I need gamblestamps - not foodstamps.

[bryand]

Do our good friends across the pond really think the US economy is that bad?

You do not have permission to view link Log in or register now.

 

[winbig]

From what I heard, 1 in 5 people in America qualify for food stamps

 

[chuchu59]

Do our good friends across the pond really think the US economy is that bad?

You do not have permission to view link Log in or register now.

It's not just them. The declines in many countries' stock markets coupled with the huge write-offs in the banking sector have people thinking that there is a serious credit crunch in the US. In the eyes of many, a lot people in the US (homeowners) use their home equities to fund their living and once this $ source is gone, their standard of living inevitably drops.

Whether the effects of subprime is spilling to other sectors is everybody's guess. However, at least in Asia, many think so because sentiment is not exactly growing stronger.

 

[brianzz]

I saw on Beck tonight on Headline News that someplace, probably CA, is running PSA's on the radio from the food stamp office encouraging people to apply.

 

[bryand]

It's not just them. The declines in many countries' stock markets coupled with the huge write-offs in the banking sector have people thinking that there is a serious credit crunch in the US. In the eyes of many, a lot people in the US (homeowners) use their home equities to fund their living and once this $ source is gone, their standard of living inevitably drops.

Whether the effects of subprime is spilling to other sectors is everybody's guess. However, at least in Asia, many think so because sentiment is not exactly growing stronger.

Clearly the US economy is in a slowdown. But the democrat party propaganda machine is grossly exagerating the situation. Some interesting factoids: 1) the US stock market (overall index) is up 20% over the last 12 months, 2) the country is still at full employment (as defined by economists) and 3) presently over 95% of all US residential mortgages are being paid on time.

 

[GrandMaster]

Clearly the US economy is in a slowdown. But the democrat party propaganda machine is grossly exagerating the situation. Some interesting factoids: 1) the US stock market (overall index) is up 20% over the last 12 months,

The Dow Jones is essentially unchanged, the S&P 500 and the Nasdaq composite index are slightly down. Which index is up 20%?

2) the country is still at full employment (as defined by economists)

As defined by some economists, because you won't get all economists agree on anything. In any case, it says more about economists than about the US economy.

and 3) presently over 95% of all US residential mortgages are being paid on time.

The delinquency rate is over 5%, and rising. In itself, this figure is meaningless, you need to compare it to other years. For most of the Clinton years, the delinquency rate was between 4% and 5%, usually closer to 4%, sometimes even below 4%. The last time it was this high was in the early 1980s. In the less savoury segments of the market the delinquency rates can be 15% or 20%. A 1% increase means hundreds of thousands of families are unable to pay their mortgages.

 

[NASHVEGAS]

Clearly the US economy is in a slowdown. But the democrat party propaganda machine is grossly exagerating the situation. Some interesting factoids: 1) the US stock market (overall index) is up 20% over the last 12 months, 2) the country is still at full employment (as defined by economists) and 3) presently over 95% of all US residential mortgages are being paid on time.

So we are in a Bull Market??,LOL,....Maybe you can provide the more broad based Nasdaq's,S&P's, and Russell's Index performance figures since the October 2007 highs and then translate it into economic dollars....hell, I do not get the market anyway even as lead lag indicator...ftr,I am not a Democrat generally!!

 

[hippo925]

Clearly the US economy is in a slowdown. But the democrat party propaganda machine is grossly exagerating the situation. Some interesting factoids: 1) the US stock market (overall index) is up 20% over the last 12 months, 2) the country is still at full employment (as defined by economists) and 3) presently over 95% of all US residential mortgages are being paid on time.

though i respect your opinion, i'm not sure your statement would ease the minds of all the decent people i know who are struggling to pay their mortgages, paying more for food and gas, and not able to save any money for their children's futures. considering the value of the u.s. dollar and the issues of recession, i'm not exactly sure why any "democrat party propanganda" would even be necessary at this point. and without starting a political slugfest, i take it that this administration's portrayal of the war and the economy is truthful and straightforward? and that it is only being tarnishd again by the democrat party propaganda machine? just my opinion of course, but i've always loved a good dialogue.

