Are we entering (or in) another recession?

[Subdude]

Geek that I am, I tend to read a number of economics sites. As anyone who follows these things realizes, economic indicators as well as the stock market are looking increasingly weak.

Dallas Fed - Risk of Slower Growth Ahead

Recession Warning

Consumer Confidence Tumbles in June

[AtticaFlinch]

I'm not sure we ever really left the last recession. My understanding is all our growth was artificial, and while it looked good on paper, it meant little to us grunts on the ground.

And I'm not in the least bit surprised consumer confidence is eroding further. Despite our employment growth earlier this year (attributed in no small part to the census) and despite last years late sales increase (attributed to Cash-for-Clunkers), there haven't been any real solid foundational changes in the way we do business in the aftermath of the meltdown. And without major change, there's little for us to feel confident about. Credit's still difficult to get, unemployment is still high, jobs are still fleeing our shores and the cost of goods has barely budged. I don't feel terribly confident going forward. Hell, I'm considering cashing in my chips and disappearing with my family to some third world country with a beach.

[jgriff]

I think some of the things that the federal government is doing is causing this recession to linger.

On example ...The EPA is revoking permits for 122 plants in Texas today.

http://www.chron.com/disp/story.mpl/metropolitan/7087940.html

Maybe the policy they are pursuing is correct. Maybe not. The result is fear and uncertainty over what the feds may do next. Fear and uncertainty are the enemy of the economy.

The fact that we have all three branches of the government controlled by one party gives them too much power. Agree with the Republicans or not. At least if they take one house back in November they can bring some stability back to regulation by slowing down the Democrat agenda. This might bring some confidence back to the business community.

[RedScare]

I think some of the things that the federal government is doing is causing this recession to linger.

On example ...The EPA is revoking permits for 122 plants in Texas today.

http://www.chron.com/disp/story.mpl/metropolitan/7087940.html

Maybe the policy they are pursuing is correct. Maybe not. The result is fear and uncertainty over what the feds may do next. Fear and uncertainty are the enemy of the economy.

The fact that we have all three branches of the government controlled by one party gives them too much power. Agree with the Republicans or not. At least if they take one house back in November they can bring some stability back to regulation by slowing down the Democrat agenda. This might bring some confidence back to the business community.

While revoking permits and stopping drilling activity 33 deep sea platforms have a chilling effect on employment (regardless whether the policy is sound), so does refusing to extend unemployment benefits and other infusions of money into the economy. Both parties are bi-polar in their approach to the economy. Republicans are limiting spending, which spurs the economy, and Democrats are tightening the screws on environmental regs, which can have the same effect. Neither is committed to ending the recession.

There is also the problem that the 2007 economy was unsustainable. Those mortgages were going to go bad, and those foreclosures were going to occur. Attempting to return to that type of economy would likely produce the same catastrophe again. Part of preventing those financial abuses means restricting the flow of money somewhat, which slows the economy. The second dip in many respects may be unavoidable in that we do not want to go back to the reckless financial markets that collapsed before.

We want our cake and to eat it too. We probably will not get to.

[AtticaFlinch]

We want our cake and to eat it too. We probably will not get to.

Part of me feels my generation came to the dance too late, and the whiskey-spiked punch has already been drunk, and there's vomit all over the floor. All the dancers are wasted and tired, lying on the floor in a twisted, tangled mess of skin and taffeta, and the cleaning crew has just gone on strike. The older generation looks at my generation, holds out a grease stained rag and says, "Do us a solid and clean this up for us. We would, but we got totally up. Woo hoo!"

I think the only places it's bound to get better are in emerging economies. Our problem is our individual largesse, and so many Americans are still unwilling to admit to our need to conserve and preserve. So many think they're living a Robert Earl Keen lyric and the road will go on forever and the party will never end. But the party's over, folks. The lights have been turned out and the shades have been drawn. Greener pastures lie in another part of the world. My parents' generation's, and to a lesser extent their parents' generation's, habit of mortgaging the future to pay for big screen TVs and gas-guzzling Humvees and Discover Card interest has left our economy in a shambles, and it seems no one cares to fix the problem.

And it's a shame, because it's a beautiful country.

It's a good thing I've developed a unique skillset that allows me to survive in the wild indefinitely.

