Economic Crystal Ball

[2centsworth]

Describe the econony over the next 12 months? I think we're going to see a major contraction and unemployment get close to 10%. Government hiring will prevent the unemployment number from going higher. Oil will continue to slide and maybe hit $60 a barrell. Consumer spending is going to collapse. We will continue to see a steady devaluation of our dollar.

The only way to turn this tide is to cut the capital gains to 0% for 24 months. Then accelerate depreciation for capital expenditures. Slash the fed funds rate to 1/2% and reinstitute the FHA 235 program.

[MannyIsGod]

Yeah, I'm not sure how much political will there is going to be in DC for a slash on capital gains. If that happens be prepared to see the Debt baloon like no other.

[2centsworth]

Yeah, I'm not sure how much political will there is going to be in DC for a slash on capital gains. If that happens be prepared to see the Debt baloon like no other.

let me rephrase that. zero capital gains tax on assets purchased within the next 12 to 24 months. hence, when people decide to sell those assets no capital gains tax would be owed. this would encourage investment and maintain asset values and current government tax revenues.

[MannyIsGod]

What really sucks is that the government did such a poor job explaining things that many people figured the bailout had failed based upon the market since its passage. What they haven't factored in is that without the bailout we surely would have had at least one day where they had to freeze trading if not more than one.

The American people really do need to have it explained to them that this is not a bump in the road but a major financial crisis that is going to have huge repercussions.

I'm just overly upset at the complete lack of leadership shown by the government right now. I know that if I have such a hard time keeping up with just what is going on that the average American doesn't have a fucking clue.

[ElNono]

To be honest with you, I've lived in countries with much, much worse economic crisis than this one, and honestly believe this is a bump on the road.

[2centsworth]

To be honest with you, I've lived in countries with much, much worse economic crisis than this one, and honestly believe this is a bump on the road.

those countries probably did not have far to fall. The US on the other hand....

[Trainwreck2100]

those countries probably did not have far to fall. The US on the other hand....

We have the luxury of taking other countries with us though.

[2centsworth]

What really sucks is that the government did such a poor job explaining things that many people figured the bailout had failed based upon the market since its passage. What they haven't factored in is that without the bailout we surely would have had at least one day where they had to freeze trading if not more than one.

The American people really do need to have it explained to them that this is not a bump in the road but a major financial crisis that is going to have huge repercussions.

I'm just overly upset at the complete lack of leadership shown by the government right now. I know that if I have such a hard time keeping up with just what is going on that the average American doesn't have a fucking clue.

Some of this is also due to the delay in the bailout. The Fed is having to deal with Commericial paper which just became a problem over the past 3 weeks. I talked about it in my horrendous economic news thread.

Obama will be a disaster, but I don't think the republicans would be that much better. Our only hope is for the republicans to regroup and come back as fiscal conservatives.

[2centsworth]

We have the luxury of taking other countries with us though.

Europe, China, yes. But certain third world countries won't see much difference.

[timvp]

We will continue to see a steady devaluation of our dollar.Dollar has been gaining recently and continues to gain -- no matter what is happening in the stock market. As bad as Americans think they have it here, most of the rest of the world has it worse. Bailouts are happening not just in the US.

We'll see what happens but I can imagine a scenario where the economy suffers but the dollar gains to its highest levels in years against foreign currencies. And I'd easily take the under in regards to unemployment hitting 10%.

[MannyIsGod]

You've known this was coming though Pete. I mean the general attitude torward finance in this country is so far from reality from the level of each person to the level of the government. We just don't handle it responsibly and now thats having some serious repurcussions. My worst fear is that this gets bad and the general public never understands WHY and we go back to doing the exact same things. I mean sure they'll understand a bit more about bad home loans, but what about the rest of the bad credit floating around?

[MannyIsGod]

I don't know, I could see 10% pretty attainable. Consumer spending is going to really fucking suck during this holiday season and we all know how badly that is going to hurt the economy. The worst part of all this bad economic news and the overall sentiment in the country right now is that even though people stand to save a good deal of money in the coming months due to lower oil costs they're also likely to stash a lot of that away and not spend it.

[timvp]

The bad news for Obama is that I can easily see a scenario where he doesn't institute any of his promises due to the economy and then the Republicans go on a witch hunt and oust him in 2012. But hopefully he can work some magic, get the US economy back on track and then be a near unanimous choice in 2012.

Then again, for the second scenario to play out, he'd have to rely on most of his policies not becoming reality . . ..

[Trainwreck2100]

Europe, China, yes. But certain third world countries won't see much difference.

China and some of Europe have turned their noses at us for awhile now.

We're America and you bitches need us

[MannyIsGod]

The bad news for Obama is that I can easily see a scenario where he doesn't institute any of his promises due to the economy and then the Republicans go on a witch hunt and oust him in 2012. But hopefully he can work some magic, get the US economy back on track and then be a near unanimous choice in 2012.

Then again, for the second scenario to play out, he'd have to rely on most of his policies not becoming reality . . ..

I have faith in Obama that he would surround himself with intelligent people and he'd listen to their advice. That being said, bad economies are just about the surest way to ensure a change in power so we'll see how long it lasts. I doubt any economic downturn would last for the entire duration of his term, though.

[RandomGuy]

I have faith in Obama that he would surround himself with intelligent people and he'd listen to their advice. That being said, bad economies are just about the surest way to ensure a change in power so we'll see how long it lasts. I doubt any economic downturn would last for the entire duration of his term, though.

It will be bad for about 2 years and right itself by the fourth.

I see a contraction for 2009 and probably for 2010 with a return to growth by about 2011.

Obama has surrounded himself with intelligent people so far, and shows no sign of instituting Bush-style ideological purity tests over competence.

[RandomGuy]

Dollar has been gaining recently and continues to gain -- no matter what is happening in the stock market. As bad as Americans think they have it here, most of the rest of the world has it worse. Bailouts are happening not just in the US.

We'll see what happens but I can imagine a scenario where the economy suffers but the dollar gains to its highest levels in years against foreign currencies. And I'd easily take the under in regards to unemployment hitting 10%.

We are seeing the dollar appreiciate due to a short squeeze and a lot of people unwinding positions that bet against the dollar. I would have to find the news article that I read that in though.