 

[bryand]

though i respect your opinion, i'm not sure your statement would ease the minds of all the decent people i know who are struggling to pay their mortgages, paying more for food and gas, and not able to save any money for their children's futures. considering the value of the u.s. dollar and the issues of recession, i'm not exactly sure why any "democrat party propanganda" would even be necessary at this point. and without starting a political slugfest, i take it that this administration's portrayal of the war and the economy is truthful and straightforward? and that it is only being tarnishd again by the democrat party propaganda machine? just my opinion of course, but i've always loved a good dialogue.

I am trying to make the point that the UK article is comparing the present US economic slowdown to the Great Depression which is completely absurd and the election year propaganda is helping to fuel the hysteria.

 

[RobWin]

Not sure if this sheds any light on anything related or not, but I do know for a fact that the single largest Industry in the US is the Housing Industry of which I have been a part of for the past 30 years. This Industry has been devastated over the past year for multiple reasons and causes, which in turn affects all other industries nationwide, even down to the price of bread at the local supermarket.

Even the small guys at the local machine shop that makes one screw for a dishwasher, etc.,etc. has recently seen the effects of the slowdown in the Housing Market. The Housing Market is the leading indicator of economic status in this country and you can always tell how the economy is really doing by simply picking up a newspaper and turning to the want ads and look and see how many jobs are listed under the "Construction" category.

Until this Industry starts to turn back around the Nations Economy will remain sluggish and stale...

 

[bryand]

The Dow Jones is essentially unchanged, the S&P 500 and the Nasdaq composite index are slightly down. Which index is up 20%?

An even better (and more broad) statistic is the 3-year NYSE composite index which is up 30% - a 10% average annual rise.

As defined by some economists, because you won't get all economists agree on anything. In any case, it says more about economists than about the US economy.

Let be more clear. Full employment is generally accepted among all economists as the greatest attainable structural employment. 100% employment is impossible to attain since some small percentage of the population will always be between jobs. The US remains in full employment.

The delinquency rate is over 5%, and rising. In itself, this figure is meaningless, you need to compare it to other years. For most of the Clinton years, the delinquency rate was between 4% and 5%, usually closer to 4%, sometimes even below 4%. The last time it was this high was in the early 1980s. In the less savoury segments of the market the delinquency rates can be 15% or 20%. A 1% increase means hundreds of thousands of families are unable to pay their mortgages.

The 95% figure is very meaningful. First, it sheds light on the truth behind the sub-prime mortgage hysteria. By listening to the US network news one would believe half of all americans are in foreclosure. But the more amazing reason - at least for those of us working in the legal side of the mortgage industry - is the figure remains high in the face of unprecedented fraud among mortgage brokers, lenders and appraisers.

 

[RobWin]

How bad is the mortgage crisis going to get?

What started in subprime is likely to continue cascading into the markets and keep the economy down until 2010, economist Paul Krugman forecasts. Bottom line for homeowners: An average drop of 25%.

By Jia Lynn Yang

(Fortune Magazine) -- If there is any word that captures the mood in the economy right now, it's uncertainty, along with shadings of bafflement and distrust. We have never seen a credit crisis quite like this. What's next?

Princeton economist Paul Krugman spoke with Fortune's Jia Lynn Yang about the impact on the economy, the outlook for home prices, and the reasons for both fear and hope. Krugman, a former Fortune columnist who now writes a column for the New York Times, will also appear in a one-hour CNN & Fortune special report on the economy that premieres March 28 at 8 p.m. ET.


Fortune: By year-end, 15 million Americans could have mortgages worth more than the value of their homes. What happens then?

Krugman: Actually, I think home prices will fall enough for us to produce about 20 million people with negative equity. That's almost a quarter of U.S. homes. If home prices are rising, or if there's positive equity, you can refinance or sell. But if you have negative equity, you can end up being foreclosed on, and then some people will just find it to their advantage to walk away. We're probably heading for $6 trillion or $7 trillion in capital losses in housing. Some fraction of that will fall on owners of mortgages. I still think the estimates people are putting out there - $400 billion or $500 billion in losses - are too low. I think there'll be $1 trillion of losses on mortgage-backed securities showing up somewhere.

How far do you think home prices will fall?

My preferred metric is the ratio of home prices to rental rates. By that measure, average home prices nationally got way too high. We'll probably basically retrace all that. So that's about a 25% decline in overall home prices. Only a fraction of that's happened so far. Of course, it varies a lot. In places like Houston or Atlanta, where home prices have not risen much compared with underlying rents, the decline will be relatively small. In places like Miami or Los Angeles, you could be looking at 40% or 50% declines.

