Archive for the ‘depression’ Category

Britain showing signs of heading towards 1930s-style depression

March 16, 2009

Britain is showing signs of sliding towards a 1930s-style depression, the Bank of England says today for the first time.

By Edmund Conway, Economics Editor
Telegraph (UK)
The country is displaying early symptoms of being trapped in a so-called “debt deflation trap” where families find themselves pushed further and further into the red every month, according to a Bank report published today.

The stark warning will cause serious concerns, since it was this combination of falling prices and soaring debt burdens that plagued the US in the 1930s.
The Bank is using its Quarterly Bulletin to highlight the threat posed to the economy by deflation – where prices fall each year rather than rise.

Although inflation is currently in positive territory, it is expected to become negative in the coming months.

The Bank is worried that this may combine with high levels of indebtedness to squeeze families further.

It says that families with high debts could fall prey to the debt deflation trap. This means that the cost of their debts, which are fixed, would rise compared to average prices throughout the economy. While inflation erodes debts, deflation makes them relatively higher.

The Bank’s paper suggests that Britain is particularly at risk because there is a high proportion of families with significant levels of debt, and many of them are on fixed mortgage rate, which means they will not benefit from rate cuts.

Britons’ total personal debt – the amount owed on mortgages, loans and credit cards – is, at £1.46 trillion, more than the value of what the country produces in a year.

Read the rest:
http://www.telegraph.co.uk/finance/financetopic
s/recession/4996994/Britain-showing-signs-of
-heading-towards-1930s-style-depression-sa
ys-Bank.html

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Obama’s three-pronged economic strategy: delay, delay and delay

March 12, 2009

We are in a world-wide economic disaster.  We are bleeding out, as doctors say.  And so far the United States has a tourniquet but there is no heartbeat.

The number of households threatened with losing their homes rose 30 percent in February from last year’s levels, RealtyTrac reported Thursday.

After the stimulus and omnibus what do we have: lots of pork and debt but still a very uncertain picture on what all economist say we need: jobs and a fix for the banking and housing sectors.

Economists’ main complaint centers on the administration’s plan for the banking sector. “The most important issue in the short run is the financial rescue,” said Stephen Stanley of RBS Greenwich Capital. “They overpromised and underdelivered. Secretary Geithner scheduled a big speech and came out with just a vague blueprint. The uncertainty is hanging over everyone’s head.”

In stark contrast with Obama’s popularity with the public, a majority of the 49 economists polled by the Wall Street Journal are dissatisfied with the administration’s economic policies.

Reaf a report from The Wall Street Journal:
http://online.wsj.com/article/SB123
671107124286261.html

[forecast] 

The number of households threatened with losing their homes rose 30 percent in February from last year’s levels, RealtyTrac reported Thursday.
http://news.yahoo.com/s/ap/200903
12/ap_on_bi_ge/foreclosure_rates

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Here’s David Ignatius of the Washington Post:

For all the legislative commotion surrounding the economic crisis, we are still living in the equivalent of “the phony war” of 1939 and 1940. War has been declared on the Great Recession, but it’s basically politics as usual. The bickering and mismanagement that helped create the crisis are continuing, even though we elected a president who promised a new start.

History tells us that phony war doesn’t last forever and that when it ends, all hell breaks loose. World War II officially began with Germany’s September 1939 attack on Poland, but for months it was just skirmishing on the sidelines. That hiatus ended on May 10, 1940, when Hitler invaded Belgium and its neighbors. Neville Chamberlain was out as British prime minister, and Winston Churchill arrived as the avenging angel.

We’re still in the Neville Chamberlain phase when it comes to the economic crisis. The government is talking about sacrifice and solutions, but it hasn’t yet made the tough decisions that will put the economy back together. Economist David Smick had it right in The Post this week when he said the administration had a three-pronged strategy: delay, delay and delay. The administration announces a rescue package but doesn’t deliver details; it promises budget discipline but saves the hard decisions for later.

