Recession Looming?

[unlawflcombatnt]

Retail Sales: Harbinger of Recession?

The total nominal increase in July 2006 Retail Sales of $368.405 billion was 3.9% from July 2005's $354.414 billion. However, adjusting for inflation using the Bureau of Labor Statistics Consumer Price Index increase of 4.3%, this reduces the "real" Retail Sales change to -0.4%. However, the figures are even worse if gasoline station sales are subtracted. Subtracting July 2006's $43.918 billion in gasoline sales from the total nominal Retail Sales gives $327 billion. Subtracting July 2005's gasoline station sales from the total nominal Retail Sales (from July 2005) gives $319.53 billion. The difference between the July 2006's retail sales (ex. gasoline station) and July 2005's retail sales is only 2.3% in nominal (non-inflation-adjusted) dollars. Adjusting for inflation using the CPI increase of 4.3% puts the total at a -2.0%. In other words, excluding gasoline station sales, inflation-adjusted Retail Sales declined 2.0% from July of 2005.

This can be seen from the Retail Sales chart below copied from the U.S. Bureau of Economic Analysis report on Retail Sales



General Merchandise Sales, which make up the biggest component of Retail Sales, showed a nominal increase in dollar sales of 4.3%. (underlined in blue on the chart above.) Again, this is exactly the same as the increase in the Consumer Price Index of 4.3%. Thus, the real change in General Merchandise Sales since July of 2005 is 0.0%. In other words, there has been NO growth in General Merchandise Sales since July of 2005.


The declining inflation-adjusted Retail Sales numbers are an ominous sign for the economy. They're even more concerning when gasoline station sales figures are not included, which leaves the remaining total for Retail Sales at 2% less than the previous July. Even with increased borrowing, consumers spending is declining. Since consumer spending is 70% of GDP growth, it makes further GDP growth difficult, if not impossible. With consumer borrowing ability expected to fall even further, consumer spending will likely decline further as well. Real wages have continued their steady decline since December 2002. Median real family income has declined every year since 1999. With decreasing consumer spending and decreasing consumer demand, labor demand can be expected to decline even further. The declining labor demand will result in further declines in both wages and employment, reducing consumer spending power even further.

Several noteworthy economists are suggesting a recession is on the way. Paul Krugman has discussed this in his most recent article titled "Intimations of Recession." Economist Nouriel Roubini, former member of Clinton's Council of Economic Advisors, has put the likelihood of Recession at 70% by the end of 2006. Another article from the Daily Reckoning has also laid out a strong case for an impending recession. All of these sources have provided a considerable amount of evidence to support their predictions. It appears that our "faith-based" economy is running out of steam. It can no longer be kept afloat by the hot air from the Housing Bubble and the alternate reality creation of the NeoCon-Artist spin machine.

unlawflcombatnt

EconomicPopulistCommentary

EconomicPatriotForum

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[AndyA]

1. The only thing good about a recession is that Bush won't be able to spin

it. It's his ball all the way. He's in charge, The Decider. He can't blame it on anyone else, Clinton has been gone for too long. Bush will be forced to accept responsibility for it, just like he was forced to accept responsibility for the sad response in New Orleans after Hurricane Katrina.

A Recession helped undo his Daddy, it will have the same effect on Jr. and his cronies.

[KKKarl is an idiot]

17. I disagree

They will still be blaming things on Clinton when Bush 12 is governor of South Carolina 200 years from now. I can hear it now. Gays are taking over our cities because Bill Clinton could not keep his hands of Monica.

[AndyA]

22. They can blame Clinton all they want, but no one will buy it.

Except for the Kool Aid addicts which don't really count anyway, they're too stupid to think for themselves, they just do as they're told.

I think a recession right now will be very helpful to the Dems, because it will prove all the GOP spin about tax cuts for the rich, spend, spend, spend, borrow, spend some more, is all bullshit. This robust economy we have will be exposed for the sham it truly is. A couple of years ago, they might have gotten away with it. But now, too many people are on to them. It won't work.

[cornermouse]

2. Given the price of gas and the way they've "adjusted" other

statistics to make the economy look good, you had to know that sooner or later the truth of Bush and the republican economy would eventually out itself.

[unlawflcombatnt]

3. With Bush, More Spin is Always Possible

Don't be surprised if the Bush dictatorship does something like finding another way to underestimate inflation, even more than they are currently, to make negative growth look positive.

They could simply print a lot more money, or drop interest rates extremely low, and then claim there is 0 inflation. There is no limit to the lies the Bush dictatorship will put out to obscure the facts. They handle economic news the same way they handle information on Iraq.

unlawflcombatnt

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The economy needs balance between the "means of production" & "means of consumption."

