ragerunner

One of the main formulas for GDP is: GDP (Y) is a sum of Consumption ©, Investment (I), Government Spending (G) and Net Exports (X - M). Y = C + I + G + (X − M) So US Corporations can clearly have booming profits but the US economy could be in a recession (do to globalization). I don't look to the stock market as a gage of how the US economy is doing. Corporations may be doing well overseas but, if they are not hiring, producing or spending that money in the US then US GDP can still be in the gutter. I think we are seeing this type of wealth effect now taking place, were main street USA is still struggling along with small business, while the big boys take home some nice profits. Not saying this is right or wrong, but it is becoming a part of our economic reality.

This is only the first of several to come. It will be interesting to see how long the EU can keep this together. Moody's warns Greek default virtually 100 percent "ATHENS, Greece—Moody's downgraded Greece's bond ratings by a further three notches Monday and warned that it is almost inevitable the country will be considered to be in default following last week's new bailout package. The agency said the new EU package of measures implies "substantial" losses for private creditors. As a result, it cut its rating on Greece by three notches to Ca—one above what it considers a default rating." Read more: Moody's warns Greek default virtually 100 percent - The Denver Post http://www.denverpost.com/business/ci_18544046#ixzz1T84EQTLG Read The Denver Post's Terms of Use of its content: http://www.denverpost.com/termsofuse

If I remember correctly from earlier posts, food stamp and government assistance is at an all time high. I also deal with a lot of non-profit assistance groups in my job and they have seen a noticeable spike in people and families needing help (and this is in a very affluent community).

How much was given so far, how about $16 TRILLION. The Fed Audit "The first top-to-bottom audit of the Federal Reserve uncovered eye-popping new details about how the U.S. provided a whopping $16 trillion in secret loans to bail out American and foreign banks and businesses during the worst economic crisis since the Great Depression. An amendment by Sen. Bernie Sanders to the Wall Street reform law passed one year ago this week directed the Government Accountability Office to conduct the study. "As a result of this audit, we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world," said Sanders. "This is a clear case of socialism for the rich and rugged, you're-on-your-own individualism for everyone else." "The non-partisan, investigative arm of Congress also determined that the Fed lacks a comprehensive system to deal with conflicts of interest, despite the serious potential for abuse. In fact, according to the report, the Fed provided conflict of interest waivers to employees and private contractors so they could keep investments in the same financial institutions and corporations that were given emergency loans." "For example, the CEO of JP Morgan Chase served on the New York Fed's board of directors at the same time that his bank received more than $390 billion in financial assistance from the Fed. Moreover, JP Morgan Chase served as one of the clearing banks for the Fed's emergency lending programs." http://sanders.senate.gov/newsroom/news/?id=9e2a4ea8-6e73-4be2-a753-62060dcbb3c3 Note: While the link is to a senate site, this is not meant to be a politically focused item, just a place to find information and a link to the full document. Interesting how the MSM has been pretty quiet about this non-partisan report.

To go along with the article above. Income down cost for essentials up. Consumers in U.S. Relying on Credit as Inflation Erodes Incomes "The dollar volume of purchases charged grew 10.7 percent in June from a year ago, while the number of transactions rose 6.8 percent, according to First Data Corp.’s SpendTrend report issued this month." "After-tax income adjusted for inflation fell 0.1 percent from January through May, according to figures from the Commerce Department. The drop came as Labor Department data showed energy prices rose 8.2 percent and food climbed 2 percent during the same period." http://www.bloomberg.com/news/2011-07-21/consumers-in-u-s-relying-on-credit-as-inflation-erodes-incomes.html

I think this data shows a lot more than companies being reluctant to hire, they are still laying off a LOT of people. 18,000 new jobs in June won't even come close to touching the amount of people losing their jobs or entering the workforce. Applications for U.S. jobless benefits rise Claims jump to 418,000 from 408,000 "WASHINGTON (MarketWatch) — New applications for U.S. unemployment benefits rose last week in yet another sign that companies remain reluctant to hire, government data showed." http://www.marketwatch.com/story/applications-for-us-jobless-benefits-rise-2011-07-21 Here is just a quick look at job cuts announced/implemented in just the last 2 weeks (and this is by no means a full list): - 6,500 Cisco - 10,700 Borders - 200+ San Francisco Superior Courts - 350 Whirlpool - 625 City of Chicago - up to 1,000 Goldman Sachs - 6,500 Lockheed Martin - 1,500 State of Connecticut - up to 500 CA Tech