[RandomGuy]

I don't know, I could see 10% pretty attainable. Consumer spending is going to really fucking suck during this holiday season and we all know how badly that is going to hurt the economy. The worst part of all this bad economic news and the overall sentiment in the country right now is that even though people stand to save a good deal of money in the coming months due to lower oil costs they're also likely to stash a lot of that away and not spend it.

10% is quite likely, in my opinion.

We have seen SHARP drops in EVERY economic indicator, and that is just the start of it. I expect that when we get final numbers from September and October, things will be looking bleak, just in time to totally f*** with Christmas sales, making things immeasurably worse.

If this had happened in, say, March, we wouldn't have seen as much of a problem.

[MannyIsGod]

Yeah, I think the fact that our economy is so dependent on Q4 sales really makes the timing of this all the more worse.

[RandomGuy]

Yeah, I think the fact that our economy is so dependent on Q4 sales really makes the timing of this all the more worse.

The US consumer will be "de-leveraging" just like banks and companies, by paying off chunks of debt. I know I will be, but I would have done that anyways.

I would guess that if you save up yer cash for January 2009, you will see retailers putting on one hell of a sale.

[2centsworth]

Dollar has been gaining recently and continues to gain -- no matter what is happening in the stock market. As bad as Americans think they have it here, most of the rest of the world has it worse. Bailouts are happening not just in the US.

We'll see what happens but I can imagine a scenario where the economy suffers but the dollar gains to its highest levels in years against foreign currencies. And I'd easily take the under in regards to unemployment hitting 10%.

short-term trading trends in currencies does not make long-term.

[2centsworth]

The US consumer will be "de-leveraging" just like banks and companies, by paying off chunks of debt. I know I will be, but I would have done that anyways.

I would guess that if you save up yer cash for January 2009, you will see retailers putting on one hell of a sale.

report today that consumer credit has shrunk for the first time since 1989?

[RandomGuy]

Here is an interesting article from 2004 on a goldbug website:

http://www.financialsense.com/editorials/blumen/2004/0528.html

I am seriously beginning to see the need to examine a lot of things concerning our financial system. It is useful in situations like this to examine one's underlying assumptions, and I will be taking a look this weekend at some of this like Mises and the Austrian school of economics.

Ron Paul strikes again? Erg.


Facing a crisis the Fed do what central banks always do: print more money. Constitutional restrictions and regulations are always ignored or over-ruled when a crisis unfolds. Whether the Fed could succeed in averting a deflationary collapse with a hyper-inflation is not certain. But who would question that unconventional measures would be tried?

[smeagol]

Dow hits 7,500.

8% - 9% unemployment.

4 - 6 Qs of recession (at a minimum).

Vbookie anyone?

[Wild Cobra]

I think with the current "bail Out" legislation, our economy will slide. We may go into depression unless the bad regulations that caused this are changed.

Oil prices dropping? Get a grip. I may be wrong here, but my inerpretation of what I heard is that prices paid on oil futures have dropped. Have oil prices really dropped, or are they still around $100? I think speculators have removd themselves from the oil market and played securities or futures someplace else. I don't think we will see substantial drops in oil prices unless the dollar regains value on the world market.

This was a big mistake to bail out indistries that should fail. Now we have weeds growing in our garden instead of weeding them out. The solution to keep the lending industry solvent was simple. Let lending institutes that did things right borrow their needed capitol directly from the Federal Reserve.

So many things will help the economy and so many things will hurt. It is obvious to me that neither presidential candidate understands economics well. Still, I believe we will be better off with McCain as president rather than the rubber-stamping Obama will do with congressional spending. Much of our future depends on the presidency.

Remember I claimed the market drops are because of voting for the Bail out rather than not? Just look at today's drop and tell me I'm, wrong. Another 508 point drop on the Dow. Other US markets down too.

[ChumpDumper]

Have oil prices really dropped, or are they still around $100? Depends on whether you believe $89 is around $100.

It had its first positive trading day in five days after hitting an eight-month low.

[RandomGuy]

Reading that article this bit struck me:


Consumption goods cannot easily liquidated for currency. While it is true that the American consumer who has bought a DVD player from Japan with his credit card is not short dollars might enjoy a bit of inflation to lower the real cost of his debt, he is not short dollars and long yen. Let him try to sell his DVD player on eBay for a few Yen so he can buy back some dollars and “cover his short”. The banks of China and Japan have obliged them by purchasing the dollars from their domestic producers, and then loaning those dollars back to the Federal Government through the purchase of Treasury debt, and now are very much long dollars.

What happens to that mountain of US consumer debt if there is deflation?

The article does talk about a lot of what is going on today...


[Would a recessionary collapse of the supply of goods available in the US affect the dollar’s privileged status? Would a banking crisis in the US threaten the privileged position of its currency? If demand for dollars as a reserve asset were to diminish, that can only be seen as most bearish for its exchange value. If dollar creditors finally recognized the impossibility of their debt every being repaid, would they start to sell their assets? Or would they sell Treasuries and start buying other riskier US assets, in an attempt to triage the losses by propping up the system a bit longer?

The inflation-deflation issue is indeed quite puzzling due to the myriad of interacting factors, both correlated and cantilevered. I do not mean to suggest that the inflationary response that engendered by a deflationary crisis is in any sense a sustainable solution to the excesses of the preceding boom. Such a program would surely result in a hyperinflationary recession, rather than a deflationary one. The Austrian view is that that resource mis-allocations of a credit-driven boom require a recession to be cleansed. This tells us that distortions in the real economy cannot be erased by changes in monetary policy (conventional or un-).

As a policy recommendation, to allow the deflationary bust to do its work would be the best path. But as financial writer James Grant has written, if there is one thing that governments excel at, it is debasing their own currency.

[Wild Cobra]

Depends on whether you believe $89 is around $100.

It had its first positive trading day in five days after hitting an eight-month low.
Again, was that the futures price, or actual price? That doesn't mean the oil companies pay that much. Just means the person buying the futures may make a large profit!

Have you ever researched the commodities and futures markets?

[RandomGuy]

Dow hits 7,500.

8% - 9% unemployment.

