Here Comes The Double Dip Pt. 4 (merged) Archived

[Plantagenet]

Clinton griped because there was nothing going on during his time in office so he had no situation to allow him to be a great president.

Truly one of the strangest complaints of all time. In hindsight we can see that Clinton entirely missed the significance of two of the largest geopolitical trends of all time---the rise of al Qaida ---which declared war on the US and repeatedly attacked the US during Clinton's watch--- and the coming arrival of Peak Oil.

Turns out his was really the apex presidency. The bankers thought their algorithms had created the perfectly efficient market ending the 'business cycle' – so the argument went, what was the need for regulation?

Yup---thats why Glass-Steagal was repealed on Clinton's watch, opening the door for the banksters.

AND I always think of the Eisenhower administration as the "apex" presidency. Kennedy and then Johnson and Nixon subsequently took us into VietNam, popping the bubble of American invincibility, and its been mostly downhill since then.

[Lore]

Eisenhower administration the apex of U.S. Presidencies? That's strange since the top tax rate during his term of office was 91%, but indeed the economy was in better shape back then because of it.

[Plantagenet]

Eisenhower administration the apex of U.S. Presidencies?

I'm not suggesting that Eisenhower was the best president of all time---I'm saying the Eisenhower period represents the apex of American prestige and power---economic, political and military power--- on the global stage.

[Lore]

I'm not suggesting that Eisenhower was the best president of all time---I'm saying the Eisenhower period represents the apex of American prestige and power---economic, political and military power--- on the global stage.

I have to agree with Pops here. Our fleeting time on stage as the sole world military and economic power really came after the fall of the old Russian political system and prior to the emergence of China, which is the Bush #1 and especially the Clinton era.

[Plantagenet]

Both the Eisenhower period (after the victory of WWII) and the Clinton Period (after the Cold War victory) are high water marks for America.

But, IMHO, there are many reasons that the Eisenhower period was a higher high water mark.

1. The US was an oil EXPORTER during the Eisenhower and a huge oil importer during the Clinton period.

2. The US national debt was small during the Eisenhower period and already huge during the Clinton period (although both Ike and Clinton slowed its growth during their administrations)

3. The US was by far the economically dominant country in the world during the EIsenhower period.

4. The US was, by far, the top manufacturing country in the world during the Eisenhower administration.

5. The US was the top exporting country in the world during the Eisenhower administration

etc. etc.

[Pops]

Plant, that was what Reich was saying in Aftershock, that during the time prior to the Reagan Revolution the capitalists could made their fortunes but they also shared the proceeds with the workers. After Reagan that changed.

[Plantagenet]

Plant, that was what Reich was saying in Aftershock, that during the time prior to the Reagan Revolution the capitalists could made their fortunes but they also shared the proceeds with the workers. After Reagan that changed.

It definitely got worse under Reagan, but US manufacturing has been on a downward slide for a long time under Presidents of both parties.

The first Maquiladora factories opened in Mexico in 1965. LBJ had just closed down the Bracero program and in exchange he offered Mexico the chance to create manufacturing jobs to keep the Mexicans at home. Bill Clinton signed NAFTA in 1994, greatly increasing manufactured imports from Mexican Maquiladoras and other countries in Latin America as US companies closed down their old factories here and fled the US to build new factories in Mexico and other lower wage latin american countries (I bet Reich didn't mention that since he was in the Clinton administration---).

Nixon "opened" China in 1972, and China steadily increased imports to the USA through the 80s, 90s and 2000s.

Reagan/Bush won the Cold War and India then turned from pro-socialist model to a more capitalistic model, with still more exports coming to the US and with many service jobs (call centers etc.) now being done in India.

The capitalists still share their proceeds with workers today----but thanks to CLinton's NAFTA bill and other similar US laws the workers with low skill manufacturing jobs and call center jobs etc. just happen now to be in Mexico and China and India and similar places with lower wages then prevail in the USA.

The only politicians I can remember who campaigned on reversing this process and warning Americans about NAFTA and the loss of American jobs to overseas low wage factories were Ross Perot (the giant sucking sound) and Pat Buchanan---and both of them were derided as kooks by the MSM.

