown of course). LEI appears to have a fairly good track record in predicting recoveries (but not downturns).
Now, I am not an economist/trader/financial analyst, so insert your favorite disclaimer here.
BTW, you get a vote up from me almost very time you write about derivatives deflation in the same paragraph. While the discussion on that is still raging, it does look like monetary deflation being masked by commodity price inflation. The derivative bomb seems in the process of exploding/defusing (dependin on one's POV).
"It doesn't seem to have a very good track record of forecasting recession on its own."
Note flat line until we invade Iraq. The final straw. Price of bunker fuel becomes unmanageable.
"this is turning into a comedy skit."-Dr Housing Bubble
“We shouldn’t, in a sense, be surprised when the data are, are, soft,” Swagel managed to say.
Does the economy need another stimulus package?
“I-it seems, you know, it seems like that’s, that’s enough, uh, enough.”
What might trigger another round of economic stimulus?
“I don’t, I guess I don’t have an answer, I mean, you know, beyond saying we look at all the data and, um — so, my usual line.”
(On the 127 000 jobs lost last month.) 62k + fake BLS Birth/death #'s.
"This is actually becoming a comedy skit. How long can we keep telling Americans the economy is fine without being chased out of Washington with a revolution?".
While the discussion on that is still raging, it does look like monetary deflation being masked by commodity price inflation.
The real question is how will gov't reacts to deflation. Obviously if the economy were permitted to run its natural course, it would be deflation, but rarely does this happen.
I believe that the gov't will put out all stops to prevent deflation. If that trigglers hyper-inflation so be it.
Last week Steve Liesman (CNBC economist) said that if he was given a choice of deflation or hyperinflation. He would choose hyperinflation as the lesser of two evils. I personally would prefer deflation. Hyper-inflation always results in deflation in the end, and creates even worse misery. Pay now, or pay much greater later.
http://www.bad-money.com/ (Kevin Philips)
"Wall street has privatized the profits, but socialized the risks". I couldn't put in any better. The financials rack in the profits creating bubbles, but when the bubble pops and profits turn to loses, they go to the Fed and Congress and demand that they pick up the pieces at the taxpayer expense. What a racket!
You call it deflation. Our working-class ancestors called it time to wave red flags and march for revolution. Let's be very careful about bringing back the kind of Darwinist economics that force people onto the streets.
It doesn't seem to have a very good track record of forecasting recession on its own.
Any other indicators one should be looking at?
off the top of my head. usually decline in home sales, decline in home values and some other indicators like car sales. links are always changing though. here is a quick search of calculated risk.
Best hopes of aquiring financing for investing in long lived capital goods. If I were trying to line up that sort of deal I would skip the banks (they are already broke) and go straight to congress. Some large campaign contributions might grease it. Good luck.
Insulation & better windows, high efficiency appliances (including heating & cooling), bicycles that will last generations, high efficiency and fairly small in-fill housing near transit, etc.
Alan, you got me there. I assumed that you were talking about city transportation investment...since you do spend a lot of time on that subject.
As for personal capital goods I took care of that long ago and continue to add/improve as time passes. Anyone that is not prepared for the economic storm that is coming is in for a rough time. Living in Florida for thirty years has given me plenty of opportunities to find out what weeks of life without electricity, water/sewage treatment, groceries, no roof, and access to bank funds is all about. Hurricanes are a great teachers.
Consider the cumulative impact if solar water heaters out-sold flat screen TVs, ultra-durable bicycles had more status then megaSUVs, $8 CFLs (I just ordered some) were a topic of conversation, the only new pavement poured by local gov't was for bikeways (properly built, almost zero maintenance for a century). Segways were common, etc.
Such changes could cushion the coming "reduced economic output" IMO.
I have a question about this. So my understanding is GDP is a measure basically of how much money was spent. Well 1. 'Things' are more expensive. So to buy the same amount of stuff this month as you did last month you have to spend more. And 2. Supposedly the M3 supply has been growing like crazy since the fed quit printing the number.
Wouldn't this mean that "negative growth" would be hidden by inflation and growth in money supply. I mean we could see GDP 'grow' right up to the point where something finally gives and the economy does crash, right?
I guess I don't trust government 'economic indicators' and hope there is another way to measure the problem.
'Gross domestic product
From Wikipedia, the free encyclopedia
Jump to: navigation, search
"GDP" redirects here. For other uses, see GDP (disambiguation).
CIA World Factbook 2007 figures of total nominal GDP (top) compared to PPP-adjusted GDP (bottom).