[unlawflcombatnt]

4. National Debt Update

One of the biggest ongoing lies the Bush dictatorship is putting out is the declining Federal "deficit." It's unclear how they have come up with their $296 billion story. But it's very clear that they are lying.

The figures on the National Debt (Public Debt) show an increase of over $500 billion per year for each of the last 3 years.

In fact, it increased $567 billion from August 1st, 2005, to August 1st 2006. And despite the Bush dictatorship's dishonest rhetoric, this is an INCREASE over the previous 12 months' number of $553 billion. This can be seen from the graphic below. The change from the previous year is denoted in red numbers below the numbers for the current year.



This information can also be found at the Treasury Dept. site.

The Public Debt has increased $1.7 trillion over the last 3 years alone.


unlawflcombatnt

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[KitSileya]

35. Not only that, Norwegian newspapers are reporting that

your prophesized housing bubble bust is coming - a big bust in the US will lower the American interest rate, which is significantly higher than the Norwegian, which in turn will make it difficult for the Norwegian Bank to raise the interest rate. This will make it less attractive to invest money in stocks etc, freeing it to be used in the already boiling hot Norwegian housing market. Anyway, it's not the Norwegian situation that is interesting, the interest lies in the certainty Norwegian brokers and economic advisors have that the US economy is heading for a fall.





I don't have an English version of the article, here's the original.
http://www.bt.no/na24/article290573.ece

[unlawflcombatnt]

38. Norwegian Report

Thanks for the article. Though I can't read Norwegian, I do appreciate your own interpretation of what was written.

It seems like some of the most honest assessments of the U.S. economy come from foreign news sources. Sometimes American reporters publish their less optimistic reports in foreign newspapers, because American news sources don't want to publish in negative stories on the American economy. I've read many less optimistic reports on our economy in the Asian Times, usually by an American economist (who couldn't get his story published in an American newspaper.)

The Guardian and the BBC are also good sources for reports on the U.S. economy. Again, many of the authors are Americans.

unlawflcombatnt

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[KitSileya]

39. What surprised me,

was the matter-of-fact tone they used. It seems they have no doubt that the American economy is tanking. The expert quoted in the article mentions both the decrease in building permits and the difference in renting and buying. He says that the average costs of buying is $1687 while average rent is $868 a month - this difference, the biggest since 1981, means that it doesn't pay to buy houses only to rent them out. He also mentions the increasing unemployment in the US.

The Norwegian economy is booming, of course. We're an oil nation, and we're getting in so much money, we have to put it in the bank just so that we don't get rampant inflation. Most of the oil business is nationalized, so that the cash doesn't flow overseas. Norwegians have been raised to think that owning your own house is the ultimate dream, which is why house prices have increased dramatically in the last 15 years. Norwegians are more likely to invest in their houses, or buying second homes, or cabins, than to venture out into the stock market. However, Oslo stock exchange has had the biggest growth in the world.

With the censorship in American media it doesn't surprise me that there are more realistic reporting on the American economy overseas than in the homegrown press. I think it's partly self censorship by the media, and partly the release in tweaked numbers from the different government sources. If they were to report the truth to the American people, it would probably be a self-fulfilling prophecy. The question is, would it be better to get the crash ASAP, or would delaying it be better. Will the crash be harder if it's postpone a few months or even a year? There's no doubt what the Bushies would like. Postponing it and then let it happen when the power has changed hands would let them spin the blame away from themselves.

[alvarezadams]

53. This one isn't Norwegian

but http://observer.guardian.co.uk/business/story/0,,1859024,00.html

[NVMojo]

5. K &R

[Name removed]

6. Deleted message

Message removed by moderator. Click here to review the message board rules.

[unlawflcombatnt]

8. NeoCon-Artist Distortion

My "understanding" of economic indicators is correct, and I've posted 3 separate links to show how 3 notable economists have interpreted current indicators.

My reporting is 100% correct. There's nothing to even debate regarding my "reporting" of statistics. You're flat out lying when you claim my "reporting" is wrong. My numbers are based on publicly published, publicly available numbers that you could have verified yourself, if you'd taken the time. The numbers come from the Bush dictatorship's own Bureau of Economic Analysis. The Consumer Price Index numbers come from the Bush dictatorship's own Bureau of Labor Statistics. The Real Wage numbers come from the Bureau of Labor Statistics-Real Wages. The inflation numbers I used come from the http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUUR0000SA0">Bureau of Labor Statistics-Consumer Price Index. I posted a copy of the Retail Sales numbers, so people like you couldn't make false claims like you're currently doing. You don't even have to go to another site to see the Retail Sales numbers, since I inserted them directly into the post. And even if you doubt the accuracy of the copy, I posted a link where you can find them. Again, my "reporting" of the actual numbers is factual, unlike you're own false comment.

