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Economic Babble
To get a real feel for which way the economy is headed, imagine if the things analysts and government officials have been saying about the economy of late were applied to your personal financial situation.
For example, these experts say that after falling off a cliff at the end of last year and the start of 2009 the economy has finally bottomed out. Visualize that in your own personal life. You’ve just fallen off a cliff and are now bottomed. You’ve hit the ground, in other words, and can’t fall lower. Does this seem like a reason to smile?
Many experts in recent weeks have noted that reports from institutions like banks have “beaten expectations.” The thing is, though, if you set expectations low enough you can’t help but exceed them. Again, consider this notion from a purely personal financial perspective. You thought by now you’d be living on the street and hustling passersby for spare change, but that hasn’t happened. Not yet anyway. Things haven’t quite come to that. Feeling upbeat in consequence?
And then there’s the whole “glimmer of hope” business, which for those old enough to remember has an eerie resemblance to the light at the end of the tunnel Lyndon Johnston and his advisors were always seeing during their great Vietnam adventure. We have more than 300 million people in this country, in three times zones, and literally millions of enterprises doing everything from loaning money to growing radishes. Even a government analyst can detect some signs of better times in this extraordinary mix. In like manner, you or I or anyone else can find some glimmer of hope in the worst of times in our personal lives. No reason to cheer about that, however.
Frankly, I’m disgusted by the forced happy talk that’s been coming from Washington and Wall Street in recent weeks and months. The Paulson II policies being pursued by the Obama Administration are better than the original in the sense that’s there’s a real stimulus included that helps us all, not just a save-the-bankers’-bacon component. But economically speaking, things in this country continue to get worse and worse. That’s not a pleasant truth to have to mention but it is the truth. And as long as Geithner and Bernanke and Summers are at the economic helm, this is likely to drag on, and on. and on, and…
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18 Responses to “Economic Babble”
Certainly a larger amount of “doom and gloom” would lift the ailing spirits of Americans everywhere!
Hear, hear!
“Frankly, I’m disgusted by the forced happy talk that’s been coming from Washington and Wall Street in recent weeks and months.”
Who am I to argue with such expert disgust.
But, I will. I rather continue with my naive glimmers of economic hope than join the doom and gloom crowd. Of course, at my own risk, as has been pointed out to me profusely.
Actually, a bottom in the markets is a good thing, if it has happened. The market is a 12 – 18 month leading indicator of economic recovery, and a 6 – 12 month trailing indicator of economic slowdown.
So, the fact that we may not be seeing a lot of signs yet of a recovery may not mean that the market bottom is illusionary. As an example, my son just accepted his first job position after he graduates in May. He ended up with two offers. From January to mid-March, he was very concerned that NO job offers would be forthcoming, but then he started hearing from companies looking to hire.
FYI Dorian – thought you would be interested that he took a position with a defense contractor (Overwatch Tactical Systems) that creates battlefield Command and Control systems, Distributed Common Ground Systems — Army (DCGS-A), etc. He is very excited about serving his country, too, even though it is in a different way than his sister.
Great to hear about your son, AR. See, “it's working” Hope and optimism, that is.
Dorian
Chrysler Financial Rejects Federal Aid Due to Compensation Limits
In other words, American Corporate Elites would rather let their companies go down the drain rather than take a temporary pay cut.
Hmm, they had other offers for monies that didn't come with the current strings, and potential future strings, looked at Obama deciding who would run GM and setting the ground rules for Chrysler having to merge with Fiat, and said 'it is not in our best interests to take additional monies from you that could hamstring future decision-making capabilities.'
The Treasury Department gets pissed at not being able to bury itself deeper into a targeted company and set themselves up for even more control over their operations, and so issues a statement using the current 'hot button', executive compensation, as the reason they refused government help. Chrysler Financial categorically denies the accusation.
So of course Chrysler is lying, and Treasury is not. I guess that is because government agencies ALWAYS tell the truth.
The economy is not some smooth, perfect parabolic curve – it's bumpy, it's messy, with jagged peaks and sharp downturns, perhaps multiple little peaks and valleys. And not all parts of the economy are bottoming out at the same time, in the same ways. When I was living in Bay Area California back in 2006, it was quite clear that things were going very south very fast; yet I now live in San Antonio, which is only now just starting to take a slight downward tick in the past couple of months.
