^ Lesser economies would have tanked by now.

3/10/2008 6:42:11 AM

I don't hold our economy to the standard of lesser economies.

This isn't a dick waving contest where there is a prize for best overall economy.

3/10/2008 7:39:21 AM

^

Quote :

"I don't hold our economy to the standard of lesser economies."

Why not? Because it's more. . .impressive?

3/10/2008 10:27:36 AM

Wow, your liberal arts degree is doing wonders for your ability to read implied meaning!

3/10/2008 10:36:46 AM

http://moneycentral.msn.com/content/P146055.asp

Quote :

"Contrarian Chronicles The numbers behind the lies Economist John Williams says real unemployment and inflation numbers -- figured the old-fashioned way -- may be two or three times what the government admits. Heres why, and what it means for Social Security. By Bill Fleckenstein Fun with numbers. Corporate America likes to play that game, the better to boost stock prices. Folks might be surprised to learn that "Governmental" America also plays the game in its compilation of macroeconomic data. Beneath the surface are undesirable, sobering consequences for us all. Last weekend, the always-terrific Kate Welling published an interview with an economist named John Williams. It will be available on the free portion of her "pay" site via this link starting March 11. This article is the first one that I have seen in which all the flaws in the government data, pertaining to the Consumer Price Index, unemployment, Gross Domestic Product, etc., are disclosed in one piece by someone who's been following the data for a long time. I have been aware of nearly all the statistical tricks used by the government since they were implemented. Nonetheless, seeing them collectively described in one article is incredibly sobering. Having said that, there is a bit more "black helicopter" insinuation and fewer data points than I would like to see in an article such as this. However, the main points are the math that most folks need to know, but likely do not. Once you read it, think about it and understand it, you will see why so many thoughtful people -- like Jim Grant, Warren Buffett, Marc Faber, Bill Gross, Fred Hickey and Paul Volcker -- have grave concerns about the future of the dollar (due to the macro imbalances that exist today). In fact, reading this article, you will conclude that there's no way out, short of running the printing presses. The problem with that end game: At some point, foreigners will revolt. One can only hope that, somehow, there will be a way out. But without an understanding of the issues, folks will have no way to react as events unfold, and adjust their assets as we get more clues as to how all this will play out. Thus, I would encourage everyone to print out the article and read it as many times as necessary, in order to gain a full understanding of the issues. Since we don't know at what rate some of these problems will start to impact the markets, all we can do is be prepared -- by having our insurance policies (in the form of the metals and foreign currencies), and then being alert to signs that the beginning of a chain reaction may be under way. Meanwhile, to pique folks' interest in the article, I'm going to take the time to provide some "Cliffs Notes" here. Jobs data don't count the down-and-out Williams starts by discussing the headline economic data: "Real unemployment right now -- figured the way that the average person thinks of unemployment, meaning figured the way it was estimated back during the Great Depression -- is running about 12%. Real CPI right now is running at about 8%. And the real GDP probably is in contraction." (By "real," he means calculating the data the way they used to be calculated, not as inflation-adjusted.) He then explains how the employment data are compiled, noting that 5 million chronically unemployed people are not included in the statistics. In fact, there are seven or eight different employment statistics. One called U-3 is the official one. The broadest one, U-6, currently shows unemployment as running around 8.4%. As he explains, the one that's the most historically consistent is running around 12%. On the Potomac: Reverence for reverse-engineering Williams differentiates between two data-manipulation practices. One is "systemic manipulations, where methodologies are changed." That's done in order to align the government's view of the world with the world, i.e., make things look better than they are. The second practice is out-and-out fudging of the data to produce whatever result is desired. Williams describes instances where various administrations have literally reverse-engineered the data to achieve that result (though politics is not the main purpose of the article). For those not familiar with "substitution," he explains the practice's evolution in the CPI calculations. The concept of substitution was a concoction of Alan Greenspan and Michael Boskin, who basically argued that if one item were too expensive, consumers would substitute that with a cheaper one. Williams' response: "The problem is that if you allow substitutions, you aren't measuring a constant standard of living. You're measuring the cost of survival. You can keep substituting down and have people buy dog food instead of hamburger. It happens. But that's not the original concept behind the CPI." That ticking sound? Social Security Williams says that the government's motive in all of this, if there is a motive (of the government collectively; don't picture a group of men cooking up something in a back room), is its desire to put a favorable spin on all the data. Another motive? Transfer payments like Social Security are indexed to the CPI, and they would be far higher if the CPI were accurate. In fact, says Williams, if the "same CPI were used today as was used when Jimmy Carter was president, Social Security checks would be 70% higher." That's seven-zero. Though Williams doesn't get much into hedonics, he does talk about the inflation-understating impact of geometric weighting versus arithmetic weighting in the CPI statistics: "Geometric weighting .. has the 'benefit' that if something goes up in price, it automatically gets a lower weight, and if it goes down in price, it automatically gets a higher weight." Then for the ticking time bomb: Social Security. The proceeds from withholding do not go into a lockbox or trust fund. They are spent, thereby reducing the size of the stated deficit. More importantly, he notes that the government's accounting for the deficit doesn't include any accruals for Social Security or Medicare liability. In fact, if that were done and the government used GAAP accounting, the deficits for 2003, 2004, and 2005 would each have been around $3.5 trillion. That's a trillion, not billion. In 2004 alone, the deficit on an accrual basis would have been $11.1 trillion, due to a huge one-time spike for setting up the Medicare drug benefits. In essence, as he points out, we're piling up additional liabilities in an amount roughly equivalent to our total GDP every three years. Lots of these imbalances have existed for some time, and they haven't mattered. Such macro problems only matter when they matter. Once that point in time is reached, events have a way of swiftly getting completely out of control -- which is why one has to understand the nuances and be alert for potential signs of chain reaction, as I mentioned earlier. Charge that Maybach to my imputed income Returning to the subject of GDP, Williams illuminates a wrinkle that I had not known about, called "imputations": They are "an outgrowth of the theoretical structure of the national income accounts. Any benefit a person receives has an imputed income component. If you're a homeowner, the government assumes that you pay yourself rent on your house, so that's rental income. ... Imputed interest income, for instance, accounted for 21% of all personal interest income in 2002, and was growing at an annual rate of over 8%. Meanwhile, fully 62% of total rental income that year was the imputed variety." He goes on to point out that folks really aren't doing that well, which is why their incomes aren't growing, which is why they've borrowed money. And that's why understanding the housing ATM is so important -- because as that sputters to a halt, folks will be stuck in the same place they were before (which precipitated the borrowing, i.e., not enough income growth). Only now, they're going to be stuck with incremental debt of their own creation. What festers underneath the data Next, he strings together the stock-market and housing bubble, for a summation of where we are: "When that (stock) bubble burst (in 2000), without a foundation of strong income growth, or a financially sound consumer, it triggered a recession that was a lot longer and deeper than the government would have you believe. "In fact, I contend that what we are in now is a protracted structural change that goes back to the beginning of that 2000 recession, which eventually may be recognized as a double-dip downturn. We did have some recovery in 2003, but in 2005, you started to see signs of a downturn in a variety of leading indicators that I use." That's not so far off from what I believe. In other words, if you really looked at the data and understood them, you'd see that what appears in the headline numbers is nowhere near what the real supporting data show. Our financial condition is a ticking time bomb. What none of us knows is when it implodes."