[Daniel_Plainview]

The job numbers were pathetic. There is no way to lip stick this pig of a report. We also lost more jobs in the two prior months.

What a disaster! Five points immediately spring to mind:

1. An economy which has eviscerated its core manufacturing and productive base in favor of part-time/temp service sector work is fundamentally unsound and will not prevail in the long-term;

2. The US never has, and never will, decouple from Europe over the long-term;

3. The US paid for temporary job growth via unprecedented deficit spending; but this has now backfired, resulting in massive debt which is now impeding growth;

4. The US's unprecedented fiscal and monetary intervention work only in the short-term, and make matters worse over the long-term.

5. This is the worst labor market in US history ... and it's getting worse.

Job Growth Is Weakest in a Year as Unemployment Rises to 8.2%

Job growth slowed sharply in May and the unemployment rate rose for the first time since June, putting pressure on the Federal Reserve to ease monetary policy further to shore up the sputtering recovery. The Labor Department report on Friday, which showed employers added a paltry 69,000 jobs to their payrolls last month, the fewest since May last year, is also troubling news for President Barack Obama ahead of November's elections. The unemployment rate rose to 8.2 percent from 8.1 percent partly because people flocked into the labor market.

Economists polled by Reuters had expected nonfarm payrolls to increase 150,000 and the jobless rate to hold steady at 8.1 percent.

While unseasonably warm weather, which brought forward hiring into the winter months, has been blamed for the step back in March and April, the latest report hinted at more fundamental weakness in the economy.

"Some had believed that we had decoupled from China slowing and all the problems in Europe, but that seems to be short-sighted," said Malcolm Polley, president and chief investment officer of Stewart Capital Advisors in Indiana, Pennsylvania. "We're slowing alongside the rest of the world."

Employers added 49,000 fewer jobs than previously estimated in March and April. The report further eroded confidence, coming on the back of a raft of soft regional factory surveys and a worsening of the debt crisis in Europe.

Mish: Another Payroll Disaster: Jobs +69,000, Employment Rate +.1 to 8.2%, April Jobs Revised Lower to +77,000; Long-term Unemployment +310,000

This month was another disaster. Actual employment fell by 169,000 and the only reason the unemployment rate dropped is the civilian labor force fell by 342,000. ... Over the past several years people have dropped out of the labor force at an astounding, almost unbelievable rate, holding the unemployment rate artificially low. Some of this was due to major revisions last month on account of the 2010 census finally factored in. However, most of it is simply economic weakness.

US jobs growth slumps to its weakest in a year

US jobs growth has slumped to its weakest in a year, deepening fears that the world's largest economy is losing momentum just as Europe is mired in recession. Companies hired 69,000 people in May, the lowest tally since the same month last year, and less than half what economists had forecast. The unemployment rate, meanwhile, climbed from 8.1pc to 8.2pc in its first rise since last June.

Evidence that the labour market is losing steam is particularly troubling because it has been the brightest point for the US economy over the last year. "The employment report was extremely weak," said Michelle Girard, an economist at Royal Bank of Scotland. "We think that, in the face of heightened uncertainty, firms moved to the hiring sidelines last month."

[Daniel_Plainview]

An Unprecedented 100,000,000 Without Jobs

The national unemployment rates gets lots of attention, and lately more attention has been paid to the workforce participation rate since more Americans have given up looking for a job, but we can also see that an astounding 100 million Americans don’t have jobs.

Specifically, these are people who are part of the civilian over-16 non-institutional population who are either unemployed or not part of the workforce. According to the April jobs report, the number of jobless American stood at 100.9 million.

That’s an all-time record and it’s an increase of 26.2 million over the last 12 years. It’s as if we absorbed the entire adult population of Canada and not a single person had a job.

The numbers are staggering. The jobs-to-population ratio peaked 12 years ago. If we were to have the same ratio today, we would need 15.3 million more jobs, or 23.7 million fewer people.

[Daniel_Plainview]

China Mfgr Slows Sharply

HONG KONG (MarketWatch) — China manufacturing activity barely expanded in May, data showed Friday, with the official version of the Purchasing Managers’ Index dropping sharply to 50.4 from 53.3 in April. ... “The aggressive pullback in May’s PMI has once again confirmed that the economy is close to stalling,” IHS Global Insight economists Xianfang Ren and Alistair Thornton wrote in a note to clients after the data release.