Capacity Utilization is one statistic only. And it's computation was already altered by the Bush dictatorship over a year ago. That alteration raised the reading approximately 1% point. Even at the current reading, it is less than the 85% achieved under the Clinton administration. And that 85% would be 86% if the same falsification used by the Bush dictatorship had been used.

Once again, the preponderance of evidence suggests a recession is looming. Simply posting and claiming my documentable numbers are wrong means absolutely nothing.

If you have specific doubts about my factual assertions, let me know what they are. I can document every single number and statistic I've used in this post, or any other letter I've ever posted.

unlawflcombatnt

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[FreeStateDemocrat]

9. Surely “blood in the water” after your trenchant and erudite riposte,

[mitchtv]

13. welcome to DU, cezebrgr

enjoy your stay
:popcorn:

[PsycheCC]

7. K&R. Love your clear, understandable explanations of the economy!

Thanks for doing the hard work for us.

[unlawflcombatnt]

10. Thank you

Thank you for the compliment. I hope people find the information useful. Also, I'd encourage people to check out the links to Krugman, Roubini, and the Daily Reckoning. The latter is especially well written.

unlawflcombatnt

EconomicPopulistCommentary

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The economy needs balance between the "means of production" & "means of consumption."

[unlawflcombatnt]

11. Further Comment

It's also worth pointing out that on the chart from the OP, that the unadjusted Retail Sale numbers from July 2005 increased slightly from June 2005 numbers, from $353.6 million to $354.4 million. In contrast, July 2006 unadjusted numbers decreased $5 million dollars, from $373 million in June to $368 million in July 2006. Not only have inflation-adjusted Retail Sales declined over the last year, last year's June-July nominal increase was replaced by this year's June-July nominal decrease of $5 million.

unlawflcombatnt

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[WCGreen]

12. Good eye......

Great pick up from all the stats....

[unlawflcombatnt]

19. Thanks

I almost missed this myself, based on today's carefully edited report showing an increase in Retail Sales from the prior month. But this was simply an aberration, and completely unrepresentative of the trend over the last year. And despite the manipulation of statistics done by the government, showing some mythological inventory to sales ratio, inventories are increasing faster than sales.

And, again, sales to consumers (or personal outlays) are rising much faster than the personal income necessary to make those personal outlays.

unlawflcombatnt

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[OzarkDem]

14. K & R - Thanks!

I was wondering about this...

[Blackhatjack]

15. Looks like they will be printing more $$$, as fast as they can .....

They have two responses to every economics question: 1) another tax cut for the wealthiest citizens and corporations; or 2)print more money as quickly as possible.

The plan is still on track to run up deficits in this country to such a level that social programs will have to be cut.

[unlawflcombatnt]

16. Tax Cuts

That's right. The Bush-ite's solution to every problem is more tax cuts for the rich. And then to make it affordable, print more money or borrow more money.

The Bush tax cuts were supposed to result in more investment. However, the result was even less investment. There simply wasn't enough consumer spending power to justify investment, and too many factories in 3rd world countries they could build with their tax cut money. So that tax cut money went into offshore accounts and to build factories in 3rd world countries to put even more Americans out of work. In that respect, the tax cuts reduced employment, because they enabled greedy American Corporations to relocate their factories in countries where they could find the cheapest labor.

unlawflcombatnt

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[fat dad]

23. Yeah, somehow that gets overlooked

In that respect, the tax cuts reduced employment, because they enabled greedy American Corporations to relocate their factories in countries where they could find the cheapest labor.

Another thing the right seems to conveniently ignore, is that higher taxes on profit/income means that businesses are more likely to reinvest in equipment, expansion, etc, than pocket that money. Cuts on the so-called supply side can often end up in less capital investment.

[unlawflcombatnt]

26. Right On

That's exactly right. And that's exactly what happened with Bush's tax cuts. The money was pocketed, instead of being reinvested in capital equipment purchases. So it did not increase (American) jobs any. It simply resulted in record levels of cash-on-hand accounts, with few good investment opportunities. And the lack of good investment opportunities is a direct result of declining real wages, which finances the consumer spending and demand that creates investment opportunities. New investment opportunities only occur when there is increased consumer demand for the goods produced by new investment.