3/10/2008 10:40:26 AM

Quote :

"Wow, your liberal arts degree is doing wonders for your ability to read implied meaning!"

SkankinMonky

1. I hold a BS in business administration, douche bag. I guarantee that I know more about economics than you do.

2. I don't hold a "liberal arts degree," douche bag. I am in an interdisciplinary master's degree program in which one can build any concentration that ones desires--a concept that is obviously far too complex for you and some others here to comprehend. STFU.

3/10/2008 10:55:07 AM

^ I have a BA in Economics - I got you covered

3/10/2008 10:59:18 AM

Hooksaw running your business:

"Well, I mean personally I think .6% growth is impressive. And if we somehow lose ground, that doesn't necessarily mean we're doing bad..."

3/10/2008 11:42:22 AM

^ Nice try.

Flat or negative growth in GDP for two consecutive quarters = Recession

That was the issue.

PS: If the hypothetical business had been hit with all the problems the U.S. economy has, you're damn right--that would be impressive.

[Edited on March 10, 2008 at 11:46 AM. Reason : .]

3/10/2008 11:45:05 AM

^ That wasn't the issue. That's what you want the issue to be about. Every time someone brings up bad economic data, you simply point out that we're not in a recession. If in several months we get data that says we were in a recession then you'll probably be saying shit like, "well at least we're not in a depression." You're a master of spin. But spin only works on people who don't know what the fuck you're talking about.

A lot of the issue is that a lot of these problems could have been avoided and that's what people are pissed about. No one is secretly wishing we go into a recession but simply saying we're not going into one isn't going to stop it.

