Free Republic

Continuing Deflation In The “Real Economy” By Bill Bonner 11/10/09 Montevideo, Uruguay – Financiers have the world’s financial system in a “doom loop,” says the Bank of England. We’ve thought so ourselves. The bankers take money from the government and use it to speculate, not to lend. “Excess” reserves are at a record high as consumer credit continues to decline. Most people find it both galling and absurd to see the bankers getting $10 million bonuses while there is 10% unemployment. Here at The Daily Reckoning, it’s just a matter of curiosity. You’d think there would be more wage competition...

Realizing the Fraud of Economic Recovery By Bill Bonner 11/10/09 Montevideo, Uruguay – The Dow rose 200 points yesterday, bringing it only about 75 points below the 10,300 level. Why is the 10,300 mark important? It’s not really…it’s just the point where this bounce will equal the bounce following the crash of ’29. No reason in particular that this bounce should be the same as the one 80 years ago. But no reason it shouldn’t either. Gold rises with the stock market. The yellow metal hit a new record over $1,100 yesterday. Why is that that important? Well, it’s not...

FedSpeak Translation - There Is No RecoveryTuesday, November 10. 2009 Posted by Karl Denninger in Federal Reserve at 15:04 Yet more BS Fedspeak, this time in the mainstream media: In separate speeches, Janet Yellen, president of the Federal Reserve Bank of San Francisco, and Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, warned that rising unemployment could crimp consumers, restraining the recovery. Consumer spending accounts for about 70 percent of economic activity. That's because there is no real economic recovery at all. So why is the stock market up so much? More than happy to show 'ya. Two...

Although the actual title of today's WSJ article, "Fed Officials See No Need to Raise Rates Soon", neither of the two Federal Reserve Presidents interviewed said anything but the usual Fedzilla dribble, one comment did stand out. Janet Yellen, head of the San Francisco Fed, said "the current consensus among Fed officials was that unemployment would likely remain high for several years". Which says that in effect there will be no recovery for several years!!!!

The Two Things That Really Matter By Ian Mathias 11/08/09 Baltimore, Maryland – We’ve said it before, and again and again, but it still bears repeating: The real barometers of this recession are employment and housing… and both fronts aren’t looking so hot today. More than one in every 10 Americans is out of work, the Labor Department reluctantly reported this morning. The official unemployment rate jumped from 9.8% to 10.2% in October. Not only is that the highest in 26 years, but it blew Wall Street clear out of the water — they had priced in a rise to...

An Associated Press review of the latest stimulus reports -- which the White House promised would undergo extensive reviews to ensure accuracy -- found that more than two-thirds of 14,506 jobs credited to the recovery act under spending by just one federal office were overstated because they counted pay increases for existing workers as jobs saved

Bailouts For Bonuses Kevin Depew Nov 06, 2009 7:55 am As the year comes to a close, Wall Street is setting up for another record year of bonuses which will be financed by bailout money. Kevin Depew debates the hot button issue on the latest Two Ways to Play.[snip]

Politically speaking, those on the Left will say that the current jobs report is better than in January when “we lost 700,000 a month.” I wrote already once that this excuse is lame, and the claim is false altogether. Besides, rest assure that those who lost their jobs this month don’t care for a dime how many more or less people lost jobs in this same month. Those on the Right knew all along that the disasters job market is here to stay, and to get worse than what it was a while ago. As long Obama’s economy does not...

The Feds Have No Faith In Economic Recovery Economics / Economic Stimulus Nov 05, 2009 - 05:18 AM By: Michael_Pento The stock market has enjoyed a significant rally since the end of the first quarter. The Bureau of Economic Analysis reported last week that the economy grew at a 3.5% annual rate in the third quarter--a figure they achieved by that claiming inflation was running at only a 0.8% annual rate, despite a sharp drop in the dollar, a spike in commodity prices and record highs for gold. The cyclical bull market in stocks and positive print on GDP has...