World map showing GDP (PPP) per capita.The gross domestic product (GDP) or gross domestic income (GDI) is one of the measures of national income and output for a given country's economy. GDP is defined as the total market value of all final goods and services produced within the country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time, and it is given a money value.
The most common approach to measuring and understanding GDP is the expenditure method:
GDP = consumption + gross investment + government spending + (exports − imports), or,
GDP = C + I + G + (X-M)'
Yes. Real GDP has been declining in the USA for a while. It is hidden by the manipulated low inflation rate. According to polls, 90% of Americans think the country is economically on the wrong path, yet, as the poster above notes, the USA is supposedly not even in a recession. This blatant propaganda will probably persist.
Brian--real GDP is likely up---since energy consumption is up. Electricity use is up about 2% year over year. Oil consumption is, perhaps down 1-2%, but Natural Gas, Coal, and Nuclear is up. Thus I assume GDP is also up.
GDP is spending minus (official government) inflation. Shadowstats provides inflation calculated by the same algorithm used in 1990, when the government most recently fudged the number. He also provides alternative GDP based on his alternative infaltion. By the standards of 1990, there has only been a single quarter (1Q2004) in GWB's presidency with positive economic growth.
You can view his alternative data series (including the GDP numbers) for free here.
I suspect Shadowstats numbers are closer to "reality" than the offical government pacification numbers.
In fairness, new perversions of inflation calculations were introduced during both Clinton's second term and Bush Junior. I tend to split the difference between the Shadowstats figures and the Feds'. It seems to me that as bad as things are now, we're only in the 1972-73 stage of this crisis; maybe 8% real inflation and 8% unemployment. Worse is to come, and you'll know when it's here when people act the way they did in the late '70s: always assuming that all the things they buy will be more expensive next month and a lot more expensive next year. Weimar Germans didn't need CPI announcements to freak out.
The GDP is the value of all goods and services produced within a country. Nominal GDP would be at current prices and real GDP would be at constant prices (1981 or some such year as the base).
Let us say that the US produced only two types of goods - Apples (A) and Oranges (O). Let us say that in 2007 it produced 5 apples and 10 oranges. And in 2008 it produced 7 apples and 9 oranges. As apples and oranges cannot be added it's hard to say if the output actually is up or down. If one orange is worth more than 2 apples it is down and vice versa. So it is usual to convert everything to a dollar value.
In the previous example, let us say an apple costs 1USD and an orange costs 1.5USD in 2007. In 2007 the GDP would have been $20.
Assuming that apples cost $1.10 in 2008 and oranges cost $1.60 in 2008, the GDP would have been $22.10. This is the nominal GDP. Nominal GDP growth would be about 10%. But out of this $1.60 came just because of price increases and not out of physical output growth.
Assuming prices remained the same in 2008 the real GDP would have been $20.5 or about a 2.5% growth.
Given the millions of products being manufactured the above exercise is impossible to do. So the nominal GDP is divided by a GDP deflator that tries to estimate the inflation in prices and that is used as an estimate of real GDP. So the real GDP can be overestimated if a lower deflator is used.
I would it not put it past Bush and his economist friends to fudge numbers.
Perhaps before we declare economic collapse, there should be at least one quarter of negative growth.
Daniel, I for one, have been predicting economic collapse for about ten years now. Funny that you should think we need a quarter of negative growth before taking a stand. My stand is based on the fundamentals that got us where we are and where those fundamentals will lead us. That is the rise in the use of fossil fuels and their eventual demise. A quarter of negative growth will show nothing new.
My prediction has always been based on the long term outlook. ALL fossil fuels will eventually go the way of liquid petroleum and it will happen in this century, with the most serious impact happening in the first half of this century.
I have been thrashing this straw since the mid 60s. That is the explosion in population growth and the environmental problems brought about by the attempt to feed this growing population. Then about ten years ago it hit me like a bolt of lightning, fossil fuel depletion will be the trigger that causes the eventual total collapse. That is, an abundance in cheap fossil energy enabled this population to happen and our vast population cannot possibly survive the disappearance of that cheap energy. It is all laid out in this essay, written about thirteen years ago. Energy and Human Evolution. Of course many other essays have appeared since then, explaining it all very well, this is just the best of them. Well, the best unless you want to read an entire book on the subject. In that case the best would be "Overshoot" by William Catton. Ant the second best would be "The Spirit in the Gene" by Reg Morrison.
