DoomwatchTM vs. Timesizing®
depression trends - 2005-2008
[Commentary] ©2008 Philip Hyde, The Timesizing Wire, Box 117, Harvard Sq PO, Cambridge MA 02238 USA 617-623-8080 - HOMEPAGE
10/31/2008 depression trends from Wall St. Journal (j), NY Times (t) or Boston Globe (g) - missing earlier and later dates are handled entirely on recent archive page(s) -
12/26/2007 headlines from hell from Wall St. Journal (j), NY Times (t) or Boston Globe (g) - missing earlier and later dates are handled entirely on recent archive page(s) -
- When consumers capitulate - The economy's next big problem, by Paul Krugman, NYT A27.
The long-feared capitulation of American consumers has arrived. According to Thursday's [10/30/2008] GDP report, real consumer spending fell at an annual rate of 3.1% in Q3; real spending on durable goods (stuff like cars and TVs) fell at an annual rate of 14%....
Also, these numbers are from Q3...before [consumer or investor?] confidence collapsed after the fall of Lehman Brothers in mid-September, not to mention before the Dow plunged below 10,000. Nor do the data show the full effects of the sharp cutback in the availability of consumer credit, which is still under way.
..\..American consumers almost never cut spending. Consumer demand kept rising right through the 2001 recession;
[cuz they could still get home equity loans.]
the last time [consumer demand] fell even for a single quarter was in 1991, [but] there hasn't been a decline this steep since 1980, when the economy was suffering from a severe recession combined with double-digit inflation.
[That is, stagflation alias stagnation-inflation alias unemployment-inflation alias simultaneous unemployment and inflation, a situation typical of the third world - and it's even worse today as the once-great USA redistributes more wealth to the most wealthy and sinks ever closer toward the third world.]
...American consumers have long been living beyond their means.
[...pushed into doing so by economists and Wall St. And if consumers hadn't been "living beyond their means," the economy would have tanked much sooner.]
In the mid-80s [they] saved about 10% of their income.
[This figure would be much higher for the higher income brackets, much lower for the lower income brackets. Expressed more positively and relevantly to recession, American consumers spent 90% of their income, much lower for the higher brackets, higher for the lower brackets who therefore are disproportionately responsible for growth and prosperity instead of recession despite the mainstream's confusing tut-tutting about spending/consumption and praise for saving.]
Lately, however, the savings rate has generally been below 2% - sometimes it has even been negative...
[Judging consumer spending by its supposed (but not really even close) opposite, savings, is crazy and a total nullification of everything we supposedly learned from the Great Depression, e.g: that there's "many a slip twixt cup and lip" in that investment cannot be equated with savings, and jobs cannot be equated with investment. Isn't there some more direct way to gauge consumer spending? They're sooo clever at devising derivatives and other financial instruments to soak up more millions in the obese financial markets.]
- and consumer debt has risen to 98% of GDP, twice its level a quarter-century ago.
[Again, a contradictory signal in their own terms - here he's treating high consumer debt as a negative signal, but as we hinted in our first comment above, the only thing maintaining spending the last 10-15 years has been rising consumer debt, making it a positive signal - now Krugman has suddenly got worried that it's unsustainable. Looks like The Economist's Disease = terminal short-termitis, afflicting even our Nobel prizewinner, the best of the best...of lethally flawed, multiply self-contradictory, mainstream economics. Here we go -]
Some economists [ie: most] told us not to worry because Americans were offsetting their growing debt with the ever-rising values of their homes and stock portfolios. Somehow, though, we're not hearing that argument much lately.
[including not from Krugman himself - though he still hasn't let go of Free Trade.]
Sooner or later...consumers were going to have to pull in their belts....
But the timing of the new sobriety is deeply unfortunate.
[As if consumers had a choice with the housing collapse.]
...Consumers are cutting back just as the U.S. economy has fallen into a liquidity trap [ie: a shortage of credit] - a situation in which the Federal Reserve has lost its grip on the economy.
[- a pretty tenuous grip at best - it was only based on manipulating loan interest rates, raising to reduce lending, lowering to increase lending - but once interest rates get close to zero, the lowering doesn't work cuz there's insufficient incentive for lenders to risk losing their money.]