Four Reasons Hyperinflation Hasn’t Hit The US... Yet Keith Fitz-Gerald Nov 04, 2009 11:30 am This uncertain limbo isn't good now, or ever. Everything we know about classic economic theory suggests the US economy should be experiencing Zimbabwe-like hyperinflation right now, thanks to the nearly $2.2 trillion the US Federal Reserve has pumped into the system. But we’re not... yet. Classic economic theory says that money supply can be used to stimulate the economy and our central bankers seem to agree. That’s why they’ve pumped more than $1 trillion dollars into the economy, engineered countless bailout bonanzas for zombie institutions,...

Global Economy is Firing On All Cylinders Economics / Economic Recovery Nov 02, 2009 - 05:43 AM Jon D. Markman writes: What a difference 12 months can make. Just one year after every national economy on earth was in deep trouble, a powerful global rebound is underway. In fact, the global upswing is a lot stronger than most investors realize. So don’t let a few days’ decline here and there cause you to lose sight of one of the most important investing trends investors will find today. According to ISI Group researchers, the transformation has been a dramatic one. A...

Economic Recovery, The Great Hoax of 2009-2010 Economics / Economic Recovery Nov 02, 2009 - 07:40 AM By: Martin_D_Weiss Before he died, Dad warned me of false profits … and fake promises. “Beware,” he said, “of shaky gains hyped up by Wall Street. “Watch out,” he insisted, “for unsustainable economic recoveries trumpeted by Washington. “And no matter when or where you may be, don’t be fooled by illusions of wealth and prosperity. “If they’re built on a foundation of shaky debt, they’re suspect. If they’re driven by unbridled speculation, they’re pure fluff. And if they’re bought and paid for by...

The Government Will Default On Its Debts Economics / Great Depression II Nov 02, 2009 - 08:01 AM By: Gary_North The governments of every major nation are going to default on their debts. There are two relevant questions: (1) How? (2) When?Establishments around the world all deny this. They have gained power and wealth by means of the expansion of government. They have justified their success by insisting that the government-business alliance is the only way to establish economic growth and economic security for the masses. This claim rests on a more fundamental claim, namely, that an unhampered free market...

The federal government reported Friday that Colorado created or saved 8,094 jobs through grants, loans and contracts funded by the American Recovery and Reinvestment Act. Problem is, the figure is wrong, according to an analysis of recovery.gov data by The Denver Post. Although a Colorado Springs Head Start program reported it had created or preserved 269 jobs, the real number was three, according to an interview with a program manager. And although the largest private contract in the state funded with stimulus dollars was estimated at $166 million, the number was off by tens of millions, apparently because of a...

WASHINGTON – Treasury Secretary Timothy Geithner says the economic recovery "could be a little choppy" and it's going to take a while. Geithner told NBC's "Meet the Press" that bringing back jobs and confidence of investors will be the real test of recovery. He declined to say whether the recession is over, saying economist will figure that out years from now.

The Grim Reality Is That America Is Not Out Of Recession The emerging giants of the East are rising, but what's happening in the US still dominates global economic sentiment. By Liam Halligan, Economic Agenda Published: 6:28PM GMT 31 Oct 2009 So I was pleased last week when I heard that, after four successive quarters of contraction, America's economy grew by an impressive 3.5pc between July and September, compared to the quarter before. "The US is out of recession" numerous newspaper headlines screamed. No wonder share prices surged. As ever, the numbers warrant a closer look. For one thing, this...

Investors will have plenty to think about this week. Federal Reserve policymakers will sit down on Tuesday and Wednesday to discuss the economic outlook and future policy strategy, with the Fed’s statement due at 2:15 p.m. on Wednesday. Then, first thing Friday morning, the Labor Dept. will issue its October employment report. Both are potentially market-moving events. Keep in mind, though, that future Fed tightening and labor market improvement are pretty much joined at the hip. Joblessness, at 9.8% in September, is far above the 5% or so level the economy can sustain without generating inflation pressures. For the majority...

The recession is over, supposedly. The preliminary estimate of the 3rd quarter's Gross Domestic Product was announced Thursday, and it showed the economy growing at an annual rate of 3.5% from July through September, after four consecutive quarters of decline.  As the Associated Press reported, waiting for the official call from the National Bureau of Economic Research -- specifically, its Business Cycle Dating Committee -- is all but a formality. That's funny; GDP growth was not used as the measure for timing the beginning of this recession. So why would it be used to time its end?GDP last peaked in...

