Not Out of The Woods Yet April 14, 2010
Posted by walterknitty in Economy, Politics.add a comment
The Dow went above 11,000 earlier this week for the first time since 2008. Today we find out that consumer spending rose in March. Unemployment is holding steady. Last month the we actually gained jobs. Not enough to bring down the unemployment rate but enough so the unemployment rate held steady. The Commercial Real Estate market didnt tank as was feared about 6 months to a year ago. And this article from the NY Times last week sounds like it’s arguing for a “V shaped” recovery.
This is all good news. I’m not going to argue that. But, we’re not out of the woods and the likelihood of a V Shaped recovery is very slim. The Great Recession is not over. We may not be in for an “L Shaped” recovery but we’re not going to hit a major rebound any time soon.
FYI, an L Shaped recovery is like what happened to Japan in the 90′s. Basically, this happens when the economy tanks, then stays flat over a long period of time. A V-Shaped recovery is when there is a sharp dive then a sharp uptick in economic activity and a U-Shaped recovery is more like what we’re experiencing right now. A dive, bottoming out, then a long, slow recovery. Then there is the dreaded W-Shaped recovery. This is what I’m most concerned about. A W-Shaped recovery is when there is a dive, then the economy begins to recover, then takes another dive. This happened in 1937 (as you can see in this lovely graph from Wikipedia) and it could happen again now.
As you can see in this lovely graph
We have a hell of a lot of ground to make up. Millions of jobs have been lost, household debt is at 94%, and with productivity having gone up 5% last year, employment may not come down any time soon. The other thing about unemployment is that it might go up before coming back down. That’s because unemployment as a statistic measures job seekers. It does not measure the number of people who have stopped looking. As the economy improves more people who had stopped looking for work will start looking agin. They will be counted in the unemployment numbers causing unemployment to go up. To keep up with population growth the US economy has to add over 100,000 jobs a month. When the economy tanked, we lost 8 million jobs. In order to even come close to breaking even the economy would have to add more than 500,000 a month. That clearly is not going to happen. To break even in 3 years the economy would have to add more than 300,000 a month. That isnt going to happen either. Ezra Klein had a good interview with a liberal economist yesterday about whether or not the recession is over.
It’s a lot of gloom and doom for such a lovely April day. It’s lovely here in Oregon at least. If it were up to me I’d put people to work in a WPA style program. The WPA didnt just employ people for manual labour but employed artists too. Timberline Lodge in Oregon is a beautiful example of artists contributions to the WPA. I’d put people to work building typical infrastructure projects, roads, bridges, national parks, that kind of thing. In the UK they are using tidal energy to make electricity. It’s kind of like taking a wind turbine, turning it upside down, and plunking it into the Ocean. We could put people to work building solar energy plants and why in the world do we need China to come to the US to build high speed rail?
Unfortunately, it isnt up to me. But we have a long slog before this country is out of the woods economically.
A primer on the economy June 11, 2009
Posted by walterknitty in Economy.1 comment so far
The red bamboo isnt going to work. It’s more pink/salmon than red. Sigh. I’m going to trade it in for some Valley Southwick icy blue. It’s a cotton/bamboo blend. Then maybe order some Misty Alpaca lace weight. Webs has some overstock. It’s 4$ for 400 some odd yards. Monday is payday and I’d like to knit the Shipwreck shawl from the last Knitty. It’ll be my first. Some knitters out there have been a bad influence on me!
I read a lot of economic news. A lot. Before August 2007 when the housing market started crashing down on us, the International Herald Tribune had several articles in their Business/Economy section about ARM resets and sub-prime mortgage defaults. This was Fall/Winter 2006. The wheels were starting to come off the economy then, even though it seemed like no one was paying attention.
There is little truth to the argument that no one saw the current economic shit storm coming. Warren Buffett warned of the dangers of derivatives. Paul Krugman and Nouriel Roubini tried to raise the alarm. The housing market couldnt go up forever, people and banks were over leveraged (meaning they owed much more than they earned or could possibly pay. An example is: For every 1$ of income you’re allowed to take out 40$ of debt) banks were giving out stated income loans (aka liar loans) where someone could say “I make 250,000$ a year” on their loan paperwork but never have to show any proof of income.
I’m not an economist, but even I can tell that kind of loan is not a good idea.
This American Life has done a few hour long shows just about the economy and how we got ourselves into this mess. Their stories are funny, poignant, and it makes the current mess easy to understand. There is no dumbing down of the issue, their correspondents interview economists, traders, people who sold some of these mortgages, bankers, etc.
If you have time, give these a listen. You wont be sorry. They’re all free
The Giant Pool of Money, Another Frightening Show about the Economy, Bad Bank, Scenes from a Recession, The Watchmen.
Insanity in Iowa May 18, 2009
Posted by walterknitty in Economy.add a comment
I’m from a fairly small town in Eastern Iowa. There are only about 20,000 or so people who live there, it’s the largest city in the county, and the county is all farm county. Take a drive out to the North End of town, keep going, and you’ll see nothing but farms in about 5 minutes.
It’s not Mayberry. There are murders and thefts. My Dad had his boat motor stolen when I was a kid, the police didnt think it was a big deal, my Dad did most of the work to get it back. The neighbour kid got into the garage, took it, and sold it. Down the street from where I had my first apartment (about 4 blocks or so) a girl was murdered by her ex-boyfriend. It was pretty gristly. When I walked by the house on my way to school, after the murder, I swore I could hear her scream. Overall though, it’s the kind of place where you can walk from one of town to the other in the middle of the night and not have to worry. That’s what makes this so unusual:
An armed man is in custody after taking two hostages Sunday night at a Clinton grocery store.
This is the second hostage situation in a month. The last one was at the Workforce Development building. A man went in with a gun, took his wife hostage, held her and other people in the building hostage for 6 hours, before shooting himself.
Even though there have been some murders, it doesnt happen often. I lived in Clinton until I was 19 and moved to a different city, but made the 2 hour trek nearly every weekend for 2 years. Hostage situations?! As far as I know, was not a hostage situation when I lived there, and hasnt been one (let alone two in about a month) since I left.
BTW, this is the 3rd hostage situation this year. The first was in January and was resolved with no loss of life.
I find these developments very disturbing.
Clinton has been an economically depressed area for a long time. Since I was a kid. There are some factory jobs (Ralston Purina 3M, ADM), but mostly retail jobs, and unless you want to farm, there is little else. My parents have owned their home for nearly 16 years. Before the housing market crashed, their home only increased in value by about 20,000$. Even for Iowa, Clinton Co. is economically depressed.
Areas like Clinton, areas that are already economically depressed, dont see much in the way of economic progress when times are good. Now, when the economy has been on the brink of collapse, and is still fragile, areas like Clinton disproportionately, feel the squeeze.
Clinton is full of people just making ends meet. Even in an economically depressed area, minimum wage, doesnt pay the bills. In a family that is already just making ends meet, the loss of a job or a cut in hours, can be devastating. All of a sudden, you’re totally screwed. A person who feels trapped under a load of stress and pressure can do crazy things.
I have no idea how sound the 3 men in the news stories were to begin with. For all I know, they could have been totally nuts and some small thing, like having crunchy peanut butter, set them off. All I know is with the economy the way it is, fear around keeping or loosing a job, generalized anxiety about the economy, families under strain . . . Sometimes something’s gotta give. I just hope this is not going to become a trend.