[TheNiche]

While revoking permits and stopping drilling activity 33 deep sea platforms have a chilling effect on employment (regardless whether the policy is sound), so does refusing to extend unemployment benefits and other infusions of money into the economy. Both parties are bi-polar in their approach to the economy. Republicans are limiting spending, which spurs the economy, and Democrats are tightening the screws on environmental regs, which can have the same effect. Neither is committed to ending the recession.

To the extent that policy can be effective at curing our ongoing financial crisis, I think that this sums it up nicely. Going into November, politicians from both sides are looking for strong sound bytes, not sensible and mundane policy. And it leaves investors traumatized by uncertainty.

If there is one indicator that would traditionally be a good one, it is that interest rates are at all-time lows. And I think that that is driven in no small part from international money seeking a safe-haven in the United States. By itself, that indicator would appear to be a good one, since low interest rates stimulate consumption and investment. But low private-sector transaction volumes betray a kind of hording behavior on the part of investors that is more or less akin to stuffing money under a mattress.

I think that the record-low interest rates are a gun named 'Deflation', and we're staring down its barrel. From a fiscal perspective, the U.S. government has a tough decision to make. It ought to be spending more money. It can't realistically raise taxes because that immediately takes money out of the private sector and inhibits consumption. Issuance of new treasury debt would suck up the private money that is out there and available for investment, but could bump up interest rates and lure new investors back out from under the mattress, hopefully stimulating transactional volumes. (And transactional volume would be a godsend for commercial real estate, in particular, which is going mostly on dated sales comps and distressed asset sales, and thus has trouble demonstrating value for investors, even as notes are poised to come due in the next couple of years.)

Another alternative is that the government could print money. It's already been pretty aggressive on the M1 money supply, and that's about the only thing that's shielding us from deflation. Banks (and anybody else that holds debt) wouldn't much like it, but a jolt of inflation probably wouldn't threaten their existence in the short term, and would help them meet or exceed reserve requirements in the mid- to long-term as new deposits trickled in. The trick to managing a currency devaluation would be getting other sovereign nations to inflate their currency along with us so as not to spook huge foreign investors that look to the U.S. as a long-term investment of first resort, and also to prevent crazy trade imbalances from coming back and biting us in the ass; there would be holdouts (Japan, I think, wouldn't be thrilled at the idea), and they would benefit immensely from holding out.

[sigh] It's complicated. Too complicated for an election year, unfortunately.

[TheNiche]

Part of me feels my generation came to the dance too late, and the whiskey-spiked punch has already been drunk, and there's vomit all over the floor.

Worse, they've given themselves cirrhosis of the liver and need a donor.

[CoolBuddy06]

Did the 2008 recession end? I mostly look at economics from the point of individuals and families. A lot of people are still unemployed and underemployed; credit, while a bit easier to get now than in early 2009, is still relatively hard hard to get; the housing market isn't convincingly good; and the disaster in the gulf adds to the bad news. To me the recession hasn't ended, it drags on.

[marmer]

From where I sit the 2008 recession is still with us and the small improvements of recent months and the possible backslides of coming months are too small to really make much of a difference.

I am very worried that significant unemployment and underemployment are here to stay. Who's going to hire all those manufacturing, clerical, and managerial employees whose jobs have evaporated?

[crunchtastic]

Other than ZIRP/deflation, I think the most serious long-term consequence will be severly constrained mobility due to the real estate market and lack of job growth, combined with reactionary immigration policy change. People can't move to take new jobs (if the jobs even existed, which increasingly they won't) because they're saddled with property they can't sell and mortgages they can't get out from under except to foreclose. The coming clampdown on immigration ( IMO the low-hanging fruit of republican/tea party wins sure to come in November) will further erode consumer spending and housing and depress population growth. Meanwhile boomers get older, sicker, and more expensive, and you have the beginnings of

a demographic cycle that leads to long-term declining GDP. I am convinced that my generation (x) will be the

first modern cohort to die poorer than what they were born into.

[KinkaidAlum]

Credit is simply too hard to get unless you are "too big to fail."

My contractor's lines of credit have dried up. He's screwed, and therefore I am too. Like many small businesses, he's now forced to run a semi-ponzi scheme using my money to finish his last client with the hope that someone else will come along to fund my renovation. It didn't help that he expanded at the absolute worst time.