And the bill is coming due and a lot of Americans have seen their incomes go down noticably. Slumps in Consumer Spending "During economic downturns, consumers usually spend less on what the Fed calls “discretionary services” — items like education, entertainment, restaurant meals and insurance. But in the chart below, it’s clear that consumers today are cutting back much more sharply. Part of the reason: In previous years, households often added debt to continue spending. Now the bill has come due." http://www.nytimes.com/interactive/2011/07/15/sunday-review/consumer-spending.html?ref=sunday-review

I have noticed in my job that we had an nice surge in new home construction this spring but it appears that a nice chuck (50%+) of all those new homes are still empty and have signs infront of them saying available. While not at the same level as in the past I think we maybe seeing another overestimation by the home builders of market demand and price points.

Sales of existing homes slip 0.8% in June "WASHINGTON (MarketWatch) — Sales of existing homes slipped in June to a seven-month low, and a real estate trade group attributed the surprise downturn to a weak economy and a spike in cancellations. The National Association of Realtors reported sales of single-family existing homes fell 0.8%, the third consecutive monthly drop, to a seasonally adjusted annual rate of 4.77 million from 4.81 million in May. Compared with June 2010, the scheduled closing deadline for the home buyer tax credit, sales fell 8.8%." http://www.marketwatch.com/story/sales-of-existing-homes-slip-08-in-june-2011-07-20

I would take that even a step more. I think its a lot to expect anyone or any agency to have the ability to deal with a truly broke Country that is basing a lot of it economic growth on financial based products.

A candidate for potential quote of the decade. "We have to keep all the options on the table. We don't know where the economy is going to go," - Federal Reserve Chairman Ben Bernanke http://www.startribune.com/business/125482988.html A little concerning that the man who has been asked to steer the ship doesn't know where it is going. But, it might be one of the more honest comments we have heard in a while from the FED.

No debt deal yet as S&P warns of downgrade Back-up plan in works; S&P says 50% chance of ratings cut "S&P said it had put U.S. sovereign ratings on formal credit watch and that, ”owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U.S. within the next 90 days.” http://www.marketwatch.com/story/debt-talks-to-resume-after-testy-exchanges-2011-07-14 Consumer sentiment plunges in July "The Thomson Reuters/University of Michigan index of consumer sentiment fell to 63.8 in early July, reaching the lowest level since March of 2009, from 71.5 in June, according to media reports." http://www.marketwatch.com/story/consumer-sentiment-plunges-in-july-2011-07-15 Manufacturing weakens in New York in July "The Empire State index remained below zero for the second straight month, rising only to negative 3.8 in July from negative 7.8 in June. The index has fallen dramatically the past three months after hitting a 12-month high of 21.7 in April." http://www.marketwatch.com/story/manufacturing-weakens-in-new-york-in-july-2011-07-15

It becoming very clear the to big to fail banks are in taking control of our economy and much more. Hoenig targets Fed, Wall Street, big banks in Denver talk "The idea of stimulating the economy by boosting liquidity and lowering interest rates began in the Asian currency crisis in 1997, Hoenig said, and has continued to today. Unemployment remains over 9 percent, with real unemployment closer to 16 percent, and “we’re wringing our hands” trying to figure out how to solve it, he said. “Part of our basic problem worldwide and here in the U.S. … is that the emperor has no clothes and no one’s willing to say it,” Hoenig said. “You print money, print money and print money, but you don’t create real wealth,” he said. In 1913, when the Federal Reserve was created the five largest financial institutions controlled the financial equivalent of 2.5 percent of the U.S. gross domestic product, he said. In 1980, they controlled about 14 percent of GDP. Follow this company was created, the five largest financial institutions controlled the financial equivalent of 2.5 percent of the U.S. gross domestic product, he said. In 1980, they controlled about 14 percent of GDP. After the financial crisis in 2008, the five largest financial institutions now control the equivalent of 60 percent of the U.S. GDP, Hoenig said. “So they are 20 percent larger after the crisis,” he said. “This says the consequence of bad management is that they’re 20 percent larger and too big to fail.” He called the growth of large financial institutions “a threat to capitalism. You have to break them up. Commercial banks need to be separated from investment banks.” http://www.bizjournals.com/denver/news/2011/07/12/hoenig-targets-fed-wall-street-big.html?page=2