Fed's Massive Secret Wall Street Bailout Still Going Strong Posted Oct 30, 2009 08:53am EDT Henry Blodget Remember last fall, when our government explained that the reason we needed to give $800 billion to Wall Street was so the banks could lend it back to us and shock the economy back to life again? That was a happy story! And we fell for it. What happened, of course, was that the banks took the money, stopped lending, and used it to pay themselves and their shareholders through the nose.[snip]

Nothing’s Over: The Top Reason GDP Does Not Show Recovery By Rocky Vega 10/29/09 Stockholm, Sweden – In order to juice the US into recovery the economy has been stimulated all over the place. The mainstream media is wild with cheerleading that the 3.5 percent third quarter GDP growth is a sign that the day is saved. Is it? No. The single clearest reason the GDP figure is hugely misleading is the Cash for Clunkers program. That particular government hand out caused motor vehicle output to spike almost 160 percent when compared to last quarter. That’s easily the highest quarter...

Shell Sees No 'Quick Recovery' As Energy Company Cuts 5,000 JobsRoyal Dutch Shell is “not expecting a quick recovery” after shedding 5,000 jobs in a global restructuring and seeing profits drop 73pc on lower oil and gas prices. By Rowena Mason Published: 7:59AM GMT 29 Oct 2009 Europe’s biggest energy company made $2.99bn in profits on a cost of supplies basis – a measure that strips out the effect of changing inventories – slightly beating analyst expectations. Revenue fell 43pc to $76bn. Peter Voser, the chief executive who took over in July, said 5pc of the oil giant’s staff would...

Deflation Fears As Eurozone And US Credit ContractsBank lending to firms and households in the eurozone has fallen for the first time, raising fears of an economic relapse and a slide into deflation next year. By Ambrose Evans-Pritchard Published: 8:26PM GMT 27 Oct 2009 Data from the European Central Bank shows that the M3 broad money supply has contracted over the last six months, confounding expectations that ultra-low interest rates would soon boost monetary growth. Loans to the private sector fell 0.3pc from a year earlier, the first such decline since the data started in 1983. The M3 figures include...

DryShips Q3 Earnings Beat Estimates Mon Oct 26, 2009 6:34pm EDT By Hezron Selvi BANGALORE, Oct 26 (Reuters) - Drybulk shipping and contract drilling company DryShips Inc (DRYS.O) reported quarterly earnings that comfortably beat Wall Street expectations, helped by increased spot charter rates for its ships and higher revenues from its drilling rigs. "There was some upside from spot vessels. The spot vessels in the dry bulk fleet came better than expected, but a lot of it also had to do with the fact that the drilling business came in strong," Credit Suisse analyst Gregory Lewis said. Dry bulk shipping...

Consumer Confidence? Ha!Tuesday, October 27. 2009 Posted by Karl Denninger Gee, this is a green shoot.... NEW YORK, Oct. 27 /PRNewswire/ -- The Conference Board Consumer Confidence Index®, which had declined in September, deteriorated further in October. The Index now stands at 47.7 (1985=100), down from 53.4 in September. The Present Situation Index decreased to 20.7 from 23.0 last month. The Expectations Index declined to 65.7 from 73.7 in September. The kicker.... In fact, the Present Situation Index is now at its lowest reading in 26 years (Index 17.5, Feb. 1983). The short-term outlook has also grown more negative, as...

Jeremy Grantham: The Sucker's Rally Is Almost Over Posted Oct 27, 2009 08:30am EDT by Henry Blodget: Jeremy Grantham of Boston-based GMO called the crash. He also called the rally. He also called a whole bunch of stuff before that--although, as he is the first to admit, like other value folks, he does have the habit of being early. Not this time, though. Within days of the March low, Jeremy published "Reinvesting While Terrified," in which he observed that it was time to bet the farm. He soon called for a stimulus-fueled rally that would take the S&P 500 to...