“The only reason it kept its head above water this month is likely the string of stimulus moves announced by authorities to combat rediscovered weakness in the economy,” they said.

“Expectations are now, quite rightly, being pulled back,” they said.

This helps explain why commodity prices have fallen: the world's biggest engine of growth has stalled; meanwhile, the US and the Eurozone have become basketcases.

[Daniel_Plainview]

"The End Game: 2012 And 2013 Will Usher In The End"

"The world has no engine of growth with most of the G20 growth approaching stall speed at the same time. The Western World is about to enter its second recession in an ongoing depression..." In addition:

----- We can join the dots from where we are now, to the collapse of the first major bank… With very limited room for government bailouts, we can very easily join the next dots from the first bank closure to the collapse of the whole European banking system, and then to the bankruptcy of the governments themselves.

----- There are almost no brakes in the system to stop this, and almost no one realises the seriousness of the situation.

----- The problem is not Government debt per se. The real problem is that the $70 trillion in G10 debt is the collateral for $700 trillion in derivatives… Yes, that equates to 1200% of Global GDP and it rests on very, very weak foundations

----- From an EU crisis, we only have to join one dot for a UK crisis of equal magnitude.

[Daniel_Plainview]

Britain's manufacturing sector shrinks at fastest rate in three years

Britain's manufacturing sector contracted at the fastest rate in three years in May, signalling the economy is still mired in recession.

[Daniel_Plainview]

Eurozone crisis: manufacturing sector shrinks in May
Prospects for eurozone manufacturing sector were bleak after the sector contracted at the fastest pace in almost three years in May and even Germany suffered a large fall.

The Markit manufacturing PMI for the region fell to 45.1 from 45.9 in April, where anything below 50 signals contraction. In Germany the index fell to 45.2, which was a 35-month low. “Eurozone manufacturers reported a deepening downturn in May, indicating that the damage to the real economy caused by the region’s financial and political crises continues to spread across the region," said Chris Williamson, chief economist at Markit. "The data suggest that the sector is contracting at a quarterly rate of around 1pc, suggesting that manufacturing will act as a major drag on economic growth in the second quarter."

Ireland was the only country where manufacturing expanded in May, while the sector contracted in Spain, Greece, France and Italy.

“All four of the largest Eurozone nations are now reporting worryingly sharp downturns in their manufacturing sectors, but the situation is perhaps now the most intense in Spain, where the PMI fell below that of Greece to signal the steepest deterioration of business conditions of all countries surveyed," Mr Williamson said.

Gee, I wonder whether all of the signs are pointing toward a global economic recession? Or are we headed for a deflationary depression?

[Armageddon]

Phase 2 of the global economic crash is starting. This time, is the gov't out of magic bullets ?

[AgentR11]

There will be no deflation.

If Bernanke has to get in a magic slay and stuff cash into every dang pocket in the country to keep modest nominal inflation going, then that is what he will do.

I suspect the solution won't need to be so drastic, but to even type the word "deflation" in a fiat money economy, managed by a central bank with as much power as the Fed has; its silly. Can't happen.

Understand, deflation in the 30's depression was painful and difficult; deflation in the 2010's would be lethal, and lethal, FAST.

[Fishman]

"Understand, deflation in the 30's depression was painful and difficult; deflation in the 2010's would be lethal, and lethal, FAST"
Not disagreeing Agent, but please explain why you think such.

[dsula]

Tech is NOT about reducing work. Its about making it possible to do more, faster, harder, better.

There you have it. Till you make things so fast, it takes you a split second to make everything.

And it absolutely destroys jobs.

I hope so, or else what's the point of having all that productivity, if you can't enjoy it?

[AgentR11]

"Understand, deflation in the 30's depression was painful and difficult; deflation in the 2010's would be lethal, and lethal, FAST"
Not disagreeing Agent, but please explain why you think such.

