Thread: The strongest economy in the world

Schiff and "analysts" discuss the US + China relationship.

Discussion of the US Dollar, Obama's trip.

After the 3:40 mark, more specific on China, possible bubbles, RE, etc., in China.

Unemployment:

The worst is yet to come: Unemployed Americans should hunker down for more job losses

BY Nouriel Roubini
Sunday, November 15th 2009, 4:00 AM

Related News


Think the worst is over? Wrong. Conditions in the U.S. labor markets are awful and worsening. While the official unemployment rate is already 10.2% and another 200,000 jobs were lost in October, when you include discouraged workers and partially employed workers the figure is a whopping 17.5%.

While losing 200,000 jobs per month is better than the 700,000 jobs lost in January, current job losses still average more than the per month rate of 150,000 during the last recession.

Also, remember: The last recession ended in November 2001, but job losses continued for more than a year and half until June of 2003; ditto for the 1990-91 recession.

So we can expect that job losses will continue until the end of 2010 at the earliest. In other words, if you are unemployed and looking for work and just waiting for the economy to turn the corner, you had better hunker down. All the economic numbers suggest this will take a while. The jobs just are not coming back.

There's really just one hope for our leaders to turn things around: a bold prescription that increases the fiscal stimulus with another round of labor-intensive, shovel-ready infrastructure projects, helps fiscally strapped state and local governments and provides a temporary tax credit to the private sector to hire more workers. Helping the unemployed just by extending unemployment benefits is necessary not sufficient; it leads to persistent unemployment rather than job creation.

The long-term picture for workers and families is even worse than current job loss numbers alone would suggest. Now as a way of sharing the pain, many firms are telling their workers to cut hours, take furloughs and accept lower wages. Specifically, that fall in hours worked is equivalent to another 3 million full time jobs lost on top of the 7.5 million jobs formally lost.

This is very bad news but we must face facts. Many of the lost jobs are gone forever, including construction jobs, finance jobs and manufacturing jobs. Recent studies suggest that a quarter of U.S. jobs are fully out-sourceable over time to other countries.
Other measures tell the same ugly story: The average length of unemployment is at an all time high; the ratio of job applicants to vacancies is 6 to 1; initial claims are down but continued claims are very high and now millions of unemployed are resorting to the exceptional extended unemployment benefits programs and are staying in them longer.

Based on my best judgment, it is most likely that the unemployment rate will peak close to 11% and will remain at a very high level for two years or more.

The weakness in labor markets and the sharp fall in labor income ensure a weak recovery of private consumption and an anemic recovery of the economy, and increases the risk of a double dip recession.

As a result of these terribly weak labor markets, we can expect weak recovery of consumption and economic growth; larger budget deficits; greater delinquencies in residential and commercial real estate and greater fall in home and commercial real estate prices; greater losses for banks and financial institutions on residential and commercial real estate mortgages, and in credit cards, auto loans and student loans and thus a greater rate of failures of banks; and greater protectionist pressures.
The damage will be extensive and severe unless bold policy action is undertaken now.

Roubini is professor of Economics at the Stern School of Business at New York University and Chairman of Roubini Global Economics.
Top economic prognosticator says job seekers
must face grim economic facts

Link: The worst is yet to come: Unemployed Americans should hunker down for more job losses

On the topic of US Unemployment. Click this link. It offers a time-line of increasing unemployment county be county.

Very interesting:

multimediafinal

^^ Roubini is saying the same as Paul Krugman then. More government debt, for less unemployment and more consumption. I wouldn't yet rule out a second stimulus package.

Originally Posted by sabang

^^ Roubini is saying the same as Paul Krugman then. More government debt, for less unemployment and more consumption. I wouldn't yet rule out a second stimulus package.

A second stimulus package is what the US cannot afford.

The US is broke.

The stimulus is a false propeller.

Spend more, borrow more, create more fake jobs.

It truly shows, that the US is in the toilet. Wish I didn't have to say this, but I am.

^ C'mon, Milkie! The terrorists are going to create lots of LONG-TERM jobs when they are moved to the Mainland!

Gee, really?

What a surprise:

“It is important though to recognize if we keep on adding to the debt, even in the midst of this recovery, that at some point, people could lose confidence in the U.S. economy in a way that could actually lead to a double-dip recession,” Obama said.

http://www.thecomingdepression.info/...ga-depression/

The US adds on average 100,000 new citizens to the workforce every month... It will be some time before the unemployment rate begins to decline as the economy has to generate 100K new positions monthly just to maintain the status quo, much less to put the unemployed back to work...