4 - 6 Qs of recession (at a minimum).

Vbookie anyone?

Time to ask intrade.com for some new categories.

[ChumpDumper]

Again, was that the futures price, or actual price? That doesn't mean the oil companies pay that much. Just means the person buying the futures may make a large profit!

Have you ever researched the commodities and futures markets?You asked about the price of oil. I gave you the price of oil. If you are incapable of looking it up for yourself, you'll just have to take my word for it.

[Wild Cobra]

You asked about the price of oil. I gave you the price of oil. If you are incapable of looking it up for yourself, you'll just have to take my word for it.
If you knew, you would tell me, right?

The price of oil here are often confused with the futures. That's why I asked for clarity, which, being the ASS you are, refuse to tell me. Would it have been hard for you to not be an ASS for once and tell me what you quoted was spot price?

OK, It appears the spot price is at $89. Good. I do hope they drop farther. Real hard to say, so many factors influence the price. Looks like OPEC is unable to keep their members from fighting for production increases.

Let me ask you this. With the drop in demand we have because of oil prices, it it hard to believe we would keep lower prices with the increased USA supply from ANWR and added continental shelf drilling? If we were allowed...

[ChumpDumper]

If you knew, you would tell me, right?I knew and I told you, you stupid piece of shit.

And look, I said something and it was true. Learn from that, liar.


Let me ask you this. With the drop in demand we have because of oil prices, it it hard to believe we would keep lower prices with the increased USA supply from ANWR and added continental shelf drilling? If we were allowed...How much? No one has ever been able to say how much. I'm asking.

[RandomGuy]

http://www.financialsense.com/editorials/blumen/2004/0528.html

Seriously. This article makes for some VERY interesting reading. I would recommend it to anyone even vaguely interested in the crisis who had some knowledge of finance.

He is describing, in 2004, what is likely going on today.

Not that anyone knows where we will end up .

[Wild Cobra]

I knew and I told you, you stupid piece of shit.

And look, I said something and it was true. Learn from that, liar.
I'm stupid for asking for clarification when you confuse so many things?

OK...

Again, start a new thread on my lying please. I cannot think of a single instance.


How much? No one has ever been able to say how much. I'm asking.

I don't know, but $89 from $130+ is a nice drop. I do wonder how much of the drop is simple supply vs. demand pricing. If any significant amount can be atrributed to lower demand, then more drilling will make a signoificant difference as well.

[ChumpDumper]

I'm stupid for asking for clarification when you confuse so many things?You are the one who backtracks every time he is called out on one of his lies. I know you feel kind of stupid that you found out I was exactly right, but that's nothing new either.


Again, start a new thread on my lying please. I cannot think of a single instance.That itself is a lie. :lol




I don't know.Then quit acting like you do. It's just another lie.

[ElNono]

those countries probably did not have far to fall. The US on the other hand....

Well, once you lived through:
1) 10% daily inflation increases throughout an entire month, including riots of people ransacking supermarkets for food.
2) You money depreciating and eventually losing 3 digits.
3) Caps in the amount of money you can withdraw from your bank account.
4) Forceful conversion of your investments in foreign currency into the local currency.

then you realize that how far you fall is not the problem. The hit you take when you hit rock bottom hurts a shitload no matter what. I actually experienced point 2 at least 3 or 4 times in my lifetime already.

One of the reason for accepting the job offer here in the US was actually that crap like all of the above does not happen here. And I'm pretty confident we're not going to get there. But if it happens, that would be nothing new... :lol

[MannyIsGod]

I swear to god WC tilts me like no other. The fucking price of oil is given to me and he asks what the price of oil is. Jesus.

[Wild Cobra]

I swear to god WC tilts me like no other. The fucking price of oil is given to me and he asks what the price of oil is. Jesus.
Why should that matter? Given to you? I was asking if the price was under $100. I see no place you asked the price... Where is your quote?

My question was "Have oil prices really dropped, or are they still around $100?" I wasn't aware the spot price went to $89. Too often, people confuse the prices between spot and futures. I explained that. I was trying to get clarification, and concedded the $89 was right.

Where's the problem? Are you just looking for a reason to find fault in me, or are you Chump... and because I don't respond to Chump now, you have to start an argument?

[Wild Cobra]

I haven't responded to the polling question. The simple fact is, I don't know. I believe we will now sink into a recession, or more because of the bailout. That might not be so if what I heard on the radio today is true. The Feds are doing what I asked for all along. The Federal Reserve will back up the banks for loans. Funny, that's not part of the $700 billion handout to corporate elitists. Of course, this will probably remain quiet, and if they do it properly, it will stop the bleeding. If it alone was announced, I don't think we would have the drops in the markets we do now. I think it is the bailout that is doing damage, not the lack of bailout.

I predict the following:

The Federal Reserve will back up bank loans, with little or no media attention.

The crisis will end after a few months of termoil, and market adjustments.

The Bailout plan will get credit, again, with no mention of the Federal Reserve help.

[ChumpDumper]

Where's the problem? Are you just looking for a reason to find fault in me, or are you Chump... and because I don't respond to Chump now, you have to start an argument?Geez, paranoid much?

And finding fault with you is as easy as reading one of your posts.

[BradLohaus]

http://www.financialsense.com/editor...2004/0528.html

Seriously. This article makes for some VERY interesting reading. I would recommend it to anyone even vaguely interested in the crisis who had some knowledge of finance.

That’s funny, when I was reading your excerpts from the article I was going to say that it sounds like Richard Duncan’s “The Dollar Crisis”, and then the writer talks about that book in the article. That book might be the best analysis of today’s situation that I’ve read. Make sure you get the revised version; it was originally published in 2003 but the revised edition was published in ’05 and contains more chapters covering the events between those years. Duncan needs to put out a third edition. I’ve been meaning to suggest that book here, but I don’t think I ever did.