The only thing that has maintained consumer demand under the Bush dictatorship is increased borrowing ability, especially from home equity extraction. The home equity loan financed spending of the last few years can be expected to shrink as home prices decline. With falling real wages, there will be nothing left to prop up consumer spending. Without consumer spending, and the production demand it creates, will be nothing to fuel economic growth. In fact, there'll be nothing left to even maintain it at current levels. The decline in retail sales over the last year, and the stagnant consumer durable goods purchases over the last 6 months, are clear signs that consumers cannot maintain present spending levels.

Without consumer production demand, there is no demand for investment to provide consumer goods. As such, both investment and consumer spending will fall together. In fact, investment is already starting to decline, especially residential investment. Look for other areas of investment to start declining as well.

unlawflcombatnt

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[OzarkDem]

27. Would you say

if all of Bush's tax cuts for the wealthy were repealed and if Iraq were turned over to the UN to handle w/ US paying a portion of peacekeeping efforts, would our economy recover fairly quickly and would we be able to balance the budget again?

[unlawflcombatnt]

30. It would certainly help

I don't have the exact numbers in front of me. But I've seen rough estimates of both the cost of the Iraq war and the tax cuts.

The total tax cut package since Bush has been in office has been somewhat over $600 billion, according to numbers I've seen. The total cost for Iraq has been about $400 billion so far. So that would be over $1 trillion less debt if that spending hadn't taken place.

So just getting rid of those 2 would help greatly. Eliminating a couple of more Corporate giveaway bills, like the Medicare Drug/Pharmaceutical Welfare bill would save close to $100 billion/year. Eliminating the Highway/Transportation Bill would save about $47 billion/year.

We could definitely improve our budget situation tremendously by just eliminating some major expenses such as these.

unlawflcombatnt

EconomicPopulistCommentary

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[Lasher]

44. Here, try the National Budget Simulation

I turned the deficit into a 5.42 billion surplus by eliminating Iraq & Afghanistan operations, and by repealing the 2001 & 2003 tax cuts.

http://www.nathannewman.org/nbs/

[unlawflcombatnt]

48. Excellent Link-- Everyone should check it out.

Thanks for the link. It is outstanding. I've never been able to find tangible budget information in such a simplified form.

I reduced the budget deficit to -$89 billion by eliminating the tax cuts on the top 5%, the corporate tax cuts, the Corporate capital gains exemptions, the home sales capital gains exemption and imputed rental exemption, the foreign investment exemption, and the Medicare-Pharmaceutical Welfare bill. I made no reductions whatsoever in any social welfare programs or Earned Income Tax Credits. The really big items are not the so-called "entitlement programs." The big items are the Corporate and high income-earner tax cuts.
Tax cuts for the top 1% alone total $117 billion per year.

unlawflcombatnt

EconomicPopulistCommentary

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[Lasher]

50. Thank you sir, may I have another?

I am highly pleased you liked it, unlawflcombatnt. I have learned quite a bit from your contributions here, and am flattered to think that anything from my humble knowlege base could be of benefit to you.

Now would you like to play the Social Security Game?

http://www.actuary.org/socsec.asp

I resolved almost all the Social Security shortfall simply by eliminating the cap on earnings that are subject to payroll taxes. Very simple. I have found that when an issue is so complicated that it's hard to understand, that's often because people have made it that way on purpose because they don't want you to be able to figure it out.

These 2 tools would help make an excellent complement to an OP titled something like, If I were elected President and if Democrats controlled Congress, here's what I would do to fix the budget. Just some quick, simple solutions that come quickly to mind. I would do exactly what I said about Social Security to resolve the shortfall, and you already know what I would do to eliminate the deficit.

Oh, and that Medicare-Pharmaceutical Welfare bill would be history because I would initiate single provider universal health care for everybody under Medicare, which would cost no more than we are spending on healthcare today. No more insurance company involvement, and buh bye to pharmaceutical company giveaways.

http://www.citizen.org/pressroom/release.cfm?ID=1623

I wish you would start that OP, because you are quite a bit more qualified than I. But if you would prefer not to, I'll take a stab at it.

I'll PM you tomorrow with some other thoughts.

[unlawflcombatnt]

51. Great Program for Social Security

Lasher,

Thanks again for another excellent simulator/program. According to the program, 93% of the future Social Security shortfall could be eliminated by removing the cap. 11% could be eliminated by including state and local government employees. (The 2 together would completely eliminate the shortfall.) Raising the tax rate from 6.2% to 6.7% would eliminate 53% of the deficit.

Clearly the biggest dent would be made in the shortfall by eliminating the cap.

unlawflcombatnt

EconomicPopulistCommentary

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___________
The economy needs balance between the "means of production" & "means of consumption."

[Wiley50]

21. I exist on $603 a month SSI Disability

This looks really scary to me.

Even more scary than the second spine operation
the doctors now want to do.