2010 will be an ugly year for employment and the economy in general as inflation continues to devalue the USD, placing even more pressure on lower / middle class citizens... The consumer price index, which is a key indicator for inflation, hit 0.3% in October 2009 across all sectors... This is if you trust the US government numbers... The consumer is being hit with higher costs for staples at the exact time when they cannot afford it...

Satirical, yes... Reality, yes again... Let the lunacy continue...

An Open Letter to the Federal Reserve (GS)

An Open Letter to the Federal Reserve

By Matt Koppenheffer and Morgan Housel
November 20, 2009 | Comments (37)

Dear Ben Bernanke and distinguished members of the Federal Reserve: We are writing today to formally solicit your help in obtaining approvals to start a new bank holding company, Money Unlimited. We of course understand that the approval process for a new bank is typically done through the FDIC, but as the Federal Reserve plays a crucial role in our business plan, we hope that you can expedite the process.

First, let us assure you that we will start from day one as a very well capitalized institution, with no need to raise outside capital. While actual cash is on the lower end of the spectrum, we both own stock portfolios that we plan to use as collateral for our banking operations. Our current holdings include Berkshire Hathaway (NYSE: BRK-B), Johnson & Johnson (NYSE: JNJ), Procter & Gamble (NYSE: PG), and Coca-Cola (NYSE: KO).

For the purposes of this application, we are choosing to mark these assets to model rather than to market. Our basic assumptions include 7% U.S. GDP growth, 12% global GDP growth, a 4% U.S. unemployment rate, rising corporate profitability, U.S. debt repudiation, and the end of cloudy days.

In addition, Matt owns a home in Las Vegas. Though this asset is currently considered "under water" based on market valuations, a house down the street just sold for slightly more than Zillow.com said it was worth. We extrapolated that gain into infinity and determined the housing bust is simply a figment of the media's imagination.

Now the good news: Without getting into the complexities, our models show our combined net worths at just over $1 billion, all of which we'll use as capital for Money Unlimited. We hired a 22-year-old right out of college who's pretty darn good with Excel. He assures us it's a conservative figure.

While neither of us has any "formal" banking experience, our time-tested business model more than compensates for this apparent shortfall. As with Goldman Sachs (NYSE: GS), which was recently made a bank holding company, we have no plans to engage in actual banking operations such as deposit-taking and lending. That stuff just sounds hard. Regulators are always all, "You need to lend money to people who can pay you back." We'd rather just avoid that whole sticky situation altogether.

Instead, we're going to leverage our borrowings from the Federal Reserve to create a massive, money-spewing trading operation.

It's quite simple, really. We're going to borrow money from the Federal Reserve at 0%, then lend it back out to the U.S. Treasury at 3%. The Treasury can then use that money for fantastic programs like Cash for Clunkers. If we leverage our $1 billion asset base 20-to-1, we'll pull in $600 million in year one without breaking a sweat.

Because we want to do what's right for the economy, we plan to keep operating expenses to a bare minimum and limit our bonuses to $20 million each for the first five years. By plowing the remaining money back into the bank -- and, of course, leveraging it at 20-times -- we'll be able to grow like a weed. Assuming you folks at the Federal Reserve continue to do your part by lending money at 0%, we expect to clear $120 billion in assets in five years flat.

And don't worry about us. We understand that hard work and tangible economic contributions need to be rewarded, so in the sixth year of operation we both plan to take $500 million bonuses and use company money to buy ourselves private jets.

Money Unlimited will offer other significant benefits to the economy as well. We'll compete against banking organizations such as Goldman Sachs, JPMorgan Chase (NYSE: JPM), and Citigroup (NYSE: C), who are no doubt engaging in similar practices. (Have you seen their earnings?) Plus, we'll allow other banks to buy credit defaults swaps against us. As any financial professional worth his salt can tell you, this "increases liquidity" and helps small businesses. We can't tell you exactly how that works, but salesmen who wear shiny cuff links and talk really fast tell us it's true.

But helping the economy isn't all we're about. As Goldman Sachs' CEO Lloyd Blankfein recently put it, this is "God's work," and we certainly don't disagree with that.