I have been talking about the Job Loss Recovery for quite some time. Here are a few recent examples. July 14: Bernanke Sees Chance of Jobless RecoveryGiven that the Fed's first mission is to delay, confuse, hope, and otherwise attempt to buy time while engaging in wishful thinking along the way, that Bernanke is willing to admit this may be a jobless recovery is a sign that things will likely be at least that bad. In other words, prepare for a job loss recovery.August 3: Thoughts On The "Recoveryless Recovery" Most know that I am in favor of an "L...

Asia Shares Dip, Weak Oil Hits Resource Firms On 12:23 am EDT, Tuesday October 27, 2009 By Susan Fenton HONG KONG (Reuters) - Asian shares followed Wall Street lower on Tuesday with resources stocks under pressure as the price of oil stayed below $79 and with investors growing increasingly worried about the recovery of the world economy. Japan's Nikkei index (Osaka:^N225 - News) was down 1.3 percent with shares in Mitsubishi (Tokyo:8058.T - News) skidding 4.3 percent as trading houses were hurt by lower oil and commodity prices in the past day. Oil was at $78.78, below $79 a barrel...

NEW YORK (Reuters) – Regional economic reports on Monday suggested the U.S. economy has clambered back to levels associated with the end of recession, but recovery will be patchy and may prove fleeting. Economic activity and manufacturing data for the U.S. Mid West and Texas hinted the impact of the global financial crisis is slowly abating as the economy emerges from the longest recession in 70 years. However, an index of national economic activity slipped on a monthly basis and a Texas manufacturing output index fell. ... The indices preceded gross domestic product results on Thursday, the broadest measure of...

Get Ready: The Case-Shiller Will Show Housing Is Falling Again Vince VenezianiOct. 26, 2009, 12:43 PM The last few Case-Shiller reports have shown sequentially increasing home prices, but that's about to come to an end when the new numbers come out tomorrow. The Altos Research 10-City Composite Index is down 1.1% for the third quarter of 2009. Altos Research: From our October 2009 Real-time Housing Report, The Altos Research 10-City Composite Index was down by 0.5% in September and 1.1% during the third quarter. Using the housing market ask prices and more specifically, looking at the ask prices of new...

“…For the world's more full of weeping than you can understand. …”~W.B. Yeats First, my title is in no way intended to be a slight to C.S. Lewis, but rather a tribute and expression of gratitude for his many works that have profoundly influenced my intellectual and spiritual life these past years. Mimicry, it is said, is the sincerest form of flattery, and while I get the impression that Mr. Lewis was not particularly prone to vanity, I like to think he might be smiling down with the knowledge that my humble efforts here have grown out of thoughts and...

World Recovery Is In The Hands Of OPEC Andrew Butter October 25, 2009 In a recent interview posted here, Professor Nouriel Roubini said: I worry that oil is going to go up above $100 for reasons that have nothing to do with the fundamentals of supply and demand. Oil at $100 would have the same negative effects on the global economy as oil did at $145 last year. Last year, when oil was at $145, the global economy was still growing. Right now it has collapsed, and is recovering. Oil pushing above $100 would have nasty, negative real trade effects...

China Faces 'Economic Slowdown' In 2010 China may face an economic slowdown next year, Stephen Roach, the chairman of Morgan Stanley Asia, has warned. By Rupert Neate Published: 5:18PM GMT 25 Oct 2009 A massive government stimulus package and more than $1 trillion (£613bn) of new bank lending helped the Chinese economy jump 8.9pc in the third quarter. However, Mr Roach warned that China still faces "tough challenges in the years ahead". Speaking in Shanghai over the weekend, Mr Roach said: "China's growth model is much more about supply than demand. It's not a sustainable model for China. It's not...

U.S. Faces Second Lost Economic Decade Because Of Misguided Stimulus Economics / Great Depression II Oct 23, 2009 - 04:00 PM By: Mike_Shedlock Japan has gone through two lost decades, in and out of deflation, with nothing to show for it but increasing debt to GDP and a stock market still 70% below its peak. Now, Richard Koo of Nomura Research Institute Ltd. says U.S. Risks Japan-Like ‘Lost Decade’ on Stimulus Exit. U.S. officials contemplating an exit from record fiscal stimulus are in danger of repeating mistakes that plunged Japan into its lost decade of stagnant growth, according to Richard...

