The Worst Is Not Behind Us !

[teletiger]

Hard assets. That shiny metal stuff and land.

Regards.

[hhgz]

"The US now is saying that it will pay you zero interest if you loan them money."

No, Alex, once again you are wrong.

[trogers]

Unless governments rapidly recapitalize financial institutions, the credit crunch will become even more severe as losses mount faster than recapitalization and banks are forced to constrain credit and lending. LaoPo

IMO - Wrong -credit worthy people/etc are not borrowing - that is the problem - there is an infinite amount of money to lend (or was)

That's the real problem. Most think there is money.......so where is this wealth? It's all make-believe and illusion.

Creditworthy people will borrow when banks offer to pay them double digits interest rates on the principals of the loan contracts.

Edited July 31, 2009 by trogers

[LaoPo]

Doctor Doom

Stop Asking When The Recession Will End

Nouriel Roubini, 08.20.09, 12:01 AM ET

Growth will be below potential for several years.

Nouriel Roubini, a professor at the Stern Business School at New York University and chairman of Roubini Global Economics, is a weekly columnist for Forbes. (Christian Menegatti and Arpitha Bykere, analysts at Roubini Global Economics, contributed to the writing and research here.)

A number of economic and financial variables have exhibited signs of improvement recently even if macro indicators are still mixed. The pace of economic deterioration has slowed significantly and, after four quarters of severe contraction in economic activity, I now forecast that the U.S. will display positive real GDP growth in the second half of 2009. However, that does not mean that the recession in the U.S. is already over, as many analysts have argued. Indeed, all the variables used by the National Bureau of Economic Research (NBER) to date recessionary periods will continue to contract or display subpar growth. However, I now anticipate that policy measures and other factors will boost real GDP growth, albeit in a temporary manner, in the second half of 2009. Yet the shape of the recovery (will it be V, U or W?) and other challenges will influence the U.S. economic outlook going forward. Growth will remain well below potential in 2010, while the shape of the recovery will be closer to a U.

Some of the so-called "green shoots" observed in the economy in recent months can be defined as green shoots only if compared with the economic picture painted at the beginning of the year. The contraction in some indicators, such as industrial production, is still comparable to the recessions in the 1970s and 1980s. The July 2009 employment report displayed "only" 247,000 nonfarm payroll losses—hardly qualifying as a green shoot in any other postwar recession. However, given how close the U.S. was to entering a depression, even 250,000 payroll losses seem capable of cheering up investors.

In the second half of 2009, as the economy bottoms out from a record contraction (the worst in the last 60 years), adjustments, such as slower inventory destocking, will occur, while policy measures such as "cash for clunkers" will boost auto production and induce continued spending brought on by the stimulus. These factors will likely bring U.S. real GDP growth back to positive territory in the third quarter of 2009. However, the NBER is not likely to call the end of the recession until at least late 2009 or early 2010. In addition to GDP growth, the NBER looks at four variables in making recession calls: real personal income less transfer payments; real manufacturing and wholesale-retail trade sales; industrial production; and payroll employment. While all of these indicators might perform better in the second half of 2008 than in the first, they are likely to remain in contraction or register subpar growth. With the labor market now a leading indicator for the recovery in private consumption and the wider economy, trends in payrolls will definitely influence the NBER's call.

The inventory adjustments will largely be over by the middle of 2010 as will the impact of the stimulus. But since the recovery in private demand will be weak, the economy is poised to slip back to anemic growth (well below potential) in 2010, posing the risk of a double-dip recession. Exhausting most policy measures now means that there will be little room for additional fiscal and monetary stimuli in the future. Policy measures entailing long-term fiscal costs can only provide temporary stimulus to growth. Any sustained economic recovery will ultimately have to come from the revival in private demand—i.e., through consumption and investment—both of which will be constrained by structural factors.

Preceded by a financial crisis, this is the most severe and prolonged recession since the 1930s. Avoiding the short-term pain of private-sector deleveraging by socializing private losses and releveraging the public sector with large deficits and debt accumulation will spur long-term costs and crowd out private spending. The drivers of the previous economic boom—consumers, the housing sector and easy credit—will remain under pressure even after the economy is out of recession. Structural weaknesses will persist. Until the economy finds new sources of growth, it will grow below potential for several years. Potential GDP growth might also take a hit, falling from around 2.8% during 1997-2008 to around 2.25% in the coming years. Productivity growth has held up—on a temporary basis—during the current recession, not due to innovation or productive investment but due to aggressive cuts in labor and labor hours by firms. In the coming years, productivity growth will remain under pressure as workers age, structural unemployment rises, labor skills deteriorate, and investment and innovation slow.