Before long, the founders of Money Unlimited expect our trading operations will become so large that we will be considered "too big to fail." While some may consider this a concern, we disagree. There should be more competition among "too big to fail" institutions so that the risk of a Chernobyl-type catastrophe in our financial system is spread more broadly.

Thank you for your time and we look forward to your help obtaining a speedy approval for Money Unlimited.

Sincerely,
Matt Koppenheffer and Morgan Housel

Great post cheers. Nicely done.

Originally Posted by sabang

Your politicians, Bankers and the wealthy totally pulled the wool over your eyes America. I dunno, maybe they believed their own lies- that would be their only excuse.

They exported your jobs Offshore, en masse', and with a Tax regime that encouraged them to do so- you had to get new jobs waiting tables, flipping burgers or working in shops. They concentrated enormous wealth in the hands of a few- but they used that capital to speculate and drive up asset prices, not engage in building productive capacity- and the Fed was complicit in this, by offering them interest rates on borrowing below the actual cost of money, for many years on end.

Brilliantly said. This ought to be printed on a plaque and given to every US citizen.

How many Americans are even aware of this? Very few.

When it all came tumbling down, you were thrown out of your jobs by the million- and, Suckers, the homes that you borrowed so heavily on in this naive belief in a never ending inflationary spiral are victims too. Now many of you are out of a job, and out of your Home- or just hanging in there, with much of your 'wealth' wiped out by the fall in the value of your property. Meanwhile, the unskilled people, or those that can even find a job flipping burgers, are abysmally paid compared to your equivalents in other Western countries- yet, on paper, your country is just as rich or richer than ours. Problem is, it's only owned by a Few. So, now the Crisis has hit, Consumption (the Driver of the economy) has gone down the Pan- no ones got any money left to spend, except the Rich. Your Social welfare benefits are pitiful compared to other Western countries too- but they can't do much about that I'm afraid, because your government was underfunded for many years, and is basically Broke- Thanks Dubya. The money has had to be spent mainly bailing out the banking and financial sector- yeh the same guys that helped you get into this mess in the first place. They're minting it again now- Nice, innit? I guess real estate prices in the Hamptons will do OK, but large parts of CA, FL and Detroit are ghost towns. How sweet.

Really guys, you should be an awful lot more angry with the Republicans and Bush administration than you are. And the Fed, and the Bankers. They shilled you.

Worth a hundred greens, Sab.

This has been a con job by a few on 98% of the US population.

That about sums it up.
But of course its not what the American people want to hear.
All it takes to get the US voters minds off the real issues facing their country is a bit of flag waving and self-adulation talk by the politicians. Shouldn'T forget wars there either.

Originally Posted by sabang

Your politicians, Bankers and the wealthy totally pulled the wool over your eyes America. I dunno, maybe they believed their own lies- that would be their only excuse.

They exported your jobs Offshore, en masse', and with a Tax regime that encouraged them to do so- you had to get new jobs waiting tables, flipping burgers or working in shops. They concentrated enormous wealth in the hands of a few- but they used that capital to speculate and drive up asset prices, not engage in building productive capacity- and the Fed was complicit in this, by offering them interest rates on borrowing below the actual cost of money, for many years on end. When it all came tumbling down, you were thrown out of your jobs by the million- and, Suckers, the homes that you borrowed so heavily on in this naive belief in a never ending inflationary spiral are victims too. Now many of you are out of a job, and out of your Home- or just hanging in there, with much of your 'wealth' wiped out by the fall in the value of your property. Meanwhile, the unskilled people, or those that can even find a job flipping burgers, are abysmally paid compared to your equivalents in other Western countries- yet, on paper, your country is just as rich or richer than ours. Problem is, it's only owned by a Few. So, now the Crisis has hit, Consumption (the Driver of the economy) has gone down the Pan- no ones got any money left to spend, except the Rich. Your Social welfare benefits are pitiful compared to other Western countries too- but they can't do much about that I'm afraid, because your government was underfunded for many years, and is basically Broke- Thanks Dubya. The money has had to be spent mainly bailing out the banking and financial sector- yeh the same guys that helped you get into this mess in the first place. They're minting it again now- Nice, innit? I guess real estate prices in the Hamptons will do OK, but large parts of CA, FL and Detroit are ghost towns. How sweet.

Really guys, you should be an awful lot more angry with the Republicans and Bush administration than you are. And the Fed, and the Bankers. They shilled you.