As the article says, the Fed is the purchaser of last resort in addition to the lender of last resort, and ultimately, they can purchase anything they feel is necessary – anything at all. Today it’s commercial paper; tomorrow, who knows. But if they ever have to make massive purchases of T-bills from foreign sellers, or if foreigners stop or significantly slow down their purchases and the Fed has to make up the difference, then that’s the endgame for the global dollar standard, the end of export led growth (the exact title of one of Duncan’s chapters) in Asia and elsewhere, and the end of the trade deficit and the US’s binge on imports. But even though the author of the article makes another good case against all of this ending in deflation, IIRC, Duncan predicts in his book that this post Bretton Woods global dollar standard will end in global deflation after one last big run of inflation, followed by failed attempts at stabilization (even in the revised edition) unless some drastic measures are enacted worldwide (and I mean drastic – a global minimum wage, turning the IMF into a real global central bank that has the authority to control the world’s money supply by increasing the role of the IMF’s Special Drawing Right – kind of makes the NA dollar plan/”conspiracy theory” seem boring, doesn’t it? :lol ).

[Edit: Yeah, the second to last chapter is called “After Reflation, Deflation”] Maybe he changed his mind in the last 3 years. I’ll have to take the time to find and read something more recent from him.

Also, I asked my crystal ball what it thought about the short term economy, and it told me “signs point to yes”, whatever that means.

[bobbyjoe]

I think we are in inning 3 of a 9 inning recession. It will be a stronger recession than 01-03 but not near a depression.

I don't think $50-$60 oil is unreasonable. The recession is global, not just in the USA, so oil demand will be declining. The price was also deeply inflated by speculators and was a big bubble.

I think the commodity bubble is going to burst hard (copper, oil, and natural gas already are), which will be a silver lining which will help propel a future recovery.

The next administration needs to act prudently and institute smart and targeted regulation, but not overly burdensome regulation just to try to make up for what's happened. Tax hikes that Obama is proposing need to be thrown out the window in light of the intensifying recessionary environment.

I think the unemployment # is a flawed statistic, so it's not really super relevant. Underemployment is not taken into account and neither are people who have been out of work for several months, get frustrated, and stop looking for jobs when they would be actively searching if jobs they qualified for were available. The unemployment # is understated. The job picture is going to suck for the next 12 months. Flat wages and underemployment.

Fed funds rate to 1% by year's end or early next year.

[RandomGuy]

I think we are in inning 3 of a 9 inning recession. It will be a stronger recession than 01-03 but not near a depression.

I don't think $50-$60 oil is unreasonable. The recession is global, not just in the USA, so oil demand will be declining. The price was also deeply inflated by speculators and was a big bubble.

I think the commodity bubble is going to burst hard (copper, oil, and natural gas already are), which will be a silver lining which will help propel a future recovery.

The next administration needs to act prudently and institute smart and targeted regulation, but not overly burdensome regulation just to try to make up for what's happened. Tax hikes that Obama is proposing need to be thrown out the window in light of the intensifying recessionary environment.

I think the unemployment # is a flawed statistic, so it's not really super relevant. Underemployment is not taken into account and neither are people who have been out of work for several months, get frustrated, and stop looking for jobs when they would be actively searching if jobs they qualified for were available. The unemployment # is understated. The job picture is going to suck for the next 12 months. Flat wages and underemployment.

Fed funds rate to 1% by year's end or early next year.

Unemployment for all of its flaws does incidate the direction of overall employment, if not the exact figures.

[RandomGuy]

I swear to god WC tilts me like no other. The fucking price of oil is given to me and he asks what the price of oil is. Jesus.

Yup.

When you show him to be wrong about something, instead of manning-up to it, he will split hairs and prevaricate endlessly.

"but, but, but, but..."

[2centsworth]

Describe the mover the next 12 months? I think we're going to see a major contraction and unemployment get close to 10%. Government hiring will prevent the unemployment number from going higher. Oil will continue to slide and maybe hit $60 a barrel. Consumer spending is going to collapse. We will continue to see a steady devaluation of our dollar.

The only way to turn this tide is to cut the capital gains to 0% for 24 months. Then accelerate depreciation for capital expenditures. Slash the fed funds rate to 1/2% and reinstitute the FHA 235 program.


layoffs have been huge recently with Chrysler just announcing a 25% cut in its white collar workforce. Unemployment should get close to 7% by next month.

Oil is inching closer to $60.

Advice for the average joe is to have ZERO debt and learn to cook.

Our dollar is at a 13 year low to the yen.

[Tully365]

To be honest with you, I've lived in countries with much, much worse economic crisis than this one, and honestly believe this is a bump on the road.

It's all relative, but I've gotta agree with this. Even a serious 5 year recession wouldn't put me personally in a worse position than, say, the average person living in Bangladesh, Bolivia, Ethiopia, Somalia, or East Timor.

[Tully365]

* reposted below*

[Tully365]

Obama will be a disaster, but I don't think the republicans would be that much better. Our only hope is for the republicans to regroup and come back as fiscal conservatives.

Did you think in 1992 that Clinton be a disaster economically?

[2centsworth]

Did you think in 1992 that Clinton be a disaster economically?

Fiscally conservative Democrat Executive and a conservative Republican Congress worked out well economically.

[Tully365]

Fiscally conservative Democrat Executive and a conservative Republican Congress worked out well economically.

Agreed. But I clearly remember many saying Clinton would be a typical tax-and-spend guy who would quickly double the deficit and endanger the future of our grandchildren, etc,... and what we got, IMHO, was the most pragmatic and least ideological Executive (economically) of our time, a man who according to Alan Greenspan's memoir, was "obsessed" with eliminating the deficit.

[Anti.Hero]

Can I change my vote now that it looks like Obama is the next president and will have super majority?

[2centsworth]

Agreed. But I clearly remember many saying Clinton would be a typical tax-and-spend guy who would quickly double the deficit and endanger the future of our grandchildren, etc,... and what we got, imo, was the most pragmatic and least ideological Executive (economically) of our time, a man who according to Alan Greenspan's memoir, was "obsessed" with eliminating the deficit.

I voted for Clinton, so I saw him as someone who wanted to increase educational opportunities and move more people from welfare to work.

[Tully365]

I voted for Clinton, so I saw him as someone who wanted to increase educational opportunities and move more people from welfare to work.

I think one of the most unfortunate results of our political environment is the fact that even those politicians who attempt to compromise and solve problems pragmatically either get cast as party traitors or continue to be characterized by the other side with the same cliches, even if the facts clearly say otherwise.

