MaxedOutMama
Saturday, February 27, 2010
Blah, Hiss, Spit
Consumer Metrics Institute. This is new, but worth looking at. Especially this. Also portions of this, which although gathered by a very different means, appears to closely track my grocery store index. I got it from Mish, whom I don't really read, but I saw a reference to this in the comments over at CR's place.
In general, when sharply different methods trying to assess the same thing come up with very similar results it tends to increase one's confidence in these results. I prefer my method, since it has a lot of history behind it. But I am startled by the close correspondence of Consumer Metrics.
The remaining question is whether we can avoid a second contraction in the second half. We could if energy prices reversed sharply. Maybe. And we could if for some reason all of those who have money on the sidelines decided to spend it, but that's not happening.
However if Congress doesn't pass more than a 30 day extension of unemployment benefits, I don't think we have much of a chance of avoiding a second half contraction. In part, our problem IS confidence. People who are working or have money in the bank and relatively comfortable personal positions tend to moderate their spending based on confidence factors, and one of the factors driving confidence is the position of those close to them. If, for example, a retired couple is very worried about one of their children losing unemployment, you can be quite assured that the couple won't be spending much on themselves. They'll reserve it.
There were two structural employment bumps and one temporary (Census). The two structural were production (inventory cycle) and low-end retail, especially the growth in store hours. There is not a huge amount more in either, and throughout 2010 the state and local fiscal problems driving reductions in state and local employment and spending, plus large corporate restructuring, will slowly pare away at employment. Against that, you have retirements, which somewhat offset the trend.
What I am seeing in the grocery stores is pretty frightening. It's depression-like, quite similar to the later 70s. It's the marker of reduced living standards for a large number of people, and it's not going to clear up quickly. It has gapped down in a major way over the last month. I am pretty jittery. One ugly emerging pattern is a disproportionate decline in counties with a high percentage of government employment. We'll see if that holds.
I also have a miserable virus, probably fed by all the snow shoveling I did this week. I'm going to take a few days down.
In general, when sharply different methods trying to assess the same thing come up with very similar results it tends to increase one's confidence in these results. I prefer my method, since it has a lot of history behind it. But I am startled by the close correspondence of Consumer Metrics.
The remaining question is whether we can avoid a second contraction in the second half. We could if energy prices reversed sharply. Maybe. And we could if for some reason all of those who have money on the sidelines decided to spend it, but that's not happening.
However if Congress doesn't pass more than a 30 day extension of unemployment benefits, I don't think we have much of a chance of avoiding a second half contraction. In part, our problem IS confidence. People who are working or have money in the bank and relatively comfortable personal positions tend to moderate their spending based on confidence factors, and one of the factors driving confidence is the position of those close to them. If, for example, a retired couple is very worried about one of their children losing unemployment, you can be quite assured that the couple won't be spending much on themselves. They'll reserve it.
There were two structural employment bumps and one temporary (Census). The two structural were production (inventory cycle) and low-end retail, especially the growth in store hours. There is not a huge amount more in either, and throughout 2010 the state and local fiscal problems driving reductions in state and local employment and spending, plus large corporate restructuring, will slowly pare away at employment. Against that, you have retirements, which somewhat offset the trend.
What I am seeing in the grocery stores is pretty frightening. It's depression-like, quite similar to the later 70s. It's the marker of reduced living standards for a large number of people, and it's not going to clear up quickly. It has gapped down in a major way over the last month. I am pretty jittery. One ugly emerging pattern is a disproportionate decline in counties with a high percentage of government employment. We'll see if that holds.
I also have a miserable virus, probably fed by all the snow shoveling I did this week. I'm going to take a few days down.
Friday, February 26, 2010
Consumers, They Spoil All Our Brilliant Plans
Existing Home Sales surprised to the downside for me. I was thinking that some of the weakness in new home sales would show up as a plus in existing home sales. I don't care what the official figures say - home prices are still dropping hard. That makes it difficult for home builders to compete.
I went back and looked at pendings for December again. It was marginally above the 2009 pace, so this is a surprise.
What leaps out and grabs you by the throat in the existing home sales report is that the SA annualized number for January was below the 2009 number. Sales improved substantially through 2009, and were somewhat boosted by the tax credit. January's drop is before any signficant disturbances in the mortgage market (substantial tightening, rates) and before the expiration of the tax credit. Except in the west, which eked out a month-over-month fall but a gain over 2009's pace, sales in every region were below the 2009 pace:
Chicago PMI was good, although the pace of the improvement tailed off considerably. Production dropped a bit, but inventories tightened somewhat. There is a bifurcating pattern showing both increased improvement and increased drops, so Chicago PMI was extremely consistent with the idea that the inventory cycle is reaching a natural end. Prices paid were trending upwards.
The picture presented by the data of the last week is still some carrying impetus forward, but a waning of the inventory effect, and considerable weakness in consumer spending and weakness in reasonable expectations for consumer spending.
The newer generations of mortgages are still too loose and will generate a lot of losses, so I am expecting effective tightening in mortgages this year. That would affect sales adversely, so it is worrisome to be starting at this level. On the other hand, these numbers do make a lot of sense when one looks at consumer surveys; people who are pretty negative about the current economy and who are somewhat pessimistic about the future are not likely to buy a house. We may just have reached the phase where those who are more secure have mostly purchased. I always expected turnover to be good in large portions of the west, because the average homeownership rate there is far lower than the national rate.
PS: The takeaway from the GDP update was that PCE gains were revised down to 1.7% on Q4. See CR - when he talks about the two leading categories being revised down, he is referring to what I call the carrying wave.
I went back and looked at pendings for December again. It was marginally above the 2009 pace, so this is a surprise.
What leaps out and grabs you by the throat in the existing home sales report is that the SA annualized number for January was below the 2009 number. Sales improved substantially through 2009, and were somewhat boosted by the tax credit. January's drop is before any signficant disturbances in the mortgage market (substantial tightening, rates) and before the expiration of the tax credit. Except in the west, which eked out a month-over-month fall but a gain over 2009's pace, sales in every region were below the 2009 pace:
NationalNeedless to say, this raises questions about the carrying wave through the economy. The peak months in 2009 were Oct/Nov (nationally, 5,980,000 and 6,490,000), but that was partially the effect of buyers rushing for the tax credit and of course that generated a fall in sales afterwards. So a comparison to the overall 2009 pace is probably more valid, but if we miss it for another month a lot of eyebrows are going to be rising. Note particularly the south; weather may have been a factor for the east and midwest, but this is peak time for many active southern markets, and weather wasn't a factor there.
2009 pace: 5,156,000
January 10: 5,050,000
East
2009 pace: 868,000
January 10: 820,000
Midwest
2009 pace: 1,163,000
January 10: 1,080,000
South
2009 pace: 1,914,000
January 10: 1,870,000
West
2009 pace: 1,211,000
January 10: 1,280,000
Chicago PMI was good, although the pace of the improvement tailed off considerably. Production dropped a bit, but inventories tightened somewhat. There is a bifurcating pattern showing both increased improvement and increased drops, so Chicago PMI was extremely consistent with the idea that the inventory cycle is reaching a natural end. Prices paid were trending upwards.
The picture presented by the data of the last week is still some carrying impetus forward, but a waning of the inventory effect, and considerable weakness in consumer spending and weakness in reasonable expectations for consumer spending.
The newer generations of mortgages are still too loose and will generate a lot of losses, so I am expecting effective tightening in mortgages this year. That would affect sales adversely, so it is worrisome to be starting at this level. On the other hand, these numbers do make a lot of sense when one looks at consumer surveys; people who are pretty negative about the current economy and who are somewhat pessimistic about the future are not likely to buy a house. We may just have reached the phase where those who are more secure have mostly purchased. I always expected turnover to be good in large portions of the west, because the average homeownership rate there is far lower than the national rate.
PS: The takeaway from the GDP update was that PCE gains were revised down to 1.7% on Q4. See CR - when he talks about the two leading categories being revised down, he is referring to what I call the carrying wave.
Thursday, February 25, 2010
Still In The House Of The Unexpected
Only Wall Street economists can listen to The House of The Rising Sun and think it's a paean of optimism. On Main Street, the interpretation is perhaps more realistic. I may seem to be harping on this theme, but I saw some very remarkable research reports from Persons Who Should Know Better in the fall of last year.
Anyway ... if you will look back, you'll note that for the last few months I kept whining that all the large companies were still in cutting mode. Perhaps this has something to do with another "unexpected" rise in initial unemployment claims. This week's 496,000 SA number is less important than the continuing rise in the four-week average, which is now at 473,750. Still, for some perspective, we should remember that the comparable week in 2009 had initial claims of 656,000. There is a strong improvement. But it is very hard to look at a four-week average over 450,000 and think that we are going to be gaining much in the way of net jobs without a further step up in the economic cycle, especially once the Census jobs filter out and the full impact of the state and local fiscal situation hits this summer.
It is not that the larger company cuts are at all unprecedented. In the wake of the 75-82 cycle, large corporates cut for years. But at that time, much of the slack was taken up by small businesses which took over a lot of the cut functions and hired like crazy (and bought stuff like crazy). Thus it is the combination of an extremely depressed small business sector and large corporates still retrenching that make the 2010 picture so doubtful.
My guess is that the US will pull out at least a net +1.8% for the year, but that will not feel very wonderful if we end the year in another contraction. Sad to say, policy choices probably are determinant. I wish I felt more confident about policy-makers.
There is still some good left in this picture. Overall companies managed to make the Schumpeter turn in Q4 (according to tax receipts) which provides us some breathing room.
Today's durable goods report seems to show that we are nearing the end of the inventory clearing cycle. Specifically, look at metals. New orders for fabricated were up 2.2% Oct/Nov, down 2% Nov/Dec, and were flat Dec/Jan. Over the same period, new orders for primary metals went +2.6%, +10.1%, +1.9%. Shipments of primary metals peaked and dropped to a pace of 1.1%. The sequence on an inventory recession is dropping sales > increasing retail/wholesale inventory > slowing wholesale orders > slowing production > inventory builds down to crude materials. It reverses in order, and when the surge in crude materials passes, you have gone through the clearance cycle and ongoing production will reset to a pace equivalent to current sales flows. So we are mostly there.
New machinery orders confirmed by falling 9.6%. Motor vehicles new orders dropped 2.2%. There is still a hefty defense bulge in, but one wonders how long that can continue, and capital goods new orders ex defense and aircraft came in at -2.9%. The electronics/computers jump is still there and will provide another couple of decent months along with defense.
I also cannot stress enough that the durable goods report is currency based, not volume based. It should always be read in light of PPI trends for crude, finished and final goods. Since the 12 month change in prices for crude goods in January was +25.2%, YoY changes have to be seen in that light. The month over month changes are less affected.
Finally, oil inventories and prices do not make sense together. Inventories for every category are still above the upper bound of the average stock except for propane.
Gasoline demand is still turning in a YoY decline, which is not an indicator of economic improvement. In general gas consumption rises strongly in the early stages of recovery as jobs pick up. We have gone through a cycle where gasoline consumption did improve, and now that has retracted.
We are essentially dependent on overseas demand for improvement in corporate margins. That is why I am spending so much time on the Chinese situation.
Last, but not least, we have definitely reached the point at which gas consumption is strongly affected by prices. From the PPI report:
Anyway ... if you will look back, you'll note that for the last few months I kept whining that all the large companies were still in cutting mode. Perhaps this has something to do with another "unexpected" rise in initial unemployment claims. This week's 496,000 SA number is less important than the continuing rise in the four-week average, which is now at 473,750. Still, for some perspective, we should remember that the comparable week in 2009 had initial claims of 656,000. There is a strong improvement. But it is very hard to look at a four-week average over 450,000 and think that we are going to be gaining much in the way of net jobs without a further step up in the economic cycle, especially once the Census jobs filter out and the full impact of the state and local fiscal situation hits this summer.
It is not that the larger company cuts are at all unprecedented. In the wake of the 75-82 cycle, large corporates cut for years. But at that time, much of the slack was taken up by small businesses which took over a lot of the cut functions and hired like crazy (and bought stuff like crazy). Thus it is the combination of an extremely depressed small business sector and large corporates still retrenching that make the 2010 picture so doubtful.
My guess is that the US will pull out at least a net +1.8% for the year, but that will not feel very wonderful if we end the year in another contraction. Sad to say, policy choices probably are determinant. I wish I felt more confident about policy-makers.
There is still some good left in this picture. Overall companies managed to make the Schumpeter turn in Q4 (according to tax receipts) which provides us some breathing room.