...If consumers cut their spending, and nothing else take the place of that spending
[such as government spending?...on artificial job creation to keep people spinning their wheels for a 40-hour workweek that was produced by 100 years of reductions but has been frozen since 1940? - artificial job creation that is too little to maintain economic growth in the absence of the Cold War and is deteriorating the environment anyway? = definitely not worth it]
the economy will slide into a recession
["will slide"? is Krugman still denying reality?]
reducing everyone's income.
[More to the point, reducing markets and sales and corporate profits and stock prices and dividends and the income of wealthy - and even the principal of their estates.]
In fact, consumers' income may actually fall more than their spending...
[Ah, isn't this the same as spending more than their income - and hasn't this been the case for at least the last 10 years?]
so that their attempt to save more backfires - a possibility known as the paradox of thrift.
[Let's be clear - it ain't the middle and lower brackets who are "attempting" to save more because they don't have any extra money. So who could it be? Well, it must be the top brackets who, due to high hidden unemployment and labor surplus are receiving far more than their usual share of the national income and wealth. And "attempting to save more" is an inaccurate description of their situation. They are attempting to invest the much more that they're receiving and to invest it profitably or at least sustainably - and they can't because by fostering a labor surplus they have suctioned the wages and spending power out of the markets for the productivity they need to invest in.]
12/23/2007 headlines from hell from Wall St. Journal (j), NY Times (t) or Boston Globe (g) - missing earlier and later dates are handled entirely on recent archive page(s) -
- Holiday spending not good, but not surprising - Robust sales of luxury products could not make up for sluggish sales of jewelry ad women's clothing, by Michael Barbaro, g.D1.
...Spending between Thanksgiving and Christmas rose just 3.6% over last year, the weakest performance in at least four years, according to MasterCard Advisors, a division of the credit-card company. By comparison, sales grew 6.6% in 2006, and 8.7% in 2005.
[Guess consumers have finally maxxed out their credit lines. There goes the Great American Consumer Miracle and Last Hope of the Global Economy - except that the idiot savants have now switched to the "rise" of consumption in China and India. Let's see how long it takes them to find out that two billion people with an extra peanut to spend do not equate to millions of Americans recently pushed below the poverty line. The few imports from us/US that they are, and will be, able to afford will be hugely overpublicized ... but still insignificant. Because, don't forget, their top brackets will be copying us and vacuuming their national incomes without limit into their own few pockets too ... and strangling their consumption as it expands.]
"There was not a recipe for a pickup in sales growth," said Michael McNamara, VP of research and analysis at MasterCard Advisors, citing higher gas prices, a slowing housing market, and a tight credit market. Strong demand at the start of the season for a handful of must-have electronics, like digital frames and portable GPS navigation systems, trailed off in December....
What did eventually sell was generally marked down - once, if not twice - which could hurt retailers' last-quarter profits.... Excluding gas purchases, overall holiday sales rose a lackluster 2.4%, the credit card company said....
[Well, well, the spending of the thousands of new millionaires and billionaires is apparently not making up for spending cuts of the millions recently pushed below the poverty line. We are experiencing first-hand the reverse multiplier effect. The short-sighted and narrowly interested top brackets are vacuuming ever more of the national income and wealth into their own few bulging pockets, with no limit in sight. This is what makes a third-world economy. It's like a black hole in astronomy - after a certain point, the compaction of mass is so intense that nothing leaves the center, not even light waves. In the economy, after a certain threshold of concentrated income and wealth is passed, nothing "trickles down," except possibly the effects of the increasingly stupid decisions made by the increasingly insulated and isolated wealthy decision-makers. Today in the USA, the unlimited concentration of money in the top 0.001% is deep into its self-destructive zone, vacuuming the spending power out of the markets for the productivity in which it would like to invest - and the actual spending activity of the top fraction is insignificant compared to the weakening spending of the other 99.999% of the population. We're well into the economic death spiral, and only timesizing and its successor-programs can ease us out on a market-oriented basis. In the political age we humans learned that if we can tolerate some negativity from one another, we'll make faster progress, because negotiation will replace genocide and ostracism. In the economic age, we learned that we can build partial agreement and progress faster if we negotiate with numbers instead of the gut-churning political and religious slogans, because quantification will replace inflammatory rhetoric. Now as the ecological age begins, we're going to learn that we'll be more likely to survive the pressures we're putting on our ecosystems if we take the guesswork and arbitrary "fixes" out of our economies, identify the natural determinants that should set economic variables like workweek length, interest rates and income and wealth maxima, and design systems that automatically, smoothly and continuously tie the dependent variables to their natural determinants - with no political interventions and no swerves due to changing fashions in economic dogma.]