One reason this season feels so political is that Obama has stacked his administration with politicians and former government officials. You might think that with the greatest financial crisis of his lifetime, the president would want a few business leaders with experience managing large organizations in crisis. But no.

Here’s the un-businesslike Obama Cabinet: At Treasury, a former government official; at State, a former senator; at Commerce, a former governor; at Defense, a former government official and university president; at Energy, a former professor; at Homeland Security, a former governor; at Health and Human Services, a former governor; at the White House as chief of staff, a former congressman; at the White House as economic czar, a former university president and government official.

All fine people, no doubt. But as thin on business experience as a Hyde Park book club. Maybe Obama sees business executives as too tainted by the financial crisis to be useful, or confirmable. The closest he comes is Paul Volcker’s Economic Recovery Advisory Board — which includes Jeffrey Immelt, chief executive of GE; Jim Owens, chief executive of Caterpillar; and venture capitalist John Doerr.

The culture of immobilism starts on Capitol Hill. These people are still working a four-day week, taking Fridays off so they can run home and tell constituents how diligent they are. They may talk about a crisis, but they don’t act like it’s real.

Republicans and Democrats are sticking to party-line votes on many key issues. The Democrats were egregious in packing the stimulus bill with pet projects that won’t stimulate much except campaign contributions and in sticking with earmarks — a symbolic outrage that Obama promised during the campaign he would eliminate. But the Republicans have been even worse in their strategy of opposing recovery plans, which has given a legislative face to Rush Limbaugh’s “I hope he fails.”

The legislative pettifoggery was captured by a New York Times headline this week: “Obama’s Budget Faces Challenge by Party Barons; Panel Chairmen Oppose a Tax Plan but Want to Reduce Debt.” This nonsense has to stop, folks. The party’s over.

Read the rest:
http://www.washingtonpost.com/wp-dyn/co
ntent/article/2009/03/11/AR2009031103
214.html?hpid=opinionsbox1

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You don’t get something for nothing….

Obama says we need a total rebuilding of American health care, education and energy: but we’ll just push reset with the rest of the world….It just seems like a sophomoric and socialistic thought process that can’t work.  The Soviet Union spent itself to death trying to keep up with U.S. military advances.  Now China and Russia will just watch as America spends itself to death with $1 billion dollars an hour of borrowed (much from China) money….

And despite spending $1 billion an hour in Obama’s first 50 days, the economy hasn’t rebounded and will need (likely) much more money and much more work….

Obama’s To-Do List: Fix Economy First or Do Everything Obama’s Way?

March 12, 2009

As for what policies I’d drop from the to-do list because of the crisis, at this point I’d have to say all of them. For years, I’ve been reading alarmed commentators like Martin Wolf of The Financial Times and thinking them a bit on the outer edge of pessimistic thought. Now I am not so sure. Now I think this economic crisis could be like nothing we’ve seen in our lifetimes. Big-name economists are talking seriously about another depression.

In that context, I don’t think we can do anything but fixate on this. That is, I think the president should spend 50 percent of his time on the banking crisis, 25 percent of his time on getting our allies to coordinate with a global stimulus package and 25 percent of his time beginning work on a second round of stimulus. He’s taking his eye off the ball if he spends hours every day working on health care, education and energy. Worse, he adds uncertainty into the market.

If by summer the crisis has passed, then he should go back to the long-term stuff. But the world is too uncertain just now. If the economy collapses, history will judge him very harshly for having a budget process that is on an entirely separate track from his crisis-response process.

By David Brooks:
http://theconversation.blogs.nyti
mes.com/2009/03/11/obamas-t
o-do-list/

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Gail Collins:

Remember when the early Clinton administration got trapped by its own little economic crisis and James Carville grouched that if there was reincarnation, he wanted to be reborn as the bond market because then “you can intimidate everybody”?