Today's durable goods report seems to show that we are nearing the end of the inventory clearing cycle. Specifically, look at metals. New orders for fabricated were up 2.2% Oct/Nov, down 2% Nov/Dec, and were flat Dec/Jan. Over the same period, new orders for primary metals went +2.6%, +10.1%, +1.9%. Shipments of primary metals peaked and dropped to a pace of 1.1%. The sequence on an inventory recession is dropping sales > increasing retail/wholesale inventory > slowing wholesale orders > slowing production > inventory builds down to crude materials. It reverses in order, and when the surge in crude materials passes, you have gone through the clearance cycle and ongoing production will reset to a pace equivalent to current sales flows. So we are mostly there.
New machinery orders confirmed by falling 9.6%. Motor vehicles new orders dropped 2.2%. There is still a hefty defense bulge in, but one wonders how long that can continue, and capital goods new orders ex defense and aircraft came in at -2.9%. The electronics/computers jump is still there and will provide another couple of decent months along with defense.
I also cannot stress enough that the durable goods report is currency based, not volume based. It should always be read in light of PPI trends for crude, finished and final goods. Since the 12 month change in prices for crude goods in January was +25.2%, YoY changes have to be seen in that light. The month over month changes are less affected.
Finally, oil inventories and prices do not make sense together. Inventories for every category are still above the upper bound of the average stock except for propane.
Gasoline demand is still turning in a YoY decline, which is not an indicator of economic improvement. In general gas consumption rises strongly in the early stages of recovery as jobs pick up. We have gone through a cycle where gasoline consumption did improve, and now that has retracted.
We are essentially dependent on overseas demand for improvement in corporate margins. That is why I am spending so much time on the Chinese situation.
Last, but not least, we have definitely reached the point at which gas consumption is strongly affected by prices. From the PPI report:
The Producer Price Index for the Net Output of Total Trade Industries fell 0.5 percent in January, its second consecutive decline. (Trade indexes measure changes in margins received by wholesalers and retailers.) About two-thirds of the January decrease is attributable to a 9.3-percent drop in margins received by gasoline stations. Margins received by general merchandise stores and home centers also fell in January, contributing significantly to the decline in the total trade industries index.The reason gasoline stations drop margins is because they are fighting to keep business up. It's a dead giveaway that there's potential consumer economic trouble ahead. Once consumers are tight on gas, they are very unlikely to be spending freely on non-essentials.
Wednesday, February 24, 2010
Unexpectedly, Again
Nobody 'spects nuthin', these days. It's like living in a nursery school full of economists.
Unexpectedly consumer confidence fell, unexpectedly the MBA mortgage purchase index fell, and unexpectedly new home sales for December fell. Mortgage rates were back up a touch over 5% last week, so refis are subdued.
The talk about CPI and deflation kind of obscures the fact that consumers have only so many truly disposable dollars. When their costs for basics go up (medical, food, energy) then spending retracts on all non-essentials. If you look at the actual release, a troubling pattern becomes clear:
I don't think anything more is required to explain consumer confidence and diminishing expectations; both medical costs and insurance costs are rising, food at home is now rising, fuel is rising. While CARS goosed the economy, just look at the effect on used car prices. The stimulus is being slowly retracted there.
Retail sales for January showed a YoY gain, but when you look at it, about 2/3rds of the gain was squarely in gasoline, which tells an ugly tale of its own.
Q4 charge-off rates (link to SA numbers) were published for banks, and they rose again. Credit card charge-offs were slightly down, though. Residential charge-offs rose to 2.71% and commercial mortgage charge-offs rose to 3.05%. Total loans and leases was an awe-inspiring 2.93%, although not hugely increased from Q3's 2.85% (with the seasonal adjustment).
But I'll tell you something - if the fuel price trend continues, the trend in consumer loans is going to reverse. That category is very sensitive to increases in the cost for basics.
If you are wondering, with charge-offs on residential mortgages running over 2%, and 10 year T-bills hanging in the 3.60-3.70% range, writing mortgages at 5% makes NO sense whatsoever. It's sort of like playing Russian roulette with all the chambers loaded. The pattern of recent defaults has shifted from being strongly funny-money related to being much more related to the basic economy. You've probably got a 1% charge-off baked in for years on these new loans (appreciation is not going to save you, and Q4 delinquencies rose again to 10.14%), and future interest rates are going to rise, so pass the ammo and praise the Fed?
For those who don't get it, charge-off rates are expressed as annual percentages of the total portfolio, so they are directly convertible to interest rates. Because of the high delinquency rate, your servicing costs are higher too. We are figuring 45 basis points for five years on prime mortgage portfolios.
So:
100 basis points (=1%)
+45 basis points = 1.45% + 3.70% = 5.15%. Then add rate risk at 75 basis points. Hell yeah! Hoo-hah! I'll take the 3.70% return on the T-bills rather than the prime mortgages at 5%, Alex.
So this explains why almost all mortgage origination is going through federal programs.... To write prime mortgages I want 5.9-6%, and I really want it NOW, and no, I'm not swimming in these waters. Also, they have to be prime. I want 10% down, I want it in cash from the borrower, I want a housing inspection and MY appraisal, I want very good credit aside from exigencies, I want employment stability, I want housing stability, I want the borrower to have savings on hand for two months mortgage payments after closing, I want a record of the borrower saving, I want owner occupied, I want total mortgage payments 38% or under, and not out of range with comparable rents, I want mortgage insurance to 80% - in short, I don't want to write any mortgages in this market. I do not approve of screwing borrowers, and why should such a borrower pay me 6% for money when he can get it for 5% on the GSE market? The only ethical thing to do is pack my borrowers a lunch and send them down the road to inflict the losses on the taxpayers. As a taxpayer, I have mixed feelings about that....
I really don't worry about financing for small businesses in the market. There's no other place for the small banks and CUs to deploy their money in this market. The problem is that many small businesses are already maxed on credit at current revenues, and there are continuing worries about what health care reform proposals and energy will do to them. So I need a lot of collateral, which I can only usually get from hard assets (savings, real estate, land, stock, etc). Many of these people don't have it.
The structural problem here is pretty huge. The only place for lending to really pick up is in corporate expansion, which appears to be, ahem, waiting on consumer sales for the most part. Ag loan delinquencies, as predicted, have shot up. Q4 08 was 1.43%, Q4 09 was 3.24%. There is nothing at all to do but form a bank band which can sing a banking version of Joan Jett's "Love Hurts" after hours while preparing for the bank examiners. It really lightens the mood.
Unexpectedly consumer confidence fell, unexpectedly the MBA mortgage purchase index fell, and unexpectedly new home sales for December fell. Mortgage rates were back up a touch over 5% last week, so refis are subdued.
The talk about CPI and deflation kind of obscures the fact that consumers have only so many truly disposable dollars. When their costs for basics go up (medical, food, energy) then spending retracts on all non-essentials. If you look at the actual release, a troubling pattern becomes clear:
Seasonally adjusted changes fromConsumers who are trying to live tight are being pushed again.... A very bad sign for debt repayments and retailers over the long term. Shelter is pushing down that aggregate index, but real aggregate shelter costs are probably increasing now (an increasing number of people who were living rent-free and not paying their mortgages are having to deal with rents). The rent give-backs come slowly, and if you own your property a lot of localities are increasing property taxes because of the fiscal problems.
preceding month
Un-
adjusted
12-mos.
July Aug. Sep. Oct. Nov. Dec. Jan. ended
2009 2009 2009 2009 2009 2009 2010 Jan.
2010
All items.................. .1 .4 .2 .2 .2 .2 .2 2.6
Food...................... -.2 .0 -.1 .0 .1 .1 .2 -.4
Food at home............. -.5 -.1 -.3 .0 .0 .2 .4 -2.0
Food away from home (1).. .1 .1 .1 .1 .2 .1 .1 1.6
Energy.................... .5 3.7 .6 .6 2.2 .8 2.8 19.1
Energy commodities....... 1.0 6.7 1.1 .4 3.0 1.6 4.9 46.6
Gasoline (all types).... 1.1 6.9 .9 .3 2.7 2.3 4.4 51.3
Fuel oil (1)............ -.3 5.0 -.3 2.2 7.4 .0 6.1 19.3
Energy services.......... -.2 .1 -.1 .8 1.1 -.3 .0 -4.7
Electricity............. -.4 -.1 .3 .8 1.2 -.2 -1.1 -1.9
Utility (piped) gas
service.............. .5 .5 -1.5 .7 .9 -.7 3.5 -12.2
All items less food and
energy................. .1 .1 .2 .2 .0 .1 -.1 1.6
Commodities less food and
energy commodities.... .2 -.2 .3 .4 .2 .1 .1 2.9
New vehicles............ .5 -1.0 .3 1.4 .5 -.2 -.5 4.1
Used cars and trucks.... .0 2.0 1.7 3.1 1.9 2.2 1.5 11.5
Apparel................. .4 .0 .2 -.3 -.3 .4 -.1 1.7
Medical care commodities
(1).................. -.1 .5 .6 .2 .1 -.1 .7 3.5
Services less energy
services.............. .1 .2 .1 .1 .0 .1 -.2 1.0
Shelter................. -.1 .1 .0 .0 -.2 .0 -.5 -.1
Transportation services .5 .5 .7 .5 .5 .3 -.3 3.3
Medical care services... .3 .2 .3 .2 .3 .2 .5 3.5
1 Not seasonally adjusted.
I don't think anything more is required to explain consumer confidence and diminishing expectations; both medical costs and insurance costs are rising, food at home is now rising, fuel is rising. While CARS goosed the economy, just look at the effect on used car prices. The stimulus is being slowly retracted there.
Retail sales for January showed a YoY gain, but when you look at it, about 2/3rds of the gain was squarely in gasoline, which tells an ugly tale of its own.
Q4 charge-off rates (link to SA numbers) were published for banks, and they rose again. Credit card charge-offs were slightly down, though. Residential charge-offs rose to 2.71% and commercial mortgage charge-offs rose to 3.05%. Total loans and leases was an awe-inspiring 2.93%, although not hugely increased from Q3's 2.85% (with the seasonal adjustment).
But I'll tell you something - if the fuel price trend continues, the trend in consumer loans is going to reverse. That category is very sensitive to increases in the cost for basics.
If you are wondering, with charge-offs on residential mortgages running over 2%, and 10 year T-bills hanging in the 3.60-3.70% range, writing mortgages at 5% makes NO sense whatsoever. It's sort of like playing Russian roulette with all the chambers loaded. The pattern of recent defaults has shifted from being strongly funny-money related to being much more related to the basic economy. You've probably got a 1% charge-off baked in for years on these new loans (appreciation is not going to save you, and Q4 delinquencies rose again to 10.14%), and future interest rates are going to rise, so pass the ammo and praise the Fed?
For those who don't get it, charge-off rates are expressed as annual percentages of the total portfolio, so they are directly convertible to interest rates. Because of the high delinquency rate, your servicing costs are higher too. We are figuring 45 basis points for five years on prime mortgage portfolios.
So:
100 basis points (=1%)
+45 basis points = 1.45% + 3.70% = 5.15%. Then add rate risk at 75 basis points. Hell yeah! Hoo-hah! I'll take the 3.70% return on the T-bills rather than the prime mortgages at 5%, Alex.
So this explains why almost all mortgage origination is going through federal programs.... To write prime mortgages I want 5.9-6%, and I really want it NOW, and no, I'm not swimming in these waters. Also, they have to be prime. I want 10% down, I want it in cash from the borrower, I want a housing inspection and MY appraisal, I want very good credit aside from exigencies, I want employment stability, I want housing stability, I want the borrower to have savings on hand for two months mortgage payments after closing, I want a record of the borrower saving, I want owner occupied, I want total mortgage payments 38% or under, and not out of range with comparable rents, I want mortgage insurance to 80% - in short, I don't want to write any mortgages in this market. I do not approve of screwing borrowers, and why should such a borrower pay me 6% for money when he can get it for 5% on the GSE market? The only ethical thing to do is pack my borrowers a lunch and send them down the road to inflict the losses on the taxpayers. As a taxpayer, I have mixed feelings about that....
I really don't worry about financing for small businesses in the market. There's no other place for the small banks and CUs to deploy their money in this market. The problem is that many small businesses are already maxed on credit at current revenues, and there are continuing worries about what health care reform proposals and energy will do to them. So I need a lot of collateral, which I can only usually get from hard assets (savings, real estate, land, stock, etc). Many of these people don't have it.
The structural problem here is pretty huge. The only place for lending to really pick up is in corporate expansion, which appears to be, ahem, waiting on consumer sales for the most part. Ag loan delinquencies, as predicted, have shot up. Q4 08 was 1.43%, Q4 09 was 3.24%. There is nothing at all to do but form a bank band which can sing a banking version of Joan Jett's "Love Hurts" after hours while preparing for the bank examiners. It really lightens the mood.
