Posted on 02/23/2010 12:04:18 PM PST by John Carney
Today's bleak consumer confidence number is undoubtedly bad news for the economy. The bigger than expected drop suggests that consumers have lost confidence in the recovery, which will drive down home prices and consumer spending.
Consumer confidence is typically our "first look" at the state of the economy. While most government aggregated data come out with a two-month lag, or more, consumer confidence hits with just a one month lag. Studies have shown that consumer confidence is a good predictor of consumer spending numbers. Basically, people surveyed seem to be good at accurately reading their own economic situation, and those surveyed accurately reflect the broader economy. When consumer confidence drops to such deep unexpected levels--today's were the worst in 27 years--then it is a flashing red-light about the economy.
There wasn't anything good about today's numbers. Every part of the survey was awful. On jobs, the optimistic folks who say jobs are plentiful fell to 3.6 percent from 4.4 percent. The pessimistic people who said jobs are hard to get increased to 47.7 percent from 46.5 percent. The gauge of expectations for the next six-months fell to 63.8, from 77.3 the prior month. The share of people who believe their incomes will increase over the next six months fell to 9.5 from 11 percent. The share of those expecting more jobs fell to 12.4 percent from 15.8 percent.
The message: the economy sucks.
(Excerpt) Read more at businessinsider.com ...
“Thought my friends at FreeRepublic would like this one.”
Ummmmmmmmm, yeah...thanks...very nice...VERY nice, indeed...
Aggressive action with tax cuts, drastically reduced govenment spending, and reduction of government mandates on small business may or may not be helpful but may be the only chances we have. But then we have this idiot in the White House who will not be able to forego his own ideology to consider them. AND we can’t get rid of him for 3 years.
But only a year ago, all this hope and change;
01/10/09: President-Elect Obama’s Weekly Address
http://www.youtube.com/watch?v=cTDln2f0GvQ&feature=player_embedded
[[At 2 minutes]]
“Our plan will likely save or create three to four million jobs,” Obama says today. “Ninety percent of these jobs will be created in the private sector – the remaining 10 percent are mainly public sector jobs we save, like the teachers, police officers, firefighters and others who provide vital services in our communities.”
Several federal places of work could be up for major renovations however, since Obama says that “We’ll create nearly half a million jobs by investing in clean energy – by committing to double the production of alternative energy in the next three years, and by modernizing more than 75 percent of federal buildings and improving the energy efficiency of two million American homes.”
To be fair, this is only one month. Consumers are fickle. Watch it mysteriously rocket up as we approach the November elections.
Thanks, I guess I must've slept through it.
I don’t know if it is so much we like it but we prefer the truth to hope.
Good one John thanks for posting it.
ping
Good article John; thanks for posting.
To be fair, this is only one month. Consumers are fickle. Watch it mysteriously rocket up as we approach the November elections.
I dunno. This has dragged on long enough now that many people have adopted a psychology of scarcity and a hide-in-the-bunker attitude. I think it will be a long time before that starts to change.
Your side - the stock market will be at least 10% lower by December 31st of this year, and GDP growth will be negative for the year as a whole. My side - GDP growth will be positive for the year as a whole, and stocks will be higher at year end than now (measured by the SP500). Anything in between - a wash.
The economy recovers because it cycles, and politics has precious little to do with any of it.
The “recovery” that never was, to say the least. BO says the stimulus “guarantees” there’ll be no depression. Do you think this economic moron considered any of the following:the failure of Europe, France and Germany, to buy any of our debt or participate in any world growth because of having to support the euro, and their own economic structure,because of the problems in Greece, Italy, Austria, Spain, Portugal and Ireland? China, which has already warned us about our debt and has pulled back and may with Treasuries pull a Fannie/Freddie dump like in 2008? Can Japan continue to buy our debt in light of their own market needs? Oil continues up, not necessairly based on demand but disruption of supply/value of dollar goes down? Interest raates go up via the FED first then in federal securities because of tightening capital markets/increasing deficits which cause rates to go higher increasing the cost of borrowing for business expansion(not for payroll Mr. President)which further deflates private sector growth? Revenues to government continue to go down further increasing deficits and the problems/costs they cause. Just where oh where will they replace the 600 billion they werew counting on from cap and tax? Personal income taxes go up. And this guarantees no depression.
The employment situation is far, far worse than the official numbers acknowledge, in part because the "seasonally-adjusted" BLS methodology is outdated, but also because it artificially compresses the number of people comprising the "labor force" every time another group of unemployed persons hit an arbitrary point on the calendar.