I'd go postal if I thought I really had a chance to make things better
for other folks like me

Fully aware that I'd lose
unless the "78 virgins" story is true

Oh wait. I'm an non-theist

[kineneb]

31. greetings- two of us on $1199 SSDI

If I work then Hubby loses Medi-Cal, and all his drug benefits. Never mind I have to go with him to all doctor's appointments to be his "ears".

Empirical evidence shows that people are buying less due to inflation and higher oil/gas prices. There are lots of seniors and disabled people on fixed incomes in this area, and I know they have been hit, because we have. Oh, and then there is our $200 bill for running the AC ($500 before low-income discount) during California's heat wave. Hubby has to have the AC due to his health condition, otherwise he risks another trip to the ER in the "sparkley truck".

[KKKarl is an idiot]

18. I am afraid

This is scary stuff. This does not look like you run of the mill recession. Every economy goes through a recession. But this economy is headed for an amazing disaster. I heard Rush say the other day that the Clinton era brought the worse economy in 50 years. Why do they say things like that? Do they really hate America that much? Hannity says Bush is undoing the Clinton recession. Bush will use this to blame the democrats from not doing away with the estate tax. I strongly believe if we do not win the house this time round then the USA as we know it may take a long time to rebuild.

[unlawflcombatnt]

29. "Staying the Course"

I completely agree with you. This certainly is scary stuff.

At no time has the Bush dictatorship ever advocated a policy to benefit the country as a whole, or to fix a problem that has occurred. When Bush was fraudulently elected the 1st time, he already had a fixed agenda of cutting taxes on the rich and invading Iraq. Nothing he has done was to fix a problem. He has simply used new "problems" to justify an already pre-determined agenda. Reverse Robin Hood tax cuts were already planned in 2000, as was an invasion of Iraq. Opening up cheap foreign labor markets to American investment, in order to reduce labor costs and increase profits, was already planned before he took office. Social Security "privatization" never had anything to do with improving solvency. It was designed exclusively as a new taxpayer-funded Corporate subsidy for Wall Street and big business. The Medicare Prescription Drug plan never had anything to do with providing for the drug needs of the elderly, but everything to do with giving another handout to the American Pharmaceutical Cartel.

Paul Krugman has described Bush policy as "solutions in search of problem" to justify their use. I completely agree.

The worst characteristic of Bush is his "stay-the-course" policy. But then, that's because his course was never directed at serving the American people. Instead, it has always been to enrich his rich Corporate donors and rich friends. In that respect, his policies have been an overwhelming success. Thus, he has no intention of "changing the course" because his "course" has never been one designed to serve the American people.

unlawflcombatnt

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[FILAM23]

58. Why do they say such things?

Easy, neither one has one iota of economic reality.

[Tin Man]

20. Doesn't the CPI consider the rising cost of gasoline?

In your analysis, is it fair to apply the CPI index (a measure that factors-in the rising cost of gasoline) to the quantity gross retail sales less gasoline to determine inflation-adjusted economic growth? When evaluating gross economic growth excluding the contribution of gasoline sector, shouldn't you likewise be using a CPI that has been adjusted to exclude the rising price of gasoline ?

[unlawflcombatnt]

25. Yes, you're absolutely right

Good catch. You're absolutely right. It is not a perfectly fair comparison to adjust for the total http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUUR0000SA0">Consumer Price Index for all goods, and then subtract gasoline station sales from the total without adjusting for the price increases caused from gas price hikes.

So the total inflation-adjusted decline, when subtracting gasoline prices, is less than what I stated. Some part of the fuel price increase shows up in other areas, however, such as airplane fuel, factor fuel, and heating oil. However, these are probably less important than auto fuel costs.

The http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?data_tool=latest_numbers&series_id=CUUR0000SA0L1E">core CPI might be useful here. Since the core excludes fuel costs AND food costs, the CPI adjusted for fuel only would be somewhere in between the core CPI of 2.6 and the overall CPI of 4.3. It so happens that gasoline station sales and food sales contribute almost identical amounts to retail sales. So a fuel-price excluding CPI would be midway between the 2 CPIs or about 3.45%. So the inflation-adjusted change in retail sales (ex. fuel costs), would be a -1.0%.

unlawflcombatnt

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[welshTerrier2]

24. 2 to 3 million jobs could be lost ...

check this out: http://www.nytimes.com/2006/08/11/business/11econ.html?_r=2&ref=business&oref=slogin&oref=slogin

This time, many analysts say that the Fed and its new chairman, Ben S. Bernanke, face considerably tougher challenges. Crude oil, at more than $70 a barrel, is selling at prices that would have been unthinkable in 1995. Productivity growth, which was accelerating in 1995, is slowing these days. The dollar, which was climbing against other major currencies in 1995, is declining against most of them now.