One of the most insightful Celente interviews I've heard. It's a podcast. Just listen to it while you on the web or dinking around the house.

Click link --> then click microphone icon.

Gerald Celente

Originally Posted by sabang

Your politicians, Bankers and the wealthy totally pulled the wool over your eyes America. I dunno, maybe they believed their own lies- that would be their only excuse.

They exported your jobs Offshore, en masse', and with a Tax regime that encouraged them to do so- you had to get new jobs waiting tables, flipping burgers or working in shops. They concentrated enormous wealth in the hands of a few- but they used that capital to speculate and drive up asset prices, not engage in building productive capacity- and the Fed was complicit in this, by offering them interest rates on borrowing below the actual cost of money, for many years on end. When it all came tumbling down, you were thrown out of your jobs by the million- and, Suckers, the homes that you borrowed so heavily on in this naive belief in a never ending inflationary spiral are victims too. Now many of you are out of a job, and out of your Home- or just hanging in there, with much of your 'wealth' wiped out by the fall in the value of your property. Meanwhile, the unskilled people, or those that can even find a job flipping burgers, are abysmally paid compared to your equivalents in other Western countries- yet, on paper, your country is just as rich or richer than ours. Problem is, it's only owned by a Few. So, now the Crisis has hit, Consumption (the Driver of the economy) has gone down the Pan- no ones got any money left to spend, except the Rich. Your Social welfare benefits are pitiful compared to other Western countries too- but they can't do much about that I'm afraid, because your government was underfunded for many years, and is basically Broke- Thanks Dubya. The money has had to be spent mainly bailing out the banking and financial sector- yeh the same guys that helped you get into this mess in the first place. They're minting it again now- Nice, innit? I guess real estate prices in the Hamptons will do OK, but large parts of CA, FL and Detroit are ghost towns. How sweet.

Really guys, you should be an awful lot more angry with the Republicans and Bush administration than you are. And the Fed, and the Bankers. They shilled you.

I've been to a few ghost towns in Colorado. They consist of mixed development- houses, shops, offices, etc. What we mostly have now would be better characterized as "ghost sprawl"- rows of empty houses on circular drives and cul-de-sacs. Apparently they are in some cases functioning as homes for returning wildlife, like artificial reefs do in marine environments.

Great post, Sabang. The way I see it, and this metaphor has been used elsewhere, is that the financiers, insurance companies, and real estate developers have been working in tandem to strip the meat off the bones of the corpse of the great American economy built by our predecessors. Finance, especially, used to function to grease the wheels of enterprise, which mainly focused on manufacturing- money (capital) was provided to make things- but that system has been turned on its head. The system now focuses on money making money, figures on a page or a screen, which are less and less connected to anything tangible. Some sectors of the American economy are still adding value and creating things, for example agriculture (for all its faults) and IT, as well as the entertainment industry, which itself used to be considered tangential but can hardly be considered so now, but by and large the real action has been in FIRE (finance, insurance, real estate).

Since the early '70's or so the American economy has largely been about feeding on the corpse of the old economy, like sharks feeding on a dead whale. In some cases, such as the leveraged buyout pirates of the '80's and their counterparts today, the private equity firms, they actually kill the whale themselves in order to feed on it. Financial deregulation, epitomized by the repeal of Glass Steagal, was in some sense an acknowledgement that for the finance/credit game to go on the rules had to be relaxed. This led to the boom-bust cycle we have experienced for roughly the last 20 years. Even that can sort of work for a while, provided there is a basis for the next boom that at least produces the illusion of wealth. What people don't seem to be able to get their heads around is that there doesn't seem to be any follow-up to the most recent bust of the real estate boom, in large part because as long as people were still building houses there was a high demand for labor, which in turn supported the services (housing labor essentially replaced manufacturing). Unfortunately, you just can't keep building houses and office buildings forever. Japan was able to make some recovery from its busted real estate/credit/stock boom because American consumers, in many cases borrowing against their real estate, were able to prop Japan's manufacturing economy (which has, like the American one, been moving to China). The best the feds have been able to come up with it seems is a last ditch hope to reinflate the housing/commercial real estate market, but that would be a temporary solution as best.