But you can wait for your one quarter of negative growth before taking any action to help your chances of being among the survivors. After all, the problem has been ignored for half a century so why should anyone be concerned today. But by you saying we need a quarter of negative growth before we can assume anything you are essentially saying, I must see it before I will believe it. Which makes you absolutely no different than perhaps 99 percent of the world's population.
I was making a political point, which I still maintain. As most people do not have an intellectual framework for placing events into a larger context, most cannot judge your claims. This directly leads to my belief that most are guided by experience, they have to learn the hard way. It’s starting to happen now. Admittedly, not much to base hope upon – but better than nothing.
I wasn’t as foresightful as you, but my activism regarding non-sustainable growth began about 5 years ago related to global warming. Talk about a hopeless political battle; no direct feedbacks and a 20-50 year lag to impact. Political action has been a joke – my political activism has been a joke. Peak oil is the only thing beginning to change behavior and limit CO2 emissions. Peak oil is in the political drivers seat and TOD has a major role to play. At least someone somewhere is putting forward potentially viable solutions in an accessible way.
Don't you think that, at least in the short term, the impact of peak oil on climate change is likely to be most negative? As i see it, a move back to coal seems far more likely than a radical restructuring of society around sustainable levels of energy use...
How can it be worse than coal+oil+natural gas? Keep the coal in the ground and a viable strategy is born. Easier in the West, but if we are to ask sacrifice of others we have to start at home. Really good firsts step is to stop mountain top removal.
That's the best essay about the coming collapse you can find??? With lines like "The human species may be seen as having evolved in the service of entropy..."?? I mean sure, the human species can be seen that way, but that would be a stupid, anthropocentric, teleological way of thinking. Useless at best, indicative of a third rate mind at best. The essay appears to be a one-trick pony: it identifies a simple truth, that the energy we are currently using accumulated over millions of years and won't again accumulate fast enough for our use. Everything the essay has to say follows from that. But, that is not enough to conclude much, nor is it much of an insight. I hope the books you recommended are better.
The US Air Force did a study back in the '80s estimating that the Space Shuttle would suffer a catastrophic failure about once every 70-odd flights. It did not even get that far before the Challenger explosion - which is when everyone found out about the study and took action. Except that there were even fewer flights before the next crash. So I agree that we have the ability to know that a complex system has a probability of failure. We have no excuses.
It's a well known fact that the average American has little understanding of science and technology. My complaint wasn't with "the people", but with their so-called "leaders". Both the politicians and their bosses in corporate America are responsible for repeatedly presenting the illusion of infinite growth to the fools sitting in their LazyBoys in front of the daily blur of mindless TV entertainment. Corporate America (and that includes the information media) has made great efforts to spread the American Dream. Well, now the Dream has become a Nightmare and we are awakened at night with a sense of nameless dread. The People will respond by seeking revenge against the scapegoat de jour, hacking it to pieces and burning it's remains. But, the MSM is spreading disinformation about just who to blame for the mess, so the People, who are still being mesmerized by their HDTV's, will conclude that the blame should be placed on the very people that tried to warn of the mess.
We had a chance to choose a different path, back in the late 1970's and early 1980's after the two oil shocks sent prices thru the roof. But, those were temporary shocks and after those storms had passed, we all were lulled back to sleep. I would lay the blame most heavily on the Republicans, since they were effectively running the U.S. Government most of the time since Carter. Reagan had a golden opportunity to change direction after the Saudis flooded the oil market, driving the price down in 1986. La De Da, Happy Days and Cheap Oil Forever seemed to be his response. If he had used his brain (what may have been left of it) and put a floor under the price of gasoline by increasing the tax or transportation fuel, I think we would not be in this situation. Of course, his buddies in the Texas oil companies were screaming about the fact that they weren't making enough money to pay their bills and Texas was in a severe Recession, so that didn't happen.
We had another opportunity after the Asian Crisis in 1997, when the price of oil again dipped. By then, our Congress was dominated by the Gingrich Republicans, whose Neo-Con Free Market philosophy saw cutting taxes as the prime directive. OK, now it's Pay Back Time. It appears that quite a few of The People are going to find that living on the street isn't such a fun thing, even if you have a camper. (BTW, I did that for a while). Throwing rocks at a scapegoat won't solve the problem. Writing letters and sending e-mails to politicians won't solve the problem, as most of these never make it to the elected official. As I see it, the only solution is to throw the bastards out and hope that the next crew will do it right. The People won't get it until things are so bad that they are living under that proverbial bridge, living hand to mouth on what ever they can scrounge or steal. Somewhere along the way, I expect that bullets will start to fly...
The people in charge are just salesmen themselves. They had to sell themselves as a leadership product to get into office or the corporate boards. They had to convince themselves that the future would always be better. Why should we expect that they understand reality any better than us?
I can't imagine anything in this country would be different right now if we had simply appointed used car salesmen to every office of influence in every sector of the economy and government. Tell me what the opposite of a used car salesman is and I'll tell you who to hire as a replacement.
I go back and forth in the blame game. Surely the people elected the leaders that ruined them. But how were they to know when the MSM continually gave them propaganda rather than information. And yet, how is it that people are able to believe the MSM?
Today's NYT has a chronicle of the U.S. political and business efforts to ignore the problems of our oil imports.
American Energy Policy, Asleep at the Spigot
There's quite a bit of the history included, but some of the main points are missed. The biggest point they missed is Peak Oil, that is, oil production isn't likely to increase further from here on out and is likely to decline rather rapidly. There have been many warnings from the academic and environmental side of things about the problem, but TPTB ignored those of us who presented the message. Now, we find ourselves confronted with a collapsing economy and the average man and woman wants a scapegoat to blame. Well, lets be sure that the blame is placed squarely on those responsible for this tragedy. I suggest that the politicians (especially the Republicans) and the executives from the automotive industry were criminally negligent in their blatant disregard for the facts. Off with their heads! Let them walk the plank! Better yet, take all their wealth and let them live under a bridge with the poor huddled masses.
E. Swanson
Black_Dog...It is easy to play the blame game but 'the people' that you seem so anxious to let off the hook for ignoring the fact of PO were warned, and long ago, by President Jimmy Carter.
'The people' did what all people throughout history have done when they have been presented with access to excess...they took advantage of it. 'The people' of America have acted no differently than the citizens of Rome did...bread and circus. 'The people' took advantage of cheap energy to party hardy and spend their wealth on the most foolish extravagances.
I have absolutely no sympathy for 'the people' that are now anxious to point fingers at everyone except themselves. They have accumulated McMansions, SUVs, boats, airplanes, etc, all with money that they had not yet earned and did not posses. The money that 'the people' were spending was borrowed from foreigners to purchase toys on credit. The people are now being served the bill for their excess...it will be a whopper!
If the people were truly concerned about PO and their collective futures they had ample opportunity to show up at the poles and vote. The people had opportunity to save instead of spend. The people had opportunities to opt for more economical vehicles. The people had ample opportunity to pay attention to what was going on with their governance and demand change where needed...instead, the people opted to watch NASCAR, the NFL. The people opted to continuing to run up thier credit cards. The people continued to spend what they had not yet earned.
Of course the government and financial sectors are complicit but without consent of 'the people' the economic disaster we now face would not have occured.
I do not feel sorry for people that failed to act responsibly.
Perhaps before we declare economic collapse, there should be at least one quarter of negative growth. Not saying it isn't coming, but even a great depression is not societal collapse.
I agree with you on who is responsible.
Hi Daniel...I have never predicted 'societal collapse'. Please do not put my foot in my mouth.
If you have an insight into how the US will avoid a depression, or bad recession, I would be interested in hearing it.
I have and do.
Collapse is economizing and I don't see how anyone can read Leanan's
DB everyday and come to a different conclusion.
Us Dirty Phuckin Hippies have been screaming since Reagan's "Trees cause polution" remark and been punished for it.
back when I thought that the PTB were actually looking for a sustainable solution.
Even now bringing up Carter's "Malaise" speech gets shout downs -though the shouting
is alot more quiet.
Watch the Baltic Dry Index. Dryships as proxy. It's having cardiac arrest.
ships are sailing not fully loaded.
And just an aside, am I getting neg ratings for mentioning derivatives and
deflation in the same sentence? Just curious.
James
Mac, if you have access to Shadowstats.com it would be helpfull...I don't and am not going to pay the price for it. Ocassionally I get some Shadowstats info from other economic sights. The last stat I saw for M3 (calculated as it was before suspenion of publication by the Fed) was 18-23%, which would be about a doubling of the supply every 3 years.
As for the neg ratings...to hell with them. The damn rating system that they have created here is for beans. Only nitwits would use the ratings to downgrade a post for content and no one at the site is doing anything about misuse of the ratings. Maybe they are former government employees?
