Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Double-Dip Recession

Preliminary GDP Report a Nasty October Surprise

Cash

Cash (Photo credit: bfishadow)

The preliminary report on the country’s gross domestic product (GDP) issued on Friday by the Bureau of Economic Analysis (BEA) was called a “nasty October surprise” by James Pethokoukis at the American Enterprise Institute. On its face the report noted that the nation’s economic output during the third quarter exceeded economists’ expectations, growing at an annualized rate of 2 percent when it was expected to grow at only 1.7 percent. This was a significant jump from the second quarter which notched a poor 1.3 percent annualized rate of growth.

But Pethokoukis, an expert at parsing such reports, found little about which to rejoice. For instance, the economy has only averaged 2.2 percent annual growth since the Great Recession  officially ended in June 2009 and Friday’s report showed essentially no change from that average. In fact, when this year’s first quarter and second quarter growth rates are averaged, the economy grew at 1.65 percent, triggering the distinct probability, according to Pethokoukis, of another slip into recession.

Relying on data from both the Federal Reserve and Citigroup, Pethokoukis offered three reasons why another recession is likely: 

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Economy Tipping Over Into Recession, Again

English: Yellow hard hat. Studio photography.

When shipping and supply managers were quizzed about their current outlooks by two separate reporting agencies, their answers were the same: Orders are slowing and so is production of manufactured goods. The Purchasing Managers’ Index (PMI), released in late June, and the Report on Business of the Institute of Supply Management (ISM), which was released on Monday, each showed significant slowing. The PMI’s manufacturing index came in at its lowest level since last July, while new orders for durable goods (autos and appliances) fell sharply in June, continuing a trend downward since early spring. It also showed a decline in the backlog of orders, the first since last September.

According to the ISM, its index fell below 50 for the first time since July 2009, indicating continuing contraction in the manufacturing sector of the economy and echoing the PMI’s report. What was startling in the ISM’s report was the decline in new orders: down by an astonishing 12.3 percentage points in the month of June. ISM’s production index also declined severely, by 4.6 percent, and was down by 10 percent since the end of March.

Retailers’ inventories are climbing as well, indicating lack of demand by consumers. More troubling was

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American Families Lose 40% of Net Worth to Housing Bubble

The Harvey family

The release last week of the Federal Reserve’s much-anticipated three-year study of America’s finances, its Survey of Consumer Finances, confirmed what many families already know: Between 2007 and 2010 the average family’s net worth declined by nearly 40 percent, mostly because of the decline in housing prices. The Fed study also confirmed that their incomes also fell significantly in real terms, by nearly eight percent.

It was during this period that the country’s Gross Domestic Product (GDP) dropped by more than five percent between the third quarter of 2007 and the second quarter of 2009 while unemployment jumped from 5 percent to 9.5 percent. But the seeds of the decline in net worth had been sown decades earlier as politicians, aided by the media, successfully persuaded Americans that home ownership was to be desired greatly.

By reducing interest rates, giving tax breaks on the deductibility of interest paid on home mortgages, and encouraging (some would say forcing) banks to reduce lending standards, the stage was set for

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Worldwide Recession Impending and Inevitable

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Christine Lagarde, managing director for the International Monetary Fund (IMF), warned that the world faces the risk of a “lost decade” and that “there are dark clouds gathering in the global economy.”

Reiterating her call for global cooperation, she added,

If we do not act, and act together, we could enter a downward spiral of uncertainty, financial instability, and a collapse in global demand. Ultimately, we could face a lost decade of low growth and high unemployment.

Following a “financial dialogue” between China and India, it was announced that the global economy is now in a “critical phase…. There are clear signs of a slowing as developments in advanced economies begin to weigh on [both of] these countries.” And the Chief Executive of Hong Kong, Donald Tsang said earlier this week that the world economy faces a 50-percent chance of a recession.

Economist John Hussman thinks those chances are much closer to 100 percent.

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How Bad Will This “New” Recession Get?

A homeless man in Paris

The prediction by the Economic Cycle Research Institute (ECRI) that the United States is headed into another recession was greeted by a rise in the stock market from 1,074 on the Standard and Poor’s 500 Index on Tuesday, October 4, to 1,238 on Friday, October 21, a gain of 15 percent in just 13 days.

This sudden rise happened in the face of ECRI’s spokesman Laksman Achuthan’s emphatic forecast that “it’s going to get a lot worse…you haven’t seen anything yet.” Furthermore, Achuthan said that

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Looking for Green Shoots in the Economy

Cracked Mud Texture

Image by Darren Hester via Flickr

Just a month ago one of the most accurate economic forecasters on the planet looked at the economy and concluded that another recession is 99 percent certain.

David Rosenberg of Gluskin Sheff, a Canadian private money management firm, noted at the time that consumers were still trying to reduce their debt load, which reduces their ability to purchase consumer goods and services. That continued reduction in demand is being felt all across the economy with no end in sight:

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Evidence for Double Dip is Growing

Recession

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Establishment economists and other economic cheerleaders were disappointed to learn that, despite the government’s best efforts to revive the economy through Keynesian interventions and stimuli, the GDP (Gross Domestic Product) for the first quarter of 2011 was half the rate of growth in the last quarter of 2010.

As noted by the Wall Street Journal,

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High Gas Prices Set to Cause Double Dip Recession

Fuel Guage

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“I’m sure the rising cost of energy is bothering the market,” said Fred Dickson, chief investment strategist at D. A. Davidson & Company last week. “I do think the uptick in gasoline prices will have an impact on consumer spending in the next few quarters.”

One could scarcely call it an “uptick,” with gasoline prices up by $.70 a gallon since the first of the year, and approaching $4 a gallon. The American Automobile Association said at that level consumers “will have to start cutting back to pay their fuel expenses. This could adversely affect restaurants, malls, and entertainment venues that count on people driving to get there.”

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Housing Double-Dip is Here: Case-Shiller

LAS VEGAS - FEBRUARY 24:  Hotel-casinos on the...

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One of the most-watched and highly regarded indices giving direction to the housing market is the S&P/Case-Shiller Home Price Index published every month. Its latest report, announced on Tuesday, provides the clearest evidence so far that housing prices are continuing to fall and in fact may represent a significant double-dip in the housing market into 2011.

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Housing Prices to Fall Further

FOR SALE BY OWNER (if you can find it)

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When Bloomberg polled so-called real estate “experts” about the housing market, they expected a slight pull-back in housing prices of perhaps 0.2 percent when compared to a year ago. Instead, the Case-Shiller Index showed prices dropped four times greater than expected: “The biggest year-over-year decline since December 2009,” according to the group.

This caused many of those observers to confirm the worse than expected result.

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Behind the Numbers: October Employment Report

Spiekermann House Numbers

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Even though 151,000 new real jobs were added in October, according to the Bureau of Labor Statistics, the unemployment rate stayed at 9.6 percent. This announcement not only successfully masked the fact that fewer people were looking for work, which made the rate look better, but also that more people are staying unemployed longer.

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Fed’s Bernanke Running Out of Options

WASHINGTON, DC - MARCH 02:  U.S. Federal Reser...

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When Fed Chairman Ben Bernanke speaks on Friday at the Fed’s annual meeting in Jackson Hole, Wyoming, Fed-watchers from around the world will be hanging on his every word, phrase, and nuance for clues. They’ll be listening to hear that the chairman knows what’s happening in the economy, and that if things get worse, he has a plan.

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Fixing State Budgets will be Painful

Carly Fiorina (MBA 1980), former CEO of Hewlet...

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Pew Research recently polled Americans about ways to bring state budgets into balance and found that respondents did not like any of the options. In its Congressional Connection poll released June 28, Pew Research asked if a federal bailout of financially troubled states should be considered. Barely one in four said yes. Nearly 60 percent said no, that the states should take care of their problems on their own.

Other options offered by Pew included cutting transportation funding, raising taxes, cutting health services, reducing spending for police and fire departments, and slashing the public school budget. Each of those options was also strongly opposed, often by majorities approaching 70 percent.

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The Invisible Recovery

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On Friday Reuters reported that non-government payrolls rose only slightly in June and overall employment fell “for the first time this year…indicating the economic recovery is failing to pick up steam.” This report followed several others last week indicating weakness in consumer spending, housing, and manufacturing which “have heightened fears [that] the economy could slip back into a recession.”

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Double Dip Evidence Piling Up

Double Dipped Cones

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When John Hussman, in his Weekly Market Comment, noted that the Economic Cycle Research Institute’s (ECRI) Index “has slumped to the lowest level in 44 weeks and has now gone to a negative reading,” he was confirming other recent signals that the economy was giving off, notably here and here, that the possibility of a double dip recession continues to increase.

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Latest Unemployment Numbers: Shoveling Snow?

Bureau of Labor Statistics

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When the Bureau of Labor Statistics announced last Friday that the economy lost only 36,000 jobs in February, the usual choristers took that as good news. Christina Romer, the Chairwoman of the White House Council of Economic Advisers said, “Today’s report on the employment situation is consistent with the pattern of stabilization and gradual labor market healing we have been seeing in recent months.”

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Geithner: No Double Dip

Timothy Geithner at the United States Departme...

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When he appeared on ABC News‘s This Week on February 7, U.S. Treasury Secretary Timothy Geithner was quizzed about the risk of the United States losing its triple-A credit rating, the chances that foreign investors might start shunning US debt, and whether the economy would suffer a double dip recession.

Last week the credit rating agency Moody’s warned that weak economic growth and increasing debt burdens could “put pressure on the country’s triple-A status.”  When asked to respond, Geithner said, “Absolutely not. That will never happen to this country.”  One remembers the speaker’s rule to be very careful about using absolutes, such as “absolutely”, and “never happen.”  History books are filled with examples of events that could “absolutely never happen.”

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What Part of “No” Doesn’t He Understand?

Pelosi Showing Obama Health Care

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This change allegedly reflects the impact the Brown win in Massachusetts last week had on politics in general, but also that it had not been anticipated by Obama or the Democrats.

“The entire political community was caught a little bit unawares on that one,” said David Axelrod, White House senior advisor. The impact of Brown’s win on Obama’s healthcare bill was significant in that it deprived the Democrats of the opportunity to push the bill through the Senate without a Republican vote.

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Double Dip Recession Coming?

Double Dip Package

If Will Rogers didn’t say “Those who don’t read the papers are uninformed; those who do are misinformed,” he probably should have.

Witness this headline from The Wall Street Journal: “Jobs, Spending Bode Well for Growth.”

Compared to this from Bloomberg: “Orders for Durable Goods in U. S. Unexpectedly Fall.”

Or this from APNews: “Jobless claims off, spending up in sign of rebound.”

Finally, to confound the confusion, see this from the Denver Post: “Good news raises hopes that recovery won’t fizzle.”

How does one make any sense of it all? Dr. Kenneth McFarland (named America’s Number One Public Speaker by the U. S. Chamber of Commerce in 1965) once quipped that he had read so much about the harmful effects of tobacco and alcohol that he just decided to give up reading!

There is another option: dig deeper.

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Inflation? What inflation?

Huff and puff and...

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We dont have to hire historians to see where deficit spending will take us. We have only to look around now. Since the end of World War II, some of history’s greatest national disasters have taken place right here in the Americas. North Americans used to laugh or shake their heads at the economies of the south that seemed always on the brink of collapse.  Banana republics, we derisively called them. We’re not laughing now.

Here are some examples he provides of inflation lag time:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2018 Bob Adelmann