Loans hurt, loans scar, loans wound and mar
Any bank not tough nor strong enough
To take a lot of pain, take a lot of pain
Lending like a cloud holds a lot of rain
Loans hurt, loans hurt.
I may be slow, but even so
I know a thing or two, Ive learned from you
Ive really learned a lot, really learned a lot
Lending like a flame, burns you when its hot
Loans hurt, loans hurt
Tuesday, February 23, 2010
But The Bumblebee Still Flies
As CR notes, Q4 state tax collections were bad, and by "bad", we mean "still declining in a very unambiguous way".
Still, the US economy appears to be growing. This February we are crossing the line to YoY gains on WIET and CIT. FUT already crossed and continues positive.
FUT (Federal Unemployment Tax) is a particularly encouraging indicator, because it is not paid on tax-exempt employees (such as non-profit charities, churches), on state and local employees, or on federal employees. So it is a measure of private employment, which is a particularly important indicator given the Census and its distortion. So I don't care what the unemployment and employment official stats may say for February - it is a decent month. Not great, but not bad.
If one tried, one could make a case that the economy will continue decent growth in 2010, or one could make the case that the economy would subside once more in the later part of 2010. There are indications both ways. Usually, that is an encouraging sign.
I won't try to make any case. In my view this is somewhat fragile and the final trajectory for 2010 depends most on government policy and fuel prices (which will control a lot about spending power). We are entering the danger period, because M1 and M2 don't look too good. This is related to the fall in deposits. See historical H.6 and H.8.
I think we are going to squeak through if Congress would just get off its butt and approve the unemployment extension. This is urgent. Over two million people will lose their unemployment benefits through April if they don't, and even if they do, some people are now facing another interruption in unemployment benefits, which is not going to help.
And that is why I spent part of yesterday afternoon running around in a frenzy yelling stuff about "President Buffoon". It is governmental malpractice to be pushing insurance reform before the unemployment extension is approved. But seriously, folks, it is. It doesn't matter what you do at top levels if the money isn't inserted at the ground levels. This is an administration so occupied with posing before the mountains on its home range that it forgets to change the oil in the trucks and feed the livestock.
I have completely had it with this administration. I can't be polite about it any more. It's got grandiose delusions or something of the sort. If it were a human being it would be Reverend Jim from Taxi. Nice, but so far out there that things are getting unnecessarily difficult.
Our future choices are constrained - that is true. But that is an overarching situation affecting the entire developed world. See BIS on the topic. We can't spend heedlessly, and I utterly agree that we have to make hard choices. The unemployment benefits question isn't one of those choices. It's a no-brainer.
Still, the US economy appears to be growing. This February we are crossing the line to YoY gains on WIET and CIT. FUT already crossed and continues positive.
FUT (Federal Unemployment Tax) is a particularly encouraging indicator, because it is not paid on tax-exempt employees (such as non-profit charities, churches), on state and local employees, or on federal employees. So it is a measure of private employment, which is a particularly important indicator given the Census and its distortion. So I don't care what the unemployment and employment official stats may say for February - it is a decent month. Not great, but not bad.
If one tried, one could make a case that the economy will continue decent growth in 2010, or one could make the case that the economy would subside once more in the later part of 2010. There are indications both ways. Usually, that is an encouraging sign.
I won't try to make any case. In my view this is somewhat fragile and the final trajectory for 2010 depends most on government policy and fuel prices (which will control a lot about spending power). We are entering the danger period, because M1 and M2 don't look too good. This is related to the fall in deposits. See historical H.6 and H.8.
I think we are going to squeak through if Congress would just get off its butt and approve the unemployment extension. This is urgent. Over two million people will lose their unemployment benefits through April if they don't, and even if they do, some people are now facing another interruption in unemployment benefits, which is not going to help.
And that is why I spent part of yesterday afternoon running around in a frenzy yelling stuff about "President Buffoon". It is governmental malpractice to be pushing insurance reform before the unemployment extension is approved. But seriously, folks, it is. It doesn't matter what you do at top levels if the money isn't inserted at the ground levels. This is an administration so occupied with posing before the mountains on its home range that it forgets to change the oil in the trucks and feed the livestock.
I have completely had it with this administration. I can't be polite about it any more. It's got grandiose delusions or something of the sort. If it were a human being it would be Reverend Jim from Taxi. Nice, but so far out there that things are getting unnecessarily difficult.
Our future choices are constrained - that is true. But that is an overarching situation affecting the entire developed world. See BIS on the topic. We can't spend heedlessly, and I utterly agree that we have to make hard choices. The unemployment benefits question isn't one of those choices. It's a no-brainer.
Monday, February 22, 2010
A Couple Of Things
First, both CFNAI in the US and the world steel report seem to show that globally, the recession is over:
But a brief read of the world steel report raises many troubling questions. Last year China accounted for 47% of world steel production. In December, a month when world steel production was recovering dramatically, China accounted for 45% of the total. This is why Chinese news about tightening causes such market angst.
There are other extremely worrisome aspects of China's 2009 economy. China is now the world's largest auto market - yet oil consumption barely increased in 2009. Chinese bus travel figures showed a decrease in acceleration in 2009. One hardly knows what to make of this. The discrepancy is causing analysts everywhere to scratch their heads. China has spent a massive amount to stimulate their economy, including a huge building program of new refineries, power plants, etc. It is also building up its navy.
There are two possible interpretations. One is that Hjalmar Schacht has been reincarnated and is running China's economy. That cannot be discounted, because China's economy is dependent on some far-flung supply lines that extend to Africa and the Middle East. The Chinese oilfields in the Sudan are one of the root causes of the conflict there, and China's operations in the Gulf have been causing stress in India for years. Here's an article from December that sums up the basic position.
The other possible interpretation is that China is in a bubble and doesn't know how to get out, and that the decline in world demand appears to be long term, so its normal strategy of infrastructure to tide it over is doomed to fail.
Neither interpretation contradicts the other.
Another reality is that Krugman aside, the western countries are confronting a joint crisis involving welfare spending. In the aggregate, government spending for welfare programs per capita is going to be constrained. This raises issues about demand and economies. See Samuelson here and here.
But a brief read of the world steel report raises many troubling questions. Last year China accounted for 47% of world steel production. In December, a month when world steel production was recovering dramatically, China accounted for 45% of the total. This is why Chinese news about tightening causes such market angst.
There are other extremely worrisome aspects of China's 2009 economy. China is now the world's largest auto market - yet oil consumption barely increased in 2009. Chinese bus travel figures showed a decrease in acceleration in 2009. One hardly knows what to make of this. The discrepancy is causing analysts everywhere to scratch their heads. China has spent a massive amount to stimulate their economy, including a huge building program of new refineries, power plants, etc. It is also building up its navy.
There are two possible interpretations. One is that Hjalmar Schacht has been reincarnated and is running China's economy. That cannot be discounted, because China's economy is dependent on some far-flung supply lines that extend to Africa and the Middle East. The Chinese oilfields in the Sudan are one of the root causes of the conflict there, and China's operations in the Gulf have been causing stress in India for years. Here's an article from December that sums up the basic position.
The other possible interpretation is that China is in a bubble and doesn't know how to get out, and that the decline in world demand appears to be long term, so its normal strategy of infrastructure to tide it over is doomed to fail.
Neither interpretation contradicts the other.
Another reality is that Krugman aside, the western countries are confronting a joint crisis involving welfare spending. In the aggregate, government spending for welfare programs per capita is going to be constrained. This raises issues about demand and economies. See Samuelson here and here.
Thursday, February 18, 2010
I Hear The Fat Lady Caterwauling In The Distance
Despite the fact that this is struggling to come back, I think I see the word "Mene" forming on the wall:
Singapore's tourism is up, but its January exports dropped 8.9%.
Crude oil prices are back up to about $78. This is pretty delusional, but it kind of guarantees a world-wide drag. The drag would not be sufficient to knock things out of recovery if it were not for the fact that mean, mean persons are beginning to wonder if governments can possibly pay their debt, so a lot of government stimulus is ending of necessity. In the US, states are short about 180 billion in the next budget, which is about 10% of their Q4 spending. With pension costs continuing to escalate sharply, that implies that they have to cut spending by about 120 billion to have a hope.
But still that wouldn't do it, except for this one ugly fact: January producer prices showed the danger signal. The 12 month change in crude goods is + 25.2%; the 12 month change in intermediate goods is +4.6%, and the 12 month change in finished goods is +4.6%. A few months ago (Oct), the 12 month change in crude goods was -14.1%. In November, it rose to +4.7%. In December, it rose to +12.3%. That's a "Mene, Mene, Tekel" right there.
As the full inventory replacement cycle moves to its natural end, the carrying wave will consist of end sales, and producers are going to have to raise prices to accommodate current costs. I have already seen the nasty signs in the last few weeks of groceries - stuff like pasta is inching up, but the non-essential stuff is being flogged for about nothing. There is a shortage of consumer dollars to cover those producer costs; the result is further compression of margins and further compression of end sales. That means that many companies will be cutting costs further. We are going to have some incredible bargains in commercial space for years to come.... And hiring ain't gonna be very hot either.
So I was a bit surprised to see that the rise in initial claims was "unexpected" (4-week MA at 467,500); and I laughed out loud at Walmart's "surprising" comparable store sales drop of 1.6% in Q4. Walmart also observes that the first quarter will be "more challenging". How that could surprise anyone is beyond me, because a Mene, Mene was flashing above January advance retail sales:
Here you have to look at the YoY. Table 1B gives you the unadjusted which are the best for a YoY, and here we go Jan 2010/Jan 2009 (figures are in millions):
Total: 323,688/ 313,593 (+10,095). This doesn't seem so bad, but when we look at the categories the weakness appears:
Gasoline: 31,515/ 24,681 (+6,834) We've got only 3,261 of our nominal increase left.
Pharmacies: 21,132/ 20,664 (+468) We've got 2,793 nominal increase.
At this point, the need to replace clothing and buy new or fix cars is becoming ever more pressing. So we are seeing the result of the diversion in spending in major YoY falls in sales for categories like electronics (-7.6%), furnishings (-6.4%), and building supplies (-9.9%). Some of that is shifted to non-store retailers (partly due to sales tax), but most of it is just coming out in the form of either reduced prices or reduced sales.
I believe we can discount the possibility that consumers are suddenly going to start charging a lot of "wants" stuff on their credit cards. That means that we are seeing a shift back toward spending only on essentials.
Wholesale inflation in India is running well over 8%, and their central bank will have to act.
We still have some temporary boost in the US domestic economy due to Census jobs this year. Those will tail out this summer, but even if we figure a million of them, we have about 5 million people due to lose unemployment benefits through the summer. Today is February 18th. As of the 28th, every person whose current tier of unemployment benefits expires will be told to walk the plank.
After the first 26 weeks of unemployment, there were four additional tiers (workers in every state weren't eligible for all):
Tier 1 - 20 more weeks
Tier 2 - 14 more weeks
Tier 3 - 13 more weeks (available in states with unemployment 6%)
Tier 4 - 6 more weeks. (available in states with unemployment 8.5%)
As of the 28th of February, no one gets to go to the next tier under current law. There are currently about 5.5 million people on regular unemployment and about 5.8 million on EUC tiers 1-4. According to BLS there were 14.8 million unemployed in January. My most optimistic estimate is that if Congress were not to extend, there would be about six million people losing benefits without getting jobs or being able to go to early retirement by July. What is the effect?
Assuming a month of 4 weeks and an average benefit of $290 weekly, the average monthly benefit lost would be $1,160. Multiply that by six million; 6,960,000,000 a month. Somewhere around -7 billion a month, comparable to the effect of the increased gas prices in January. Walmart is not worried about a "more challenging" sales environment. Walmart is pissing its corporate pants, but of course it cannot say that in a press release. There would be offsets, of course, but the offsets (like food stamps) will be offset by other offsets.
So there are millions of people looking at a sharp drop in income in the next few months, and right now they can't plan at all. The longer Congress waits the more anxious people will get, and the more conservative they will be in their spending. This spreads out in families; with unemployment rates so high, parents are concerned about children losing unemployment benefits, spouses about spouses, etc. It also takes time for the states to implement and the checks to get out there once Congress does act, so waiting for dramatic effect is not going help the retail environment.
This uncertainty is going to have an economic effect on consumer spending, as will fuel prices. It will also have an effect on corporate spending.
Singapore's tourism is up, but its January exports dropped 8.9%.