Is there a risk of a spiral too, where the more homes that are foreclosed on, the lower home prices go?

Not without limit. But if we think home prices overshot on the way up, why can't they overshoot on the way down too? And to the extent that this all produces a recession, that's also bad for housing demand. People at the Fed are talking about feedback loops. At the moment, most of what they're concerned about is that falling home prices are leading to a credit crunch, which is actually driving up mortgage rates and making mortgages unavailable, which is causing home prices to fall even more. I'm not one of those people who thinks the Great Depression is coming back, but there's lots of echoes.

But if we think home prices overshot on the way up, why can't they overshoot on the way down too?

Why not the Great Depression?

Because I think we know something that we didn't then. The Federal Reserve was clueless back then. They were only concerned about protecting the nation's gold reserves, and the federal government believed that austerity and cutting spending was the answer to recession. I think we know more than we did then, and just the fact that we have a big federal government is a stabilizing factor. But the current problem is still pretty awesome.

Can you compare this to other economic crises the U.S. has faced?

The financial stuff looks like a combination of 1990 and 2001, and probably bigger than both combined. You've got the financial disruption, which is probably bigger than the savings and loan crisis. And you've got the loss of wealth from the housing bust, which is bigger than the dot-com bust. So this looks fairly nasty. And then everybody who's paying attention is worrying about the Japan analogy. Japan never had a really severe recession. It just started with a recession and never really had a recovery for a whole decade. And that's the kind of thing we're afraid of.

You've been saying 2010 is when we get out of this recession. How did you arrive at that date?

The last recession officially ended after eight months, but employment didn't start to recover until 30 months later, so I think we go at least that long this time. If the recession started in January 2008, then that would mean July 2010 is the first month we have anything that feels like a recovery. But I wouldn't be surprised if it goes longer than that - maybe into 2011.

What can Fed chairman Ben Bernanke do in terms of cutting rates? You wrote on your blog recently, "Keep cutting, Ben!"

Yeah, that's right. I'm now reasonably sure that they will cut again and again and again. A few cuts of 75 basis points and we'll be down to zero. And there's a pretty good chance that we're heading to zero, and that there's going to be a Japan-style ZIRP, zero-interest-rate policy.

Has that happened in the U.S. before?

Not since the 1930s. They didn't have the Fed funds target rate back then, but effectively we had a zero-interest-rate policy for a good part of the '30s. If the Fed responds this time with as much cutting as it did in the last two recessions, we get to zero. And then the problem is, What if that isn't enough? And there's a pretty good chance it won't be.

If the credit markets are still in paralysis, doesn't that blunt any monetary policy from the Fed?

The effective borrowing costs for a lot of people are rising, not falling, despite the Fed cuts. The rising spreads are more than offsetting it. The mortgage rates have not been falling as you might hope. And, of course, for many types of people who were able to borrow two years ago, they now can't - at any interest rate. We're looking at the classic pushing-on-a-string problem, where the Fed can cut, but it's not clear it does much for the real economy.

One of the criticisms of Alan Greenspan is that his rate cuts helped cause two bubbles, first tech, then real estate. Do we run the risk of creating another one if we keep cutting rates?

His rate cuts helped make the bubble possible, but I'm not sure there was any alternative. I remember the interest rate was down to 1%, and the economy was still losing jobs. What Greenspan did not do was listen to warnings about subprime. The Fed had substantial regulatory and moral-suasion power. They could have done a lot to limit the excesses. It's more what he failed to do during the boom than what he did in response to the last slump.

There's been talk about the 1970s and a return of stagflation. What's the risk of that?

What you worry about with stagflation is that price increases start to feed on themselves. Expectations of inflation get built into the price-setting process. I don't see any sign of that. The inflation happening right now is not being fed by expectations of inflation - there's no self-reinforcing process - it's just mostly commodity prices going through the roof. That's not pleasant, but it's not something the Fed needs to be all that worried about, as long as it stops there.

What do you think about the government's economic stimulus plan?