I fail every time I try to explain what I'm thinking on this topic, and it is just my opinion afterall. But an assumed positive inflation rate, with a coupled interest rate floating just a bit above inflation is built in to every assumption underlying every financial transaction.

Say I have a company with $100 in receivables, $5 in cash, and I have a $10 payroll obligation tomorrow and a set of rental payments totaling $30 next week. If I fail to make payroll, that's game over. If I fail to make rent, game over. I can borrow money against the value of my receivables though, or at least always have been able to in the past. So I go about the process and people loan me money for a day or three days based upon the value of the receivables, and I roll them over as they come due, essentially making my receivables work sorta like cash. What happens one morning and we're now in a deflationary spiral? Those people who were loaning money, now sit on it and want to be paid out on what they have outstanding, in cash they are making solid increases in value with no risk, no taxes. Meanwhile... my payroll is still due, but instead of $105 of effective liquid spendables, I got $5, if I'm lucky. When my employees don't get paid, there is no magic Easter Bunny that will show up and pay their light bill or their mortgages. The company is done. And those employees are hosed; and it won't take months or years to come all unglued; it'll take hours.

There are no limits to which those in power will go to prevent a deflationary condition in any of the world's major trading currencies. Because the penalty for deflation, is annihilation.

Right now, you can honestly say things are kinda broken, interest rates are below even reported inflation, and they are WAY below inflation as reported on alternative measures. Everyone is still playing the game though because tomorrow's dollar is worth less than today's dollar, and any yield is better than none or all-risk-no-pay be lucky to escape with your hide...

[dohboi]

Big drop in the Dow today -274.88‎ (-2.22%‎) to 12118.57. DAX down 3.5%.

Bad news on jobs,

http://www.philly.com/philly/business/breaking/156359215.html

and Euroland continues to spin into the abyss.

Danish Banks Downgraded

http://www.heraldsun.com.au/business/breaking-news/moodys-downgrades-nine-danish-banks/story-e6frf7ko-1226376101009

Total Emergency; Fear Grips Markets in Spain

http://www.telegraph.co.uk/finance/financialcrisis/9301270/Spain-faces-total-emergency-as-fear-grips-markets.html

Record High Unemployment in Eurozone

http://www.reuters.com/article/2012/06/01/us-eurozone-unemployment-idUSBRE8500EY20120601

"Eurozone Unsustainable" says Head of European Central Bank, Mario Draghi

http://www.telegraph.co.uk/finance/financialcrisis/9304027/Eurozone-is-unsustainable-warns-Mario-Draghi.html


http://www.ft.com/intl/cms/s/0/c3200410-aa6b-11e1-899d-00144feabdc0.html#axzz1wZyXiNUD

The summer of 2012 offers an eerie echo of 2008

[Daniel_Plainview]

Amid all of this dire economic news, there's even more bad news for the future generations as they're forced to confront an out-of-control national debt:

As of May 31, US Debt Swells by $54 Billion to a Record $15,770,685,085,364.10



Notice how the rate of change in the national debt is significantly steeper than GDP's slope. IOW, the growing debt is utterly unsustainable. And if today's disastrous economic news worsens over time (which it will, as predicted by peak oil), then we can expect GDP to further deteriorate, while the annual deficits will continue to escalate.

We can expect that, by 2020, the US national debt will be significantly worse than the CBO's estimates:



As Karl Denninger notes:

If we keep deficit spending we are simply debasing the purchasing power of the common man in a puerile attempt to pacify the people and avoid holding the financiers who were responsible for this debacle, including Bernanke, Greenspan, Paulson and Geithner along with both Obama and George W Bush to account. This attempt is mathematically doomed to fail as median family income has not moved which means that we're shifting an ever-greater part of the population to social programs like food stamps and other handouts while the taxpaying productive population continues to shrink. This is exactly how Greece and Spain went down the bowl and we're right behind them unless we stop this crap right now.

... Exponential growth, as I have repeatedly pointed out, is utterly unsustainable over the long term. It doesn't matter if you want these sorts of schemes to work or not; the longer you continue to pretend that there is some path forward that achieves these goals the worse the outcome is when you discover that you're wrong. ... There is no such thing as a Unicorn -- that is a mythical creature -- and what's coming from its ass are not candies.