Crude oil prices are back up to about $78. This is pretty delusional, but it kind of guarantees a world-wide drag. The drag would not be sufficient to knock things out of recovery if it were not for the fact that mean, mean persons are beginning to wonder if governments can possibly pay their debt, so a lot of government stimulus is ending of necessity. In the US, states are short about 180 billion in the next budget, which is about 10% of their Q4 spending. With pension costs continuing to escalate sharply, that implies that they have to cut spending by about 120 billion to have a hope.
But still that wouldn't do it, except for this one ugly fact: January producer prices showed the danger signal. The 12 month change in crude goods is + 25.2%; the 12 month change in intermediate goods is +4.6%, and the 12 month change in finished goods is +4.6%. A few months ago (Oct), the 12 month change in crude goods was -14.1%. In November, it rose to +4.7%. In December, it rose to +12.3%. That's a "Mene, Mene, Tekel" right there.
As the full inventory replacement cycle moves to its natural end, the carrying wave will consist of end sales, and producers are going to have to raise prices to accommodate current costs. I have already seen the nasty signs in the last few weeks of groceries - stuff like pasta is inching up, but the non-essential stuff is being flogged for about nothing. There is a shortage of consumer dollars to cover those producer costs; the result is further compression of margins and further compression of end sales. That means that many companies will be cutting costs further. We are going to have some incredible bargains in commercial space for years to come.... And hiring ain't gonna be very hot either.
So I was a bit surprised to see that the rise in initial claims was "unexpected" (4-week MA at 467,500); and I laughed out loud at Walmart's "surprising" comparable store sales drop of 1.6% in Q4. Walmart also observes that the first quarter will be "more challenging". How that could surprise anyone is beyond me, because a Mene, Mene was flashing above January advance retail sales:
Here you have to look at the YoY. Table 1B gives you the unadjusted which are the best for a YoY, and here we go Jan 2010/Jan 2009 (figures are in millions):
Total: 323,688/ 313,593 (+10,095). This doesn't seem so bad, but when we look at the categories the weakness appears:
Gasoline: 31,515/ 24,681 (+6,834) We've got only 3,261 of our nominal increase left.
Pharmacies: 21,132/ 20,664 (+468) We've got 2,793 nominal increase.
At this point, the need to replace clothing and buy new or fix cars is becoming ever more pressing. So we are seeing the result of the diversion in spending in major YoY falls in sales for categories like electronics (-7.6%), furnishings (-6.4%), and building supplies (-9.9%). Some of that is shifted to non-store retailers (partly due to sales tax), but most of it is just coming out in the form of either reduced prices or reduced sales.
I believe we can discount the possibility that consumers are suddenly going to start charging a lot of "wants" stuff on their credit cards. That means that we are seeing a shift back toward spending only on essentials.
Wholesale inflation in India is running well over 8%, and their central bank will have to act.
We still have some temporary boost in the US domestic economy due to Census jobs this year. Those will tail out this summer, but even if we figure a million of them, we have about 5 million people due to lose unemployment benefits through the summer. Today is February 18th. As of the 28th, every person whose current tier of unemployment benefits expires will be told to walk the plank.
After the first 26 weeks of unemployment, there were four additional tiers (workers in every state weren't eligible for all):
Tier 1 - 20 more weeks
Tier 2 - 14 more weeks
Tier 3 - 13 more weeks (available in states with unemployment 6%)
Tier 4 - 6 more weeks. (available in states with unemployment 8.5%)
As of the 28th of February, no one gets to go to the next tier under current law. There are currently about 5.5 million people on regular unemployment and about 5.8 million on EUC tiers 1-4. According to BLS there were 14.8 million unemployed in January. My most optimistic estimate is that if Congress were not to extend, there would be about six million people losing benefits without getting jobs or being able to go to early retirement by July. What is the effect?
Assuming a month of 4 weeks and an average benefit of $290 weekly, the average monthly benefit lost would be $1,160. Multiply that by six million; 6,960,000,000 a month. Somewhere around -7 billion a month, comparable to the effect of the increased gas prices in January. Walmart is not worried about a "more challenging" sales environment. Walmart is pissing its corporate pants, but of course it cannot say that in a press release. There would be offsets, of course, but the offsets (like food stamps) will be offset by other offsets.
So there are millions of people looking at a sharp drop in income in the next few months, and right now they can't plan at all. The longer Congress waits the more anxious people will get, and the more conservative they will be in their spending. This spreads out in families; with unemployment rates so high, parents are concerned about children losing unemployment benefits, spouses about spouses, etc. It also takes time for the states to implement and the checks to get out there once Congress does act, so waiting for dramatic effect is not going help the retail environment.
This uncertainty is going to have an economic effect on consumer spending, as will fuel prices. It will also have an effect on corporate spending.
Wednesday, February 17, 2010
Very Busy, So....
A summary of the terrorism situation around the world (Thanks, Lance!):
The English are feeling the pinch in relation to recent terrorist threats and have raised their security level from "Miffed" to "Peeved." Soon, though, security levels may be raised yet again to "I Say, Old Chap!" or even "A Bit Cross." The English have not been "A Bit Cross" since the blitz in 1940 when tea supplies all but ran out. Terrorists have been re-categorized from "Tiresome" to a "Bloody Nuisance." The last time the British issued a "Bloody Nuisance" warning level was in 1588 when threatened by the Spanish Armada.
The Scots raised their threat level from "Pissed Off" to "Let's get the Bastards." They don't have any other levels. This is the reason they have been used on the front line of the British army for the last 300 years.
The French government announced yesterday that it has raised its terror alert level from "Run" to "Hide". The only two higher levels in France are "Collaborate" (a recent replacement for "Blame Bush") and "Surrender." The rise was precipitated by a recent fire that destroyed France's white flag factory, effectively paralyzing the country's military capability.
It's not only the French who are on a heightened level of alert: Italy has increased the alert level from "Shout Loudly and Excitedly" to "Elaborate Military Posturing." Two more levels remain: "Ineffective Combat Operations" and "Change Sides."
The Germans also increased their alert state from "Disdainful Arrogance" to "Dress in Uniform and Sing Marching Songs." They also have two higher levels: "Invade a Neighbor" and "Lose".
Belgians, on the other hand, are all on holiday as usual, and the only threat they are worried about is NATO pulling out of Brussels.
The Spanish are all excited to see their new submarines ready to deploy. These beautifully designed subs have glass bottoms so the new Spanish navy can get a really good look at the old Spanish navy.
Americans meanwhile and as usual are carrying out preemptive strikes on three continents under the 'Just in Case' doctrine. The US state of Georgia still has an estimated 16% of its male population armed and patrolling the GA borders watching hopefully for signs of the Russian army; perhaps coincidentally, 16% of the GA population is primarily of Scottish or Scotch-Irish derivation.
Canada doesn't have any alert levels. Historically, it has occasionally escalated directly to the Scottish "Let's get the Bastards" level when the population perceives that the strategic UK malt supply lines are threatened. Once the escalation occurs, the only known method of de-escalation is victory and the Canadian government's announcement of "The Beer's Over Here, Boys", at which the Canadians return to Canada on the next available transport.
And in the southern hemisphere ...
New Zealand has also raised its security levels - from "baaa" to "BAAAA". Due to continuing defense cutbacks (the airforce being a squadron of spotty teenagers flying paper aeroplanes and the navy some toy boats in the Prime Minister's bath), New Zealand only has one more level of escalation, which is "I hope Australia will come and rescue us".
Australia, meanwhile, has raised its security level from "No worries" to "She'll be right, mate". Three more escalation levels remain:
"Crikey!',
"I think we'll need to cancel the barbie this weekend" and
"The barbie is cancelled".
So far no situation has ever warranted use of the final escalation level. During WWII Australia remained at the "Need to Cancel" level for an unprecedented seven straight months, causing eighty-two percent of the adult Australian population to head overseas in the Scottish "Let's get the Bastards" mode. The stress produced by that circumstance is believed to have been culturally long-lasting. Ever since at the "Crikey" alert level the Australian population begins to spontaneously patrol the beaches and fling any observed foreigners into the ocean. The Indian embassy last year issued a "Crikey" alert for Indians living in Australia.
Monday, February 15, 2010
Beware The Narrative
For the narrative is often fatal.
As a case in point, let us consider Krugman's latest conscience thingie in the NY Times. I pick on Krugman, because he can take it, what with the Nobel prize, the professorship, and the NY Times as a platform. Krugman is capable of doing truly excellent economic work, which makes some of his performances all the more dazzlingly idiotic. This is one of his best efforts along that line ever. I assume that his desire to stick to his narrative causes this, because otherwise it must be meth and the last time I saw a photo his teeth looked okay.
So here goes (as a fair use, I am going to reprint and discuss the whole darned thing):
For a little more in-depth and less narrated discussion of the Euro situation, may I suggest this paper by Sebastian Dullien and Daniela Schwarzer of Eurozone Watch? The paper both discusses the impact of the uniform currency and the impact of different public policies. It is a much more balanced discussion of the EU's current situation and possible future.
The choices the EU must make do have implications for the future of the US, because the choices European countries are making and have made are the choices we are discussing. If we do not change course, we will have public debt of 80% of GDP within a decade, and historically that is a major marker of trouble. We want to halt at no more than 65% or 70%, and thereafter hold debt increases to those which can be financed from internal savings until, at least, we can bring debt down to the 60% level. That leaves us room to address crises.
Such a goal limits future spending plans on defense and entitlements, but it should preserve enough room for growth. We are currently publicly capitalizing private debt at an astonishing rate to bail out our to-big-to-fail banks plus our dysfunctional auto companies, and we will have to end that policy very soon.
As a case in point, let us consider Krugman's latest conscience thingie in the NY Times. I pick on Krugman, because he can take it, what with the Nobel prize, the professorship, and the NY Times as a platform. Krugman is capable of doing truly excellent economic work, which makes some of his performances all the more dazzlingly idiotic. This is one of his best efforts along that line ever. I assume that his desire to stick to his narrative causes this, because otherwise it must be meth and the last time I saw a photo his teeth looked okay.
So here goes (as a fair use, I am going to reprint and discuss the whole darned thing):
Lately, financial news has been dominated by reports from Greece and other nations on the European periphery. And rightly so. (No argument so far.)
But I’ve been troubled by reporting that focuses almost exclusively on European debts and deficits, conveying the impression that it’s all about government profligacy — and feeding into the narrative of our own deficit hawks, who want to slash spending even in the face of mass unemployment, and hold Greece up as an object lesson of what will happen if we don’t. (All right, right there he says it is about the narrative. He's worried about the message we'll get, and that it will be the wrong one. I think this is what caused this abject display of incompetence.)Krugman wants to believe that playing with currencies can fix structural economic problems, but where is the economic evidence of that? And anyone who thinks Spanish bank regulation was exemplary is way out of touch with reality or does not understand bank regulation. You can't regulate risk if you don't know about risk, and risk in banking is related to collateral quality (assessments and adjustments based on economic background) and borrower financial status.
For the truth is that lack of fiscal discipline isn’t the whole, or even the main, source of Europe’s troubles — not even in Greece, whose government was indeed irresponsible (and hid its irresponsibility with creative accounting). (All right, here we go. Greece's government employs more than 1/5th of all workers in Greece. Well more. Officially the labor force is under 5 million; at least 700,000 workers are employed by the government directly, but far more are actually paid through government programs. Government is commonly quoted as being 40% of GDP. The pensions for all those workers are a problem, as is the government share of total GDP. The other problem is that private sector worker compensation is somewhat pegged to public sector compensation. In December the Greek public debt was estimated at 430 billion with a labor force of 4.9 million? Needless to say, when you have a recession as bad as the one we've had globally, the private sector is going to shrink - especially when tourism, etc is a large part of it. So lack of fiscal discipline is absolutely the problem with Greece; the recession brought the problem to the fore, but Greek sovereign debt would have been in trouble in a few short years regardless, as retirements escalated and the funds to pay them collapsed.)
No, the real story behind the euromess lies not in the profligacy of politicians but in the arrogance of elites — specifically, the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such an experiment. (Now really, why and how would a country like Greece be in less trouble if it were not on the Euro? Yes, being on the Euro now does limit its options, but what the heck is going to save a country that gets itself in this fix - certainly not currency manipulation!)
Consider the case of Spain, which on the eve of the crisis appeared to be a model fiscal citizen. Its debts were low — 43 percent of G.D.P. in 2007, compared with 66 percent in Germany. It was running budget surpluses. And it had exemplary bank regulation.
But with its warm weather and beaches, Spain was also the Florida of Europe — and like Florida, it experienced a huge housing boom. The financing for this boom came largely from outside the country: there were giant inflows of capital from the rest of Europe, Germany in particular. (The above is all true.)