[Edited on March 10, 2008 at 11:52 AM. Reason : ]

3/10/2008 11:51:12 AM

Bullshit. I'll say exactly what I have been saying:

Quote :

"You need two consecutive quarters of flat or negative growth. If that happens, I will concede there is a recession--but not before. In any event, even if there is a recession, I predict that we will pull out of it by Q4 '08."

/message_topic.aspx?topic=500489&page=9

3/10/2008 11:57:26 AM

Quote :

"That wasn't the issue. That's what you want the issue to be about. Every time someone brings up bad economic data, you simply point out that we're not in a recession."

Actually read and reply to all of my post you fucking dipshit. You just proved my point.

And linking to the last page of the thread does nothing to help you in this argument. Especially without letting me know what it is you want me to be looking for.

[Edited on March 10, 2008 at 12:03 PM. Reason : ]

3/10/2008 12:02:31 PM

^ That's the link to my quotation, you idiot.

3/10/2008 12:07:32 PM

Once again, you purposefully fail to read everything I posted. GG. Try to stick to only getting owned in one thread, instead of spreading your weak arguments out into 3 or 4 and getting raped in all of them.

3/10/2008 12:10:50 PM

^ Ha! That'll be the day.

3/10/2008 12:16:17 PM

I can't help it, but this is who I imagine pounding away furiously on the other side of the computer any time I see hooksaw post:

3/10/2008 12:40:30 PM

Everyone is out of their element other than hooksaw.

3/10/2008 12:44:18 PM

that gets the hooksaw rolly eyes of approval:

3/10/2008 12:46:50 PM

you're a creepy dude Josh, but I laughed at that.

3/10/2008 1:14:59 PM

For those of you who didn't read BobbyDigital's article, I found this especially troubling:

Quote :

"Then for the ticking time bomb: Social Security. The proceeds from withholding do not go into a lockbox or trust fund. They are spent, thereby reducing the size of the stated deficit. More importantly, he notes that the government's accounting for the deficit doesn't include any accruals for Social Security or Medicare liability. In fact, if that were done and the government used GAAP accounting, the deficits for 2003, 2004, and 2005 would each have been around $3.5 trillion. That's a trillion, not billion. In 2004 alone, the deficit on an accrual basis would have been $11.1 trillion, due to a huge one-time spike for setting up the Medicare drug benefits. In essence, as he points out, we're piling up additional liabilities in an amount roughly equivalent to our total GDP every three years. Lots of these imbalances have existed for some time, and they haven't mattered. Such macro problems only matter when they matter. Once that point in time is reached, events have a way of swiftly getting completely out of control -- which is why one has to understand the nuances and be alert for potential signs of chain reaction, as I mentioned earlier."

3/11/2008 6:20:41 AM

^ I don't understand any of that, other than the huge deficit thing, which I don't understand how they reached.

3/11/2008 10:55:22 AM

^

Quote :

"Kate Welling published an interview with an economist named John Williams. It will be available on the free portion of her "pay" site via this link starting March 11."

All the info will be there, but i didn't see it posted yet today.

3/11/2008 11:12:38 AM

I understand hooksaw's definition of recession, but one thing I just thought of: Is growth in the GDP inflation adjusted quarter to quarter at all - meaning would it have to grow at a rate equal to inflation to stay at 0% growth? Could the .6% growth or whatever actually be negative growth?

/economy n00b

3/11/2008 11:49:34 AM

Does not account for inflation. Pure growth.

3/11/2008 11:55:38 AM

^^^ http://www.shadowstats.com/pdf/779-626538446.pdf

3/11/2008 1:29:09 PM

Dow Climbs 416.66 for Its Biggest Gain in Over 5 Years

Quote :

"On Tuesday, the Fed announced it would offer up to $200 billion in ultra-safe Treasury securities to the nation's banks, including several major brokerage firms, in exchange for a variety of collateral options — including the very mortgage-backed securities that have spurred the recent financial crisis. For many investors, it was the move they had been waiting for. 'For the first time, the Fed now is doing the relevant work,' said David Kovacs, an investment strategist at Turner Investment Partners in Berywn, Pa. 'This is a move by the Fed that has teeth to it."

