Here Comes The Double Dip Pt. 2

[TheAntiDoomer]

NobodyDaniel Plainview Doesn't Understand Debt

http://www.nytimes.com/2012/01/02/opini ... .html?_r=1

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.

But isn’t this time different? Not as much as you think.

[Daniel_Plainview]

Well, well, well. It looks like Japan is finally leaving La La Land, and beginning to face reality: Japan now pays a mere 1% interest on its bonds, but given the massive size of its debt, if that increases to 3%, the country would implode. Thus, Japan now sees an urgent need to address its debt problem ... and its primary tool appears to be raising taxes, which a majority of the public opposes.

Japan Must Heed Lessons of European Credit-Rating Downgrades, Noda Says

Prime Minister Yoshihiko Noda said containing Japan’s public debt load, the world’s largest, is critical after Standard & Poor’s downgraded credit ratings on France, Austria and seven other European nations.

Europe’s fiscal situation “isn’t a house burning on the other side of the river,” Noda said on TV Tokyo Holdings Corp.’s program on Jan. 14. “We must have a great sense of crisis.”

Noda reshuffled his cabinet last week, aiming to win support for doubling Japan’s 5 percent national sales tax by 2015 to trim the soaring debt. S&P said in November Noda’s administration hadn’t made progress in tackling the public debt burden, an indication the credit-rating company may be preparing to lower the nation’s sovereign grade.

Japan’s government, which has enjoyed borrowing costs that are around 1 percent, wouldn’t be able to manage its finances if bond yields surged to 3 percent, Noda said last week.The country risks seeing a spike in government bond yields unless it controls a debt load set to approach 230 percent of gross domestic product in 2013, the Organization for Economic Cooperation and Development said on Nov. 28.

“The proposed increase in the consumption tax to 10% would not be enough to put the public finances on a sustainable track,” David Rea, a Japan economist at Capital Economics Ltd. in London, wrote in a report last week. “A larger increase is needed, and soon, but is highly unlikely without a specific mandate from the electorate as support from the opposition and even some elements of the ruling party is non-existent.”

... About 57 percent of the public opposes raising the sales tax, and the approval rating for Noda’s cabinet fell to 29 percent from 31 percent last month, the Asahi newspaper said yesterday, citing its own survey. The Nikkei newspaper said Noda’s public approval rose 1 percentage point to 37 percent after a cabinet reshuffle last week, while the Yomiuri newspaper reported a decline in public approval to 37 percent from 42 percent.

‘Worse and Worse’

Japan’s finances are “getting worse and worse every day, every second,” Takahira Ogawa, Singapore-based director of sovereign ratings at S&P, said in an interview on Nov. 24. Asked if this means he’s closer to lowering Japan’s credit rating, he said it “may be right in saying that we’re closer to a downgrade.”

S&P rates Japan AA- and has had a negative outlook on the rating since April. Ogawa said Japan needs a “comprehensive approach” to containing its debt burden, which the government has projected will exceed 1 quadrillion yen ($13 trillion) in the year through March as the nation pays for reconstruction costs from March’s record earthquake.

Remember when our La La Land corny crowd was proclaiming that "debt doesn't matter" ??? Well, tell that to Japan ... and France ... and Italy .. and Greece ...

This precarious house-of-cards is moving closer and closer to implosion.

[Plantagenet]

families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base....

Yes, but you apparently are too much of a thickie to realize that the US government isn't ensuring that debt is growing more slowly than the tax base. The opposite is happening.

Since Obama took over in 2009 the federal deficit in the US has tripled. Debt is now growing much more rapidly than tax receipts.

[newman1979]

According to Zfacts.com, 3/4's of the $15.23 trillion National debt was created under Republican Administrations. Two unfunded wars,Bush tax cuts, and a unfunded Medicare D program account for over $6 trillion in debt under Bush II. Obama came into the worst recession since the depression in the 1930's. Supply side theory has only increased debt, helped the rich and cost jobs. Keynesian economics have also increased debt but added some jobs. The problem is not enough jobs and the cost of more stimulus is not a good enough return to the future. Economists need to retool their theories to keep debt from hurting the future. Higher taxes are needed in a high oil economy as profits are inpacted adversly.

[Daniel_Plainview]

Keynesian economics have also increased debt but added some jobs. The problem is not enough jobs and the cost of more stimulus is not a good enough return to the future.

The marginal utility of using deficit spending to enhance GDP is now NEGATIVE ... Stated otherwise, govt deficit spending has now become SO INEFFICIENT and PERVERSE that the multiplier is now less than zero.

Keynesian economics is now dead ... and every dollar spent using deficit dollars has a NEGATIVE impact on the economy.

The govt needs to stop intruding on private free markets ... because every time it intrudes it makes matters WORSE.

Economists need to retool their theories to keep debt from hurting the future. Higher taxes are needed in a high oil economy as profits are inpacted adversly.