Maybe they are former government employees? BWHAHAHA ;}
"Have you ever wondered why the CPI, GDP and employment numbers run counter to your personal and business experiences? The problem lies in biased and often-manipulated government reporting."-shadowstats
You're right, the Fed is pushing inflation as hard as they can.
Then, after the election Obama's Volker jacks up rates to 10%
to bring the $ stability.
Dr Housing Bubble has taken the lead in predicting IMHO:
"
It must come as no surprise that prices are falling off a cliff both nationwide and in California. The reason California carries a lot of weight is that taken alone, California would be the world’s 8th largest economy. California is also the hub of the mortgage bubble. We earlier reported that prices in the golden state were off by 27 percent but have to update that since the C.A.R. recently came out saying the median price drop now stands at a stunning 35%! Given the $500 billion Option ARM implosion which will be one of the major stories in the second half, we can nearly predict the next few months.
Nationwide prices are down 15.2% which is the steepest drop ever. Even worse than the drop during the Great Depression because of the speed in which prices are correcting. What once seemed a mere impossibility, the forecasts for nationwide drops of 20 to 30 percent almost seem like foregone conclusions. We should be seeing 20 percent this year and if prices accelerate, who really knows. These forecasts were for bottoms in 2009 and 2010 at least if we are to look at futures markets but a 35% drop in California in one year is even shocking bears like myself. The ferocity of the correction is stunning."
http://www.doctorhousingbubble.com/
"Even worse than the drop during the Great Depression"
Mc: His interesting comment is that even a guy like himself who predicted this is still shocked. IMO the same phenomenom will happen with oil supply and prices-it is very clear what is coming yet it will still be shocking to knowledgeable observers as we are all influenced by the MSM which plays into our desire to engage in wishful thinking.
It goes without saying that the home equity loan is going extinct. But how far down are we from 2004, when those loans pumped close to a trillion $ into the US economy? And what was the multiplier effect of each of those borrowed $ in further economic activity? If each loaned $ created $3 more in GNP that year, then won't we soon be seeing a $4 trillion reduction in the (inflation-adjusted) GNP? Is there any place left where we can (foolishly) make up the loss?
I'm not sure what to make of it either, but I respect their desire to address the high number of comments.
I'd like us all to allow them some space for experimentation. If this doesn't work, they'll yank it and try something else. No need to be mean to people who are volunteering their time to give you a space to have your say.
-André
Do you mean this:
It doesn't seem to have a very good track record of forecasting recession on its own.
Any other indicators one should be looking at?
Funnily enough, even LEI seems to indicate that US might not be heading into a recession, but in fact recovering (barring financial meltdown of course). LEI appears to have a fairly good track record in predicting recoveries (but not downturns).
Now, I am not an economist/trader/financial analyst, so insert your favorite disclaimer here.
BTW, you get a vote up from me almost very time you write about derivatives deflation in the same paragraph. While the discussion on that is still raging, it does look like monetary deflation being masked by commodity price inflation. The derivative bomb seems in the process of exploding/defusing (dependin on one's POV).
Yes, of course. Thank you for the pic.
"It doesn't seem to have a very good track record of forecasting recession on its own."
Note flat line until we invade Iraq. The final straw. Price of bunker fuel becomes unmanageable.
"this is turning into a comedy skit."-Dr Housing Bubble
“We shouldn’t, in a sense, be surprised when the data are, are, soft,” Swagel managed to say.
Does the economy need another stimulus package?
“I-it seems, you know, it seems like that’s, that’s enough, uh, enough.”
What might trigger another round of economic stimulus?
“I don’t, I guess I don’t have an answer, I mean, you know, beyond saying we look at all the data and, um — so, my usual line.”
(On the 127 000 jobs lost last month.) 62k + fake BLS Birth/death #'s.
"This is actually becoming a comedy skit. How long can we keep telling Americans the economy is fine without being chased out of Washington with a revolution?".
The real question is how will gov't reacts to deflation. Obviously if the economy were permitted to run its natural course, it would be deflation, but rarely does this happen.
I believe that the gov't will put out all stops to prevent deflation. If that trigglers hyper-inflation so be it.
Last week Steve Liesman (CNBC economist) said that if he was given a choice of deflation or hyperinflation. He would choose hyperinflation as the lesser of two evils. I personally would prefer deflation. Hyper-inflation always results in deflation in the end, and creates even worse misery. Pay now, or pay much greater later.
http://www.bad-money.com/ (Kevin Philips)
"Wall street has privatized the profits, but socialized the risks". I couldn't put in any better. The financials rack in the profits creating bubbles, but when the bubble pops and profits turn to loses, they go to the Fed and Congress and demand that they pick up the pieces at the taxpayer expense. What a racket!
You call it deflation. Our working-class ancestors called it time to wave red flags and march for revolution. Let's be very careful about bringing back the kind of Darwinist economics that force people onto the streets.
Then again, don't be careful. I'm ready to march.
off the top of my head. usually decline in home sales, decline in home values and some other indicators like car sales. links are always changing though. here is a quick search of calculated risk.
Recession: CRE and PCE
http://calculatedrisk.blogspot.com/2008/02/recession-cre-and-pce.html
Recession: Mild or Severe?
http://calculatedrisk.blogspot.com/2008/01/recession-mild-or-severe.html
New Home Sales: Cliff Diving
http://calculatedrisk.blogspot.com/2008/01/new-home-sales-cliff-diving.h...
Best Shot (no guaranties) to avoid a Depression ?
A massive switch from consumption to investing in long lived capital goods that will help, in one way or another, in the coming energy crisis.
Best Hopes,
Alan
Best hopes of aquiring financing for investing in long lived capital goods. If I were trying to line up that sort of deal I would skip the banks (they are already broke) and go straight to congress. Some large campaign contributions might grease it. Good luck.
Some "capital goods" are at the personal level.
Insulation & better windows, high efficiency appliances (including heating & cooling), bicycles that will last generations, high efficiency and fairly small in-fill housing near transit, etc.
Alan
Alan, you got me there. I assumed that you were talking about city transportation investment...since you do spend a lot of time on that subject.
As for personal capital goods I took care of that long ago and continue to add/improve as time passes. Anyone that is not prepared for the economic storm that is coming is in for a rough time. Living in Florida for thirty years has given me plenty of opportunities to find out what weeks of life without electricity, water/sewage treatment, groceries, no roof, and access to bank funds is all about. Hurricanes are a great teachers.
Consider the cumulative impact if solar water heaters out-sold flat screen TVs, ultra-durable bicycles had more status then megaSUVs, $8 CFLs (I just ordered some) were a topic of conversation, the only new pavement poured by local gov't was for bikeways (properly built, almost zero maintenance for a century). Segways were common, etc.
Such changes could cushion the coming "reduced economic output" IMO.
Best Hopes for a Change in Values,
Alan
I have a question about this. So my understanding is GDP is a measure basically of how much money was spent. Well 1. 'Things' are more expensive. So to buy the same amount of stuff this month as you did last month you have to spend more. And 2. Supposedly the M3 supply has been growing like crazy since the fed quit printing the number.
Wouldn't this mean that "negative growth" would be hidden by inflation and growth in money supply. I mean we could see GDP 'grow' right up to the point where something finally gives and the economy does crash, right?
I guess I don't trust government 'economic indicators' and hope there is another way to measure the problem.
'Gross domestic product
From Wikipedia, the free encyclopedia
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"GDP" redirects here. For other uses, see GDP (disambiguation).
CIA World Factbook 2007 figures of total nominal GDP (top) compared to PPP-adjusted GDP (bottom).
World map showing GDP (PPP) per capita.The gross domestic product (GDP) or gross domestic income (GDI) is one of the measures of national income and output for a given country's economy. GDP is defined as the total market value of all final goods and services produced within the country in a given period of time (usually a calendar year). It is also considered the sum of value added at every stage of production (the intermediate stages) of all final goods and services produced within a country in a given period of time, and it is given a money value.
The most common approach to measuring and understanding GDP is the expenditure method:
GDP = consumption + gross investment + government spending + (exports − imports), or,
GDP = C + I + G + (X-M)'
http://en.wikipedia.org/wiki/Gross_domestic_product
i have argued for a loooooooooooooooooong time that much of gdp growth is inflation in drag.
Yes. Real GDP has been declining in the USA for a while. It is hidden by the manipulated low inflation rate. According to polls, 90% of Americans think the country is economically on the wrong path, yet, as the poster above notes, the USA is supposedly not even in a recession. This blatant propaganda will probably persist.
Brian--real GDP is likely up---since energy consumption is up. Electricity use is up about 2% year over year. Oil consumption is, perhaps down 1-2%, but Natural Gas, Coal, and Nuclear is up. Thus I assume GDP is also up.
GDP is spending minus (official government) inflation. Shadowstats provides inflation calculated by the same algorithm used in 1990, when the government most recently fudged the number. He also provides alternative GDP based on his alternative infaltion. By the standards of 1990, there has only been a single quarter (1Q2004) in GWB's presidency with positive economic growth.
