.comment-link {margin-left:.6em;}
Visit Freedom's Zone Donate To Project Valour

Wednesday, March 25, 2009

Everyone Gets Cockleburr Rations For Dinner

In January, I was writing that fundamentals had taken an upswing, and that the US economy was going to try to resurge in the third quarter.

The numbers that came in for January and February did show what P-Nat projected, which was a gradual bottoming pattern overall and the beginning of some upticks. Bloomberg today:
Orders for U.S. durable goods unexpectedly rose in February on a rebound in demand for machinery, computers and defense equipment.
...
Combined with reports showing improvements in retail sales, residential construction and home resales, the figures indicate the economy is stabilizing after shrinking last quarter at the fastest pace in a quarter century. Stepped-up efforts by the Obama administration and Federal Reserve to ease the credit crunch may help revive growth later this year.
Last night Obama took credit for these events, but the stimulus package had nothing to do with it - the effects of that haven't even hit the economy yet. Very little of that package will be felt in the first half of 2009, in fact, and less than 25% of the effect will be felt in 2009. I would also like to point out that at the time the stimulus bill was being debated, the administration was claiming that the economic emergency was so dire that the representatives and senators shouldn't even be allowed to read the thing before they voted on it. Instead, this was what was really going on in the economy.

According to P-Nat, the major drivers of these statistics were price drops and need. Price drops in housing and price drops in energy, which led to a defusing of inflation, and led to control of food prices, which resulted in a pretty signficant boost to effective incomes for the bottom third of the households in the US. And need, which is just a matter of appliances, autos, shoes and clothing, for example, wearing out, babies being born, people buying things they really need, because they have to have them whether they want to spend money or not.

It is now my tragic duty to explain that all of that positive effect of price drops has been nullified by the recent policy actions. The UK's rising inflation is now our own, and this summer the effect will completely disrupt forces which were generating a slow turn for the better in the US economy.

Last week I was so sick at heart that I didn't think I could continue writing this blog. But many factors, including the intelligent commenters over here, the conversation at the convenience store, Shrinkwrapped's stunningly good explanation of the new bank bailout plan, some timely email therapy from my main economic thinking buddy (who seems almost as shaken as I am), and the fact that two commenters on this blog (Joy and Boots) have made policy suggestions that in fact would greatly help the situation, have strengthened my spine a little.

I will have to deal with my own emotions as best I can, but I am convinced that the American people have the ability to understand what must be done, the courage to accept it, and the grace to forge a way forward that is realistic and can generate slow, consistent and reasonably fair improvements in our basic circumstances. We are, as an aggregate, far better than our current leadership shows.

I am, however, terrified and struggling to control it. The way I model and envision the economy (domestic and foreign) is largely through modeling the chances and options of people, households and nations, so there is no comfortable distance here for me.

I suppose I need to address Ken's questions about why Treasury just can't print more money and buy more Treasury bonds. He doesn't see a problem with the perpetual money motion machine. In the meantime, I would like to suggest a quick review of the UK Bubble's domestic coverage, which notes that gilt (their government bond) auctions are in trouble, the money supply is ballooning, and surprise, inflation, not deflation, is the result. Who'd a thunk?

I would like to hope that I am wrong, but P-Nat is pretty much an independent entity - an AI system of sorts that is not determined by inputs but by possible interactions between economic vectors, with probabilistic functions. In essence, it tests current conditions, forms theories, tests those with randomization, and then often starts demanding a bunch of information. I have developed an enraged, wary respect for P-Nat.

Currently it's demanding a bunch of information about ag prices, plantings etc, that I just don't have. I sure hope it's not going to tell me that a bunch of people are about to starve to death.

Comments:
I'm sorry, who is P-NAT? I'm new here.
 
I think your model is correct, we're doomed to become Japan/South America and we the workers didn't do this but were sold a bill of goods (madison ave) on the dream. I wish I was wrong and hope I am but I've tried to get ready just in case.
jo6pac
Still employeed but for how long?
 
Post a Comment



<< Home

This page is powered by Blogger. Isn't yours?