[2centsworth]

I think one of the most unfortunate results of our political environment is the fact that even those politicians who attempt to compromise and solve problems pragmatically either get cast as party traitors or continue to be characterized by the other side with the same cliches, even if the facts clearly say otherwise.

unfortunately, in the case of Obama, all we have is his rhetoric.

[Tully365]

Sadly, I think the economy will be in trouble for quite a while, and the only thing I hear from Washington is the idea of throwing more money at the problem.

[2centsworth]

damn I'm smart.

[Wild Cobra]

Recession, but we'll be okay in a year or so.
How long is "so?"

[2centsworth]

How long is "so?"

also, what is "ok"?


the point was, the end of the world wasn't imminent.


I'll have another year or so prediction soon.

[2centsworth]

btw, when I said

reinstitute the FHA 235 program.

that's almost exactly what Nassim Taleb, author of the Black Swan, recently said in a CNBC interview that got a lot of national headlines.

http://chattahbox.com/business/2009/07/03/black-swan-author-nassim-taleb-to-us-end-stimulus-deleverage-debt-or-suffer-a-crash/

[Winehole23]

Creepy:


“We’re in the middle of a crash.” “So if I’m going to forecast something, it is that it’s going to get worse, not better,” said Taleb.

Taleb described our global financial systemhttp://images.intellitxt.com/ast/adTypes/mag-glass_10x10.gif (http://chattahbox.com/business/2009/07/03/black-swan-author-nassim-taleb-to-us-end-stimulus-deleverage-debt-or-suffer-a-crash/#) as extremely fragile that is destined to crash. He referred to stimulus programs as an example of monetary policy that’s out of control, producing little “green shoots” of economic recovery, “…but you are still in a world that’s breaking,” said Taleb.


Taleb advised the U.S. government to deleverage debt and not rely on stimulus packages that will only inflate assets. He recommended that the government convince banks to take aggressive, large-scale steps to convert debt into equity. He called for a worldwide, deleveraging of debt totaling $40-to-$70 trillion:wow,” to make a transition into a more stable financial environment.

Taleb suggested that banks attempt to negotiate with homeowners on the verge of foreclosure, offering to lower monthly payments in return for part-ownership of the property, averting foreclosures and additional debt on the banks’ balance sheets. [ FHA 235? -Ed.]

“The monkey on our back is debt,” said Taleb. Government leaders need to “take the devil by the horn” and aggressively deleverage our massive debt into equity or suffer the consequences of a global financial crash.

[coyotes_geek]

But how is deleveraging debt going to get me re-elected?

- every politician

[Winehole23]

Were you impressed with the amount of deleveraging recommended, CG?

[Wild Cobra]

Creepy:

Why is it creepy?

He started predicting these events in 2007.

[Winehole23]

Maybe you've gotten over it already.

[Winehole23]

Maybe the rest of us haven't.

[coyotes_geek]

Were you impressed with the amount of deleveraging recommended, CG?

Sadly, not really. With just the U.S. government being something like $14 trillion in the hole on their own I figured the rest of the financial sector and personal debt would be several times that.

[Winehole23]

It kinda freaks me out that we're not going to deal with a $40-70 trillion debt problem.

[coyotes_geek]

It kinda freaks me out that we're not going to deal with a $40-70 trillion problem.

Don't forget medicare and social security. It kinda freaks me out that we're not going to deal with either of our $40-$70 trillion dollar problems.

[SnakeBoy]

Too bad this poll doesn't show who voted for what.

[Winehole23]

I think I went tongue-in-cheek *sandwich board* on this poll. The end is near.

[Winehole23]

Wishy-washy options #2 and #3 are almost exactly alike, leaving two shitty choices for everyone who isn't wishy-washy.

[Winehole23]

viz., prophesying the end times, or boutons.

[SnakeBoy]

Wishy-washy options #2 and #3 are almost exactly alike, leaving two shitty choices for everyone who isn't wishy-washy.

Good point. I just barely glanced at the questions. He basically designed it so that most would pick #2.

[Winehole23]

Don't forget medicare and social security. It kinda freaks me out that we're not going to deal with either of our $40-$70 trillion dollar problems.Touche', CG. :king

[2centsworth]

Creepy:

Yes, fha235 is converting debt to equity as taleb described

[Winehole23]

What was your vote, 2cents?

[word]

None of the above. Recession that lasts well into 2011. The housing burst isn't halfway through as we have another coming along with commercial real estate bubble burst. We're in recession, easily, to 2011, probably 2013. Depends. We'll have to see who gets elected in 2012. Seriously doubt Obama gets a second term.

[101A]

Is there a way to see how I voted? I don't remember.

[Winehole23]

http://www.newyorker.com/online/blogs/johncassidy/2014/06/the-great-deleveraging-six-and-a-half-lost-years.html

[boutons_deux]

What Took You So Long?

As predicted, there’s a fair bit of kvelling over the fact that payrolls last month finally recovered the almost nine million jobs lost in the GR (great recession). The figure below, by my CBPP colleague Chad Stone, shows the comeback, but more important from the perspective of this post, the pronounced difference in length it took to get the jobs back (seeEPI’s Heidi Shierholz (http://www.epi.org/blog/watch-jobs-day-time-high-indicator-rising/) as to why just getting back to zero ain’t the goal).

Why so long? I’ll tick off all the reasons I can think of, in rough hierarchical order (again, as I see them—I don’t have any metrics here), and I suggest readers add any I’ve left out to comments.

–When you’re down so far, it takes longer to come up: The picture clearly shows the role of the depth of the hole in the job market in the GR relative to milder downturns. In fact, eyeballing slopes, you can see that the rate of job growth in this recovery is about the same as the last one. When you’re filling holes at the same rate, it will take longer to fill a deeper hole.

–Policy mistakes: See Krugman, but the aggressive turn to austerity (budget cuts in the face of weak demand), the failure to recognize unique inflation dynamics at the “zero-lower-bound” (including the need for negative real interest rates), and most importantly the refusal to continuing plying fiscal stimulus, are perhaps the best answers to the question of this post.