Eboni Jones...of Windsor CT epitomized the problem for stores.... "I am on a tighter budget than I've ever been," said Jones..\..a phone company manager.... In the past, she easily spent $100 each on her six nieces and nephews. This year, it was more like $50. "If it's not on sale, I won't buy it," Jones said....
[And this is evidently a person with no kids. What kind of spending cuts must the parents of her nieces and nephews have been making?! Gee, maybe the consumer base isn't infinite after all! Maybe it can't take any amount of punishment and abuse. If you keep downsizing consumers from their jobs, and downsizing the pay of those who are still working, and upsizing their health costs, and downsizing the pensions and pension funds of those who have retired - and then making consumers pump their own gas, and be their own bankteller and travel agent, and check out their own supermarket purchases, well gee, maybe it all finally starts, just starts, to take a toll.]
8/17/2007 headlines from hell from Wall St. Journal (j), NY Times (t) or Boston Globe (g) - missing earlier and later dates are handled (with gaps there too) entirely on current homepage or archive pages -
- Firms find ways around [Massachusetts] state health law, by Alice Dembner, g.A1.
To comply with the new state insurance law, a Burger King franchisee in Boston expanded coverage from just his salaried staff to all full-timers. To control his costs, he halved the share he pays. Only three of the 27 newly eligible employees took the insurance; others say they can't afford it.
A large human service provider toughened eligibility for coverage in response to the new law, requiring employees to work 30 hours a week to qualify. That took away the option of work-based coverage for nearly 100 low-wage workers, but made them eligible for cheaper, state-subsidized insurance. It could reduce the company's costs while increasing the state's.
Another employer split his firm into separate corporations, each with fewer than 11 full-time employees, according to his insurance broker. That way he does not have to offer insurance, nor pay a fine.
Businesses from Boston to the Berkshires are responding to the state's [so-called] landmark health insurance initiative in ways that could help it succeed - or stumble.
[So far she's only provided examples of the stumble - so why'd she mention succeed? Bad journalism.]
Policy makers are watching and waiting, but said they will act if many employers dodge their obligations.
[Policy makers are great at "doing good with other people's money."]
In the first nine months of this year, according to the latest state figures, about 45,000 workers and their families gained insurance because employers picked up part of the tab. That number represents a small but significant chunk of the 293,000 newly insured state residents, a total that puts Massachusetts between half and three-quarters of the way toward its goal of covering nearly every resident.
["Nearly every resident"? How scientific!]
Yet some employers are taking actions that could shift costs to the state [appropriately, because of this unfunded mandate due to cowardly legislators], or leave more people uninsured, potentially upsetting the delicate balance of responsibility on which the initiative rests [such B.S.!], according to interviews with more than 20 companies, insurance brokers, and trade organizations....
Businesses with 11 or more full-time equivalent workers are now required to offer insurance or pay a fine. The law also bars employers from offering higher-wage workers better health benefits than low-wage employees. In addition, workers with access to employer-subsidized insurance are now barred from getting state-supported coverage, and will be excluded from the state's free care program starting in April.
[Note this is all negative and punitive, not positive and incentivized - all stick and no carrot.]
The provisions were designed to ensure that as many workers as possible get coverage through their employers in a state where about 70% of the 200,000 businesses offer insurance benefits.
[There's the problem. These are not really provisions because they provide nothing - they only try to force others (employers) to provide something. Spineless legislators passing unfunded mandates.]
For years, Doug Barlow and his business partner had paid 100% of the insurance cost for 11 full-time salaried workers at their three Burger King restaurants in Boston. The new law's antidiscrimination provisions [ie: requirements] led them to offer insurance to 27 hourly employees [in addition]. But the potential cost - nearly $1,100 per month for family coverage - pushed them to cut the firm's contribution to 50%.
"I was prepared for a lot more people coming into our plan, but it didn't happen," said Barlow. Other employers said they are seeing the same pattern - expanded eligibility that does not lead to many more insured individuals.
"For most working class people, regardless of whether the company pays part of the premium, it's very expensive," Barlow said. "Some full-time people said they'd done the math and it is cheaper for them to pay the state penalty than pay their half of health insurance."
[This turns mandated health insurance into just a very stupid and destructive tax on the middle class.]
The law requires individuals to obtain insurance by Dec. 31, if the state deems it affordable [huh?], or pay a penalty of $219. Next year, the penalty will rise.
[Brilliant - add to the burdens of the uninsured by penalizing them for being uninsured. This is as viciously stupid as debtors' prison. And how likely are state legislators to "deem insurance affordable" when they each draw over $100,000/year in salary from taxpayers, most of them much poorer?]
Rebecca Posada works the counter at the busy Burger King in Center Plaza [where's that?]. Although she's been uninsured for the 5 years she's worked there and would like coverage, she is refusing Barlow's offer. "I don't make enough" to pay $46 a week in premiums [she] said...during a morning break. She hopes to continue getting free care at the East Boston Neighborhood Health Center, and may be able to avoid the state penalty because of her low income.
Vinfen, a 2,000-employee company that runs programs for mentally ill clients statewide, took a different approach.... New employees now have to work 30 hours a week to qualify for insurance, up from 20. ...Said Tim De Arajo, VP of HR, "By denying them eligibility to our plan, we gave them eligibility to the state plan...."
Two thirds of their employees earn less than $24,000 a year, which would qualify them for state-subsidized coverage.
Separately, Vinfen renewed an offer of coverage, with a 70-75% subsidy, to 650 existing employees who were eligible but not enrolled. Only 72 (11%) signed up.
Some other firms have similarly tightened eligibility to control costs or try to shift employees to state plans, said Christopher DeLorey, a director of Telamon Insurance & Financial Network....
Policy makers and analysts are concerned that this pattern could boost enrollment in the state-subsidized plan, which is already far above predicted levels.
[And rightly so, because the only real universal coverage is single-payer government-provided coverage, not ridiculously mandated coverage, amounting to a destructive attempt to force business toward a particular private industry (the overpriced and inefficient health insurance industry).]
The bulk of the newly insured so far are covered by state-funded programs....
Some additional public money is coming from companies required to pay fines of $295 [ie: $300] per employee under the law because they don't offer insurance.
Northeast Knitting Mills, a small sweater factory in Fall River MA, dropped coverage in February because the 4th-generation family owners could no longer afford it, said Pres. Dan Reitzas.... [This will help] employees get a tax break on privately purchased insurance..\.. He will pay a $13,000 fine [for 44 employees?], which is about 6% of his expenses, he said, but far less than the $50,000 he was paying for insurance....
But other firms are avoiding fines by designating their employees as independent contractors or using other questionable means, employees and brokers said.
Paul Pietro, chairman of the Mid-State Insurance Agency, said he helped one of his clients set up separate corporations for each of its Massachusetts locations. Each then had fewer than 11 employees, so the insurance law did not apply..\..
..\..When drafting the [would-be] universal insurance law, "we purposely did not raise employer taxes to pay for insurance," said Sen. Richard Moore, cochairman of the Legislature's Committee on Health Care Financing, who plans oversight hearings within a few months....
[This still amounts to a raise in taxes, on both employers and employees, and a pretty arbitrary one at. Until we research the good, employment-linked Hawaii plan of 1990, our best suggestion is a single-payer government plan paid for by graduated income taxes, if necessary at World War II levels. Remember wartime prosperity? This was one of its ingredients.]
12/10/2005 headlines from hell from Wall St. Journal (j), NY Times (t) or Boston Globe (g) - missing earlier and later dates are handled entirely on current homepage or archive pages -
- [Stumbled on this gem when googling David Cay Johnston's "Free Lunch" (Kate heard interview on NPR's Here & Now 1/27/2009) - so backfilled it -]
Gilded Age Crime: Poor Go Homeless, Wealthy Get Bailouts (Brent Budowsky), The Hill's Pundits Blog, pundits.thehill.com
Driving to the Naval Academy at Annapolis, the route goes through poor neighborhoods where house after house have signs: For Sale.
What this really means is: foreclosed.