Quote :

"'No doubt there's a relief,' said James Paulsen, a strategist at Wells Capital Management. 'For us bulls that had been getting run over, it's nice to have a day like this.' Shares of financial services firms, which have suffered steep losses in recent months, led Tuesday's revival, with companies like Wachovia and Morgan Stanley recording double-digit percentage gains. Of the 30 Dow components, American Express led the way, gaining almost 10 percent. Only Boeing declined."

http://www.nytimes.com/2008/03/11/business/12stox-web.html?_r=1&hp&oref=slogin

Here's a little ray of sunshine.

3/11/2008 3:49:24 PM

Yes, but to enduce that big stock jump the Federal Reserve has traded away 50% of its assets. Yes, the assets it gets in return are AAA, but there is no doubt the collateral requirements are being reduced.

3/11/2008 7:56:33 PM

^ Fair enough. How about this little ray of sunshine then? Sure seems like confidence in the economy to me.

Survey: 26 Pct Of Employers Plan To Hire

Quote :

"(AP) Even as employers nationwide slashed some 63,000 jobs last month, more than a quarter of U.S. companies say they plan to hire within the next three months, according to a survey of 14,000 companies. Across the country, some 26 percent of companies expect to increase the size of their work force between April and June, according to the survey to be released Tuesday by Manpower Inc. Nine percent plan a decrease, while 60 percent predict no change and 5 percent are unsure, the Milwaukee-based global staffing company found."

http://www.cbsnews.com/stories/2008/03/11/ap/business/main3924016.shtml

3/12/2008 2:33:25 AM

Read the link I posted ref BobbyDigital's article, it'll cast serious doubts on your reliance on federal numbers.

I'll go with the Economist:
http://www.economist.com/daily/news/displaystory.cfm?story_id=10837381&fsrc=nwl


Also, isn't it a bit backwards to discuss the U.S. economy as something seperate from the world economy? I'm not being snide here, but there is way too much interconnection to argue the US alone.

3/12/2008 8:34:52 PM

I am actually a big fan of the Feds new TSLF. I think this type of action can help make the difference between recession and Japanese style depression. However, the realization of recession is finally setting in.

http://online.wsj.com/article/SB120534519452630845.html

3/13/2008 3:29:06 PM

^^

By the way the Economist article is pretty sloppily written. The author doesn't seem to understand credit markets or the crisis. For example he or she says

Quote :

"the problem is particularly intense in an area of the market that, in theory, should have been the safest; paper given AAA-like ratings by the agencies. There are no longer end buyers for this paper. The yields on such assets are too low to make them of interest except to geared investors"

First off, the problem with AAA (and AA) paper is that
1) There is so much of it
2) Its heavy on bank balance sheets
3) Its the only kind of paper that some funds and trusts are allowed to buy

The market for BBB for example is in far worse shape but its BBB so you don't expect much.


Second, the yeild on any paper is inversely proportional to the price. If the coupon on AAA is 5% but I am buying it for 20 cents on the dollar I have a 25% yield. Thats pretty darn high.

3/13/2008 3:36:48 PM

The yen carry trade into dollars is dead.

3/13/2008 3:39:58 PM

kwsmith2

I think we're a long long way from a Japanese style depression. The Japan of the '90s was a scary place because 1) expectations of deflation became entrenched and 2) nominal interest rates fell to zero, leaving the central bank without the option of creating inflation through conventional open market operations.

In 2008 America, expectations of inflation are actually going UP!
http://blogs.wsj.com/economics/2008/01/31/those-pesky-inflation-expectations/

So I'm not too worried about the U.S. entering a liquidity trap.

Honeslty, this is appears to be just another economic slow-down, not the financial meltdown the op-ed writers like to talk about. I'm thinking it's more like late 1980s America (post S&L collapse), and less like 1990s Japan. We are still lightyears away from that deflationary tail spin.

[Edited on March 13, 2008 at 3:54 PM. Reason : ``]

3/13/2008 3:43:09 PM

I don't have quite enough time to go into it now, hopefully a little later. However, my basic thesis is that the issue is a combination of debt deflation and bank insolvency. These two factors lead to a dramatic slowdown in consumption which leads to a liquidity trap.

Even if we avoid deflation we still face the prospect of declining consumption with the Fed funds rate at 0%. Traditional monetary policy still becomes ineffective.