And depth of the hole is no excuse. If anything, that was a reason to do more. You wanted your policy makers to look at the figure below when jobs were at their trough in early 2010 and conclude: “we’re going to need to significantly beat the slope of the last recovery or else we risk not breaking new ground until…um…as late as May of 2014!” And I can assure that some of your policy makers, or at least their economists, were saying something much like that at the time.

In this regard, political dysfunction is an important part of the answer to “why so long…”

–Unique factors regarding the housing bubble, the wealth effect, balance sheets, etc: One meme here is that busts that result from the collapse of finance are always more protracted than those that result from a supply shock, be that shock exogenous—a disruption in the supply of a key input like oil—or endogenous—the Fed slams on the monetary brakes to prevent overheating.

Meh…I don’t doubt for a second that the loss of trillions in wealth from the bursting of the housing bubble was a factor in the depth of the downturn. We’re a 70% consumer-spending economy and that’s a huge downshift in the wealth effect. Nor do I doubt that debt bubbles are more pernicious and long-lasting than mark-to-market equity bubbles. Banks can’t play extend-and-pretend in the latter case, for example, and deleveraging, risk aversion, the “Minsky moment” (flip from under-pricing to over-pricing risk)—they’re all real factors that made the GR tougher to grow out of than many of its predecessors.

But—and this is my biggest punchline of the downturn, my “what-did-you-learn-Dorothy?” insight— every freakin’ one of these problems was known and was movable by better policy. Mostly temporary fiscal stimulus to offset the demand contraction of the negative wealth effect, but also debt reduction (cramdowns, principle reduction) to clear out that channel as well.

–Trade deficits: The fact that we went into the downturn with large negative trade imbalances meant we went in with a major drag on domestic labor demand, well before the collapse (trade deficit/GDP in ’06 and ’07: -5.5% and -4.9%, historically very big numbers). That means we jumped into a deep hole with a heavy anvil around our neck.

–Inequality: The expansion began in the second half of 2009, but the fact that what growth we’ve generated has gone mostly to the top has likely played a role, again through the consumer spending channel.

–Hysteresis: Or as I like to mellifluously describe it, “once you bend the trend, it’s hard to mend.” See here (http://jaredbernsteinblog.com/the-great-recession-hysteresis-tolstoy-and-unhappy-economies/) for details, but once all the factors above were working to slow growth, cyclical problems from the recession became structural ones in the recovery. This is most clearly seen in our depressed labor force participation rate, but the fact of large and persistent gaps in output, jobs, and wage growth this late in the expansion are equally visible forms of proof.

–Global interconnectedness: The fact that so many other economies weakened along similar time frames to our own also made it tougher to more quickly recover. There was a period in there somewhere when practically every advanced economy was talking about export-led growth, the arithmetic of which doesn’t quite work (somebody’s got to import).

I’m sure there’s more but I’ve got other stuff to do. I’ll add other entries as they bubble up. And sure, it’s fun to make lists, but the point is to learn from our mistakes. Or, at least that would be the point if we were capable of doing so.

http://jaredbernsteinblog.com/wp-content/uploads/2014/06/payrollsback.png (http://jaredbernsteinblog.com/wp-content/uploads/2014/06/payrollsback.png)

http://jaredbernsteinblog.com/what-took-you-so-long/

[Winehole23]

more boutons sloppy seconds

[boutons_deux]

As Krugman so correctly predicted, it will take a full 10 YEARS to recover to ABOVE 0-pt employment as seen in the non-red lines above.

And as has been repeated everywhere, the growth in national wealth has gone almost totally to the top few %, while most of the 99% have seen declines in income and wealth.

[Winehole23]

Krugman isn't a soothsayer, particularly for saying what more or less everyone (including a lot of nobodies on this board) said six-plus years ago: that this recovery would be sluggish and slow in comparison to others

[boutons_deux]

Krugman isn't a soothsayer, particularly for saying what more or less everyone (including a lot of nobodies on this board) said six-plus years ago: that this recovery would be sluggish and slow in comparison to others

Krugman so correctly predicted is still true.

Did anybody else point out recovery from FINANCIAL-cause recession is always longer?

US has a Lost Decade like Japan has.

HUGE policy mistakes (fed govt austerity) and WILLFUL fuckups, obstruction, LYING by the Repugs, 1%/VRWC trying keep the economy screwed to beat Obama and the Dems.

[Winehole23]

widely remarked on at the time and in these pages. you were too busy listening to your own echo, as usual.

(echo chamber of one)

[angrydude]

As Krugman so correctly predicted, it will take a full 10 YEARS to recover to ABOVE 0-pt employment as seen in the non-red lines above.

And as has been repeated everywhere, the growth in national wealth has gone almost totally to the top few %, while most of the 99% have seen declines in income and wealth.

You can't say you hate banks and then praise Krugman who is a spokesperson for them.

[boutons_deux]

You can't say you hate banks and then praise Krugman who is a spokesperson for them.

:lol Krugman's position towards the banksters is well-known, no secret.

[CosmicCowboy]

A good case can be made that we are headed into a Japanese style deflation.

[Wild Cobra]

Does this put anything into perspective:

http://i181.photobucket.com/albums/x262/Wild_Cobra/Politics/Percentageofpopulationemployed_zps51b00789.png

[Spurminator]

Reagan sucked?

[m>s]

http://www.billytheheretic.com/pages/images/usseconomy.jpg

[Th'Pusher]

Doesn't make sense. Op shows no understanding of basic economics.

[boutons_deux]

Reagan sucked?

yeah, St Ronnie sucked, and as just another Useful Idiot for the VRWC, fucked America real good.

[boutons_deux]

Remember Republican Austerity? (http://www.dailykos.com/story/2014/06/22/1307545/-Remember-austerity)

It's amazing just how nonchalant (http://blogs.wsj.com/economics/2014/05/29/contracting-gdp-is-rare-outside-of-recessions/) economists are about the fact that the GDP for the 1st quarter came in negative. Economic contractions are a rare event outside of recessions, so someone should be concerned, if only to just be different.

They've all written it off to bad weather, as if snowstorms in January are something no one could have predicted. These are the same guys who predicted +3% growth just a few months earlier.