You can view his alternative data series (including the GDP numbers) for free here.
I suspect Shadowstats numbers are closer to "reality" than the offical government
pacificationnumbers.In fairness, new perversions of inflation calculations were introduced during both Clinton's second term and Bush Junior. I tend to split the difference between the Shadowstats figures and the Feds'. It seems to me that as bad as things are now, we're only in the 1972-73 stage of this crisis; maybe 8% real inflation and 8% unemployment. Worse is to come, and you'll know when it's here when people act the way they did in the late '70s: always assuming that all the things they buy will be more expensive next month and a lot more expensive next year. Weimar Germans didn't need CPI announcements to freak out.
The GDP is the value of all goods and services produced within a country. Nominal GDP would be at current prices and real GDP would be at constant prices (1981 or some such year as the base).
Let us say that the US produced only two types of goods - Apples (A) and Oranges (O). Let us say that in 2007 it produced 5 apples and 10 oranges. And in 2008 it produced 7 apples and 9 oranges. As apples and oranges cannot be added it's hard to say if the output actually is up or down. If one orange is worth more than 2 apples it is down and vice versa. So it is usual to convert everything to a dollar value.
In the previous example, let us say an apple costs 1USD and an orange costs 1.5USD in 2007. In 2007 the GDP would have been $20.
Assuming that apples cost $1.10 in 2008 and oranges cost $1.60 in 2008, the GDP would have been $22.10. This is the nominal GDP. Nominal GDP growth would be about 10%. But out of this $1.60 came just because of price increases and not out of physical output growth.
Assuming prices remained the same in 2008 the real GDP would have been $20.5 or about a 2.5% growth.
Given the millions of products being manufactured the above exercise is impossible to do. So the nominal GDP is divided by a GDP deflator that tries to estimate the inflation in prices and that is used as an estimate of real GDP. So the real GDP can be overestimated if a lower deflator is used.
I would it not put it past Bush and his economist friends to fudge numbers.
Srivathsa
The ISM Manufacturing Survey is as close as you'll get.
See the BLS birth/death model and Mish's description of it
for details.
bottom line, the gov't never used the word depression from
Oct 29 to Dec 7.
Daniel, I for one, have been predicting economic collapse for about ten years now. Funny that you should think we need a quarter of negative growth before taking a stand. My stand is based on the fundamentals that got us where we are and where those fundamentals will lead us. That is the rise in the use of fossil fuels and their eventual demise. A quarter of negative growth will show nothing new.
My prediction has always been based on the long term outlook. ALL fossil fuels will eventually go the way of liquid petroleum and it will happen in this century, with the most serious impact happening in the first half of this century.
I have been thrashing this straw since the mid 60s. That is the explosion in population growth and the environmental problems brought about by the attempt to feed this growing population. Then about ten years ago it hit me like a bolt of lightning, fossil fuel depletion will be the trigger that causes the eventual total collapse. That is, an abundance in cheap fossil energy enabled this population to happen and our vast population cannot possibly survive the disappearance of that cheap energy. It is all laid out in this essay, written about thirteen years ago. Energy and Human Evolution. Of course many other essays have appeared since then, explaining it all very well, this is just the best of them. Well, the best unless you want to read an entire book on the subject. In that case the best would be "Overshoot" by William Catton. Ant the second best would be "The Spirit in the Gene" by Reg Morrison.
But you can wait for your one quarter of negative growth before taking any action to help your chances of being among the survivors. After all, the problem has been ignored for half a century so why should anyone be concerned today. But by you saying we need a quarter of negative growth before we can assume anything you are essentially saying, I must see it before I will believe it. Which makes you absolutely no different than perhaps 99 percent of the world's population.
Ron Patterson
I was making a political point, which I still maintain. As most people do not have an intellectual framework for placing events into a larger context, most cannot judge your claims. This directly leads to my belief that most are guided by experience, they have to learn the hard way. It’s starting to happen now. Admittedly, not much to base hope upon – but better than nothing.
I wasn’t as foresightful as you, but my activism regarding non-sustainable growth began about 5 years ago related to global warming. Talk about a hopeless political battle; no direct feedbacks and a 20-50 year lag to impact. Political action has been a joke – my political activism has been a joke. Peak oil is the only thing beginning to change behavior and limit CO2 emissions. Peak oil is in the political drivers seat and TOD has a major role to play. At least someone somewhere is putting forward potentially viable solutions in an accessible way.