I wasn't happy with it. Most of the money is given to people who are not much inclined to spend it, people who are not in financial difficulty. And therefore they will just put it in the bank or pay down credit card debt. I've been trying to make the case that since this thing is going to go on for a long time, effectiveness is more crucial than speed. I'm actually for public investment now - repairing bridges, building infrastructure. Normally people say if you try to do any public investment to stimulate the economy, the recession will be over before it can come online. But I don't think that's a problem this time.

Do you think the U.S. economy relies too much on consumer spending?

Oh, yeah. No question. If you looked at the profile of the U.S. economy as it was two years ago, we had what looked like prosperity, based on high consumer spending, huge residential construction, unspectacular levels of business investment, and a huge trade deficit. You want to turn that around and have an economy that does less consumer spending, runs less of a trade deficit, and has more business investment. Of course, the problem is getting there from here.

Is there any solution?

Well, a weak dollar is helping. I look at the euro at $1.53 and cheer - not for this European trip I'm planning to take after classes are done. But for manufacturing plants in the Midwest, it's a very good thing. Arguably the only good thing we have going for the U.S. economy now is the weak dollar and how that helps exports.

A lot of foreboding economic numbers are floating around right now. What strikes you as the most alarming?

I'm looking at the increase in interest-rate spreads, with the LIBOR (London interbank offered rate) pulling away from U.S. Treasury bills. When the spread gets that big, it suggests that banks are losing trust in each other. Various measures of panic in the markets are looking bad again. I've been thinking to myself, This is now the fourth wave. We had a first wave more than a year ago, when subprime first began to go. And everyone said that was contained. We had a second wave last August, when things started going to hell. We had a third wave late in the fall, and heroic efforts seemed to bring the problems under control. And now here we go again. This is starting to look like a much more comprehensive financial crisis.

What's changed?

There has been the realization that the increased nervousness about risk and deleveraging is going to hit a lot of markets a long way removed from subprime - like when people start to see auction-rate securities go. Something has finally tipped the balance. We've got Fannie Mae and Freddie Mac suddenly having to pay substantial spreads. It seems to me like every few weeks there's another $300 billion market I've never heard of that has just collapsed. And there's credit cards, auto loans - I don't know what's next. But it's clear we're going to have a commercial real estate crash not too far short of the severity of the housing crash.

Can the government step in more and deal with this liquidity problem?

What we're having looks like a minor-key version of the bank failures in the early 1930s. Now it's mostly not banks, it's markets that were serving the function of banks and institutions that were doing banklike stuff, and it's not as bad - at least so far. But it's a question. If we were actually having a string of bank failures, then we would know what to do. The government would essentially seize the banks and guarantee the deposits. But what do you do when you have a wave of failures of things like the auction-rate securities market, which was effectively a funny way of doing banking? If you look historically at other financial crises, they typically end up with big government bailouts. But how's that going to work in this case? We don't even know who to bail out. And part of the problem is we don't even know who owes what to whom.

What do you think of the Fed's recent $200 billion temporary bailout of mortgage-backed securities?

I hope it will work, but I doubt it will; $200 billion sounds like a lot of money, but it's small compared with the securities market, so it's probably not effective.

On the other hand, do you think the sense of crisis is turning into a crisis of confidence more than anything else?

I fluctuate on that. I look at the prices on subprime-backed securities. Even the AAA-rated tranche is selling for barely over 50 cents on the dollar, and the rest is essentially worthless, which amounts to a prediction that you're going to get really very little on this stuff. Even if every subprime borrower walks away from his house and a lot of money is lost in foreclosure, it's hard to get numbers that bad. So there might be some overselling in these markets. But on the other hand, a lot of the financial system looks like it's going to shrivel up and have to be rebuilt. And that's not too good.

What's the biggest x factor, the question no one really knows the answer to?

What I don't know is how serious the real consequences of the financial-market stuff ends up being on Main Street. If all of the fancy financial instruments that have been so popular these past couple of decades sort of roll over, it's still not entirely clear to me how that ends up affecting the real economy. Will a lot of business investment just go on unaffected because companies can pay for it out of retained earnings or by borrowing with good old bank loans? How much in the end does the ability of consumers to keep spending get affected by what's going on in fairly abstruse financial markets? So I'm not quite sure how this works. Maybe that's a reason for hope. Maybe it'll turn out that all this Wall Street stuff is just less important than we think it is.