Analysts and other experts say that if Mr. Bernanke is serious about his goals for controlling inflation, at least two million more workers may have to lose their jobs over the next two years.

“The economic slowdown has to be much more substantial than anybody in the Federal Reserve or on Wall Street is expecting,” said Robert J. Gordon ... <skip>

To reduce inflation to the upper limits of what Mr. Bernanke and other Fed officials consider acceptable, more than three million jobs would be lost, a bigger drop than in the recession of 2001.

And that is Mr. Gordon’s relatively upbeat hypothesis, which assumes no other shocks to the economy — no additional increases in energy prices, no collapse in the dollar’s value, no collapse in housing.

[unlawflcombatnt]

28. Unsustainability of "Staying the Course"

Very interesting article. I found Noriel Roubini's commentary especially interesting. He doesn't think the Fed's inflation reduction goals and a soft-landing are compatible. In other words, to achieve Bernanke's goals, there will be a "hard" landing.

I also find the commentary about job loss interesting. During the 2001 recession, the United States "lost" 2-3 million manufacturing jobs. But those jobs were "found" by China and other 3rd world countries. The loss of jobs was not a result of declining demand for production, and the labor to provide that production. It was "caused" by the incessant greed of Corporate America to increase profits further by searching globally for the cheapest labor. Though American workers "lost" jobs, Corporate America "found" replacement workers in foreign countries who'd work for a fraction of what Americans work for.

The resultant loss of American labor income would have worsened and extended the recession, had it not been for the increase in borrowing ability created by Greedspan and his rate cuts, which allowed Americans to continue spending using borrowed money, to replace what they'd lost in wages.

The replacement of higher paid American workers with lower paid foreign workers reduces aggregate American consumer income. Though the aggregate price savings from imported foreign goods may partially offset the aggregate American worker income loss, it is only a partial compensation. Again, were it not for consumer ability to substitute borrowed money for lost wages, we wouldn't have even had the pseudo-recovery that we had.

In retrospect, it appears much of the decline experienced leading to the 2001 recession (and the weak recovery in its aftermath) can be attributed to outsourcing-related job loss. This added to the problems created by rampant over-investment and mal-investment of late 1990's. The over-investment/mis-investment problem resolved, but the outsourcing-related job loss did not. Again, the consumer income-financed spending loss from outsourcing was completely replaced by borrowed money-financed consumer income. This was never a sustainable course.

The real hope was that consumer income would rise sufficiently to take the place of borrowed money. This has not happened. In fact, borrowed money has become an ever increasing source of consumer spending as real wages have declined. The unsustainability of this course is starting to become apparent. Over the next year it will become even more apparent, as home equity extraction declines, and consumer debt rises even further.

unlawflcombatnt

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[kineneb]

32. fewer cars sold ?

July 2006 vs. July 2005?

Note stats for motor vehicles, furniture and electronics stores. All are lower in 06 vs. 05. These are the areas where people spend the big money- cars, sofas and TVs. This tells me that the re-fi boom is over and there is a lot less "discretionary" (whatever in hell that means) money available.

[unlawflcombatnt]

33. Durable Goods Purchases Decline

One of the recession indicators cited by both economist Nouriel Roubini and the Daily Reckoning was a decline in consumer purchase of durable goods. According to the U.S. Bureau of Economic Analysis, the annualized rate of consumer purchase of Durable Goods declined $1.4 billion in the second quarter, or about 0.5%. Below is a copy of a page from the BEA with the recent changes underlined in re.



This can also be found on Table 8 from the latest BEA report. This decline is one of the indicators cited by both economist Nouriel Roubini and at the Daily Reckoning site.

unlawflcombatnt

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[unlawflcombatnt]

34. Housing Decline and the Economy

The Housing Starts numbers declined by 2.5% for the month of July. There has been a 21% decline in starts since January 2006. With an estimated 3 million workers involved directly in home construction, this would logically lead to a decline in home construction employment of similar magnitude. A 21% decline in home construction would reduce employment by 630,000. This is based on only 3 million workers. Including those indirectly involved, such as real estate agents and bank loan officers, would put this number even higher. Below is a graph showing the decline in Housing Starts.


Below is another graph from Briefing.com, also showing the rapid decline in housing starts.

<[br />
To reiterate the significance of the rapidly declining number of housing starts, it will result in a significant decline in employment related to the housing boom. It also indicates that builders anticipate a sustained decline in both sales and prices. Declining home prices means declining home equity extraction for consumer spending, in addition to wage loss from the employment loss, causing still further declines in consumer buying power, consumer spending, and the production demand necessary to keep the economy going.