I think I want to come back as a moderate Republican. A club so exclusive it could hold a meeting in a Capitol elevator. But these days, nothing moves unless they’re happy. Stimulus packages hang on two senators from one of the most underpopulated states in the nation {Maine].

By Gail Collins, The New York Times:
http://theconversation.blogs.nyti
mes.com/2009/03/11/obamas-to
-do-list/

Obama’s Honeymoon In Hell

March 8, 2009

On the most important issue of the day, the NEWSWEEK Poll shows that close to two thirds (65 percent) of the public say they are very or somewhat confident that Obama will be successful in turning the economy around. That’s down just a little from the 71 percent who felt that way before he took office. Still, overall perceptions of the economy remain solidly negative, with 84 percent saying the national economy is in poor shape and just 3 percent viewing things positively.

From Newsweek

Read the rest:
http://www.newsweek.com/id/188002

Related:
Stimulus Too Late, Wasteful, Reckless; Toxic Assets and Banks Still Unaddressed

Recession on track to be longest in postwar period

Obama’s Next Challenge: Iran, Israel, Russia? It’s Here Now

Recession on track to be longest in postwar period

March 8, 2009

Factory jobs disappeared. Inflation soared. Unemployment climbed to alarming levels. The hungry lined up at soup kitchens.

It wasn’t the Great Depression. It was the 1981-82 recession, widely considered America’s worst since the depression.

By DEB RIECHMANN, Associated Press Writer

That painful time during Ronald Reagan’s presidency is a grim marker of how bad things can get. Yet the current recession could slice deeper into the U.S. economy.

If it lasts into April — as it almost surely will — this one will go on record as the longest in the postwar era. The 1981-82 and 1973-75 recessions each lasted 16 months.

Unemployment hasn’t reached 1982 levels and the gross domestic product hasn’t fallen quite as far. But the hurt from this recession is spread more widely and uncertainty about the country’s economic health is worse today than it was in 1982.

Back then, if someone asked if the nation was about to experience something as bad as the Great Depression, the answer was, “Quite clearly, `No,'” said Murray Weidenbaum, chairman of the Council of Economic Advisers in the Reagan White House.

“You don’t have that certainty today,” he said. “It’s not only that the downturn is sharp and widespread, but a lot of people worry that it’s going to be a long-lasting, substantial downturn.”

For months, headlines have compared this recession with the one that began in July 1981 and ended in November 1982.

-In January, reports showed 207,000 manufacturing jobs vanished in the largest one-month drop since October 1982.

Read the rest:
http://news.yahoo.com/s/ap/20090308/
ap_on_bi_ge/the_worst_recession

Global Unemployment Threat to Stability Worldwide

February 14, 2009

From lawyers in Paris to factory workers in China and bodyguards in Colombia, the ranks of the jobless are swelling rapidly across the globe.

Worldwide job losses from the recession that started in the United States in December 2007 could hit a staggering 50 million by the end of 2009, according to the International Labor Organization, a United Nations agency. The slowdown has already claimed 3.6 million American jobs.

NELSON D. SCHWARTZ
The New York Times

High unemployment rates, especially among young workers, have led to protests in countries as varied as Latvia, Chile, Greece, Bulgaria and Iceland and contributed to strikes in Britain and France.

Last month, the government of Iceland, whose economy is expected to contract 10 percent this year, collapsed and the prime minister moved up national elections after weeks of protests by Icelanders angered by soaring unemployment and rising prices.

Just last week, the new United States director of national intelligence, Dennis C. Blair, told Congress that instability caused by the global economic crisis had become the biggest security threat facing the United States, outpacing terrorism.

“Nearly everybody has been caught by surprise at the speed in which unemployment is increasing, and are groping for a response,” said Nicolas Véron, a fellow at Bruegel, a research center in Brussels that focuses on Europe’s role in the global economy.

In emerging economies like those in Eastern Europe, there are fears that growing joblessness might encourage a move away from free-market, pro-Western policies, while in developed countries unemployment could bolster efforts to protect local industries at the expense of global trade.