My biggest fear is the unemployment rate. The official rate is just under 10% and we all know that grossly underreports the actual number of unemployed. That is way too high but neither party seems to be worried about it. The Democrats are trying to extend benefits which are greatly needed while the Republicans are busy telling us that the unemployed are just lazy fatcats living off of the government dime while true Americans are working for less money than unemployment pays. Neither party though seems interested in doing the real work of trying to spur employment.

[TheNiche]

The Democrats are trying to extend benefits which are greatly needed while the Republicans are busy telling us that the unemployed are just lazy fatcats living off of the government dime while true Americans are working for less money than unemployment pays. Neither party though seems interested in doing the real work of trying to spur employment.

Exactly. You'd think that infrastructure spending would be common ground. And it's what we should've been doing more of from the beginning, whether it was "shovel ready" 18 months ago or still in the design/engineering/regulatory phases.

In an economy like this, there should be no excuse for me taking my nephew camping and finding that the playground equipment at a state park is semi-dismantled. There should be no excuse for waiting in long lines at a DMV. To make Republicans happy, there should be no excuse for any amount of illegal immigration because at a time when many struggling municipalities have to cut back on police manpower, the Border Patrol should be staffed-up enough (and have a wall, physical or virtual, under construction) to handle anybody and anything that would cross south-to-north or north-to-south. And likewise, to make Democrats happy, there should be no excuse for any major city not having significant mass transit projects under way. It frankly doesn't matter whether these kinds of expenditures are justified by cost-benefit analysis if the alternative is that people working on them would otherwise be unemployable and on the dole.

[Subdude]

Samples from Bloomberg's home page headlines earlier today:

Stocks, Commodities, Dollar Drop on Recovery Worries

Global Manufacturing Shows Weakening from China to Europe, US

Jobless Claims Show US Jobs Machine Sputtering in Recovery

Construction Spending in US Falls .2% in May

Pending Sales of Existing US Homes Decreased 30% in May

[KinkaidAlum]

Homerun, Niche.

Since you are currently idle, you should run for office! With that platform, I'd vote for you.

I simply can't believe that Obama's plan was billions of dollars to fat cats and big wigs. How is that different than the Republican's trickle down theory? Hell, Wall Streeters took those funds and have sat on them when they weren't busy rewarding themselves outrageous bonuses.

Why aren't we completely rebuilding our highway system? Why aren't we emplying thousands or sending the Americorps to the Gulf of Mexico? Why aren't we spending billions in Houston, LA, Seattle, Boston, Chicago, Salt Lake, etc... to expand public transportation?

It makes no sense. Washington is totally out of control and both parties are to blame. It's infuriating because I don't think there's a damn thing we can do about it.

[Subdude]

If there is one indicator that would traditionally be a good one, it is that interest rates are at all-time lows. And I think that that is driven in no small part from international money seeking a safe-haven in the United States. By itself, that indicator would appear to be a good one, since low interest rates stimulate consumption and investment. But low private-sector transaction volumes betray a kind of hording behavior on the part of investors that is more or less akin to stuffing money under a mattress.

I think that the record-low interest rates are a gun named 'Deflation', and we're staring down its barrel. From a fiscal perspective, the U.S. government has a tough decision to make. It ought to be spending more money. It can't realistically raise taxes because that immediately takes money out of the private sector and inhibits consumption. Issuance of new treasury debt would suck up the private money that is out there and available for investment, but could bump up interest rates and lure new investors back out from under the mattress, hopefully stimulating transactional volumes. (And transactional volume would be a godsend for commercial real estate, in particular, which is going mostly on dated sales comps and distressed asset sales, and thus has trouble demonstrating value for investors, even as notes are poised to come due in the next couple of years.)

Another alternative is that the government could print money. It's already been pretty aggressive on the M1 money supply, and that's about the only thing that's shielding us from deflation. Banks (and anybody else that holds debt) wouldn't much like it, but a jolt of inflation probably wouldn't threaten their existence in the short term, and would help them meet or exceed reserve requirements in the mid- to long-term as new deposits trickled in. The trick to managing a currency devaluation would be getting other sovereign nations to inflate their currency along with us so as not to spook huge foreign investors that look to the U.S. as a long-term investment of first resort, and also to prevent crazy trade imbalances from coming back and biting us in the ass; there would be holdouts (Japan, I think, wouldn't be thrilled at the idea), and they would benefit immensely from holding out.