We're in for a major slowdown in the economy.

unlawflcombatnt

EconomicPopulistCommentary

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___________
The economy needs balance between the "means of production" & "means of consumption."

[whistle]

36. Oh and don't forget the Ford and General Motors bankruptcies

...looming just around the corner.

[unlawflcombatnt]

37. Yes, along with increased mortgage payments for many homeowners

Thanks for pointing that out.

Also, as was pointed out by another poster at another site, many recent buyers are not even making full interest only payments. In other words, they're making even less than "interest-only" payments.

This situation was described in an article in a Baltimore Sun newspaper article.

Countrywide Home Loans has begun sending letters out to home loan borrowers that their minimum payments may increase over 100%, since many of them are making payments that are less than half the monthly interest payments. In the example given, the loan payment would more than double, increasing the monthly payment over $1500. This means such borrowers will have $1500 less to spend each month. If this is widespread phenomena (which apparently it will be), it will still further reduce consumer spending.

unlawflcombatnt

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___________
The economy needs balance between the "means of production" & "means of consumption."

[fuzzyball]

43. But Japanese cars made in America are selling well because

they don't have the type of union contracts GM & Ford
have signed.

[earth mom]

54. So let's bash the Unions, right?!

* hates Unions which he has done his damnedest to squash. I'm sure you're happy he is succeeding! :eyes:

BTW-people are buying Japanese cars because they get better gas mileage. Which is something Union workers employed by GM, Ford and Chrysler have NO control over. If you have a beef about the quality of the cars from Detroit-you need to take it up with the BOSSES-NOT THE WORKERS! :grr:

[unlawflcombatnt]

55. Exactly

Japanese cars sell better because of their cost and quality. And the lowness of the cost is not due to the low pay of Japanese workers, who are extremely well paid. And the good working conditions Japanese workers experience has the amazing effect of reducing the desire to form unions. If workers are treated well, it reduces attempts to unionize.

Unfortunately, the reduction in unionization in the U.S. is caused by anti-labor laws, and the Corporate writing of most legislation pertaining to labor, and the Corporate-controlled media brainwashing the public into believing Unions are hurting our economy. The only thing hurting our economy is the unbridled greed of Corporate America, and its unqualified support of the Bush dictatorship.

unlawflcombatnt

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The economy needs balance between the "means of production" & "means of consumption."

[FreeStateDemocrat]

40. Baltimore Sun: Economic slowdown, yes, but no recession

Originally published Aug 20, 2006

Jay Hancock

--------------------------------------------------------------------------------


Recession is on the menu. Because of the housing slump, $3 gas, indebted consumers and higher interest rates, analysts increasingly suspect production and employment may shrink in coming months, possibly dealing the country its worst economic blow since 1990.

"The U.S. economy is headed for a sharp recession by early 2007," Nouriel Roubini, chairman of Roubini Global Economics Monitor, says on his blog.

"Intimations of recession" was the headline on economist Paul Krugman's column in The New York Times two weeks ago
.
"The economy is slowing, and I suspect that by the end of the year it could very well be in recession," investment strategist Gary Shilling told CRN magazine (formerly Computer Reseller News ) last month.

Here is why they are probably wrong:

(Continued with about 8 specific reasons why it will not happen, this guy is rather confident that it will not devolve to a recession, but where is the dividing point between "economic slow down" and a recession?)


http://www.baltimoresun.com/business/yourmoney/bal-bz.hancock20aug20001530,0,3226295.column?coll=bal-business-headlines

[unlawflcombatnt]

42. He's not very convincing

His reasons claiming a recession is not coming are completely un-convincing.

Here is his first argument, referring to why Krugman, Roubini, and Gary Shilling are "probably wrong."

"Here is why they are probably wrong:
• Pessimists usually are. History is strewn with many more recession warnings than recessions."

Pretty flimsy argument. More importantly, it was the overwhelming majority of "experts" who were wrong about the recession of 2001. And the experts in the financial field, including the economists of the day, denied that a recession was even possible in early 1929, just before the stock market crashed. The point here is that it is usually the optimists that are wrong, not the pessimists, when it comes to the economy.

He's really off base on the housing bubble. He claims that homeowners won't dump their homes because "They need them to live in." That's nothing but wishful thinking. 35% of homes bought in the last couple of years are 2nd or even 3rd homes, bought exclusively for investment. Those will be put on the market at the drop of a hat. Furthermore, residential homeowners may find it wise to sell their residences for a profit, and pay rent instead of mortgage payments. Dean Baker, who is one of the most knowledgeable economists on the housing bubble, has done just that. He sold his residence a couple of years ago and is now renting until prices come down.