The result was rapid growth combined with significant inflation: between 2000 and 2008, the prices of goods and services produced in Spain rose by 35 percent, compared with a rise of only 10 percent in Germany. Thanks to rising costs, Spanish exports became increasingly uncompetitive, but job growth stayed strong thanks to the housing boom. (Professor, Spain imports pretty much all its fossil fuels. Does that give a clue as to how some of those costs occurred? Huh, professor?)
Then the bubble burst. Spanish unemployment soared, and the budget went into deep deficit. But the flood of red ink — which was caused partly by the way the slump depressed revenues and partly by emergency spending to limit the slump’s human costs — was a result, not a cause, of Spain’s problems. (Here we run into an interpretative difficulty. Housing costs escalated sharply, in due part to very loose lending standards, and in part due to Europeans buying housing in Spain - a trend which is very long-term. Another problem for Spain was its green energy program, which has boosted its energy costs sharply. Let's just go to Gabriel Calzada Alvarez's report (he is a Spanish economics professor). Start at page 25 where it is noted that Spain's green energy program probably destroyed more than two jobs for each job it produced. Continue to page 31 and 32, where Calzada looks at the ongoing cost of subsidizing electricity rates in order not to drive industry out: "For example, the average annuity payable to renewables is equivalent to 4.35% of all VAT collected, 3.45% of the household income tax, or 5.6% of the corporate income tax for 2007.60 Regardless of whether the increase impacts consumption or investment more, the most affected sectors of the economy will be those with a greater pro-cyclical productions (such as automotive)." Continue on to page 33 and follow citations of specific industry costs that have exported industry from Spain. It should not be surprising that increases of 50% in electric rates in a decade exported jobs. I guarantee you that the same will happen anywhere. But since the investments were made elsewhere during this time, there is an additional cost due to the lost investment.)
And there’s not much that Spain’s government can do to make things better. The nation’s core economic problem is that costs and prices have gotten out of line with those in the rest of Europe. If Spain still had its old currency, the peseta, it could remedy that problem quickly through devaluation — by, say, reducing the value of a peseta by 20 percent against other European currencies. But Spain no longer has its own money, which means that it can regain competitiveness only through a slow, grinding process of deflation. (Arggh. Only economics professors make every day talk like a doo-rag surfer pirate day. Sigh. Where to begin. Okay, the housing bubble is like, gone, man, which means that the deflation in housing prices is like, inevitable, dude, because when median household debt to income ratios went over 125% in 2005, the words "Mene, Mene, Tekel, Upharsin" appeared in fiery letters above Barcelona. I mean, dude, even WikiNerds know that construction had peaked at 16% of GDP and 12% of employment, which, dude, means that when the building stopped the economy stopped. Deflation is a corrective in and of its own, and deflation makes investment in a country cheaper - but only if countries can afford to produce goods there - and when you have to import just about all of your fossil fuels, deflating your currency inflates your import costs and base costs like crazy. So, like, dude, maybe one thing Spain should consider changing is its energy costs. Want some good weed? Further, deflating your currency causes import costs to rise, which would place further pressure on Spanish consumers, thus making debt less payable.)
Now, if Spain were an American state rather than a European country, things wouldn’t be so bad. For one thing, costs and prices wouldn’t have gotten so far out of line: Florida, which among other things was freely able to attract workers from other states and keep labor costs down, never experienced anything like Spain’s relative inflation. For another, Spain would be receiving a lot of automatic support in the crisis: Florida’s housing boom has gone bust, but Washington keeps sending the Social Security and Medicare checks. (OMG. This was where ZZ Top's "Sharp Dressed Man" started playing in my mind. Dude! Dude! Stop the peyote and try Wiki! If Wiki offends your pride, here is the official Spanish statistics office, dude. 1/1/2000, pop 40.5 million; 1/1/2009, pop 46.745 million. Dude, that's more than a 15 percent increase in a country with one of the lowest fertility rates in Europe! Way more than half of that was immigration. It is also true that Florida, up until the average worker couldn't even afford to rent an apartment, had an influx of workers. Many of them were illegals. But there was absolutely no bar to emigration from the rest of Europe for Spain, and Spain also experienced a large influx of illegal workers from other countries. The lack of workers wasn't a problem. And dude, if you really believe that one of Florida's problems isn't those measly Medicare checks, I advise you to go seek care in a Florida hospital and try paying it without insurance. This paragraph alone would qualify most high school papers for a D, dude. Students spend far more effort on hair brushes than you did on the economy of a nation with 46.7 million people, Prof. )
But Spain isn’t an American state, and as a result it’s in deep trouble. (Oh, my fanny. The difference between Spain's economy and Florida's is that Florida's was never nearly as dependent on construction as Spain's. Try this.As of 2008, FL GDP construction share was under 6%, whereas Spain's was still around 10% as of 2009. See also this backgrounder from 2007.) Greece, of course, is in even deeper trouble, because the Greeks, unlike the Spaniards, actually were fiscally irresponsible. Greece, however, has a small economy, whose troubles matter mainly because they’re spilling over to much bigger economies, like Spain’s. (The Greek workers do not think so.) So the inflexibility of the euro, not deficit spending, lies at the heart of the crisis. (Bubbles and high government spending have NOTHING to do with it? You let your construction peak well over 17% of GDP, and expect there's no problem to come?)
None of this should come as a big surprise. Long before the euro came into being, economists warned that Europe wasn’t ready for a single currency. But these warnings were ignored, and the crisis came. (This has nothing to do with debt, nothing to do with economic growth associated with rapidly escalating household debt levels and unsustainable lending ratios? Nothing? It's all about the inability of countries to play with their currencies? Trade means nothing? It seems to me that the Euro has held up well through this global seizure.)
Now what? A breakup of the euro is very nearly unthinkable, as a sheer matter of practicality. As Berkeley’s Barry Eichengreen puts it, an attempt to reintroduce a national currency would trigger “the mother of all financial crises.” So the only way out is forward: to make the euro work, Europe needs to move much further toward political union, so that European nations start to function more like American states. (You know, this is the strangest, most unsupported claim. It's not as if a state like Michigan or Illinois or California or Florida doesn't experience exceptional difficulties during these downturns, or that states like the Dakotas do. It's all in the mix. And really there is not a lot that the federal government does aside from blend it all together. It's not as if these states can play with their currencies, and it's not as if they can't go bankrupt. And just as you are not going to find the Dakotas willing to pay for Florida's bad taste in condos by paying its taxes, you are not going to get Germany's savers to pay for Greece's government sector. CA is going to have to come to grips with its problems, and so will NJ, and so will Greece. The IMF has already extended large amounts of money to some countries to bail them out (like Hungary), but there is only so much functional countries can do for non-functional countries just as there is only so much functional states can do for non-functional states. To the extent that a state or a country purchases present prosperity through unsustainable spending, their future spending is impaired. Moving it around doesn't change things much.)
But that’s not going to happen anytime soon. What we’ll probably see over the next few years is a painful process of muddling through: bailouts accompanied by demands for savage austerity, all against a background of very high unemployment, perpetuated by the grinding deflation I already mentioned.
It’s an ugly picture. But it’s important to understand the nature of Europe’s fatal flaw. Yes, some governments were irresponsible; but the fundamental problem was hubris, the arrogant belief that Europe could make a single currency work despite strong reasons to believe that it wasn’t ready. (The US achieved a political union and a trade union before it achieved a common currency. But a strong European "national government" wouldn't change the overall European structure; growth in the past decade has been associated mostly with countries which escalated debt to achieve growth; growth over the next decade will have to come from the countries that are less debt-laden. Is this truly that much different from the US? Hasn't the story of US state prosperity been one of changes, the dreaded "grinding deflation", and then rises to a new prosperity, etc, based on competitiveness?)
For a little more in-depth and less narrated discussion of the Euro situation, may I suggest this paper by Sebastian Dullien and Daniela Schwarzer of Eurozone Watch? The paper both discusses the impact of the uniform currency and the impact of different public policies. It is a much more balanced discussion of the EU's current situation and possible future.
The choices the EU must make do have implications for the future of the US, because the choices European countries are making and have made are the choices we are discussing. If we do not change course, we will have public debt of 80% of GDP within a decade, and historically that is a major marker of trouble. We want to halt at no more than 65% or 70%, and thereafter hold debt increases to those which can be financed from internal savings until, at least, we can bring debt down to the 60% level. That leaves us room to address crises.
Such a goal limits future spending plans on defense and entitlements, but it should preserve enough room for growth. We are currently publicly capitalizing private debt at an astonishing rate to bail out our to-big-to-fail banks plus our dysfunctional auto companies, and we will have to end that policy very soon.
Sunday, February 14, 2010
I Caught Ceiling Mole
He is in a scrub bucket on the table, available for inspection. I caught the little bozo in the kitchen. He was seized by an irresistible impulse when I was cooking bacon for the bull dog, and emerged in a faintly squeaking frenzy to claim his share. I grabbed him up in a towel. This was easy because he is totally blind.
At first, I felt a surge of euphoria, reasoning that no one could question my sanity any longer. Granted, one does not usually have house-dwelling moles. Nonetheless, damn it all, when I say there's a mole in my ceiling, there is a mole in my ceiling!!!
However, now I wish I hadn't. As rodents go, this is a cute little critter. I stare at the snow drifts outside and feel compunction. Normally I would just deport this little fellow a few miles, and leave him to move into someone else's home so that no one would believe their story. But under the circumstances the mole's survival seems doubtful.
I have already called one of my brothers thinking that he really needed a mole as a pet, but he was completely unhelpful.
I put half a paper towel tube in there, a couple of grapes, some seeds, bit of peanut brittle and a bit of cheese. He seized on the cheese immediately, but keeps squeaking about bacon. He looks fat to me - maybe he's just a bacon fanatic. One can believe anything of a mole that hangs out in ceilings. He also drank some water from a little bottle cap I put in there with water, so he is not currently in danger.
Now all I have to do is convince someone that they want a mole until spring. This may test my powers of salesmanship. He's really kind of cute.
At first, I felt a surge of euphoria, reasoning that no one could question my sanity any longer. Granted, one does not usually have house-dwelling moles. Nonetheless, damn it all, when I say there's a mole in my ceiling, there is a mole in my ceiling!!!
However, now I wish I hadn't. As rodents go, this is a cute little critter. I stare at the snow drifts outside and feel compunction. Normally I would just deport this little fellow a few miles, and leave him to move into someone else's home so that no one would believe their story. But under the circumstances the mole's survival seems doubtful.
I have already called one of my brothers thinking that he really needed a mole as a pet, but he was completely unhelpful.
I put half a paper towel tube in there, a couple of grapes, some seeds, bit of peanut brittle and a bit of cheese. He seized on the cheese immediately, but keeps squeaking about bacon. He looks fat to me - maybe he's just a bacon fanatic. One can believe anything of a mole that hangs out in ceilings. He also drank some water from a little bottle cap I put in there with water, so he is not currently in danger.
Now all I have to do is convince someone that they want a mole until spring. This may test my powers of salesmanship. He's really kind of cute.
Saturday, February 13, 2010
Mobisyl For A Snowbound Nation
Let's face it, a lot of us are middle-aged. Many of us are middle-aged and taking care of the aged. We hurt. As I stare sorrowfully at the forecast for another six inches of snow Monday into Tuesday, I realize that I am fated to knock the snow off the roof before that happens. In very cold weather yet. With wind. And I have not yet gotten the old lady's driveway down to black. Disaster impends. It is too cold for any of this to melt.
I contemplate my spasming right thigh muscle, and I realize that I have only one way out - aside from suicide - and that way is MOBISYL.
It is pretty much aspirin in a cream. You rub it on for sprains, joint pains, muscle aches etc. This stuff works like nothing else around. You can have a joint swollen twice its size or an immovable limb, and within a couple of days Mobisyl will have it close to normal.
Because you rub it on, it is a lot easier on the gastric system than taking anything. Obviously, if you can't take aspirin you shouldn't fool around with this stuff. Follow the directions, and before you use it the first time, rub a little on somewhere and watch for irritation.
I swear to you, Mobisyl will resolve problems in days that would otherwise leave you gimpy for weeks.
I contemplate my spasming right thigh muscle, and I realize that I have only one way out - aside from suicide - and that way is MOBISYL.
It is pretty much aspirin in a cream. You rub it on for sprains, joint pains, muscle aches etc. This stuff works like nothing else around. You can have a joint swollen twice its size or an immovable limb, and within a couple of days Mobisyl will have it close to normal.
Because you rub it on, it is a lot easier on the gastric system than taking anything. Obviously, if you can't take aspirin you shouldn't fool around with this stuff. Follow the directions, and before you use it the first time, rub a little on somewhere and watch for irritation.
