Saturday, December 13, 2008

Always "Worse than Expected"

Our so-called experts have been thoroughly discredited. They are a bunch of ignoramuses who believe "long-run historical rise in the market" is an iron law. Since they don't understand the economy, they have no clue why things are going so wrong, or how to fix it. All predictions of a recovery are founded on little more than optimism, which is sadly mistaken, combined with magical "technical analysis" thinking (believing in arbitrary limits to market numbers). The fact is, all economic indicators are still getting worse, all of them. We aren't even close to the bottom yet, let alone recovery, and government actions are making things worse, so we really have no idea how long bad times will last. Until government stops screwing with the market in negative ways, we have no idea when it will bottom out.

Even the analysts who correctly expected the worst, like Peter Schiff, were wrong in limiting their expected problems to the U.S. The U.S. financial and economic system are melting down, but so is the rest of the world. Even Schiff did not foresee the global systemic crash that is happening.


New claims for jobless benefits rose more than expected last week, exceeding even gloomy expectations for an economy stuck in a recession that seems to be deepening. The Labor Department reported Thursday that initial applications for jobless benefits in the week ending Dec. 6 rose to a seasonally adjusted 573,000 from an upwardly revised figure of 515,000 in the previous week. That was far more than the 525,000 claims Wall Street economists expected.

New jobless claims last week reached their highest level since November 1982, though the labor force has grown by about half since then. The number of people continuing to claim jobless benefits also jumped much more than expected, increasing by 338,000 to 4.4 million, the Labor Department said. Economists expected a small increase to 4.1 million. As a proportion of the work force, the number of people continuing to receive benefits is the highest since August 1992, when the U.S. was recovering from a relatively mild recession. The increase in continuing claims was the largest jump since November 1974, the department said.

The Labor Department said last week that employers cut a net total of 533,000 jobs in November and the unemployment rate reached 6.7 percent, a 15-year high. The rate would have been higher, except that more than 400,000 Americans gave up looking for a new job and weren't counted in the labor force. Companies have eliminated a net total of 1.9 million jobs this year, and some economists project the total cuts could reach 3 million by the spring of 2010. [I'd be interested in hearing why they limit it to 3 million].


Also Thursday, the U.S. trade deficit rose unexpectedly in October as a spreading global recession dampened sales of U.S. products overseas and the volume of oil imports surged by a record amount, the Commerce Department said. The trade deficit rose to $57.2 billion in October, from an imbalance of $56.6 billion in September. Analysts had been looking for the deficit to decline to $53.5 billion on lower oil prices.
While oil prices did drop by a record amount, that was offset by a record surge in the volume of oil imports. [No one has been able to, or even tried, to explain this. Are we driving more, combined with winter oil needs?]


The figures come a day after the Treasury Department reported a record budget deficit for November, driven by lower tax revenues and higher spending on programs such as unemployment insurance and food stamps. In just the first two months of the budget year that started Oct. 1, the budget deficit totaled $401.6 billion, nearly matching the record gap of $455 billion posted for all of last year, the department said Wednesday. Economists expect the deficit will top $1 trillion in the current budget year, which would be a post-World War II high when measured as a percentage of the economy.

The "nasty" U.S. recession will tighten its grip next year as unemployment rises and weak home and stock prices imperil consumers, finance firms and debt-laden businesses, a UCLA Anderson Forecast report released on Thursday said. Additionally, a sustained retreat in prices for goods and services is a very real possibility that would further drag on the economy, according to the forecasting unit's report. "Where only last quarter we were worried about inflation, we are now worried about its very rare opposite: deflation," the report said. Falling prices would cut demand and discourage employers from hiring. "The record collapse in oil prices has brought with it welcome relief to motorists throughout the country and an effective tax cut of $440 billion in the form of a lower oil import bill," the closely-watched report said. "Nevertheless the swift fall in oil prices is now lowering the absolute level of consumer prices and bringing with it likely declines in nominal GDP over the next three quarters."
"The news from the economy is bad," the report said. "The recession that we had previously hoped to avoid is now with us in full gale force." The UCLA Anderson Forecast unit expects real GDP to shrink by 4.1 percent this quarter and by another 3.4 percent and 0.8 percent in the first and second quarters of next year, respectively, as consumer and business spending weaken and as the foreign trade that had propped up growth much of this year sags. "Because Europe and Japan are already in recession and China and India are suffering from a significant slowdown in growth, the export boom of the past few years will wane," the report said. "Make no mistake the global economy is in its first synchronized recession since the early 1990s."

HONG KONG -- China's producer price index climbed 2% in November from a year earlier, easing from a 6.6% rise in October on year, according to data released by the National Bureau of Statistics Wednesday. November's figures were the slowest pace of gains in the wholesale inflation in more than two years, Dow Jones Newswires reported. In the first 11 months of the year, wholesale inflation climbed 7.6%. "China's price inflation data is now declining rapidly, building on deflationary concerns that may prompt further monetary easing," wrote J.P. Morgan analysts in a research note following the data release.
Deflation pressures that are spreading through Europe and the United States also now appear to be threatening China, the world's fourth-largest economy. Deflation, a drop in prices, tends to defer spending and makes it harder for governments to boost growth. China's annual consumer price inflation fell to a near two-year low in November, a report showed on Thursday, a day after data reflected a collapse in wholesale prices and a startling drop in exports and imports. The slowdown in inflation is partly due to a collapse in global energy and commodity costs, but also reflects demand-sapping recessions underway in Europe, Japan and the United States [Dominoes falling in a row. Notice that the economy most based on production is the last to fall.]

Monetary authorities worldwide have been cutting interest rates sharply to try to get their economies moving but have had trouble persuading banks to lend more. [In a deflation, why would they?]

In a move that suggested trouble ahead for concerted European and perhaps world efforts to end the financial crisis and restore global economic growth, Germany criticized countries for rushing into untested economic rescue packages. Finance Minister Peer Steinbrueck urged governments to pause before pledging to spend billions of dollars to try to push their economies out of trouble. "The speed at which proposals are put together under pressure that don't even pass an economic test is breathtaking and depressing," he said in an interview with Newsweek magazine, published on the magazine's website on Wednesday. He singled out British Prime Minister Gordon Brown for particular criticism, accusing him of switching to economic policies that would saddle a generation with debt. "The switch from decades of supply-side politics all the way to a crass Keynesianism is breathtaking," he said.
Another German policymaker, European Central Bank Executive Board member Juergen Stark, also indicated concerns about responses to the crisis, saying late on Wednesday that the ECB does not have a lot of room for maneuver after its interest rate cut last week. The comments came as European Union leaders were to meet in Brussels to discuss a 200-billion euro ($260-billion) stimulus package to wrench the bloc out of recession.German Chancellor Angela Merkel said in Brussels that she was aware that Germany as an economic power had a responsibility to look over time at new stimulus steps.

No comments: