Posted on 11/22/2007 3:32:10 AM PST by Strings of Yoakam
Today is Thanksgiving, the day when, as the first Congress proclaimed in 1777, Americans "may express the grateful Feelings of their Hearts". But those with an eye on the economy would be forgiven if, this year, they felt a little miffed with their lot. ... When four things come together, [John.Stussman] argues, it suggests that recession is near. They are widening credit spreads, a moderate or flat yield curve, falling stock prices and a contraction in manufacturing activity, as measured by the purchasing managers’ index (PMI). On each criterion, America is in trouble.
The first red light is a widening in the gap in yields between commercial bonds and three-month Treasury bills. That rise suggests that the market is increasingly wary of bearing the risk of corporate default.
The second warning sign of a flight to safety is the high cost of long-term borrowing. The yield on the Treasury’s ten-year note yesterday briefly dropped below 4 per cent for the first time since 2005 as stocks fell.
Meanwhile, the stock market is down. Mr Hussman says that his criterion here is met if the S&P 500 is lower than its level six months before. Yesterday the index turned negative for the year.
The only one of the four measures not being met is the manufacturing PMI, which at 50.9 in the latest report is still just above the line separating a rise in activity from a fall. But with employment growth very weak as well, Mr Hussman says this is also a bearish sign.
In a research note published earlier this month, he wrote: “In every instance we’ve observed these conditions (since 1963), the US economy has either already been in a recession, or within a few weeks of what turned out to be the official beginning of a recession."
(Excerpt) Read more at theaustralian.news.com.au ...
Great, next they will lower intrest rates again, just to prove to the world just how valuable the Dollar really is.
I don’t pretend to know what the future holds but I don’t know anyone personally that has had their “credit wrecked by the financial crisis”. In addition I do know people that have bought houses recently because they could afford a house when not long ago they couldn’t.
I would guess a good number of people that have “wrecked” their credit didn’t have good credit to begin with - hence sub prime...
I’m not that old so I haven’t been through that many recessions but this “down turn” seems different than all the others. Normally people start losing their houses because they lost their job. That isn’t at all the case here, at least so far. The down turn normally begins with business failures and spreads. Other than the construction industry (and those related to it) it doesn’t seem like most business have changed that much. The construction industry was way overheated so it was past due for a major correction. After recently completing a house I’m not very sympathetic with their plight. They bent me over at every opportunity.
The Iraq situation is improving, so the usual leftist liars are trying to talk down the economy.
This seems to happen in every election when a Republican is in the whitehouse. I certainly don’t recall the MSM talking about the Nazdog crash and consequent recession right before the 2000 election.
To hell with these jerks. I’m eating turkey today and intend to be grateful for my blessings.
That's is not the Fed job. Their job is to balance growth versus inflation. Bush and the treasury department have purposefully let the dollar slip and continue to do nothing about it. There will be another rate cut under the current conditions.
Gov’t pushed the sub-prime lending several years now, how could they not expect negative results. Next recess. is on the Gov’t. Suckers
The dollar is collapsing from oversupply.
So what is the Fed's solution ?
Supply more dollars.
Changing exchange rates is how markets correct for trade imbalances.
The markets are doing what they are supposed to do and our trade imbalances are improving. Trying to get government to intervene only means the correction will be worse later. You either pay the piper now or later with interest...
We will soon need wheel barrels to haul our credit cards to the grocery store.
Their job is to maintain price stability.
Since 1913 they have failed miserably.
The bill is coming due very shortly.
That’s true.
There’s a crunch inside the country and a oversupply outside.
Tough spot.
The reason though is our massive trade deficits. A lower dollar is the markets way of correcting for those imbalances.
Historically, there is little or no correlation between the size of the trade deficit and the exchange rate of the dollar. Besides, the trade deficit is falling, so why isn't the dollar rising? Answer: other factors.
Factors like way yonder too many dollars in circulation......
Created by a Federal Government that spends more than it takes in . . . it’s really not that complicated, I wonder why people find it so mystifying.
How many lazy suckers are going to blame their lack of motivation on a ‘recession’?
The reason though is our massive trade deficits. A lower dollar is the markets way of correcting for those imbalances.
I expect people are spending plenty for Thanksgiving and after Christmas and all the negative stories told by the media they will be trying to explain why Christmas was so good. If these are not enough examples of the true life on the street - ask a mother what it will take to buy Hannah Montana tickets.
Its a myriad of problems, all being allowed to happen by our Gloalists in the Admin and Congress
Until we increase manufacturing and resource development (oil, coal, energy) we will always have this problem.
America needs to return to manufacturing and in-sourcing. Give tax breaks to American companies manufacturing in America and hiring Americans, while putting impact fees on companies not hiring or manufacturing in America. Also do away with any program that helps US companies dealing w foreign countries (we dont need to spend billions to push jobs overseas).
Very naive, very naive indeed.
That’s because foreigners where buying our debt returning dollars to the US. When they stopped buying it because of the sub prime mess it exposed the bigger underlying problem.
And yes, the trade deficit is improving but it has a long way to go before being anywhere near parity.
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