3/13/2008 5:18:57 PM

Quote :

"NEW YORK (CNNMoney.com) -- Stocks tumbled Friday after news that Bear Stearns needs emergency funding due to a liquidity crisis intensified fears that the credit crunch is spreading. Bond prices surged, lowering corresponding yields as investors sought the comparative safety of government debt. The Dow Jones industrial average (INDU) lost more than 300 points at one point in the afternoon, before recovering to close down about 192 points, according to early tallies. The broader Standard & Poor's 500 (SPX) index lost 2% and the Nasdaq composite (COMP) lost 2.2%. "

http://money.cnn.com/2008/03/14/markets/markets_afternoon/index.htm?postversion=2008031416

3/14/2008 5:29:29 PM

^ Yeah, and the Dow shot up like a rocket on Tuesday:

Dow surges more than 400 points, Nasdaq jumps 86 on Fed move

http://www.mercurynews.com/ci_8532807

Why didn't you post that?

3/14/2008 7:20:16 PM

because you already did?

3/14/2008 7:29:25 PM

^ Well, I didn't see a comment about my good news. It just strikes me as a glass-half-empty outlook.

To each his or her own. I just prefer to stay optimistic--I never found pessimism to be very useful.

3/14/2008 7:33:12 PM

I've been telling people for weeks...

"The stock market's on sale!"

Alas...

3/14/2008 8:41:27 PM

http://www.reuters.com/article/idUSL1491971920080314

Quote :

"Weak dollar costs U.S. economy its No. 1 spot PARIS (Reuters) - The U.S. economy lost the title of "world's biggest" to the euro zone this week as the value of the dollar slumped in currency markets. Taking the gross domestic product of both economies in 2007, the combined GDP of the 15 countries which use the euro overtook that of the United States when the European currency surged to a record high of more than $1.56 per euro. "The curious outcome of breaching this latest milestone is that the size of the euro zone's annual output has now exceeded that of the U.S.," the economics department of Goldman Sachs, the Wall Street investment bank, said in a note to clients. ..."

HAVE A GREAT WEEKEND, ECONOMY!

3/15/2008 6:28:28 AM

Quote :

"I just prefer to stay optimistic--I never found pessimism realism to be very useful."

So how did that 400pt day work out for you? One up day does not a trend make.

We're still lower than we were at the beginning of the month, chief.

3/15/2008 8:15:01 AM

Yeah, and the 3 days since then have pretty much wiped out any gains made on Tuesday.

3/15/2008 12:15:59 PM

^^ Um. . .the point--if you'll try to keep up--was that the user in question didn't fly in here to post about the 400-point gain, but he sure as hell posted about the 300-point drop. Can you not see the distinction?

In any event, I am not saying that everything's a bowl of cherries right now. I have been saying and am saying that the U.S. economy's resilience--despite all that is being thrown at it--is impressive. That is a reality that you seem incapable of grasping.

3/16/2008 11:22:12 PM

ok why are their 2 of these threads?

http://politicalcalculations.blogspot.com/2007/11/2006-gdp-ppp-eu-vs-us-smackdown.html

3/17/2008 9:06:59 AM

Quote :

"^^ Um. . .the point--if you'll try to keep up--was that the user in question didn't fly in here to post about the 400-point gain, but he sure as hell posted about the 300-point drop. Can you not see the distinction?"

You stupid little twit, all you do is post your partisan rants. Where the fuck do you get off calling someone else out for not being impartial?

You're the worst kind of cocksucker on this board.

[Edited on March 17, 2008 at 11:44 PM. Reason : 2]

3/17/2008 11:43:48 PM

^ Basically, fuck you--I'm not necessarily "impartial"; I'm just optimistic. But why did you post about the 300-point loss and not the 400-point gain?

PS: Must've hit a nerve center.


[Edited on March 18, 2008 at 12:01 AM. Reason : .]

3/17/2008 11:59:02 PM

You posted about the 400 point gain. It was already in this thread. The collapse of Bear Stearns and the associated ramifications in the market were directly relevant to this thread, so I posted as much.

Why the fuck is that so hard to understand?

[Edited on March 18, 2008 at 12:04 AM. Reason : PS you're not "optimistic", you're a partisan douchebag. ]

3/18/2008 12:03:41 AM

Never be simple enough to exclusively label troughs "volatility" and you'll always be fine.

3/18/2008 12:07:16 AM

^^ Yes, I did--and you didn't. Why not? You couldn't even muster one comment about the gain? It's just a question.

BTW, I never said I was "impartial"--are you saying that you are?

3/18/2008 12:18:58 AM

I'm saying that you're a goddamn hypocrite for calling me out. If you admit that you aren't impartial, then why could you possibly think it's alright to call someone else out for doing exactly what you do? Oh yeah, thats right, you're an unabashed hypocrite.

3/18/2008 12:58:00 AM