Listening to Jimmy Cramer yell and scream on CNBC about how "there is so much pain
out there," he was not referring to underpaid American troops, or homeless American poor, but the banks, hedge funds and private equity deal-makers whose hundreds of millions of dollars have been reduced to hundreds of millions of dollars.
In fact, the great pain suffered on Wall Street is this: At the market close this past Thursday, the Dow Jones average was up 3 percent, down from an all-time record high only several weeks ago.
These are tough times for the wealthy.
What has happened during the Bush years, with the Bush ethic of "grab all you can" greed, is the stench of a new Gilded Age that is morally disgraceful, economically unsustainable and politically deadly for Republicans if the Democrats speak clearly against this.
Hillary would probably argue that the wealthy, like special-interest lobbyists, are just plan old Americans who never influence government with their money. Some in Congress will have to interrupt their fundraisers and offend their campaign contributors. For most Democrats, this is the issue of a lifetime, the stuff of which landslides are made of.
Is it right that American troops are told we can't afford to give them body armor and protected vehicles, so they die preventable deaths, while the highest-income 1 percent receive huge tax cuts?
Is it right that the new racket on Wall Street is that banks make bad loans, sell them to hedge funds and private equity firms, many of whom are virtually unregulated and untaxed, who then complain about their pain after they foreclose on average Americans for falling a little behind their payments?
It is good that today the Fed cut the prime by 50 points, but it is bad, and terribly wrong
and unjust, that in the last week the Fed has essentially used Americans' money to bail out the wealthy who made the profits, while doing zero for the foreclosed and homeless.
When the banks, hedge funds and private equity firms make bad deals, they keep the
personal profits, while the corporate profits are protected by bailouts. Meanwhile, when the average Americans in the middle class, or the poor, fall a little behind, they get the boot, they lose their jobs, they are thrown into the street without homes and often without food.
Erin Burnett, the new glamor star at CNBC, says with a sneer that Americans are wrong to believe they have any right to a home.
In Ms. Burnett's world, the people have no right to a home, but the hedge funds have a right to the bailout. When things go bad, the average Americans get the boot, while the upper class gets the loot, paid for by the taxpayer, helping only the few.
With American troops getting killed because of a lack of armor we can't afford to give them, paying loan shark rates for desperation loans because of fair wages we don't pay them, with middle America feeling the squeeze because of the greed, and poor Americans going hungry and homeless, Jimmy Cramer cries out against the pain at the top. Erin Burnett sneers at the dream of a home, and the Gilded Age stars tell The New York Times they have more money, because they are superior.
Why are so many of these superior specimens of humankind the first in line for the bailout, paid for by those they believe inferior?
The Gilded Age ends on Jan. 20, 2009, but until then, the bailouts will flow for the few,
while the pain will be felt by the many.
This is another reason the world will rejoice when the age of Bush ends, and the age of reform begins, after the American people speak in November 2008.
- Judges weigh hedge funds vs. the SEC, by Stephen Labaton, NYT, B1.
WASHINGTON, Dec.9 - A federal appeals court on Friday sharply questioned the SEC's plan to tighten oversight of hedge funds.... The notable troubles of some hedge funds - most recently the collapse of Bayou, a Connecticut hedge fund - have inspired calls for greater regulation....
[Ah, hedge funds, and soon, debt swaps and single stock futures and NINJA loans (no income check, no job check, no assets check) and liar's loans and toxic assets... as Wall St gets creative in dreaming up new investment instruments, with much osteoporosis, to absorb the huge coagulation of money funneling up into the top 1% and fewer Americans, since the deepening labor surplus can't hold it down among the 299,000,000 Americans who actually want and need to SPEND it.]
For earlier collapse stories, click on the desired date -
July 1-15/2002 + Jun 30.
Dec/2001. Earlier 2001 months accessible via links at bottom of Dec/2001 page.
Earlier Y2000 months accessible via links at bottom of Dec.1-10/2000 page.
Earlier 1999 months accessible via links at bottom of Dec.1-15/99 page.
Earlier months accessible via links at bottom of Dec/98 page.
Check also doomtrackers *Roubini and *Dismal Scientist from The Economist (3/13/99 p.7), and how
the way we're using technology makes life harder instead of easier at *NetSlaves.
Questions? Comments? email firstname.lastname@example.org.