Furthermore, I doubt we'll really know when the worst is over until *well* after the fact – as the old saying goes, hindsight is 20/20. No amount of prognostication or reading of the tea leaves can give us a true, clear picture of where things stand right now, especially when we cannot even agree on how to properly measure things and the value of thosse measurements.
Yet, people try and try – perhaps one of my favorite 'big picture' prognosticators is Barry Ritholz over at “The Big Picture” – http://www.ritholtz.com/blog/ . One of the more interesting articles he links to recently is 'Four Markers of an Economic Turnaround' (http://www.ritholtz.com/blog/2009/04/four-marke…), where Merrill Lynch's David Rosenberg crunches the numbers on four specific markers, and concludes were are 44% of the way through the recovery cycle. Interesting hypothesis, and it has a nice “feel” to it, but how accurate could any prediction be, really – we won't know for a couple of years which of the financial wizards were right and wrong.
In other words, American Corporate Elites would rather let their companies go down the drain rather than take a temporary pay cut.
Call me old-fashioned but I think private companies turning down taxpayer money is a GOOD thing.
AR
Congrats to you and yours, and thank your daughter. I take it she is in the service.
I hope you're right about Wall Streets prognosticating properties. I hope they are accurate in this circumstance, but because we came so close to actual collapse, these usual future indicators may not be as accurate. hope I'm wrong.
I'll hold my breath a little longer.
HemmD -
Yes, she is in the Navy. Thanks for asking.
As for the comment of coming so close to actual collapse, there are signs we were not in quite as dire straights as initially thought. Obama has backed off that contention himself, and given the number of banks that have managed to both turn profits already, and are able and willing to repay their loans (even if the government currently does not want to allow it), you have to question how quickly all that happened given how serious the crisis was supposedly. I
cannot help being cynical.
I am also not saying there were not real problems, just not as bad as we may have thought, and I am actually more concerned now about the combination of commercial real estate and the coming hyper-inflationary period (which cannot be prevented, given the massive increases in the money supply with no underlying economic growth) perhaps giving lie indeed to the normal leading indicator function of the market.
My only thoughts about how bad it actually was I der4ive from how the “experts” reacted. Nobody shows up asking for 3/4 of a trillion bucks needed immediately without some serious spooking. If they were wrong, they sure didn't act like they thought they were wrong.
Just sayin'
No company (or groups of companies) turns down 3/4 of a trillion dollars, until they learn about the strings attached! And they were not visible at first.
AR, I agree with you that companies NOT taking taxpayer money is a good thing. And congrats to the Obama administration for putting some conditions on feeding at the government trough. If it makes them find private capital instead, good for them! Good for us!
I'm not disagreeing with how things have turned out, I'm just saying that a lot that happened at the beginning of this definitely had scared sh*tless written all over it.
Lots of money went into the money market directly from the government because so much went out in one day.
This video kind of addresses what I saw:
http://www.youtube.com/watch?v=_NMu1mFao3w
When Chrysler goes though bankruptcy and tens of thousands of Americans hit the unemployment lines, we shall find out who was lying.
Now it may well be that there is nothing that can be done and that Chrysler is already a walking corpse in which case i am not sure what Financial institutions are doing when they loan it money.
Chrysler SHOULD go through bankruptcy. So should GM.
The difference is there will be something left of GM, but maybe not Chrysler.
IMF Says Losses From Crisis May Hit $4.1 Trillion
http://online.wsj.com/article/SB124031818704938927.html' rel=”nofollow”>Banks Need $875 Billion in New Equity by 2010, IMF Says
FY 2009 Toyota domestic output may hit 31-year-low below 3 mil. units
Nothing to see here, no crisis…
I am sure that if the Fed raises it rates to 5%, that only a few small banks(Citi, Bofa. Wells Fargo, GS, etc ) and industrial conglomerates( GM, GE, Chrysler, Ford, Toyota, VW, Boeing, etc…) will go belly up.
DQ – you always think the sky is falling, and are waiting with the glee of a vulture, hoping it will happen.
Again, I didn't say there were not, and are still not, problems, just maybe not as bad as initially presented. And there are very few more discredited monetary organizations than the IMF. If THEY say the sky is falling, then I feel even better about things.