Possible Credit Dislocation: Be WarnedFriday, October 23. 2009 Posted by Karl Denninger in Musings I have reason to suspect that the "monetary transmission mechanism" is full of rocks (again), and we are about to have another instance of what could colloquially be called "fun." (Yes, that's sarcasm.) Here's what we know and what I can deduce from it: * JP Morgan's "cash position" was analyzed by a writer who published on SCRIBD, which showed that actual cash held has deteriorated radically. By more than half in the last year. The deterioration is continuing, not slowing. * I am hearing repeated...

Unintended Consequences By Ian Mathias 10/22/09 Baltimore, Maryland – Follow this one… how the recent rise in retail sales might bust the housing “recovery”: “Retail sales growth is understandably proving meager and hard to regenerate,” writes our macro sage Rob Parenteau, “in a nation where private debt deleveraging is under way and net job generation has yet to return. The early read on consumer expectations for October shows a seven-point drop, which is very indicative of the hesitancy that we suspect will characterize the tentative return to higher spending by U.S. households. Too many rugs have been ripped out from...

The worst recession since the Great Depression has already eliminated 7.2 million jobs, and analysts figure 750,000 more jobs could disappear over the next six months. That means the administration of U.S. President Barack Obama may be forced to employ a second stimulus if it wants to preserve the fledgling recovery that has carried the Dow Jones Industrial Average back above 10,000. The U.S. unemployment rate officially hit 28-year high of 9.8% in September, according to the Labor Department. But that number grows to 16.8% when you add the number of “total unemployed, plus all marginally attached workers, plus total...

1929 And Today - Sobering Parallels Abound By Simon Maierhofer On 1:14 pm EDT, Thursday October 15, 2009 When was the last time you saw stocks decline 54% followed by a 55% rally? When was the last time you saw stocks (NYSEArca: VTI - News), bonds (NYSEArca: AGG) and commodities (NYSEArca: DBC - News) move in sync for nearly two years? When was the last time asset allocation did not really provide the diversification and protection it was supposed to? When was the last time, a ten year investment in the stock market delivered negative returns? Investors that care to...

Inflation Sinks to Five-Year Low On Lower Utility And Food BillsInflation fell more sharply than expected in September, hitting a five-year low of 1.1pc, on lower utility and food bills. By Angela Monaghan Published: 7:16PM BST 13 Oct 2009 Economists had expected the consumer prices index (CPI) to fall less steeply to 1.3pc from 1.6pc in August. The main drivers of the drop, revealed in data published by the Office for National Statistics yesterday, were a 7.2pc fall in electricity prices and a 5.6pc fall in gas prices compared with a year ago. It was the fourth month in a...

Recovery To Be Moderate, Not V-Shaped: KohnOct. 13, 2009, 2:34 p.m. EDT Greg Robb, MarketWatch WASHINGTON (MarketWatch) -- The economy recovery will be moderate and not a quick snap-back commonly referred to as a V-shaped growth path, said Donald Kohn, the vice-chairman of the Federal Reserve Board on Tuesday. "All told, I expect that the recovery in U.S. economic activity will proceed at a moderate pace in the second half of this year before strengthening some in 2010," Kohn said in a speech to the National Association of Business Economics meeting in St. Louis. Difficult labor market conditions are a...

When it comes to the economy and financial markets, good news has far outweighed bad news in 2009. Just about every piece of economic and financial market data is tracing out a V-shaped recovery. One would think that this would lead to a little more optimism from the conventional wisdom crowd, but it doesn't. With unemployment at 9.8% last month and the economy still losing jobs at an elevated pace, people are worried. Many fear a W-shaped economy, otherwise known as a double-dip recession. These fears are overblown. The only double-dip recession of recent decades happened in the early 1980s,...

Chronic Depression By Bill Bonner 10/09/09 London, England This week, the Australian central bank became the first to declare victory. It raised its key lending rate 0.25% and gave a whoop…signaling an end to the slump. The European Central Bank fidgeted and vaguely threatened to raise rates too. But the Americans stayed in their trenches. New York Fed governor Bill Dudley said that even though the economy is recovering, any rate hikes in the United States would be over his dead body. Then, word came that even Alan Greenspan thinks a recovery is underway. “This is what a recovery looks...

Americans Still Delusional About House Prices Henry BlodgetOct. 11, 2009, 9:09 AM The recent upturn in house prices from April to July (3.6%) is the sharpest change in direction professor Robert Shiller has ever seen. It could signal a v-shaped recovery in house prices. Or it could be the "mother of all head fakes," as investor Whitney Tilson has described it. Robert Shiller's recent survey of attitudes about house prices suggests it's probably the latter. The survey also suggests that Americans are still delusional about the long-term trajectory for house prices.[snip]

Businessman Steve Wynn, Chairman and CEO of Wynn Resorts, agreed the most powerful tool the government has is its tax policy. "The priorities of the administration should have been more directly focused on job creation from the day of the inauguration forward. That's the thing that changes America," Wynn said. "If the government had used its power to restrain its tax collection, they would have given everybody who runs small businesses, large businesses, a chance to hire more people," he added. Wynn claimed, "Government has never increased the standard of living of one single human being in civilization's history." Republican...

The head of Britain's biggest bank has warned we could soon be heading into a second recession. Michael Geoghegan of HSBC said he had delayed expansion plans because he fears the upturn could be short lived. The chief executive said the economy could follow a W-shaped trajectory, with the rebound going into reverse and growth retreating into the red. 'Is this a V recovery or a W?' he said in an interview with the Financial Times. 'It's the latter.' Mr Geoghegan's words carry weight because of the global reach of his bank and its track record on identifying economic turning...

TCM Announces Temporary Closures Sun, 04 Oct '09 More 'Signs Of The Times' The economic malaise continues... During a recent chat with TCM's Rhett Ross, ANN has learned that Teledyne Continental Motors 'will close its factory for one week in response to reduced demand from new aircraft manufacturers for engines and related parts. The closure will start this Monday, 05 October 2009. The plant will reopen for normal business on Monday, 12 October 2009.'

This Recession Ain’t Over by: Steven Hansen October 03, 2009 With so much at stake, you will not be surprised to know that, over the years, many very smart people have applied the most sophisticated statistical and modeling tools available to try to better divine the economic future. But the results, unfortunately, have more often than not been underwhelming. Like weather forecasters, economic forecasters must deal with a system that is extraordinarily complex, that is subject to random shocks, and about which our data and understanding will always be imperfect. In some ways, predicting the economy is even more difficult...

“The New Deal will bring the Communist Party within striking distance of overthrow of the American form of government. …” Arthur Henning, Chicago Tribune (1935), “… The New Deal is to America what the early phase of Nazism was to Germany.” Mark Sullivan of the Buffalo Evening News (1935) While Democrats hold FDR up as an icon, nothing could be further from the truth. FDR prolonged the “Great Depression” by at least a decade because of the wasteful, unconstitutional programs he implemented. Bush and Congress pulled off the biggest heist of century one year ago with the unconstitutional bail outs...

WASHINGTON (AFP) – US economic recovery hopes got a rude shock Friday as official data showed job losses accelerated to 263,000 in September and the unemployment rate rose to 9.8 percent. The Labor Department report, one of the best indicators of economic momentum, showed the critical labor market reversed course after months of improvement. The unemployment rate was up one-tenth of a point from August and in line with most forecasts, but would have been higher if not for 571,000 people dropping out of the labor force. But payroll losses were far worse than expectations for a loss of 175,000...

The number of long-term unemployed (those jobless for 27 weeks and over) rose by 450,000 to 5.4 million. In September, 35.6 percent of unemployed persons were job- less for 27 weeks or more. About 2.2 million persons were marginally attached to the labor force in September, an increase of 615,000 from a year earlier. Among the marginally attached, there were 706,000 discouraged workers in September, up by 239,000 from a year earlier.

No Chance of a 'V' Recovery This is an interesting recession. In the past I have postulated the various possibilities of the type of recovery we would face – L, U, V, or W. The theory is that the deeper the recession, the more pressure exists to drive a recovery – hence a “V”. Even though the coincident data did not support a “V” recovery, leading indicators did. But data this week has destroyed the belief there is pent up demand or any other bull tendencies raging. The possibility of a “V” recovery has been taken off of the table....