I swear to you, Mobisyl will resolve problems in days that would otherwise leave you gimpy for weeks.
Friday, February 12, 2010
What The World Needs Now
It's snowing in SOUTH GA. Or so the Chief reports gravely. There is, I'm told, white on the grass.
The casualties should be tremendous. Beer plus snow plus weekend plus true southerners. I now realize that I have sent the Chief into the SNOWLIGHT ZONE. Aiiiieeee.
My family members in north GA are of course used to the white stuff, being hardy mountain folk (by GA standards). So the five or six inches they'll get do not matter - but in south GA, the white stuff is the source of legends and myth, akin to dragons, space aliens and balanced federal budgets.
So what the world needs now (forget that love sweet love shtick) are snowblowers like this, courtesy the indispensable Iowahawk. Read the details there. My heart beats in feeble envy:
O, for a muse of fire, that would ascend the heights of mechanical invention....
A blizzard for a stage, blowers to act, and snowbound to applaud the roaring savior!
It is a little-known fact that you can use good moonshine to rig a flamethrower, although it is a tragic waste.
The casualties should be tremendous. Beer plus snow plus weekend plus true southerners. I now realize that I have sent the Chief into the SNOWLIGHT ZONE. Aiiiieeee.
My family members in north GA are of course used to the white stuff, being hardy mountain folk (by GA standards). So the five or six inches they'll get do not matter - but in south GA, the white stuff is the source of legends and myth, akin to dragons, space aliens and balanced federal budgets.
So what the world needs now (forget that love sweet love shtick) are snowblowers like this, courtesy the indispensable Iowahawk. Read the details there. My heart beats in feeble envy:
O, for a muse of fire, that would ascend the heights of mechanical invention....
A blizzard for a stage, blowers to act, and snowbound to applaud the roaring savior!
It is a little-known fact that you can use good moonshine to rig a flamethrower, although it is a tragic waste.
What I Was Trying to Say Before
That this whole thing wasn't over in Europe? And that energy prices were going to drag the world down again (although less than in the last rise)?
First, Europe vs the US (we should all consider this while we are talking about entitlements and the theory that some sort of universal health care would be so great for the economy):
Retail US (This is through December):
It sucketh with a mighty sucking sound, but we are racking up slow, grinding YoY real increases. More on January later.
Retail Europe (pdf from Eurostat): YoY December -1.6% Euro area, -1.0% in EU27. On a month over month basis, November retail sales dropped 0.5%, and December retail sales held at that level.
Industrial Production US: In December, industrial production was down 2.0% since December 08. On the month, it was up 0.6%, same as November.
Industrial Production Europe (pdf from Eurostat): December 09 compared to December 08 industrial production fell 5.0% for the Euro area, and fell 4.9% for the EU27. For December compared to November, industrial production fell 1.7% in the Euro area, and 1.9% in the EU 27.
GDP US: Heh, remember the 5.7. Still, this is somewhat temporary, although given recent sales data we should have enough to get us through a few months.
GDP Europe - Pdf from Eurostat again. They helpfully provide their own comparison to the US, so I'll just quote:
So part of the issue with the debt in Greece and Portugal, Ireland, etc is the combination of slow growth with high debt writeoffs in certain commercial and mortgage categories, combined with a rather difficult prospect of containing the debt. Greece is just out of bounds, and would have to launch an austerity program to contain their debt. But if they do, that austerity will not help the rest of the region rebound, and the same goes for other somewhat debt-loaded members.
And then there's another reality - it is probably in Germany's interest to have a cheaper Euro to help some industry segments.
As for energy prices, they have been somewhat schizophrenic. Energy prices high enough to reduce world growth rates have their own natural bounds. The theory that we will have acute energy shortages rests on a continued rise in consumption which seems to be somewhat contradicted by recent events.
First, Europe vs the US (we should all consider this while we are talking about entitlements and the theory that some sort of universal health care would be so great for the economy):
Retail US (This is through December):
It sucketh with a mighty sucking sound, but we are racking up slow, grinding YoY real increases. More on January later.
Retail Europe (pdf from Eurostat): YoY December -1.6% Euro area, -1.0% in EU27. On a month over month basis, November retail sales dropped 0.5%, and December retail sales held at that level.
Industrial Production US: In December, industrial production was down 2.0% since December 08. On the month, it was up 0.6%, same as November.
Industrial Production Europe (pdf from Eurostat): December 09 compared to December 08 industrial production fell 5.0% for the Euro area, and fell 4.9% for the EU27. For December compared to November, industrial production fell 1.7% in the Euro area, and 1.9% in the EU 27.
GDP US: Heh, remember the 5.7. Still, this is somewhat temporary, although given recent sales data we should have enough to get us through a few months.
GDP Europe - Pdf from Eurostat again. They helpfully provide their own comparison to the US, so I'll just quote:
GDP increased by 0.1% in both the euro area1 (EA16) and the EU271 during the fourth quarter of 2009, compared with the previous quarter, according to flash estimates published by Eurostat, the statistical office of the European Union. In the third quarter of 2009, growth rates were +0.4% and +0.3% respectively.If Germany had done better in Q4 Euro numbers would look better; Germany's GDP increased 0.7% in Q3, but did not increase in Q4. Bundesbank numbers.
Compared with the same quarter of the previous year, seasonally adjusted GDP decreased by 2.1% in the euro area and by 2.3% in the EU27 in the fourth quarter of 2009, after -4.0% and -4.3% respectively in the previous quarter.
During the fourth quarter of 2009, US GDP increased by 1.4% compared with the previous quarter, after +0.6% in the third quarter. US GDP rose by 0.1% compared with the same quarter of the previous year (-2.6% in the previous quarter).
So part of the issue with the debt in Greece and Portugal, Ireland, etc is the combination of slow growth with high debt writeoffs in certain commercial and mortgage categories, combined with a rather difficult prospect of containing the debt. Greece is just out of bounds, and would have to launch an austerity program to contain their debt. But if they do, that austerity will not help the rest of the region rebound, and the same goes for other somewhat debt-loaded members.
And then there's another reality - it is probably in Germany's interest to have a cheaper Euro to help some industry segments.
As for energy prices, they have been somewhat schizophrenic. Energy prices high enough to reduce world growth rates have their own natural bounds. The theory that we will have acute energy shortages rests on a continued rise in consumption which seems to be somewhat contradicted by recent events.
Thursday, February 11, 2010
A Crazy, Noble Farmer In A Bobcat With An Excavator Shovel
That's how the old lady got out. Her driveway was unplowable, and we were discussing carrying her out on a lawnchair. I still have to shovel, but now it's doable. Men are great.
Wednesday, February 10, 2010
For Family
In an attempt to save the lines coming into the house I have been out there trying to knock the snow off the trees, but it is getting far too dangerous as the wind picks up. Because the snow was wet and icy, a lot of it is frozen on the lines and trees.
I expect to lose power. The house is okay. After I lose the phone (only 8 hours backup), I will turn my cell phone on from 11 AM - 1 PM in the mornings and 6-8 PM in the evenings.
Do not attempt to come by here. The driveway is blocked by fallen branches and cannot be plowed. I can probably clear the branches myself, but it is far too dangerous to attempt until the wind has fully died down and more of the snow is off the trees. Right now it's extremely dangerous to be out there anywhere under any trees - i.e. on the entire driveway. I think the big pine may not make it, but at least it will fall the right way.
I will be okay for days, so don't worry. There is well more than a foot of snow here, so don't be surprised if it is a while before you hear from me.
Right now Mrs. B is all right but I will probably have to get her out, but it is too dangerous now. I can't even walk over there with the tree branches falling like this, much less get her out. Say a prayer for her.
Update: PA brother still has power, but has two big trees down over his driveway. Thus 4WD man will be forced by providence to exercise discretion over valor. He says he has only around a foot and reports that he has dug his way through to the firewood. At least we know he's got plenty of ammo. Come to think of it, he's probably got enough to blast his way right through the downed trees. I better not give him any ideas.... He's got the chainsaw, too.
I've got at least 16 inches. Probably more. There is about three feet of snow on the picnic table and about two on each bench. Trying to get around in it, I was up well over my knees everywhere except where I had already shoveled today. But so far the wind has not developed.... It would be great if that part of the forecast were wrong.
Further; DC Bro checked in. He is home and fine, but reports intermittent power failures. He has plenty of everything and does not intend to go out for another couple of days. Seeing that he is a physicist, and thus slightly real-world impaired at times, I suggested that he should fill a couple of containers with water. He had not thought of that.... So everybody should be okay unless they do something stupid.
I still have power, but the trees and branches are cracking and falling all around, and I just saw a squadron of utility trucks go by north. It's gonna be a doozy. I wish I had a camera - it is stunningly beautiful. Plus, I can see a tree beginning to lean over another building, and I bet it is going to go tonight. It would be great to catch it in mid-fall.
I expect to lose power. The house is okay. After I lose the phone (only 8 hours backup), I will turn my cell phone on from 11 AM - 1 PM in the mornings and 6-8 PM in the evenings.
Do not attempt to come by here. The driveway is blocked by fallen branches and cannot be plowed. I can probably clear the branches myself, but it is far too dangerous to attempt until the wind has fully died down and more of the snow is off the trees. Right now it's extremely dangerous to be out there anywhere under any trees - i.e. on the entire driveway. I think the big pine may not make it, but at least it will fall the right way.
I will be okay for days, so don't worry. There is well more than a foot of snow here, so don't be surprised if it is a while before you hear from me.
Right now Mrs. B is all right but I will probably have to get her out, but it is too dangerous now. I can't even walk over there with the tree branches falling like this, much less get her out. Say a prayer for her.
Update: PA brother still has power, but has two big trees down over his driveway. Thus 4WD man will be forced by providence to exercise discretion over valor. He says he has only around a foot and reports that he has dug his way through to the firewood. At least we know he's got plenty of ammo. Come to think of it, he's probably got enough to blast his way right through the downed trees. I better not give him any ideas.... He's got the chainsaw, too.
I've got at least 16 inches. Probably more. There is about three feet of snow on the picnic table and about two on each bench. Trying to get around in it, I was up well over my knees everywhere except where I had already shoveled today. But so far the wind has not developed.... It would be great if that part of the forecast were wrong.
Further; DC Bro checked in. He is home and fine, but reports intermittent power failures. He has plenty of everything and does not intend to go out for another couple of days. Seeing that he is a physicist, and thus slightly real-world impaired at times, I suggested that he should fill a couple of containers with water. He had not thought of that.... So everybody should be okay unless they do something stupid.
I still have power, but the trees and branches are cracking and falling all around, and I just saw a squadron of utility trucks go by north. It's gonna be a doozy. I wish I had a camera - it is stunningly beautiful. Plus, I can see a tree beginning to lean over another building, and I bet it is going to go tonight. It would be great to catch it in mid-fall.
API On Crude
I'm expecting to lose power later in the day due to a combination of high winds and heavy snow on tree limbs, so I may not be posting for a bit.
I don't think we are getting our normal crude inventory report for Feb 5th (due to snow), but API did report yesterday after the market close that there was a huge build in crude:
So yes, Chinese imports were reported very high on strengthening internal demand - but the internal demand comes from bubble money.
If my power holds out, I'll post some things about 1929 in the US in the lead up to the crash this afternoon.
This is eerie - it is like watching some sort of movie of the 1929 collapse made in China with Chinese actors. Goldman Sachs was reported this morning to be selling some property in Shanghai, so I think the end is nigh.
The concern over Europe and government deficits really arises from this problem. No one knows where 2011 growth is coming from, if it is not coming from the US and Europe.
Snarky Mark normally has good coverage of China, and he is oddly Galbraith-like in his way of presenting it. Never has so much economic idiocy deserved dry snark as now.
I don't think we are getting our normal crude inventory report for Feb 5th (due to snow), but API did report yesterday after the market close that there was a huge build in crude:
After market close, the industry-sponsored API reported crude oil inventory surged +7.2 mmb, the biggest increase since October 2009, in the week ended February 5. Gasoline stockpile also added +1.6 mmb while distillate stockpile drew -1.5 mmb. The huge crude build was driven by low refinery runs despite reduction in imports. This sent the market a bearish signal that demands for oil product remained dismal.I downloaded the Bundesbank report for January for light reading on batteries. Must have number fix:
The recovery in the German economy is likely to have continued in the fourth quarter of 2009, albeit at a significantly slower pace. While the external sector continued to generate stimuli, domestic activity had a retarding influence. Despite a consumer climate that is still largely intact, household expenditure, in particular, is likely to have decreased again significantly in real terms. This is suggested at all events by the sharp decline in motor vehicle registrations, which had previously been boosted by the environmental premium, and rather weak retail sales. No significant impetus was generated by fixed capital formation either, and the positive contributions resulting from the inventory cycle are likely to have eased off markedly. The lack of a further rise in new orders, the decline in imports and the interrupted improvement in mediumterm business expectations suggest that the losses in industrial demand due to the discontinuation of the government car scrapping scheme will not be fully offset in the near future.Industrial production in France and Italy surprised on the low side. The only thing that's roaring along is China, but given that Chinese new loans in January are reported at 1.6 trillion yuan, it's blindingly obvious that this is a bubble that carries the seeds of its own destruction. (At this stage in a bubble, money is running into the bubble not just from bank lending but because it is being diverted from other economic activity.)