[sigh] It's complicated. Too complicated for an election year, unfortunately.

Welcome to Japan, 1990.

It is notoriously hard to pull an economy out of a deflationary spiral. Japan's approach was to spend everything they could on (frequently needless) infrastructure and run huge government deficits, and even that worked to prop up demand only sporadically. They have been able to get away with it because the Japanese save a lot, making it possible to fund large deficits.

Btw, the US underwent a similar extended period of deflation and slow economic growth - the "Long Depression" in the twenty or so years after 1873.

[Subdude]

Exactly. You'd think that infrastructure spending would be common ground. And it's what we should've been doing more of from the beginning, whether it was "shovel ready" 18 months ago or still in the design/engineering/regulatory phases.

In an economy like this, there should be no excuse for me taking my nephew camping and finding that the playground equipment at a state park is semi-dismantled. There should be no excuse for waiting in long lines at a DMV. To make Republicans happy, there should be no excuse for any amount of illegal immigration because at a time when many struggling municipalities have to cut back on police manpower, the Border Patrol should be staffed-up enough (and have a wall, physical or virtual, under construction) to handle anybody and anything that would cross south-to-north or north-to-south. And likewise, to make Democrats happy, there should be no excuse for any major city not having significant mass transit projects under way. It frankly doesn't matter whether these kinds of expenditures are justified by cost-benefit analysis if the alternative is that people working on them would otherwise be unemployable and on the dole.

One might think there would be no excuse, but states generally can't run deficits and so are forced to cut back. The federal government can and does run deficit, but political pressure against deficits is building, not the other way around. Most of the other large industrialized economies are engaging in competitive belt-tightening, and the fear is going to continue to grow that if America doesn't do so, then it is at risk of having markets turn against it. That, and our Chinese bankers wouldn't like it.

[AtticaFlinch]

Btw, the US underwent a similar extended period of deflation and slow economic growth - the "Long Depression" in the twenty or so years after 1873.

Which resulted from a costly, protracted war in which funds were diverted from the public sphere in order to blow some stuff (and people) up. Yee-haw!

[Subdude]

Which resulted from a costly, protracted war in which funds were diverted from the public sphere in order to blow some stuff (and people) up. Yee-haw!

I don't think one could say it was a result of the Civil War. Instead it immediately followed on a financial panic (The Panic of 1873). That part at least should sound familiar at the moment.

[TheNiche]

One might think there would be no excuse, but states generally can't run deficits and so are forced to cut back. The federal government can and does run deficit, but political pressure against deficits is building, not the other way around.

The federal government can and does provide funding for many state-led programs, including education and transportation. ...but yes, I understand that the political environment is not on my side.

[Subdude]

One of the most common explanations given for what appears to be a slowdown is that the various stimulus measures put in place in 2008-9 are expiring, exposing underlying weakness in aggregate demand. The bet at the time was that by mid-2010 the underlying economy would have improved sufficiently and they would no longer be necessary.

At the time of the panic there was a ton of comment - you can see some on this board - that it was a sort of divine retribution on America for living beyond its means. People driving Hummers to their McMansions, and that sort of thing. Unfortunately it was that sort of behavior that supported the boom economy. Once people become more frugal, willingly or not, it follows that the overall economy might remain weak for an extended period.

[AtticaFlinch]

One of the most common explanations given for what appears to be a slowdown is that the various stimulus measures put in place in 2008-9 are expiring, exposing underlying weakness in aggregate demand. The bet at the time was that by mid-2010 the underlying economy would have improved sufficiently and they would no longer be necessary.

At the time of the panic there was a ton of comment - you can see some on this board - that it was a sort of divine retribution on America for living beyond its means. People driving Hummers to their McMansions, and that sort of thing. Unfortunately it was that sort of behavior that supported the boom economy. Once people become more frugal, willingly or not, it follows that the overall economy might remain weak for an extended period.

The real downside from all this is that if we were asked, "What lesson did you learn from this?" everybody would shrug and say, "I dunno."

This recession has proven to be pointless in terms of improving our society.

[TheNiche]

The real downside from all this is that if we were asked, "What lesson did you learn from this?" everybody would shrug and say, "I dunno."