Oh, and by my count, about 700 banks are in serious, near-term risk of financial failure. Have a nice day.
lost confidence??????
How ‘bout never had any to begin with!
And no, the debt is not being financed by new money creation. The Fed's balance sheet is 2% larger than it was on November 15, 2008, immediately after the election. The Fed accomodated the private banking system in the smash itself of September and October 2008. Not the treasury, which didn't need it. Since then, the banking system has repaid the Fed over $1.1 trillion of its emergency loans. And the Fed has limited itself to redeploying that repaid money into longer term securities, both treasuries and mortgages. The treasury position it thereby rebuilt is the same size it was at the end of 2007 (it sold half of it into the market in the first half of 2008 to finance direct loans to the banks etc).
All the hysterics screaming about hyperinflation and money creation to fund the treasury's debt issuance are flat out lying. They don't bother to read the financial statements and they can't add. They recycle slanders based on ideological fears and institutional hatreds and conspiracy nut nonsense, with a healthy dose of hawking commodities for speculators. But it is all crap, start to finish.
Again, do you want to bet, or are you just jawing?
markets ping
Let's start with the banks, who have "paid back" their emergency loans. How did they do that? By pumping that money into equities, and driving up stock valuations (see: after-market futures). So? What's wrong with that? They helped boost the stock market and increased the value of people's savings and investments, right?
Here's what's wrong: far too much of these banks' "assets" are still composed largely of securities whose valuations are based on lolipops and unicorns. 25% of the mortgages in this country are underwater, and some of the worst of them are still bundled into CDO's, the notional value of which are are predicated on their original valuations, rather than the actual values as marked-to-market. They can park all the money they want in Treasuries (a great deal of it at near 0% interest, by the way), and they are doing so for a reason. They see things that they don't want the rest of us to notice. The Fed also soaks up a sizable portion of each auction. Also for a reason.
Meanwhile, unreformed institutions like AIG and the always-lovely Goldman Sachs are still writing credit default swap agreements, some of it on foreign debt (including sovereign debt contracts with Greece, that rock of financial stability). In addition, many of their CDO contracts are fully "synthetic"; they did not own actual bonds, they were comprised of credit-default swaps that Goldman wrote against subprime mortgage bonds. That sounds like it couldn't possibly be a problem in the future, doesn't it? After all, interest rates will stay low forever...
As for the Fed's balance sheet, I show the reserve monetary base was $900b in Sept '08 and $2.1 T today. That's just a bit more of an increase than you're indicating. The point is that the banks are no better off today than they were in 2008 because the Bernanke and the Fed have allowed them to continue to lie about the true value of their assets. Freddie Mac and Fannie Mae are still on the hook for hundreds of billions in bad mortgages that have not been reformed in any meaningful way.
The true problem we face is not inflation - not immediately, at least. The problem is debt.
Our national debt at this moment exceeds $12.4 Trillion. That does not include GSE's such as Fannie Mae and Freddie Mac. The current ratio of debt to GDP is around 87%, the highest since 1950, when the US economy had been rebuilt as a result of the war effort, and when our economy was the strongest in the world.
The combination of personal and public debt in the US is $54.7 Trillion. If we include the fast-growing unfunded entitlement obligations of Social Security, Medicare and Medicaid, the total amount of debt rises to over 107.5 Trillion. By way of comparison, the GDP of the EARTH is about $60.6 Trillion. A few dollars here, a few dollars there, you know the rest...
So: how do you propose we get out of this situation? More jobs? New technology? Increased productivity? Houston, we have a problem. Many problems, actually.
We have a profoundly anti-business Administration seeking to impose huge new costly programs on American industry and the American people. The Democrats are on the verge of passing a gargantuan new health care entitlement, the cost of which will exceed $10 Trillion over the next ten years, and the effect of which would be to cause the destruction of the American health care industry in less time than that. It would also accelerate the drive of both insurance and pharmaceutical industry operations overseas.
As if that were not enough, the Obama Administration has revived their cap-and-trade scheme, which would inflict vast new regulations and anti-competitive costs on American businesses, especially in the already hard-hit manufacturing sector. And more of them will flee overseas as well, further reducing our productive capacity. At the same time, those who choose to remain will see money that would have been available for research and development going instead to pay for environmental operating expenses.
Increasing sectors of our economy are choosing to outsource/offshore their business units, especially as tax and labor costs increase, while productivity and quality variances abroad decrease. Our private labor force is shrinking, not growing, reducing the potential tax revenue stream from any "recovery" that occurs.