Indeed, some European stimulus packages, as well one passed Friday in the United States, include protections for domestic companies, increasing the likelihood of protectionist trade battles.

Protectionist measures were an intense matter of discussion as finance ministers from the Group of 7 economies met this weekend in Rome. [Page A16.]

While the number of jobs in the United States has been falling since the end of 2007, the pace of layoffs in Europe, Asia and the developing world has caught up only recently as companies that resisted deep cuts in the past follow the lead of their American counterparts.

Read the rest:
http://www.nytimes.com/2009/02/15
/business/15global.html?_r=1&hp

Obama’s Fantastic Journey

February 14, 2009

In Elkhart, Ind., on Monday, President Obama spoke as if America were approaching a doomsday that only a massive increase in government could avert.

“The situation we face could not be more serious,” he said. “We have inherited an economic crisis as deep and as dire as any since the Great Depression. Economists from across the spectrum have warned that if we don’t act immediately, millions more jobs will be lost, and national unemployment rates will approach double digits. More people will lose their homes and their health care. And our nation will sink into a crisis that, at some point, we may be unable to reverse.”

Do we really face the possibility of an irreversible crisis? Well, yes. Not the one Mr. Obama describes, but the one he may cause.

By Terence P. Jeffrey
The Washington Times

Forget, for a moment, the economic weathermen forecasting the economic equivalent of global warming. Look instead at the historical data.

Claims Mr. Obama, “We have inherited an economic crisis as deep and as dire as any since the Great Depression.”

But the historical figures for the gross domestic product (GDP), calculated by the U.S. Bureau Economic Analysis, say something else. After growing by 0.9 percent and 2.8 percent in the first two quarters of 2008, GDP declined by 0.5 percent and 3.5 percent in the third and fourth quarters of the year. Is that “an economic crisis as deep and as dire as any since the Great Depression”?

Well, 1949 was far worse. GDP declined by 5.8 percent in the first quarter of that year and 1.2 percent in the second. It rebounded by 4.6 percent in the third, but then dropped 4 percent in the fourth. America did not start an irreversible decline that year. In 1950, the economy grew by an amazing 17.4 percent in the first quarter, 12.5 percent in the second, 16.6 percent in the third and 7.5 percent in the fourth.

In 1953-54, there was also a downturn worse than the one Mr. Obama “inherited.” GDP declined by 2.4 percent in the third quarter of 1953, by 6.2 percent in the fourth quarter and by 2 percent in the first quarter of 1954.

Did “Leave-it-to-Beaver” America spiral into a Steinbeckian Dust Bowl? No. The economy headed back to double-digit growth, expanding by 0.4 percent in the second quarter of 1954, 4.5 percent in the third and 8.2 percent in the fourth. In the first quarter of 1955, it jumped 12 percent.

Something even more dramatic happened in 1957-58. In the fourth quarter of 1957, GDP declined by 4.2 percent, and in the first quarter of 1958, it declined by 10.4 percent.

Read the rest:
http://www.washingtontimes.com/news/
2009/feb/14/doomsday-scenar
io-doesnt-add-up/

Stimulus Complete: Now Comes New Economic Nightmare in Stagflation?

February 14, 2009

CONGRESS has made a terrible mistake. Amid a rhetorical debate centered on words like “crisis,” “emergency” and “catastrophe,” it acted too fast. While arguments were made about the stimulus bill’s specific components — taxpayer money for condoms, new green cars and golf carts for federal bureaucrats, another round of rebate checks — its more dangerous consequences were overlooked. And now the package threatens a return to the kind of stagflation last seen in the 1970s.

By Paul D. Ryan
The New York Times

To get a sense of the pressures ahead, we must first assess our fiscal health. We started this year with a projected trillion-dollar budget deficit for the 2009 fiscal year. In 2008, we spent $451 billion just to pay the interest on our debt.