"Consumers, though stretched, are better off than you think."

Better off than what? Peasants in Medieval Europe? The French peasants before the French Revolution?

Real wages are declining, home equity is declining (causing a decline in the ability of homeowners to extract,) consumer debt is skyrocketing, mortgage payments are set to increase drastically for a large number of home-buyers, gasoline prices are rising, and health care costs have gone through the ceiling.

He claims the measures of consumer savings paint a "gloomier-than-deserved picture." Consumer savings are a simple measure, determined by subtracting personal outlays from disposable personal income. When that number is negative, it means consumers are spending more than they earn. This number is now negative for the 1st time since 1933. It's been negative for the last 4 quarters. Consumers cannot continue to spend more than they earn. They've continued to extend their spending through increasing borrowing alone, in lieu of real wage increases. Regardless of his claim about low interest rates, consumers are using up their ability to borrow money. When the limit is reached, and it soon will be, our economy is not going to just slow down, it's going to fall off a cliff.

"Technology efficiencies make recessions less likely.

A traditional recession trigger was the inventory glut..."

To make his long story short, what this boils down to is that even a lesser quantity of inventory is considered normal at present. Which still means that a rise in inventory level means retailers aren't selling their goods. In turn, this means consumer spending is slowing more than anticipated by retailers and producers. And inventories are rising at present. Additionally, the increase appears deceptively lower than it actually is, since companies have been keeping lower inventories during the Bush pseudo-recovery. Thus an inventory level that would have been acceptable 10 years ago is excessive today. When today's levels are touted as being favorable compared to equivalent levels in the past, it's not a valid comparison. The very same levels considered normal in the past are excessive today.

"Mortgage delinquencies and foreclosures will surely rise as housing cools off. But not enough to cause big problems.

Delinquencies are rising at a very rapid rate. They've doubled in California in the last year. Foreclosures will add even more to the rising inventory of unsold homes. As adjustable rate mortgages reset, foreclosures will increase even more rapidly. Not only will this cause a "big" problem, it will cause a "huge" problem.

The author of the Baltimore Sun article hasn't made a single reasonable argument against an upcoming recession. In fact, the weakness of his arguments further proves that a recession is coming.

unlawflcombatnt

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The economy needs balance between the "means of production" & "means of consumption."

[FreeStateDemocrat]

45. Thanks for the explication.

[RUMMYisFROSTED]

41. AND Chimp has borrowed $4 trillion to give us this dreck.

Supply side bites the dust. $4T in the hands of the "job creators" and bubkes.

[unlawflcombatnt]

46. Yes, money thrown down the drain

I agree. There's been minuscule job creation that can be attributed to tax cuts. In fact, investment spending was lower under Bush than under Clinton until 2004, when it finally caught up. The most rapid job growth has come in the government sector, not the private sector. Tax cuts have nothing to do with government job creation by definition. Most of the private sector job growth came from real estate related jobs.

Bush's pseudo-supply side tax cuts did no good whatsoever. Even an acknowledged supply-side economist and Reagan appointee, Paul Craig Roberts, says that Bush's tax cuts had no potential benefit, even from a supply-sider's point of view. They were simply counterproductive giveaways to Bush's rich supporters.

unlawflcombatnt

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The economy needs balance between the "means of production" & "means of consumption."

[leftofthedial]

47. they lie and spin and lie and spin

our economy has been in the toilet since 2000.

[unlawflcombatnt]

52. Yes

The only "recovery" has been for Corporate America and its profit margins. Real wages have been declining since December 2002, after very little rise in 2001 and the majority of 2002.

Having a recession follow on the steps of this pseudo-recovery makes it especially bad.


unlawflcombatnt

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[paulk]

49. Denver has been in a recession for six years

just sayin'.

Two more businesses within a stones throw of mine have gone under in the last two weeks.

Bush is encouraging Republicans to run on the "strong economy" this fall.

Go for it, dudes.

[Greyhound]

56. Recalculate with the old "fixed basket" CPI and it becomes obvious

that the "man on the street" is, as usual, absolutely right. The economy sucks, has sucked, and will continue to suck, as long as we retain this insane notion that we must "compete" with second and third world slave labor.

[unlawflcombatnt]

57. CPI

There's actually a site called Shadow Government Statistics that posts an alternative CPI, using a different method for computing the CPI. Below is a chart showing the computation of the Consumer Price Index using the same method used before the Clinton era.



Their calculations put the inflation rate at over 7%, not 4.3% as is currently stated by the Bureau of Labor Statistics.

unlawflcombatnt

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The economy needs balance between the "means of production" & "means of consumption."