So yes, Chinese imports were reported very high on strengthening internal demand - but the internal demand comes from bubble money.
If my power holds out, I'll post some things about 1929 in the US in the lead up to the crash this afternoon.
This is eerie - it is like watching some sort of movie of the 1929 collapse made in China with Chinese actors. Goldman Sachs was reported this morning to be selling some property in Shanghai, so I think the end is nigh.
The concern over Europe and government deficits really arises from this problem. No one knows where 2011 growth is coming from, if it is not coming from the US and Europe.
Snarky Mark normally has good coverage of China, and he is oddly Galbraith-like in his way of presenting it. Never has so much economic idiocy deserved dry snark as now.
Tuesday, February 09, 2010
Amused And Confused
Amused: In a stunning display of government efficiency, the federal offices in DC decided to remain closed today. Does anyone believe that they'll be open tomorrow? Nah? I suppose there is a real question about whether they'll be open on Thursday, also, because they're going to get significant snow, and if they can't manage to open four days after the other storm, you'd kind of expect them not to be operational less than 24 hours after this one. It's nice work if you can get it.
Confused: December's wholesale sales and inventories report is out:
You'd have to expect that businesses would be restocking now. Sales were good in December. On the one hand, I would look at this and think that businesses are going to be sending in lots of orders which would boost us through March, at the minimum. On the other hand, why hadn't they already? This looks like an indication of very low confidence.
I will go back and look at the rail, trucking and manufacturing reports for the last quarter again. In December, on an NSA basis, YoY new manufacturing orders were up about 3.4%. YoY durable orders, however, were down about 2.4%. The growth was all in non-durable orders, which were up 9.3%. This probably means that there is a wave of imports coming.
Comparing non-seasonally adjusted December 2009 to December 2008, shipments for capital goods were down, shipments for construction materials were down, shipments for information technology were down, and shipments for capital goods were down. Shipments for computers and related products were up, and so were shipments for consumer goods (8.7%). See Table 5 on page 6. New orders were only up for computers and related, construction materials, and consumer nondurable goods. People are only ramping up spending on clothing, food, etc. Not a very strong showing, and it is a marker of the income problem.
Rail for December 09/08: Carloads were down 4.1%, but if the change in coal shipments had been excluded, they would have been up 6.9%. Intermodal was up 2.5%.
Trucking: On an SA basis, tonnage was up 6.9% for December 09 compared to December 08.
It's beginning to look like cost decreases more than volume, perhaps.... But I am not sure, because of the mix in categories. New orders for primary metals were up substantially Dec 09/08, but new orders for fabricated metals were down.
Some of this is pricing differentials. Some is clearly product mix. Raw material pricing is holding up better than for finished goods, and basic consumption items are way up in comparison to deferrable purchases.
I think there could be very bad implications for the economy if Congress doesn't wake up and do something about unemployment. They've got less than a week. There are some signs of life.
Confused: December's wholesale sales and inventories report is out:
You'd have to expect that businesses would be restocking now. Sales were good in December. On the one hand, I would look at this and think that businesses are going to be sending in lots of orders which would boost us through March, at the minimum. On the other hand, why hadn't they already? This looks like an indication of very low confidence.
I will go back and look at the rail, trucking and manufacturing reports for the last quarter again. In December, on an NSA basis, YoY new manufacturing orders were up about 3.4%. YoY durable orders, however, were down about 2.4%. The growth was all in non-durable orders, which were up 9.3%. This probably means that there is a wave of imports coming.
Comparing non-seasonally adjusted December 2009 to December 2008, shipments for capital goods were down, shipments for construction materials were down, shipments for information technology were down, and shipments for capital goods were down. Shipments for computers and related products were up, and so were shipments for consumer goods (8.7%). See Table 5 on page 6. New orders were only up for computers and related, construction materials, and consumer nondurable goods. People are only ramping up spending on clothing, food, etc. Not a very strong showing, and it is a marker of the income problem.
Rail for December 09/08: Carloads were down 4.1%, but if the change in coal shipments had been excluded, they would have been up 6.9%. Intermodal was up 2.5%.
Trucking: On an SA basis, tonnage was up 6.9% for December 09 compared to December 08.
It's beginning to look like cost decreases more than volume, perhaps.... But I am not sure, because of the mix in categories. New orders for primary metals were up substantially Dec 09/08, but new orders for fabricated metals were down.
Some of this is pricing differentials. Some is clearly product mix. Raw material pricing is holding up better than for finished goods, and basic consumption items are way up in comparison to deferrable purchases.
I think there could be very bad implications for the economy if Congress doesn't wake up and do something about unemployment. They've got less than a week. There are some signs of life.
Monday, February 08, 2010
The Catholic Church Once Reigned In The West
And you know, even the Catholic church now thinks that didn't work out well - that it corrupted both the church and rulers.
This thought dominated my musings as I salted, shoveled and hacked ice this weekend (another 6-8 inches is probably on its way by mid-week, so I wanted to get down to bare ground ASAP). The humor of it somewhat distracted me from my black-ice bruises.
I realize that many people like the idea of carbon dioxide regulation as a framework for a new world order that will be all compassionate and wonderful and stuff, but this of course means that it is a religion which desires secular rule. And look around while considering the past. While ethics are a needed component of secular rule, things never work out well when the priesthood DOES rule. Perhaps it is true that those who have no sense of history are doomed to repeat it.
Of course some of those who do have this religious fervor claim to be different on the basis that CO-2 induced AGW is scientifically proven, and thus they claim that they are advocating a governmental scheme based on reality and science rather than faith.
However that concept has been failing under the weight of very solid evidence, which was brought to a laughable conclusion this weekend, demonstrating that it is not only not science but as a religion it seems to fall in the class of a cult. I refer, of course, to the Oral-Roberts-like declaration by Phil Jones that he had considered suicide and that he felt persecuted by freedom of information requests which were designed to "discredit" the unit's work.
How can anyone discredit science with information unless the conclusions drawn from that information can be shown to be incorrect? The worry alone tends to prove (and the emails confirm and programs confirm) that this unit was engaged in systematically misrepresenting the data.
All of this is not helped by the continuing revelations about the latest IPCC report, which is now shown to have been compiled at least partly for completely political reasons with no respect for underlying fact. Nor the very obvious US misrepresentations, nor the fact that Australia's official climate unit can't support its "official" temperature trends with data. It now claims that it lost the data. Haha.
So now we break down the supporters of the CO-2 extreme endangerment into two groups. There are some scientists who truly believe in it based on the work they have done. This group is pretty embarrassed by the behavior of the Phil Jones/Michael Mann crowd - but apparently very few of them are embarrassed enough to openly criticize them, or to agitate for a more scientific way to sift and collate the data. Therefore most of them are corrupt, in the same way that the leadership of the Catholic church was corrupted during the medieval times. Why should anyone trust them? How can the average person separate fact from fiction, and science from belief? How can most of us know which of these people are truly honestly studying and reporting? And if their own honest work is somewhat dependent upon the dishonest work of others, aren't they perhaps confused themselves? Honestly confused, but still in danger of delusion?
And then there are those who are unequivocally religious adherents to this point of view. They believe in it due to the fact that they think believing in it will provide a better way forward for humanity. One may admire their idealism, but I am horrified by their implicit dismissal of science itself.
It is not just our ethics which have improved the lot of the average human being - it is science. While the history of the last century alone proves that science without ethics can be terrifying, the history (past and current) of religions trying to rule isn't very inviting either. Science provided a neutral zone in which facts were privileged, just as the Reformation challenged the supremacy of a corrupted priesthood by a return to biblical religion (the checkpoint), and just as Judaism, as diverse as it is, is founded on texts which are both religious and historical, providing their checkpoint.
The culture of western enlightenment rests on the value of the individual (an axiom derived both from experience and religion), the axioms and ethics of science and its effects (our civilization is a technological and agrarian one), and a recent political tradition of split power centers and the consent of the ruled in society. This three-legged stool seems to be stable and is capable of producing considerable material and ethical progress. The fact that slavery alone has been nearly abolished globally is proof of that progress.
And science can only exist in a framework in which the fundamental data is respected above all else, and in which skepticism is privileged. Both of these fundamentals have been ignored by the IPCC form of "climate science". Science itself is a belief system based on a few axioms, but its belief system is confined to those few axioms, and its validity is based on the fact that scientific consensus about any further derived axioms can always be successfully challenged with contradictory and reproducible evidence.
I always suspected that the theory and practice of scientific method has been one of the fonts of the western enlightenment, and that destroying its place in our civilization would destroy our civilization. Watching Phil Jones climb up Oral Roberts' tower has confirmed me in that belief.
PS: The basic axioms of science are very few, although the body of scientific study has built up a mass of derived axioms (things which have never been disproved and which appear to be true because they are confirmed by the known observations). The first and most important is the concept that the natural world does exist externally to us, follows its own rules, and follows consistent rules. The second is that although we interact with that reality and are a part of it, we do not determine it except in very limited and localized ways. Science is the accumulated body of knowledge by which we describe our observations and conclusions about this axiomatic reality, and scientific method is the process which we have found to be the best way of creating a consistent, provable, and useful set of conclusions about that reality.
Most westerners are not aware of this axiomatic belief system underlying science because it is now so universal in our culture, but cultures have been founded on a different set of axioms. They haven't been that successful over time. In many ways post-modern thought about science and now climate science of the IPCC variety are an attempt to subvert scientific method. I cannot see how this will not destroy our ability to generate and use the body of knowledge we call science.
This thought dominated my musings as I salted, shoveled and hacked ice this weekend (another 6-8 inches is probably on its way by mid-week, so I wanted to get down to bare ground ASAP). The humor of it somewhat distracted me from my black-ice bruises.
I realize that many people like the idea of carbon dioxide regulation as a framework for a new world order that will be all compassionate and wonderful and stuff, but this of course means that it is a religion which desires secular rule. And look around while considering the past. While ethics are a needed component of secular rule, things never work out well when the priesthood DOES rule. Perhaps it is true that those who have no sense of history are doomed to repeat it.
Of course some of those who do have this religious fervor claim to be different on the basis that CO-2 induced AGW is scientifically proven, and thus they claim that they are advocating a governmental scheme based on reality and science rather than faith.
However that concept has been failing under the weight of very solid evidence, which was brought to a laughable conclusion this weekend, demonstrating that it is not only not science but as a religion it seems to fall in the class of a cult. I refer, of course, to the Oral-Roberts-like declaration by Phil Jones that he had considered suicide and that he felt persecuted by freedom of information requests which were designed to "discredit" the unit's work.
How can anyone discredit science with information unless the conclusions drawn from that information can be shown to be incorrect? The worry alone tends to prove (and the emails confirm and programs confirm) that this unit was engaged in systematically misrepresenting the data.
All of this is not helped by the continuing revelations about the latest IPCC report, which is now shown to have been compiled at least partly for completely political reasons with no respect for underlying fact. Nor the very obvious US misrepresentations, nor the fact that Australia's official climate unit can't support its "official" temperature trends with data. It now claims that it lost the data. Haha.
So now we break down the supporters of the CO-2 extreme endangerment into two groups. There are some scientists who truly believe in it based on the work they have done. This group is pretty embarrassed by the behavior of the Phil Jones/Michael Mann crowd - but apparently very few of them are embarrassed enough to openly criticize them, or to agitate for a more scientific way to sift and collate the data. Therefore most of them are corrupt, in the same way that the leadership of the Catholic church was corrupted during the medieval times. Why should anyone trust them? How can the average person separate fact from fiction, and science from belief? How can most of us know which of these people are truly honestly studying and reporting? And if their own honest work is somewhat dependent upon the dishonest work of others, aren't they perhaps confused themselves? Honestly confused, but still in danger of delusion?
And then there are those who are unequivocally religious adherents to this point of view. They believe in it due to the fact that they think believing in it will provide a better way forward for humanity. One may admire their idealism, but I am horrified by their implicit dismissal of science itself.
