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Panda

Its still only about 3% of GDP. Its been worse. But the trend this time is for an increasing trade imbalance which means either some belt tightening or increasing debt. And since the US social infrastructure is already trimmed to the bone its likely to mean some very hard times for a lot of people.

bkkandrew

U.S. Recession May Have Begun in Last Quarter of 2007 (Update2)

By Timothy R. Homan

July 31 (Bloomberg) -- The U.S. economy may have slipped into a recession in the last three months of 2007 as consumer spending slowed more than previously estimated and the housing slump worsened, revised government figures indicated.

The world's largest economy contracted at a 0.2 percent annual pace in the fourth quarter of last year compared with a previously reported 0.6 percent gain, the Commerce Department said today in Washington. Growth for the period from 2005 through 2007 was also trimmed.

The revisions now reinforce measures such as employment and production that already signaled the economy was shrinking. The National Bureau of Economic Research, the Cambridge, Massachusetts-based arbiter of economic cycles, defines a recession as a ``significant'' decrease in activity over a sustained period of time. The declines would be visible in GDP, payrolls, production, sales and incomes.

``We're in a recession,'' Allen Sinai, chief economist at Decision Economics Inc. in New York, said in a Bloomberg Television interview. ``It's going to widen, it's going to deepen.''

The government also said incomes grew less than previously thought, raising the risk that consumer spending will again stumble after getting a temporary boost from the tax rebates last quarter.
Previous Contraction

The prior time the economy shrank was in the third quarter of 2001 during the last recession, when it contracted at a 1.4 percent pace. Growth from January through March was revised down to a 0.9 percent pace from 1 percent. Initial jobless claims increased by 44,000 to 448,000 in the week ended July 26, from a revised 404,000 the prior week, the Labor Department said.

The revisions of growth are part of the government's annual adjustments to gross domestic product based on additional information from surveys and Internal Revenue Service data.

For 2005, growth was cut to 2.9 percent from 3.1 percent, and the rate of expansion for 2006 was reduced to 2.8 percent from 2.9 percent. The economy grew 2 percent last year, down from a previously reported 2.2 percent.
Nine of the 13 quarters under review were revised down, three increased and one was unchanged.

The largest downward revision was for the last three months of 2007, as the previously reported 2.3 percent gain in consumer spending was reduced by more than half, to 1 percent. Americans cut back on the use of electricity and gas as fuel bills soared.

Continued here:

Bloomberg.com: Economy

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A funny thing happened today - Ant trolls, stalks, prevokes and generally upsets approximately 15 members of the board, yet Noodles goes to jail. Perhaps it was a dream...
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bkkandrew

See:
http://teakdoor.com/issues/31530-oil...tml#post708099 (Oil Tumbles as Signs of Slowing Economy Spur Commodity Selling)

Butterfly

^ you are getting desperate bkka, time to see the mia noi I reckon

bkkandrew

^Funny to see you so jealous that I can afford a mia noi. But then, you being gay and all, they would interest you, would they...

Desperate? No, Busy, yes. Unlike you, I have a real job at the heart of this crisis. You, on the other hand, ponce, prance and mince about talking rubbish. It must be galling for you to come up against someone actually dealing with the financial matters that you have for so long falsely claimed you have knowledge of and then discover that being in such a position can bring rewards of wine, women and song.

Sorry about that. No, actually I'm not!

Panda

The US may yet have an ace up their sleeve. The US has the largest gold reserves in the world. About 78% of the worlds reserves. Over 8,000 tons of the stuff. More than enough to pay off their $US debt many, many times over.
Official gold reserves - Wikipedia, the free encyclopedia

Ironically, it was the $US as the worlds fiat currency that eventually, completely replaced the world gold standard by 1971.
Gold standard - Wikipedia, the free encyclopedia

It seems the USA had less faith in the continuing strength of the $US fiat currency than the rest of the world as the rest of the world sold off gold reserves and bought $USs.