This recession has proven to be pointless in terms of improving our society.

One of the recurring themes at my grandfather's funeral service was that his self-reliance, tenacity, frugality, and knack for mechanical improvisation rooted back to stark poverty during the Depression era. And I believe it! That was the poorest and hardest-working rich guy I've ever known. Yet...how is it that we pretend to celebrate the upbringing that shaped his character (a six-person family living in a single-room log cabin in east Texas and barely scraping by cultivating a garden and from hunting woodland critters)...when a similar subsistence-level experience in modern times would be considered lunacy, the realm of Unabomber wannabes? And if any significant number of people had to go through that, there'd no doubt be some kind of program started up to stamp out any trace of a self-subsistent subculture. ...because subsistence is now perceived as a human right and is to be provided to you by the collective (care of the Corn Lobby, naturally).

Then there was my other grandfather's Depression experience as a CCC worker. I don't know exactly what he did or where he did it, but he certainly didn't experience this era lounging about in a recliner waiting for a direct deposit into a bank account. Consider for a moment that the CCC employed about 2.5 million people out of a population of 132 million (per the 1940 Census). If a program of the same scale were implemented today in lieu of extended unemployment benefits to unemployable people (like me), it'd employ 5.9 million people...or about four times the size of the active-duty U.S. military...would enjoy the benefit of about tripled or quadrupled productivity of labor since the 1930's, and would put a tremendous amount of idled construction equipment back into service. Plus, we'd emerge on the other side of the Great Recession with a labor force that had learned how to build things and that had learned not to fear a little bit of sweat. That has lasting value. ...but no, we're all now, and we apparently like it that way.

[Subdude]

The real downside from all this is that if we were asked, "What lesson did you learn from this?" everybody would shrug and say, "I dunno."

This recession has proven to be pointless in terms of improving our society.

Despite the cliche that "a crisis is a terrible thing to waste," I doubt that any recession really improves our society.

[Subdude]

If a program of the same scale were implemented today in lieu of extended unemployment benefits to unemployable people (like me), it'd employ 5.9 million people...or about four times the size of the active-duty U.S. military...would enjoy the benefit of about tripled or quadrupled productivity of labor since the 1930's, and would put a tremendous amount of idled construction equipment back into service. Plus, we'd emerge on the other side of the Great Recession with a labor force that had learned how to build things and that had learned not to fear a little bit of sweat.

I think you know that in today's world something of that scope would be denounced as socialism.

[RedScare]

I think you know that in today's world something of that scope would be denounced as socialism.

It would, and it would simply reinforce what our society has become, a collection of selfish, greedy and narcissistic souls, with no concept of, or interest in, sacrifice for the greater good. And it infects every facet of society. Whereas in the past, most people understood the premise that the whole was greater than the sum of the parts, such is not the case today. Even those who claim to support the military, placing stickers on their cars and singing God Bless America at baseball games, neither would serve themselves, nor raise their taxes to fight the wars, equip the troops and treat their wounds. We are left with two factions only concerned with keeping or returning to power. Neither listens to the other, and neither is interested in compromise, lest they be seen as weak to their largely ignorant supporters. So, we are left with Democrats pushing to continue direct deposit into bank accounts, asking nothing in return, and Republicans, who'd rather see the unemployed starve than use government aid to help the unemployed, since they must be lazy Democrats if they are not working. And the constituents who encourage the politicians are every bit as much a part of the problem as the pols themselves.

[Subdude]

Interesting charts illustrating the depth of the unemployment problem.

[TheNiche]

I think you know that in today's world something of that scope would be denounced as socialism.

If the prevailing counterargument to extending unemployment insurance is merely that deficit spending needs to be reigned in, and unemployment insurance is a transfer payment pure and simple whereas a WPA/CCC-type program would be payment for services rendered...nah, that's a step in the direction of capitalism. It's not as though we're compelling people to work; they could exercise a choice, their own free will. This should be pretty solid middle ground.

Granted, FDR's New Deal didn't make a lot of sense on the whole. Many programs hurt more than helped or created long-term problems. Even within the WPA, they very intentionally slowed down work. (There's a particular building near the turning basin that was built under the WPA, and every single window pane has a different measurement. That was done intentionally to promote waste.) Obviously that kind of thing shouldn't be acceptable.