Don't you think that, at least in the short term, the impact of peak oil on climate change is likely to be most negative? As i see it, a move back to coal seems far more likely than a radical restructuring of society around sustainable levels of energy use...
How can it be worse than coal+oil+natural gas? Keep the coal in the ground and a viable strategy is born. Easier in the West, but if we are to ask sacrifice of others we have to start at home. Really good firsts step is to stop mountain top removal.
That's the best essay about the coming collapse you can find??? With lines like "The human species may be seen as having evolved in the service of entropy..."?? I mean sure, the human species can be seen that way, but that would be a stupid, anthropocentric, teleological way of thinking. Useless at best, indicative of a third rate mind at best. The essay appears to be a one-trick pony: it identifies a simple truth, that the energy we are currently using accumulated over millions of years and won't again accumulate fast enough for our use. Everything the essay has to say follows from that. But, that is not enough to conclude much, nor is it much of an insight. I hope the books you recommended are better.
The US Air Force did a study back in the '80s estimating that the Space Shuttle would suffer a catastrophic failure about once every 70-odd flights. It did not even get that far before the Challenger explosion - which is when everyone found out about the study and took action. Except that there were even fewer flights before the next crash. So I agree that we have the ability to know that a complex system has a probability of failure. We have no excuses.
It's a well known fact that the average American has little understanding of science and technology. My complaint wasn't with "the people", but with their so-called "leaders". Both the politicians and their bosses in corporate America are responsible for repeatedly presenting the illusion of infinite growth to the fools sitting in their LazyBoys in front of the daily blur of mindless TV entertainment. Corporate America (and that includes the information media) has made great efforts to spread the American Dream. Well, now the Dream has become a Nightmare and we are awakened at night with a sense of nameless dread. The People will respond by seeking revenge against the scapegoat de jour, hacking it to pieces and burning it's remains. But, the MSM is spreading disinformation about just who to blame for the mess, so the People, who are still being mesmerized by their HDTV's, will conclude that the blame should be placed on the very people that tried to warn of the mess.
We had a chance to choose a different path, back in the late 1970's and early 1980's after the two oil shocks sent prices thru the roof. But, those were temporary shocks and after those storms had passed, we all were lulled back to sleep. I would lay the blame most heavily on the Republicans, since they were effectively running the U.S. Government most of the time since Carter. Reagan had a golden opportunity to change direction after the Saudis flooded the oil market, driving the price down in 1986. La De Da, Happy Days and Cheap Oil Forever seemed to be his response. If he had used his brain (what may have been left of it) and put a floor under the price of gasoline by increasing the tax or transportation fuel, I think we would not be in this situation. Of course, his buddies in the Texas oil companies were screaming about the fact that they weren't making enough money to pay their bills and Texas was in a severe Recession, so that didn't happen.
We had another opportunity after the Asian Crisis in 1997, when the price of oil again dipped. By then, our Congress was dominated by the Gingrich Republicans, whose Neo-Con Free Market philosophy saw cutting taxes as the prime directive. OK, now it's Pay Back Time. It appears that quite a few of The People are going to find that living on the street isn't such a fun thing, even if you have a camper. (BTW, I did that for a while). Throwing rocks at a scapegoat won't solve the problem. Writing letters and sending e-mails to politicians won't solve the problem, as most of these never make it to the elected official. As I see it, the only solution is to throw the bastards out and hope that the next crew will do it right. The People won't get it until things are so bad that they are living under that proverbial bridge, living hand to mouth on what ever they can scrounge or steal. Somewhere along the way, I expect that bullets will start to fly...
E. Swanson
I doubt flying bullets any time soon. Americans seems peculiarly adept at self-censorship and paralyzing gloomy thinking.
Repression is a way of life here, but it is hidden behind soft porn on TV and the phony freedom of "consumer choice."
The people in charge are just salesmen themselves. They had to sell themselves as a leadership product to get into office or the corporate boards. They had to convince themselves that the future would always be better. Why should we expect that they understand reality any better than us?
I can't imagine anything in this country would be different right now if we had simply appointed used car salesmen to every office of influence in every sector of the economy and government. Tell me what the opposite of a used car salesman is and I'll tell you who to hire as a replacement.
I go back and forth in the blame game. Surely the people elected the leaders that ruined them. But how were they to know when the MSM continually gave them propaganda rather than information. And yet, how is it that people are able to believe the MSM?