A 4% miss isn't a marginal event. It isn't even in the same ballpark! What I find most interesting is that it hasn't occurred to any economist that their pathetic miss at predicting the economy might have a more obvious reason - austerity measures (http://www.salon.com/2014/01/30/tea_party%E2%80%99s_austerity_virus_how_washington _lost_its_fiscal_mind/) pushed through by the Republican Congress.


http://images.dailykos.com/images/90531/large/austerity.png?1403458583

In late December the GOP cut off unemployment benefits for 1.3 million people (http://www.nbcwashington.com/news/politics/NATL-Congress-Budget-Deal-Agreement-Senate-House-Bipartisan-Cuts-Spending-235305171.html?_osource=SocialFlowTwt_DCBrand). That number has since increased to 3 million (http://www.washingtonpost.com/blogs/post-politics/wp/2014/06/09/3-million-americans-now-without-unemployment-benefits-due-to-congressional-gridlock/). That cut the GDP by at least 0.2% (http://www.epi.org/publication/labor-market-lose-310000-jobs-2014-unemployment/).

In early February another 850,000 people had their food stamps cuts (http://www.msnbc.com/msnbc/obama-signs-food-stamp-cut). More food stamps cuts happened in March (http://www.usatoday.com/story/news/nation/2014/03/26/stateline-food-stamps-benefits/6906913/).

And these are just the latest austerity measures pushed through by Congress.


http://images.dailykos.com/images/90535/large/discretionary.png?1403459592
attribution: None Specified

So why don't economists consider these cuts worth mentioning, while January blizzards are? It's interesting that the IMF felt it necessary to recommend the U.S. raise its minimum wage (http://thinkprogress.org/economy/2014/06/16/3449360/imf-minimum-wage-us/)- the opposite of austerity. Why does this matter? Because if the drastic drop in GDP was from austerity and not from winter weather, then the drop in GDP wasn't a "one-off" event. It means Q2 is going to be dramatically lower than expectations as well. As will Q3 and Q4.


http://images.dailykos.com/images/90539/large/public_infra.jpg?1403462054
attribution: None Specified

If the cause of the economy's drop was from austerity, then every single economic forecast you have read is wrong, and wrong in a very big way.

This means that asset values are overpriced across the board. Only after the fact are economists beginning to drop their economic growth projections.


http://images.dailykos.com/images/90533/large/Fed_2014_GDP_forecast.jpg?1403458664
12:07 PM PT (http://www.dailykos.com/story/2014/06/22/1307545/-Remember-austerity#20140622120706): Economists also failed to anticipate the housing slowdown (http://realtormag.realtor.org/daily-news/2014/05/12/housings-slowdown-sparks-growing-concern) which started late last year.

Only now are they adjusting their forecasts (http://www.bloomberg.com/news/2014-06-20/housing-falters-as-forecasters-see-u-s-sales-dropping.html).

The Mortgage Bankers Association yesterday lowered its forecast for combined new and existing home sales in 2014 to 5.28 million -- a decline of 4.1 percent that would be the first annual drop in four years. The group also cut its prediction on mortgage lending volume for purchases to $595 billion, an 8.7 percent decrease and the first retreat in three years.

Bullish forecasts in early 2014 from MBA, Fannie Mae and Freddie Mac have been sideswiped by rising home prices and an economy that isn’t producing higher paying jobs.

Besides the enormous impact that would have on the economy, the reasons for the contraction in housing are even more ominous.

“The pool of eligible new buyers is collapsing” because of stagnant incomes and lack of credit, he said....

“Winter weather explanations are valid, but they’re not endless,” said Hastings of Global Hunter. “When prices go up too much in an environment where families can’t pay them, the rally cancels itself out.”

Which means the housing market rally has literally topped out and won't be coming back any time this year. I seriously doubt that the economic forecasts have accounted for that.

http://www.dailykos.com/story/2014/06/22/1307545/-Remember-austerity?detail=email

[CosmicCowboy]

San Antonio SA/Austin Corridor, and Austin real estate market are still smokin hot.

Food prices are going through the roof. Beef is crazy. I know a guy that ran a truckload of steers across the scales last week and got $3.25 a pound. That's hair, bones, guts and all.

Good news is Russian wheat harvest is strong and wheat prices are down so if you have to eat cheerios instead of hamburger it will still be cheap.

[2centsworth]

Doesn't make sense. Op shows no understanding of basic economics.

What did you not understand? Looks like my prediction was spot on.

[Nbadan]

San Antonio SA/Austin Corridor, and Austin real estate market are still smokin hot.

Yes it is....in the 'more desirable' parts of town there is very little new home construction, and the homes that are being build are well into the 300K and beyond....rents are anywhere from 2.3k to 3.2K...

[2centsworth]

Describe the econony over the next 12 months? I think we're going to see a major contraction and unemployment get close to 10%. Government hiring will prevent the unemployment number from going higher. Oil will continue to slide and maybe hit $60 a barrell. Consumer spending is going to collapse. We will continue to see a steady devaluation of our dollar.

The only way to turn this tide is to cut the capital gains to 0% for 24 months. Then accelerate depreciation for capital expenditures. Slash the fed funds rate to 1/2% and reinstitute the FHA 235 program.

If there is something I would have added it would have been to slash FICA taxes.

[Th'Pusher]

What did you not understand? Looks like my prediction was spot on. I Was actually referring to m>s's stupid cartoon, not sure why I said OP in my response. But while you're patting yourself on the back for a "spot on" prediction, I'll add that government only exacerbated unemployment especially at state levels, we did not see a steady devaluation of the dollar, and the tide was turned without any of your recommendations.

[2centsworth]

I Was actually referring to m>s's stupid cartoon, not sure why I said OP in my response. But while you're patting yourself on the back for a "spot on" prediction, I'll add that government only exacerbated unemployment especially at state levels
I didn't suggest the government would exacerbate. I predicted they would stem it and peaking at 10% Bingo!


we did not see a steady devaluation of the dollar,
How did the dollar do against the other major sovereign currency.
(http://www.xe.com/currencycharts/?from=USD&to=JPY&view=10Y)

and the tide was turned without any of your recommendations.
Not true. The government focused on reviving the stock market using some of what I suggested and by using QE.