With the stimulus bill now becoming law, we’re digging even deeper into debt. The headline price tag of $787 billion doesn’t include the extra $348 billion it will take to finance the new debt, or what it will cost when Congress extends the spending programs in the bill, as is likely — as much as $2 trillion more. Add in the billions that are being used to prop up the financial system, and when the dust settles on 2009, with millions of baby boomers retiring and entitlement spending exploding, taxpayers will face a financial nightmare.

From a global perspective, the picture only looks worse. As we have debated how much money to borrow and spend in hopes of jump-starting our economy, we’ve ignored the worldwide stimulus binge. China, Europe and Japan are all spending hundreds of billions of dollars they don’t have in hopes of speeding up their economies, too. That means the very countries we have relied on to buy our bonds, notably China and Japan, are now putting their own bonds on the global credit markets.

American Treasury bonds have been selling briskly on the global credit markets because they have been the calm in the storm of the global credit crisis. This has allowed advocates of borrow-and-spend to argue that for the United States, borrowing is uniquely cheap. But what happens when there is an excess supply of bonds on the worldwide markets? The cost of borrowing will rise. Today we fear deflation, but eventually our fears will turn to inflation.

A Chinese customer shows off a handfull of hundred-yuan notes ...

It seems that no one in Washington is discussing what happens when the world begins this gargantuan borrowing spree. How high will interest rates rise? And more fundamentally, who will have the money to buy our bonds? It is possible that the Federal Reserve will succumb to pressure to “monetize” our debt — that is, print new money to buy our bonds. In fact, the Fed is already suggesting that it will buy long-term Treasury securities in order to lower borrowing costs. If it does, then our money supply, which has already increased substantially over the past year, will grow even faster.

As Milton Friedman noted, “Inflation is always and everywhere a monetary phenomenon.” It is a situation in which too few goods are being chased by too much money.

To American families, inflation is a destroyer of savings, a killer of wealth, a crusher of confidence. It calls into question the value of our money. And while we all share in the pain, the people whom inflation hits hardest are elderly people who live on fixed incomes, those in the middle class who are struggling to save for retirement and college and lower-income people who live paycheck to paycheck.

Combine high inflation and high unemployment and you have stagflation. Hindsight shows how the pain of the late 1970s and early 1980s could have been avoided, yet we’re now again planning to borrow and spend — and raise taxes — as President Jimmy Carter did. Soon we may again find ourselves watching a rising “misery index” of inflation and unemployment together. If that happens, individual earning power will evaporate, and our standard of living will decline.

Read the rest:
http://www.nytimes.com/2009/0
2/14/opinion/14ryan.html

Related:
Federal debt obligations exceed world GDP

Stimulus: China Will Fund U.S. Debt But “We Hate You Guys”

http://africanamericanmoney.wordpress.com/2
009/02/14/black-news-stimulus-plan-finally
-gets-approval/

Stimulus Dilusion: More Debt Spending Will Never Resolve Debt Crisis

February 7, 2009
Governments cling to the delusion that a crisis of excess debt can be solved by creating more debt.
Niall Ferguson
The Los Angeles Times
February 6, 2009

It began as a subprime surprise, became a credit crunch and then a global financial crisis. At last week’s World Economic Forum in Davos, Switzerland, Russia and China blamed America, everyone blamed the bankers, and the bankers blamed you and me. From where I sat, the majority of the attendees were stuck in the Great Repression: deeply anxious but fundamentally in denial about the nature and magnitude of the problem.

Some foretold the bottom of the recession by the middle of this year. Others claimed that India and China would be the engines of recovery. But mostly the wise and powerful had decided to trust that John Maynard Keynes would save us all.

I heard almost no criticism of the $819-billion stimulus package making its way through Congress. The general assumption seemed to be that practically any kind of government expenditure would be beneficial — and the bigger the resulting deficit the better.