Keep debt from hurting the future? This is an oxymoron. Why? Because exponential debt, per se, destroys the future. We will soon be confronted with a hyperinflationary collapse ... even without peak oil



Obama has already destroyed every shred of "future" for the youth ... with annual trillion dollar deficits while eviscerating the moral work ethic by bailing-out every loser company that falls victim to Obama's backwards economic policies.

And Obama's partner-in-crime, Helicopter Ben Bernanke, takes delight in further expanding the Fed's role in providing life-support to a dysfunctional, moribund economy.

[AgentR11]

IF you seek after powerdown.
And
IF your economic system requires nominal growth.

THIS is how you do it.

The "hyperinflation" is restricted to food and energy.
Food and Energy inflation is removed from the inflation index.

Unemployment is restricted, by non-participating people as their benefits expire.

And if you want to achieve powerdown in a way that your opponents can not undo.
You do it with debt.

[Daniel_Plainview]

Since Obama took over in 2009 the federal deficit in the US has tripled. Debt is now growing much more rapidly than tax receipts.

Debt is now growing exponentially.

But even if debt were only growing linearly, it would still destroy the future economy ... but not quite as quickly.

Real, sustained growth is impossible amid peak oil, and with an aging population (and dwindling tax base), govt deficit spending will only increase.

And if taxes are increased to counteract the massive deficit spending, then GDP will fall proportionately ... and matters will be made worse.

This is it, folks. We're past the event horizon.

[Serial_Worrier]

This is it, folks. We're past the event horizon.

Unlike a real event horizon, we actually can pull back from this black hole of economic doom.

[Daniel_Plainview]

NobodyDaniel Plainview Doesn't Understand Debt

http://www.nytimes.com/2012/01/02/opini ... .html?_r=1

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

This is, however, a really bad analogy in at least two ways.

First, families have to pay back their debt. Governments don’t — all they need to do is ensure that debt grows more slowly than their tax base. The debt from World War II was never repaid; it just became increasingly irrelevant as the U.S. economy grew, and with it the income subject to taxation.

Second — and this is the point almost nobody seems to get — an over-borrowed family owes money to someone else; U.S. debt is, to a large extent, money we owe to ourselves.

This was clearly true of the debt incurred to win World War II. Taxpayers were on the hook for a debt that was significantly bigger, as a percentage of G.D.P., than debt today; but that debt was also owned by taxpayers, such as all the people who bought savings bonds. So the debt didn’t make postwar America poorer. In particular, the debt didn’t prevent the postwar generation from experiencing the biggest rise in incomes and living standards in our nation’s history.

But isn’t this time different? Not as much as you think.

To borrow from Carlhole's lexicon: What a dumbass, moronic, shit-for-brains!

[Daniel_Plainview]

This is it, folks. We're past the event horizon.

Unlike a real event horizon, we actually can pull back from this black hole of economic doom.

It's all mathematics. When you have an exponentially growing national debt, combined with declining real GDP, dwindling tax base, and increasing energy costs, then it becomes mathematically impossible to extricate yourself from the blackhole.

We need a miracle ... an E-cat type magical energy source. Without that, it's game over.

[Serial_Worrier]

Don't worry be happy!

[Daniel_Plainview]

Don't worry be happy!

Aw cool! What a relief!

[ralfy]

There's also the Baltic Dry Index, with new info mentioned in another thread.

[OilFinder2]

Funny this is the same report DP used to start this thread. Still awaiting that double dip!



NEW YORK FACTORY CONDITIONS BEST IN 9 MONTHS

A gauge of manufacturing in New York State showed growth picked up in January, rising to the highest level in nine months as new orders and employment improved, the New York Federal Reserve said in a report on Tuesday.

The New York Fed's "Empire State" general business conditions index rose to 13.48 from a revised 8.19 in December, topping economists' expectations of 11.0. It was the highest level since April 2011.

New orders climbed to 13.70 from a revised 5.99, while inventories also gained to 6.59 from minus 3.49.

The survey of manufacturing plants in the state is one of the earliest monthly guideposts to U.S. factory conditions.

Employment gauges showed strength. The index for the number of employees rose to 12.09 from 2.33 and the average employee workweek index climbed to 6.59 from minus 2.33.

Manufacturers were also more optimistic about their outlook with the index of business conditions six months ahead rising to its highest level since last January at 54.87 from 45.61.

[...]

[OilFinder2]

NobodyDaniel Plainview Doesn't Understand Debt

http://www.nytimes.com/2012/01/02/opini ... .html?_r=1

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

[...]

To borrow from Carlhole's lexicon: What a dumbass, moronic, shit-for-brains!

Here we go with another wondrous example of hypocracy from DP. On December 12 here, DP cited a Krugman article in which Krugman said we're basically in a depression. But, now that Krugman has said something in AD's article which DP doesn't like, all of a sudden Krugman becomes a "dumbass, moronic, shit-for-brains." Well, if Krugman is a dumbass, moronic, shit-for-brains, perhaps he's also a dumbass, moronic, shit-for-brain when it comes to deciding if we're in a depression, no? Or maybe, DP conveniently cites him as an authoritative figure when it's convenient for him, and calls him a dumbass shit-for-brains when it's convenient for him.