[Th'Pusher]

I didn't suggest the government would exacerbate. I predicted they would stem it and peaking at 10% Bingo!


How did the dollar do against the other major sovereign currency.
(http://www.xe.com/currencycharts/?from=USD&to=JPY&view=10Y)

Not true. The government focused on reviving the stock market using some of what I suggested and by using QE.
You said government hiring would stem unemployment from reaching 10%. It didn't. The government, especially at the state level, was also trimming payrolls. Government hiring had nothing to do with preventing unemployment from reaching 10%.

the yen? Cherry pick much?

Wrt your policy suggestions, The only thing you got close on was a slashing the fed rate, which was pretty much a given tbh.

[2centsworth]

You said government hiring would stem unemployment from reaching 10%. It didn't. The government, especially at the state level, was also trimming payrolls. Government hiring had nothing to do with preventing unemployment from reaching 10%. The data just doesn't support your argument. Go to Census.gov and you'll see increase in government employment, both federal and state, starting in 2008. The increase in especially pronounced when looking at payroll as it increased over 10% while private sector payrolls shrank. btw, I'm not arguing for or against the policy. If private payrolls shrank and public sector payrolls increased per Census.gov, not sure how you can argue government hiring had nothing to do with stemming unemployment from exceeding 10%.



the yen? Cherry pick much? It's an apples to apples comparison. Both are Sovereign, so no Cherry picking.


Wrt your policy suggestions, The only thing you got close on was a slashing the fed rate, which was pretty much a given tbh. The administration took aim at boosting the stock market. I suggested capital gains cuts and accelerated depreciation, the Fed decided on QE and bank stock purchases. 6 in one hand half a dozen in the other imo. The FHA 235 program was aimed at helping main street with underwater mortgages. The administration decided on Harp and Loan Modifications. Same shit but my idea would have been better.

Again, hindsight I would have added a reduction in FICA as part of my recommendation.

[angrydude]

Awesome GDP print today. -2.9.

Stocks are green of course.

http://www.bloomberg.com/news/2014-06-25/u-s-stock-index-futures-are-little-changed-before-data.html

[boutons_deux]

Banksters Great (Jobs) Depression killed 8M jobs.

How many Ms did Fed govt hire since 2008?

[boutons_deux]

CNBC’s Tea Party Mad-Prophet Rick Santelli Loses It; Gets SMACKED Down! (http://www.dailykos.com/story/2014/07/14/1314024/-CNBC-s-Tea-Party-Mad-Prophet-Rick-Santelli-Loses-It-Gets-SMACKED-Down)


Outspoken (and many would say empty headed polemicist and attention hound) CNBC reporter Rick Santelli gets into one of his most-heated arguments ever with economics reporter Steve Liesman and a panel of four other financial reporters over Fed policy, inflation and interest rates.

Santelli's CNBC colleagues do not seem even remotely amused. Watch it here. It gets heated about 2:30 in, really boils over at around 6 minutes,.

Whoa.

We’re used to seeing CNBC reporter Rick Santelli rant, and rave. He established it as part his brand at the start of the financial crisis, in a tirade against the bailout that called for a new “tea party” protest. But he has been given a lot of wiggle room by his fellow reporters, and at times, open admiration for "telling it like it is." Not this time.

Steve Liesman seems to have lost all patience with him and summed up the opinion of the panel and Paul Richards at UBS:


“Rick, there is no single piece of advice you’ve given that’s worked, Rick. Not a single one. It is impossible for you to be more wrong. Your call for inflation, the destruction of the dollar, the failure of the U.S. economy to rebound. Every single bit of advice you have given would have lost people money.

Santelli walks off camera at about 11 minutes.

http://www.dailykos.com/story/2014/07/14/1314024/-CNBC-s-Tea-Party-Mad-Prophet-Rick-Santelli-Loses-It-Gets-SMACKED-Down?detail=email

These right-wing assholes makes all kinds of claims, and NEVER get called out like that.

Hey, Yoni, tell us again how CRA/govt FORCED banks to make all those toxic loans to black people! :lol

[RandomGuy]

CNBC’s Tea Party Mad-Prophet Rick Santelli Loses It; Gets SMACKED Down! (http://www.dailykos.com/story/2014/07/14/1314024/-CNBC-s-Tea-Party-Mad-Prophet-Rick-Santelli-Loses-It-Gets-SMACKED-Down)


Outspoken (and many would say empty headed polemicist and attention hound) CNBC reporter Rick Santelli gets into one of his most-heated arguments ever with economics reporter Steve Liesman and a panel of four other financial reporters over Fed policy, inflation and interest rates.

Santelli's CNBC colleagues do not seem even remotely amused. Watch it here. It gets heated about 2:30 in, really boils over at around 6 minutes,.

Whoa.

We’re used to seeing CNBC reporter Rick Santelli rant, and rave. He established it as part his brand at the start of the financial crisis, in a tirade against the bailout that called for a new “tea party” protest. But he has been given a lot of wiggle room by his fellow reporters, and at times, open admiration for "telling it like it is." Not this time.

Steve Liesman seems to have lost all patience with him and summed up the opinion of the panel and Paul Richards at UBS:


“Rick, there is no single piece of advice you’ve given that’s worked, Rick. Not a single one. It is impossible for you to be more wrong. Your call for inflation, the destruction of the dollar, the failure of the U.S. economy to rebound. Every single bit of advice you have given would have lost people money.

Santelli walks off camera at about 11 minutes.

http://www.dailykos.com/story/2014/07/14/1314024/-CNBC-s-Tea-Party-Mad-Prophet-Rick-Santelli-Loses-It-Gets-SMACKED-Down?detail=email

These right-wing assholes makes all kinds of claims, and NEVER get called out like that.

Hey, Yoni, tell us again how CRA/govt FORCED banks to make all those toxic loans to black people! :lol




hehehehehehehhehehehe...

scott needs to see this one. it is funny.

[RandomGuy]

ROFL.... that shit is comedy gold. for nerds. who like economics.

http://plus.cnbc.com/rssvideosearch/action/player/id/3000292243/code/cnbcplayershare

[RandomGuy]

Doesn't make sense. Op shows no understanding of basic economics.

Eyup.

Troll based hysteria, however, he has down pat. ;)