 

[bryand]

Is there any solution?

Well, a weak dollar is helping. I look at the euro at $1.53 and cheer - not for this European trip I'm planning to take after classes are done. But for manufacturing plants in the Midwest, it's a very good thing. Arguably the only good thing we have going for the U.S. economy now is the weak dollar and how that helps exports.

Another democrat propaganda buster.

 

[pacers31]

Lets talk about gambling.

 

[pacers31]

What flavor kool aid is the GOP O.D.ing on this week bryand?? I'm glad things are so good for you in the present economy, but not the case for the average. S&P, NASDAQ, DOW, are all meaningless to the guy trying to put gas in the car and food on the table. You know how it is, things are never as bad as they seem, but they are never as good as they seem either.

 

[Mousey]

Lets talk about gambling.

OK.

If rising prices (on every damn thing I buy) continues, I have less disposable income, therefore less - or NO - gambling money.

And that applies to B&M as well as online.

 

[NASHVEGAS]

AN ARTICLE FROM WWW. BLOOMBERG.COM. DATED APRIL 3RD, 2008: No offense intended BRYAND (as I understand you were directing your comments at the subject article) not that I do not see fallacies in your arguements/opinions especially the assertion of "Democratic Propaganda'' and once again for the record although I will cross party lines, I am a Republican residing in one of the wealthiest counties in the US that votes over 80% Republican but even locally the "wealth effect" is already being felt.....I try to follow (at least read) those with track records like SOROS below as well as the Brilliant like Buffet, nonetheless a good read:

Soros Sees Additional Market Declines After Reprieve (Update1)

By Katherine Burton

April 3 (Bloomberg) -- Billionaire George Soros called the current financial crisis the worst since the Great Depression and said markets will fall more this year after a brief rebound.

``We had a good bottom,'' Soros said yesterday in an interview in New York, referring to the rally in stocks and the dollar after JPMorgan Chase & Co. agreed to buy Bear Stearns Cos. on March 17. ``This will probably not prove to be the final bottom,'' he said, adding the rebound may last six weeks to three months as the U.S. moves closer to a recession.
Last summer, worried about market disruptions that started with rising subprime-mortgage defaults, Soros, 77, returned to a more active role in managing the $17 billion Quantum Endowment Fund, whose profits pay for his philanthropic projects. Quantum returned an average of 30 percent a year before Soros started using outside managers in 2000 for much of his money.

He also decided to write a book, his 10th, ``The New Paradigm for Financial Markets'' (Public Affairs, 2008). Released today online, the book explains the causes of the current meltdown, a crisis he says has been in the making since 1980, and the trades he put in place this year to protect his wealth, much of it in Quantum.

Soros has bet on declines in the dollar, 10-year Treasuries and U.S. and European stocks this year. He expected foreign currencies to rise, as well as Chinese and Indian equities. The latter bet helped Quantum return 32 percent in 2007. Quantum's returns this year have ranged from up 3 percent to down 3 percent.

`Heightened Uncertainty'

The euro has climbed 7.5 percent against the dollar this year and the Japanese yen has gained 9.1 percent. These and other currencies may continue to strengthen, he said.

``There is an increasing unwillingness to hold dollars, though there's a lack of suitable alternatives,'' he said. ``It's a period of heightened uncertainty.'' Federal Reserve officials dropped their benchmark interest rate 2 percentage points this year to 2.25 percent, and Soros doesn't see that they can lower the rate much further, given the weak dollar.

``We are close to the limit,'' he said.

New York Federal Reserve Bank President Timothy Geithner said today capital markets are still ``substantially impaired'' and policy makers and financial industry leaders must ``act forcefully'' to stem the crisis.

As for his wagers on developing markets, Soros hasn't abandoned his holdings in India, even with the 22 percent drop in the benchmark Indian index this year.

``The fundamentals remain good,'' he said. He is less certain about what will happen to Chinese H shares, which trade in Hong Kong. They've fallen 18.5 percent this year.

Credit-Default Swaps

Credit default swaps -- a way to bet on the creditworthiness of a company -- may be the next crisis area because the market is unregulated, and it's impossible to know whether counterparties can meet their obligations in the event of a bond default. The market has a notional value of about $45 trillion -- or about half the total wealth of U.S. households.

Soros recommends the creation of an exchange with a sound capital structure and strict margin requirements, where current and future contracts could be traded.

The cause of the current troubles dates back to 1980, when U.S. President Ronald Reagan and U.K. Prime Minister Margaret Thatcher came to power, Soros said. It was during this time that borrowing ballooned and regulation of banks and financial markets became less stringent.

Avoiding a `Super-Bubble'

These leaders, Soros said, believed that markets are self- correcting, meaning that if prices get out of whack, they will eventually revert to historical norms. Instead, this laissez- faire attitude created the current housing bubble, which in turn led to the seizing up of credit markets and the demise of Bear Stearns, Soros said.

To avoid a super-bubble in the future, Soros said banks must control their own borrowing. They must also curtail lending to clients such as hedge funds by demanding greater collateral and margin requirements on loans.

Asked if such moves would make it impossible to achieve returns like those of his pre-2000 days, Soros laughed.

``Since I'm designing these regulations, they would not hurt me,'' he said. ``We made direction bets but we haven't used leverage'' like the $25-to-$1 borrowing that brought down John Meriwether's Long-Term Capital Management LLC in 1998.

To contact the reporter on this story: Katherine Burton in New York at kburton@bloomberg.net

Last Updated: April 3, 2008 11:40 EDT

 

[bryand]

I see, let's all move to Montana and write a manifesto against the US government since we're in the The Great Depression, Part 2.

I respect all posts on this thread notwithstanding that only chuchu understood its premise.

 

[GrandMaster]

An even better (and more broad) statistic is the 3-year NYSE composite index which is up 30% - a 10% average annual rise.

It went up in the first two years and it is down by about 5% over the past year.

Let be more clear. Full employment is generally accepted among all economists as the greatest attainable structural employment. 100% employment is impossible to attain since some small percentage of the population will always be between jobs. The US remains in full employment.

I am familiar with the economic theories of employment and the concept of NAIRU, but unfortunately it is impossible to measure. Furthermore, the 80000 non-farms jobs lost in March don't support your claim either.

The 95% figure is very meaningful. First, it sheds light on the truth behind the sub-prime mortgage hysteria. By listening to the US network news one would believe half of all americans are in foreclosure. But the more amazing reason - at least for those of us working in the legal side of the mortgage industry - is the figure remains high in the face of unprecedented fraud among mortgage brokers, lenders and appraisers.

A number like this in isolation is meaningless. If I say that 99.99999% of people did not get murdered today is it good or bad? There is a huge difference between 95% and 96% of people paying their mortgages on time.
If somewhat over 5% of people are delinquent on their mortgages, it means about 25% more people are having financial problems than a couple of years ago.

 

[pacers31]

The economy is always great if you're in the top 1%. Typical republican rhetoric So you can't afford that hospital stay?? TOO BAD, you shouldn't have gotten sick. Rome is burning while the GOP fiddles. Government is suppose to be there for all citizens, not just the ones that can afford it! There are in fact alot more have nots than haves in this country. Keep that in mind when the shithouse goes up in flames, because unless the haves find a way to give a little, the have nots will take it from them eventually!

 

[pacers31]

Not quite the great depression part 2, but getting there.

 

[winbig]

You do not have permission to view link Log in or register now.

80,000 Jobs Lost, Worst Since 2003; Jobless Rate Spikes


Apr. 7, 2008 (Investor's Business Daily delivered by Newstex) --

Employers shed 80,000 jobs in March, the worst decline in five years, the Labor Department said Friday, the strongest sign the U.S. is in a recession.

The jobless rate jumped to 5.1% from 4.8% in February, the highest since September 2005.

'nuff said.

 

[GrandMaster]

Clearly the US economy is in a slowdown. But the democrat party propaganda machine is grossly exagerating the situation. Some interesting factoids: 1) the US stock market (overall index) is up 20% over the last 12 months, 2) the country is still at full employment (as defined by economists) and 3) presently over 95% of all US residential mortgages are being paid on time.

Do you still feel everything is fine and all this stuff about the bankruptcy of the Lehman Brothers and Washington Mutual is just Democratic propaganda?

 

[bryand]

Do you still feel everything is fine and all this stuff about the bankruptcy of the Lehman Brothers and Washington Mutual is just Democratic propaganda?

I think the democrats got lucky on the river this hand