And will such a recovery will be made more or less likely with the return to 2001 tax levels at the end of this year? Income, dividend, cap gains, estate taxes: all are scheduled to revert to their prior levels on January 1st of next year.
And then, there is the prospect of immigration "reform", by which its proponents wish to convert as many as 20 million largely underclass, unskilled people into permanent federal dependents, the better to drive entitlement spending to new heights.
So, do you really think it matters whether the S&P closes the year above or below where it started? I would not bet on it either way. We've got much bigger issues to confront, and they are not going away any time soon, and one of these days, the equity markets will awaken from their short-term speculative haze and realize that unless we act and soon, copper and lead will be more valuable commodities than the gold that Gordon Liddy hawks every night on TV.
The market is up since last March because it had no business falling to the levels seen last March in the first place. It was an normal retracement of an oversold panic. All it took to trigger it was the bond market stabilizing; when it rallied every financial institution had far better results to report, etc.
For the rest, it is the same idiotic pretense that money is owed to a hole in the sky. The net worth of the American household sector is $53 trillion and rising. Net of all debt. Who do you think owns debts, Martians? The net foreign asset position of the US is only about $4 trillion negative, out of $67.5 trillion in assets.
On entitlement liabilities, who do you think they run in favor of, the same Martians? They are transfers.
But the know nothings think if anyone owes anything they have a negative net worth, and if lots of people owe anything then everyone's combined net worth must be negative, and that everyone must strive with might and main to never owe anything, because only an economy without any money is sound I guess. They've never learned accounting and have no idea what they are raving about.
The banks did not "goose" the stock market - the Federal Reserve Bank of New York has been buying after-hours S&P options for months now. The private banks simply used the money as they always do, originating new loans, purchasing other banks' assets and jacking up fees and interest rates on credit cards to usurious levels. The TARP process itself merely transferred the bank's garbage mortgage loans to the public, who are now on the hook for values that will never be realized.
We don't owe money to a hole, we owe it to the Chinese and the Japanese who loaned it to us. We owe it to the banks who purposely defrauded people with opaque mortgage instruments predicated on insane valuations - all underwritten by US taxpayers. We owe it to "ourselves", only we can never pay it back because we have no prospect of future earnings growth in a socialized economy with a shrinking manufacturing sector and service industries now running for the exists as well.
Our debt service is growing far, far, faster than either GDP or net worth, most of which is not fungible in any case (buildings, vehicles and developed infrastructures) and could never be used for that purpose. When interest rates go up (and they must in view of monetary expansion and unprecedented government spending) it will get far worse. Bonds are selling at artificially low values because of Fed monetary policy. We tried this once, in 1930. The stock market stabilized back then, too; retracing almost all its losses in late 1929. It didn't end well, as I recall.
Entitlements are growing faster than our ability to ever sustain them, and they are NOT TRANSFERS, but a THEFT of productive resources for the purpose of facilitating political spending (buying votes) now with no provision for how to pay for promised, ever-escalating benefits later. There are no "lock-boxes" or "trusts". The money has already been spent - it is gone.
At the same time: our productive population is not growing; a diminishing number of workers are actually contributing to the economy.
If you don't believe that debt matters - go out run up your credit cards, buy tons of crap you cannot afford and see what happens. It does not matter who you owe it to, you still have to pay it back one way or the other.
The idea that governments are somehow different because they can create fiat currency is an illusion. If you don't believe that, I've got a seaside villa I'd like to sell you in Zimbabwe. It's a steal at only 85 trillion Zimbabwean dollars (I believe that's about enough for a cup of coffee).
Look: I am not opposed to "debt". Debt can be very good - as with bond purchases to finance worthy projects, or business loans or fixed-rate mortgages, properly underwritten. We have a serious problem, though: we are no longer operating in a free-market economy or anything like it. For equity and debt to work (both individually and symbiotically) several preconditions are required: sound money, transparency of instruments, honest and predictable valuations, knowable risks, opportunity for reward, objective laws and law enforcement, and morality.
Most of these things are missing today, and government is primarily responsible (even if we continue to enable it). When profit is privatized but risk is socialized, moral hazard will reign. When profits are socialized (redistributed) and risk is privatized, state socialism has triumphed. When both are socialized, there is no more market, save the state, and scarcity ensues. We are presently on #2, heading for #3.
The bottom line is that for all the Fed's attempts to artificially goose demand through a policy of easy money/low rates/excess liquidity, credit demand in the US is dropping. They are still trying to prime the pump and blow another bubble, but this time, it's not working. I would not go near this stock market, even with a flame-retardant suit on.
Now you are just making it up - lol. Outright lying...
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