[eXpat]

NobodyDaniel Plainview Doesn't Understand Debt

http://www.nytimes.com/2012/01/02/opini ... .html?_r=1

Deficit-worriers portray a future in which we’re impoverished by the need to pay back money we’ve been borrowing. They see America as being like a family that took out too large a mortgage, and will have a hard time making the monthly payments.

[...]

To borrow from Carlhole's lexicon: What a dumbass, moronic, shit-for-brains!

Here we go with another wondrous example of hypocracy from DP. On December 12 here, DP cited a Krugman article in which Krugman said we're basically in a depression. But, now that Krugman has said something in AD's article which DP doesn't like, all of a sudden Krugman becomes a "dumbass, moronic, shit-for-brains." Well, if Krugman is a dumbass, moronic, shit-for-brains, perhaps he's also a dumbass, moronic, shit-for-brain when it comes to deciding if we're in a depression, no? Or maybe, DP conveniently cites him as an authoritative figure when it's convenient for him, and calls him a dumbass shit-for-brains when it's convenient for him.

[OilFinder2]

U.S. Unemployment at 8.3% in Mid-January

PRINCETON, NJ -- U.S. unemployment, as measured by Gallup without seasonal adjustment, is 8.3% in mid-January -- a slight improvement from 8.5% in December, and down from 9.9% in January a year ago.



Gallup's mid-month unemployment reading, based on the 30 days ending Jan. 15, serves as a preliminary estimate of the U.S. government report, and suggests the Bureau of Labor Statistics will likely report on the first Friday of February that its seasonally adjusted unemployment rate declined once again in January.

[,,,]

[OilFinder2]

Credit Stress Indicators: Little Spillover to US from Europe

As we've discussed, there are several possible channels of contagion from the European financial crisis. The most obvious is the trade channel. The recession in Europe appears to already be negatively impacting U.S. exports. The most recent trade report showed exports to eurozone countries declined 6.9% in November. Although Europe is a major U.S. trading partner, exports only make up a small portion of U.S. GDP, and the drag from lower exports will be minimal.

A more significant channel would be tightening of U.S. credit conditions in response to the European crisis. I will look closely at the Fed’s January Senior Loan Officer Opinion Survey on Bank Lending Practices that will be released at the end of the month. The October survey showed “considerable” tightening on lending to European banks, and some tightening to European firms, but the survey showed no significant additional tightening in the U.S.

Since the most significant channel will probably be credit stress, here are a few indicators of credit stress:

• The three month LIBOR has decreased:
[...]
• The TED spread is at 0.537. The TED spread is the difference between the three month T-bill and the LIBOR interest rate. This peaked in December at 0.581 and has declined slightly since then. The 5 year graph shows that recent increase in comparison to the U.S. financial crisis in 2008.
[...]
• The A2P2 spread as at 0.39. This spread is mostly moving sideways, and is far below the peak of the financial crisis of 5.86.
[...]
• The two year swap spread screen shot from Bloomberg. This spread has declined to 34.3.

This spread peaked at near 165 in early October 2008.

So far there hasn't been much spillover to the U.S.

[OilFinder2]

Pickup in Lending Lifts Big Banks: Citi, Wells Report Best Loan Demand Since 2008 Crisis

Big U.S. banks are reopening the lending spigot amid signs that an improving economy is spurring companies and individuals to borrow more.

On Tuesday, Citigroup Inc. and Wells Fargo & Co. recorded their strongest loan-growth numbers since the financial crisis. The figures confirm a warming trend highlighted Friday by J.P. Morgan Chase & Co.

The lending gains mark a change from the past few years, when lackluster figures opened the banks to criticism from politicians and others that the firms' tight grip on their cash was keeping economic growth under wraps. Banks responded that, after the bursting of the credit bubble that led to the financial crisis, consumers and companies were unwilling to borrow.

The data offer the latest signal that the deleveraging that swept the economy following the 2007-08 turmoil may be easing.

"Companies that are credit-worthy haven't been in a borrowing mood, but we are starting to see that change," said Jeffrey Harte, a principal with Sandler O'Neill + Partners LP.

At Citi, retail-banking loans rose 15% from a year ago to $133 billion, as the New York bank lent more to individuals and local businesses. At San Francisco-based Wells, commercial and industrial loans rose 11% from a year earlier to $167 billion at Dec. 31, amid what Chief Financial Officer Tim Sloan called broad-based growth.

[...]

[thisisit]

The big inflationary bull market of the 21st century is coming soon and that is not at a theater near you...it will start slowly by the end of this year or the next and it will pick-up pace to grow steadily for at least 15 years the dow jones should double from here as well as the s&p 500...hey better party hard while there is still boose (oil) in the bar....