Source: http://www.forbes.com/2009/08/19/recession...aily_newsletter

LaoPo

[LaoPo]

U.S. Dollar Will Weaken, Currency Crash Possible, Roubini Says

By Sonia Sirletti and Jeffrey Donovan

Sept. 4 (Bloomberg) -- The dollar will weaken and the U.S. risks seeing a crash of the currency unless it does more to control the deficit and reduce debt, said New York University Professor Nouriel Roubini, who predicted the financial crisis.

“If markets were to believe, and I’m not saying it’s likely, that inflation is going to be the route that the U.S. is going to take to resolve this problem, then you could have a crash of the value of the dollar,” Roubini said in an interview today in Cernobbio, Italy. “The value of the dollar over time has to fall on a trade-weighted basis, but not necessarily relative to euro and yen.”

Roubini said he didn’t see a risk of a dollar crash in the “‘short term.” The value of the U.S. currency relative to currencies such as the yen or the euro “cannot change too much compared to current levels because if the dollar were to weaken a lot and the euro strengthen a lot, that’s going to warp any chance for the European economy to recover, same argument as to the yen,” he said.

“Most of the adjustment of the dollar in the future has to occur relative to China, relative to emerging Asia and relative to some of the other commodity exporters in the world, whether these are advanced economies or emerging markets,” he said.

Foreign creditors need assurances that the U.S. will address its deficit, Roubini said.

“Unless in the medium term these issues of fiscal sustainability are addressed, and unless we mop up that excess liquidity from the financial system, eventually the financial markets and the foreign creditors of the United States might get more concerned about the sustainability of the U.S. fiscal deficit and about the U.S. being tempted to use the inflation tax as a way of resolving its private and public debt problems,” he said.

Source: Bloomberg

LaoPo

[flying]

Roubini said he didn't see a risk of a dollar crash in the "'short term." The value of the U.S. currency relative to currencies such as the yen or the euro "cannot change too much compared to current levels because if the dollar were to weaken a lot and the euro strengthen a lot, that's going to warp any chance for the European economy to recover, same argument as to the yen," he said.

LaoPo

Gloomy stuff

Problem in my mind is if a currency failure should occur it will happen rapidly (likely overnight to 8-12weeks).

As for inflation taxes at a time when unemployment is rampant & really closer to 16.8% than the figures show.....I just don't see how it will all work. What we would see is more & more wards of the state.

Food stamps is now over 35 million

http://www.reuters.com/article/domesticNew...E5825OT20090903

To top that the UE benefits will soon go the way of SS & Kalifornia

http://www.propublica.org/feature/unemploy...not-working-603

Things are piling up faster than the shovels trying to dig their way out can shovel.

Why in the world would we be funding the war on supposed terror at a time like this? Just one more nail in the coffin of the US? Why are they funding corrupt banks & Wall Street with more & more deficit that is not even going towards the claimed cause of the problem? Why ask why?

Edited September 5, 2009 by flying

[LaoPo]

Why in the world would we be funding the war on supposed terror at a time like this? Just one more nail in the coffin of the US? Why are they funding corrupt banks & Wall Street with more & more deficit that is not even going towards the claimed cause of the problem? Why ask why?

I wonder how the world would have looked WITHOUT all the wars since, let's say, 1950....?... although I realize nobody has an answer since it's no reality.

LaoPo

[sokal]

It's a K-Winter on Yabaa.

I'm sure you want to enlighten me...such 5-word expressions are not in my vocabulary, sorry.

LaoPo

Rubini knows something but he still does believe in some Keynesianism. Like stimulus.

[sokal]

And, MJP, if I look at your -mostly short- answers I would welcome your thoughts about the views by Roubini, but founded answers, not so called smart-@ss answers.

LaoPo

Liquidity trap is a Keynesian term, there is no such thing as a liquidity trap. Just because an institution cant sell something for what they think it is worth does not make it a liquidity trap, it just means that their price is too high.

[sokal]

Ever see this?

Flying, you are becoming more and more like your goldbug bretheren every day! Giving links to youtube as a news source? Whats next, links to goldbug nesletters to show that gold will go to $2000/ounce in 2009 Merry Christmass my friend, enjoy those elevated levels of PM's because the gold bubble is about to burst in January after the next round of hedge fund redemtions and ECB and BOE rate cuts (not too mention the coming Yen devaluation)

Your dollar will be worth half as much as it is now, does that sound better to you ?

[sokal]

Karl Denningers blog sums things up fairly well. Find the video on this page.

Denninger vs CNBS on the economy

Edited September 6, 2009 by sokal

[teletiger]

No brownie points in this world for slaying old posts.

Regards.