So what is going to replace all the lost construction and related jobs? Unlike Japan we don't have a manufacturing infrastructure to fall back on. Government spending on infrastructure and other stimuli will help, but even that looks like a temporary solution. The only hope I can see lies in an almost total re-orientation of society, away from consumerism, easy credit, etc. This would be painful at best, and frankly I don't think the American public is up for it, given that it has been fed unrealistic expectations and is generally woefully under-equipped intellectually and otherwise to understand or otherwise cope with what is happening. It is difficult to imagine anything that is going to prevent further deterioration of the nation's economic, moral, and political fabric, and a collapse mirroring that of the USSR no longer seems as outrageous a possibility as it once did.

^
Two posts that well sum up the general mood, if not the fact, of contemporary America.

Originally Posted by robuzo

The only hope I can see lies in an almost total re-orientation of society, away from consumerism, easy credit, etc. This would be painful at best, and frankly I don't think the American public is up for it, given that it has been fed unrealistic expectations and is generally woefully under-equipped intellectually and otherwise to understand or otherwise cope with what is happening.

Americans are quite capable of understanding, but they the tools have been reduced, and too good effect for the powers that be. The American public us up for it if the unrealistic expectations are replaced with something more approaching reality. But we're talking about turning around a big part of current American Mythos about captitalism (whatever the hell that is) and itself. The idea that we cannot fail if we work harder and faster for less. That give aways to corporations (even those that live off-shore and avoid taxes) are the price we pay for them blessing us with a job, and that a political system that is so obviously bought and paid for by these corporate entities is alright because, "...dammit, being free in America means you too can rise to be one of those doing the buying." As long as we live within that narrow perspective, the Corporate interests prevail. And all of them, Financial, business and government control media. That's a circle of friends that's hard to undermine unless something drastic happens. Like a huge meltdown maybe...? So the statement below is true:

Originally Posted by sabang

Really guys, you should be an awful lot more angry with the Republicans and Bush administration than you are. And the Fed, and the Bankers. They shilled you.

The fact that there is not more screaming is weird. And worrisome.

Originally Posted by robuzo

It is difficult to imagine anything that is going to prevent further deterioration of the nation's economic, moral, and political fabric, and a collapse mirroring that of the USSR no longer seems as outrageous a possibility as it once did.

Might be a bit of a stretch. Though the right will exploit any pretense to take over. On the American Exceptionalism spectrum, the righteous Right sees itself as the most exceptional.

A new world trading currency based on productivity and a major devaluation in the $US exchange rate will do it. These things are already in the pipeline.
The sooner it happens the better for every country, including USA.

Great posts Sabang and robuzo. Nailed it and some.

Originally Posted by Milkman

One of the most insightful Celente interviews I've heard. It's a podcast. Just listen to it while you on the web or dinking around the house.

Click link --> then click microphone icon.

Gerald Celente

Just listened to Celentes interview.
Shades of Thailand there.

Sorry, I think Sabang's post is tripe. Most countries shipped jobs overseas. Why? Because the mfg base in home countries are too expensive to maintain with unionised workers. People tossed out of their mansions coz they can't pay? Did they ever have the wages to pay? And wasn't it Barney Frank who demanded these stupid twats get mortgages?
You can't blame Bush anymore. Unemployment at 10.2%, the deficit spiralling out of control and Obama just prints more money, gives people incentive to stay off work by extending unemployment benefits, taxes the businesses who create jobs and has created an economic climate that is so crap that nobody wants to invest in new biz or hire anyone. Oh, but the stock market is rising!!! Sure, Soros and his ilk are artificially inflating it and thus attracting people to invest because that's the only way they can make money right now. But gee, you libbies hate that ideal of making money without doing real labour, don't you? I thought y'all detested the capitalist stock market.
What a bunch of hypocrites you are. Obama is ruining the American spirit of free enterprise and just propping up the free-loading welfare libbies who just want to stay home and watch Oprah, eat junk food and get their Obama money.

Originally Posted by Jet Gorgon

Sorry, I think Sabang's post is tripe. Most countries shipped jobs overseas. Why? Because the mfg base in home countries are too expensive to maintain with unionised workers. People tossed out of their mansions coz they can't pay? Did they ever have the wages to pay? And wasn't it Barney Frank who demanded these stupid twats get mortgages?

1. very few workers are unionized in the US, Jet. I have told you this many times before.

2. Sabang's post was not about "people getting thrown out of mansions."

3. Wages to pay were not noted.

4. Barney Frank is a part of this, as hundreds of other politicians. And thousands of others in the government and private industry.

You post above is all over the place, and a bit of rambling.