As a country that owned the mint for the worlds trading currency, the USA could simply print paper money and lend it to other countries or exchange it for real tangible consumer goods. Since virtually all US trade was denominated in $USs.
On top of that, the USA has been a nett exporter for several decades (until now) which encouraged international faith in investment in $USs and US industries including finance.

Now we have hit a tipping point where the US balance of trade is going into the negative. The country can no longer continue to produce competitive exports to balance imports. International faith in the strength of the $US is ebbing and now moving more towards the $Euro, although the $US hegemony still holds the (declining) lions share of about 66%.

Here is a situation where a country doesn't have enough tangible goods to export in order to buy their way out of debt. As the only other factor keeping the $US at its present and recent high exchange rates has been the rest of the worlds faith in the trading value of the $US, it does seem like another bubble about to burst when international investment in $USs and industry starts to decline.

That all sounds like bad news for the value of the $US on the world market. But for the countries that are actually producing a surplus of tangible goods, their profits will be invested elsewhere, probably in $Euros or industries in countries that are actually showing real growth (eg: China and India).

USAs only way to trade their way out of increasing world debt is allow the value of the $US to fall. And thats not necessarily going to be a bad thing for employment. Only catch is that imported consumer goods will not be so cheap anymore and life will be a little tougher for the little people. The bad thing for the big money people in USA is that a drop of up to 20% in the value of the $US (over the next 10 years as I predict) would deter international investment and reduce their profits very considerably.

What alternatives does the US government have? They can crank up the printing presses at the mint and flood the world with cheap $USs in even more loans (hello Zimbabwe). They cant produce any more tangible goods for trade unless the $US drops in trading value. They could dump their reserves of gold onto the world market in exchange for $USs, but as they own nearly all of it, it wouldn't be worth much after a short time. It would get them out of debt for sure but would only be buying time for a declining economy.

The fact is that the USA has been living above their means for a long time at the expense of the rest of the world, mainly because of the $US hegemony. And also because they were a secure international investment because of a surplus in exports. That era is just about over now.

Bugs

You might want to check that chart again. The 78% is not an indication that the US holds 78% of the worlds reserves, it holds less than 30% of the nearly 30,000 tonnes of the stuff.

Panda

You are correct. My apologies. 8, 000 tons of the stuff is still a lot of cash though.

bkkandrew

Way out I am afraid.

The facts:

Current price of gold: $918
Current value of 8000 tons: $236,109,600,000
Current US National Debt: $9,534,846,989,875

So even assuming that the US could get today's price if they sold off all their gold (in reality the price would crash through the floor), the US National Debt is over 40 times greater than the gold reserve. I.E., put another way, it doesn't even cover one years worth of interest on the debt.

Source for quoted debt figure:

U.S. National Debt Clock

Also, remember that the debt figure does not include personal and corporate debt in the US. Doing so would include so many zero's it would be scary.

Panda

^ Well scratch the idea of the gold reserves pulling them out of the shit then.

bkkandrew

^Any other ideas? They could do with them!

Butterfly

sure, troll, sure, plenty of evidence in the other thread exposing your fraud and lies

I bet you drive a Ferrari and also have a 100m THB mansion somewhere in Phuket,

what school are you teaching, son ?

Panda

^^ Invade somebody?

bkkandrew

None actually. Where?

No, I dislike Ferraris. You will find a pic of my old TVR in the 'Favourite Car' thread however.

I also dislike Phuket.

TeakDoor. Its just one or two pupils (you and Britmaverick) are dim, unruly and uneducatable.

bkkandrew

Brilliant!

I'mAdinnerJacket better watch out! (Or pray for rapid US economic recovery)

Butterfly

at the bottom, I have quoted for posterity your little jewels in case you forgot them

http://teakdoor.com/issues/31530-oil...tml#post708570 (Oil Tumbles as Signs of Slowing Economy Spur Commodity Selling)

Panda

^^ would be funny if it wasnt so scarry.

Spin

BMW not doing very well in the states at the moment, the world's largest maker of luxury vehicles, reported second-quarter earnings that trailed analysts' estimates and abandoned its profit forecast on falling U.S. sales, the dollar's decline and rising costs for plastics, steel and oil.

Full Story

Milkman