It is not just our ethics which have improved the lot of the average human being - it is science. While the history of the last century alone proves that science without ethics can be terrifying, the history (past and current) of religions trying to rule isn't very inviting either. Science provided a neutral zone in which facts were privileged, just as the Reformation challenged the supremacy of a corrupted priesthood by a return to biblical religion (the checkpoint), and just as Judaism, as diverse as it is, is founded on texts which are both religious and historical, providing their checkpoint.
The culture of western enlightenment rests on the value of the individual (an axiom derived both from experience and religion), the axioms and ethics of science and its effects (our civilization is a technological and agrarian one), and a recent political tradition of split power centers and the consent of the ruled in society. This three-legged stool seems to be stable and is capable of producing considerable material and ethical progress. The fact that slavery alone has been nearly abolished globally is proof of that progress.
And science can only exist in a framework in which the fundamental data is respected above all else, and in which skepticism is privileged. Both of these fundamentals have been ignored by the IPCC form of "climate science". Science itself is a belief system based on a few axioms, but its belief system is confined to those few axioms, and its validity is based on the fact that scientific consensus about any further derived axioms can always be successfully challenged with contradictory and reproducible evidence.
I always suspected that the theory and practice of scientific method has been one of the fonts of the western enlightenment, and that destroying its place in our civilization would destroy our civilization. Watching Phil Jones climb up Oral Roberts' tower has confirmed me in that belief.
PS: The basic axioms of science are very few, although the body of scientific study has built up a mass of derived axioms (things which have never been disproved and which appear to be true because they are confirmed by the known observations). The first and most important is the concept that the natural world does exist externally to us, follows its own rules, and follows consistent rules. The second is that although we interact with that reality and are a part of it, we do not determine it except in very limited and localized ways. Science is the accumulated body of knowledge by which we describe our observations and conclusions about this axiomatic reality, and scientific method is the process which we have found to be the best way of creating a consistent, provable, and useful set of conclusions about that reality.
Most westerners are not aware of this axiomatic belief system underlying science because it is now so universal in our culture, but cultures have been founded on a different set of axioms. They haven't been that successful over time. In many ways post-modern thought about science and now climate science of the IPCC variety are an attempt to subvert scientific method. I cannot see how this will not destroy our ability to generate and use the body of knowledge we call science.
Saturday, February 06, 2010
At The Washington Post
Surprising:
One of the oddest facets of current US politics is that so many are dismissing the tea party crowd as a bunch of right wingers, when the reality is that many of these people have been pretty consistent Democratic voters. In no way does fiscal responsibility require a particular political bent. Look at Canada - it got itself into fiscal trouble decades ago and then adopted a policy of fiscal conservatism which has largely been followed by liberal and conservative politicians.
As far as I'm concerned, the tea party movement is a third party at this point - probably produced by the cooperation between the GOP and Democrats to bar third party candidates from presidential debates. Thus both parties insulated themselves enough from gnawing concerns among the citizenry to produce a large pool of voters who were disaffected and concerned over the national direction.
Not only that, but the reality is that we have to pay for what we want, and this country has enough entitlements already to ensure that reckless spending threatens most citizens' welfare. The theory that they are too stupid to know that is just, well, stupid.
The tea party movement might be the response to the theory that the fatal flaw in democracies is the power of the voters to "vote themselves largesse"; the problem for voters is that once they have got the largesse, they now find they have an interest in continuing it. There is little sense in robbing the bank that you expect to pay your pension.
A hot and unpleasantly nasty discussion in the comments on the article.
Every political community includes some members who insist that their side has all the answers and that their adversaries are idiots. But American liberals, to a degree far surpassing conservatives, appear committed to the proposition that their views are correct, self-evident, and based on fact and reason, while conservative positions are not just wrong but illegitimate, ideological and unworthy of serious consideration.I wonder why WaPo printed this?
One of the oddest facets of current US politics is that so many are dismissing the tea party crowd as a bunch of right wingers, when the reality is that many of these people have been pretty consistent Democratic voters. In no way does fiscal responsibility require a particular political bent. Look at Canada - it got itself into fiscal trouble decades ago and then adopted a policy of fiscal conservatism which has largely been followed by liberal and conservative politicians.
As far as I'm concerned, the tea party movement is a third party at this point - probably produced by the cooperation between the GOP and Democrats to bar third party candidates from presidential debates. Thus both parties insulated themselves enough from gnawing concerns among the citizenry to produce a large pool of voters who were disaffected and concerned over the national direction.
Not only that, but the reality is that we have to pay for what we want, and this country has enough entitlements already to ensure that reckless spending threatens most citizens' welfare. The theory that they are too stupid to know that is just, well, stupid.
The tea party movement might be the response to the theory that the fatal flaw in democracies is the power of the voters to "vote themselves largesse"; the problem for voters is that once they have got the largesse, they now find they have an interest in continuing it. There is little sense in robbing the bank that you expect to pay your pension.
A hot and unpleasantly nasty discussion in the comments on the article.
Plaintively
It is snowing at a rate of well over an inch an hour. There's like a foot out there. Already.
Oh, for the sunny south (not that it is so sunny right now). I had taken the precaution of packing the Chief in a crate and shipping him south by air earlier this week, and he indignantly reports that it is very wet - too wet to golf. So he is not gettin' any of anything, if you know what I mean. Well, it is his own fault, because he was making noises about splitting firewood. I had to hide the firewood splitting thingie. And I needed firewood.
Yesterday I unearthed the firewood splitting thingie and split a good deal just in case the power went out. There are few things that make you feel better than splitting firewood, so yesterday between the employment report and the firewood I was in a good mood. Which has since waned, given the weather and the fact that it is supposed to snow next week again and then again next weekend, which will be Valentine's Day, which I will spend alone save with a grumpy, forlorn bulldog.
After considering the totality of the circumstances (deep snow, no man, grumpy bulldog) clearly there is only one thing to do:
Oh, for the sunny south (not that it is so sunny right now). I had taken the precaution of packing the Chief in a crate and shipping him south by air earlier this week, and he indignantly reports that it is very wet - too wet to golf. So he is not gettin' any of anything, if you know what I mean. Well, it is his own fault, because he was making noises about splitting firewood. I had to hide the firewood splitting thingie. And I needed firewood.
Yesterday I unearthed the firewood splitting thingie and split a good deal just in case the power went out. There are few things that make you feel better than splitting firewood, so yesterday between the employment report and the firewood I was in a good mood. Which has since waned, given the weather and the fact that it is supposed to snow next week again and then again next weekend, which will be Valentine's Day, which I will spend alone save with a grumpy, forlorn bulldog.
After considering the totality of the circumstances (deep snow, no man, grumpy bulldog) clearly there is only one thing to do:
Play with J.
Friday, February 05, 2010
Very Happy
As one would expect, the household survey showed the turn in jobs before the establishment survey - in this release establishment reports a net job loss but the household survey reports a net jobs gain.
One should believe the household survey, not just on theoretical grounds but because of the change in FUT. Look at January-Feb 2nd 2009/2010 Daily Treasury Statements (MTD for January and February through the 2nd):
According to the employment report, since September 2009 temporary jobs have increased by 247,000. That's the type of thing that generates that rise in FUT.
This release contains adjustments to the household survey and the establishment survey. The population adjustments introduce a discontinuity into the Dec/Jan numbers, which are helpfully summed for us as follows in Table C:
What you can take from this is that the improvement in employment is not an artifact of adjustment.
More on this later - there are some pretty typical rises in self employment YoY, the pop in temporary employment, and rises in hours that show the effect of ramping up production and activity.
You can also look at Table A-11 to confirm the ramp - the distribution of unemployment in the temporary layoff category has fallen from 17.3% in Jan 09 to 13.6% in Jan 10. (Note, numbers I give in this post are not seasonally adjusted for YoY comparisons, but seasonally adjusted for other comparisons).
Table A-14 gives the breakdown of unemployed persons YoY by industry (these numbers are not seasonally adjusted). One of the reason why some more money spent on basic infrastructure (think roads and bridges) would help us so much is that January 2009's eyeball-popping 18.2% construction unemployment rate has only transitioned to a skull-busting 24.7% in January 2010. If you want to address structural long-term unemployment, here is the place that you can make a difference. Further, it is cheaper to work on roads and bridges now than it will be a few years from now, and a lot of the nation's roads and bridges need work.
Our current administration cannot resist going after the glitzy and trendy, but it won't help us much. We truly are in a debt bind (Moody just warned on US credit), so set aside the funding for rail, etc, and buy buses and fix the roads. The boring old tried-and-true will; infrastructure repair is one of the few ways we can introduce current stimulus at almost zero cost when figured over a few years. Both Exurban Nation and Coyote blogs have written about the stupidity of many of the passenger rail proposals. I cannot equal their excellence, so if you doubt my assertion try this and this for starters.
Table A-8 shows that we gained over 600,000 private wage and salary jobs in January. This is far beyond statistical significance. Many of them are in lower-paying industries (establishment retail shows a gain of 42,000), but these are solid gains if we can just keep from messing this up - and each of these gains translates to more activity and spending in the same stores.
Unemployment percentages would look much worse if this were even a decade ago, but the number of retirees is helping us out by draining workers from the work force. You can see the recession ramp in this graph:
U-6 dropped below the 17% range. The number of workers unemployed for 27 weeks or more rose to 6.3 million. Unemployment extensions need to be addressed.
We seem to be on the other side of the mountain. It will not be that easy to stay this course because of income trends, so a careful and plodding adherence to the basics is dictated. It may not be exciting, but it will work. We keep throwing money at stuff that sounds good, but that does not produce any long term benefits. Life is not a Harlequin romance.
One should believe the household survey, not just on theoretical grounds but because of the change in FUT. Look at January-Feb 2nd 2009/2010 Daily Treasury Statements (MTD for January and February through the 2nd):
Jan-Feb 2nd 2009In most categories, tax receipts are still down YoY. But the net decline has plummeted in recent months, and look at Federal Unemployment Tax, which is up YoY.
WIET: 176,949
CIT: 9,750
FUT: 944
Tot: 194,491
Jan-Feb 2nd 2010
WIET: 167,167
CIT: 8,161
FUT: 984
Tot: 183,999
According to the employment report, since September 2009 temporary jobs have increased by 247,000. That's the type of thing that generates that rise in FUT.
This release contains adjustments to the household survey and the establishment survey. The population adjustments introduce a discontinuity into the Dec/Jan numbers, which are helpfully summed for us as follows in Table C:
What you can take from this is that the improvement in employment is not an artifact of adjustment.
More on this later - there are some pretty typical rises in self employment YoY, the pop in temporary employment, and rises in hours that show the effect of ramping up production and activity.
You can also look at Table A-11 to confirm the ramp - the distribution of unemployment in the temporary layoff category has fallen from 17.3% in Jan 09 to 13.6% in Jan 10. (Note, numbers I give in this post are not seasonally adjusted for YoY comparisons, but seasonally adjusted for other comparisons).
Table A-14 gives the breakdown of unemployed persons YoY by industry (these numbers are not seasonally adjusted). One of the reason why some more money spent on basic infrastructure (think roads and bridges) would help us so much is that January 2009's eyeball-popping 18.2% construction unemployment rate has only transitioned to a skull-busting 24.7% in January 2010. If you want to address structural long-term unemployment, here is the place that you can make a difference. Further, it is cheaper to work on roads and bridges now than it will be a few years from now, and a lot of the nation's roads and bridges need work.
Our current administration cannot resist going after the glitzy and trendy, but it won't help us much. We truly are in a debt bind (Moody just warned on US credit), so set aside the funding for rail, etc, and buy buses and fix the roads. The boring old tried-and-true will; infrastructure repair is one of the few ways we can introduce current stimulus at almost zero cost when figured over a few years. Both Exurban Nation and Coyote blogs have written about the stupidity of many of the passenger rail proposals. I cannot equal their excellence, so if you doubt my assertion try this and this for starters.
Table A-8 shows that we gained over 600,000 private wage and salary jobs in January. This is far beyond statistical significance. Many of them are in lower-paying industries (establishment retail shows a gain of 42,000), but these are solid gains if we can just keep from messing this up - and each of these gains translates to more activity and spending in the same stores.
Unemployment percentages would look much worse if this were even a decade ago, but the number of retirees is helping us out by draining workers from the work force. You can see the recession ramp in this graph:
U-6 dropped below the 17% range. The number of workers unemployed for 27 weeks or more rose to 6.3 million. Unemployment extensions need to be addressed.
We seem to be on the other side of the mountain. It will not be that easy to stay this course because of income trends, so a careful and plodding adherence to the basics is dictated. It may not be exciting, but it will work. We keep throwing money at stuff that sounds good, but that does not produce any long term benefits. Life is not a Harlequin romance.