There is something desperate about the way economists are clinging to their dogeared copies of Keynes’ “General Theory.” Uneasily aware that their discipline almost entirely failed to anticipate the current crisis, they seem to be regressing to macroeconomic childhood, clutching the Keynesian “multiplier effect” — which holds that a dollar spent by the government begets more than a dollar’s worth of additional economic output — like an old teddy bear.

They need to grow up and face the harsh reality: The Western world is suffering a crisis of excessive indebtedness. Governments, corporations and households are groaning under unprecedented debt burdens. Average household debt has reached 141% of disposable income in the United States and 177% in Britain. Worst of all are the banks. Some of the best-known names in American and European finance have liabilities 40, 60 or even 100 times the amount of their capital.

The delusion that a crisis of excess debt can be solved by creating more debt is at the heart of the Great Repression. Yet that is precisely what most governments propose to do.

Read the rest:
http://www.latimes.com/news/opinion/comme
ntary/la-oe-ferg6-2009feb06,0,6972232.column

Asian New Year Down in Many Countries Due To Economy

January 25, 2009

Our Vietnamese-American New Year got off to a slow start I thought and our pastor said to enjoy God’s blessings.

In years past, we just had fun!

Then a friend suggested the economy had depress the New Year’s start globally, which is undoubtedly true….

******

From Czech News, Czech Republic

“They say the year of the water buffalo will not be good. People who are born this year will have to work hard,” Mr. Hai says worryingly in a Vietnamese restaurant Little Hanoi in Prague’s outskirts where a celebration of New Year is about to begin.

The Vietnamese zodiac calls 2009 the year of the water buffalo and the Czech Vietnamese community is likely to experience a bad year, not only because of the water buffalo.

Hard Times

Lots of food and fun festivities welcome the Vietnamese Lunar New Year. This time Prague’s Vietnamese community invited Czech journalists to celebrate New Year with them and thus discover the charms of Vietnam’s most popular holiday called Tet.
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The relaxed atmosphere of the Tet celebration was however occasionally interrupted by a mention of the economic downturn that has mercilessly hit the world, including the Czech Republic.

“Why don’t you wish this economic crisis is over soon,” says one of the Vietnamese organizers to a guest who is about to say his wish to a Vietnamese-sign painter.

It is understood by everybody present in the room why the guest should wish the end of the economic crisis. The facts are well known – Czech factories are massively sacking employees and foreign workers are the first ones to lose their jobs.

As soon as their work contracts are terminated, jobless foreigners must return home but often find themselves in a difficult situation, not having any money to buy a ticket. According to humanitarian organizations, hundreds if not thousands of Vietnamese happen to be in a such desperate situation.
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“Laying off people is a great problem. We are trying to find some kind of solution for these people, get them a new working permit and we have been appealling to Czech companies to give them at least temporary jobs,” says Le Minh Cau, vice-president of the Vietnamese Association in the Czech Republic.
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According to Marcel Winter, the chairman of the Czech Vietnamese Society, the Vietnamese markets that are so abundant in every Czech town are expected to disappear in about three years as a consequence of the global economic meltdown.

“We conducted a survey and our profits dropped down to half in the past year. It is because of the financial crisis,” representative of Asia Dragon Bazar Hong Nguyen said for Aktuálně.cz not long ago. “The truth is nobody really knows what is going to happen,” he added.
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In January a Czech green card program kicked off, which allows guest workers to get working permits in the country but has been limited to 12 non-EU countries by the Interior Ministry. Vietnam was excluded over alleged security risks. The only Asian countries included in the list are Japan and South Korea.
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The Vietnamese community is the third largest immigrant group in the Czech Republic and Vietnam is also among the 9 priority countries of Czech development aid.
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The Czech Republic is the only country in the world that has been providing a continuous humanitarian or development aid since 1945. The first Vietnamese came to the country in 1950 and the prolific cooperation went on until 1989 when the communist government was toppled.