To infinite and beyond. If they do more easying look for oil prices to spike higher in relationship to the dollars decline. This will continue to put pressure on the economy, but wall street will have some more fun. Fed weighing further easing, Bernanke says Calls study ‘prudent planning’ "WASHINGTON (MarketWatch) — Just two weeks after completing a second extraordinary effort to juice the moribund U.S. economy, the Federal Reserve is contemplating more “untested” steps, the head of the central bank said Wednesday." “The possibility remains that the recent weakness may prove more persistent than expected and that deflationary risks might reemerge, implying additional policy support,” Bernanke told the House Financial Services Committee, in the first of two days of testimony about the economy and monetary policy. At the moment, Fed officials see a recovery that “will likely remain moderate,” Bernanke said, with the unemployment rate falling “only gradually.” Inflation is expected to subside in coming months, he said." http://www.marketwatch.com/story/fed-weighing-further-easing-bernanke-says-2011-07-13

One up and two down. Hope everyone has a great 4th of July. June ISM factory index rises unexpectedly to 55.3 "WASHINGTON (MarketWatch) -- Conditions for the nation's manufacturers picked up unexpectedly in June, easing fears of a double-dip. The Institute for Supply Management's factory index rose to 55.3% in June from 53.5% in May, the ISM reported Friday. The increase was a surprise. The consensus forecast of estimates collected by MarketWatch was for the index to fall to 52.3%. The ISM index had plunged to 53.5% in May from 60.4% in April. Below the headline, the report was also firm." http://www.marketwatch.com/story/june-ism-factory-index-rises-unexpectedly-to-553-2011-07-01 May construction spending drops 0.6% "WASHINGTON (MarketWatch) -- Construction spending fell 0.6% in May to a seasonally adjusted $753.5 billion, worse than the 0.1% dip that economists polled by MarketWatch had anticipated, as residential construction dropped 2.1%. That represents a 7.1% downturn from May 2010. April's data was downwardly revised to show a 0.6% drop." http://www.marketwatch.com/story/may-construction-spending-drops-06-2011-07-01 Consumer sentiment index declines to 71.5 in June "WASHINGTON (MarketWatch) -- A gauge of consumer sentiment declined to 71.5 at the end of June from 74.3 in May, according to the Thomson Reuters/University of Michigan survey released Friday. A preliminary June reading pegged sentiment at 71.8. Economists surveyed by MarketWatch had expected a final reading of 72." http://www.marketwatch.com/story/consumer-sentiment-index-declines-to-715-in-june-2011-07-01

I think they will come to an agreement. The real issues is the debt just keeps growing and we just keep kicking the can down the road. What happens if the can gets to big to kick? That is more concerning to me.

Another one of our fine institutions (no longer with us) and their lack of following the laws. Slowly but surely more and more info comes out about our financial industry and wall street. Of course we continue to see no one visiting jail, but its steps in the right direction. How a big US bank laundered billions from Mexico's murderous drug gangs "Criminal proceedings were brought against Wachovia, though not against any individual, but the case never came to court. In March 2010, Wachovia settled the biggest action brought under the US bank secrecy act, through the US district court in Miami. Now that the year's "deferred prosecution" has expired, the bank is in effect in the clear. It paid federal authorities $110m in forfeiture, for allowing transactions later proved to be connected to drug smuggling, and incurred a $50m fine for failing to monitor cash used to ship 22 tons of cocaine. More shocking, and more important, the bank was sanctioned for failing to apply the proper anti-laundering strictures to the transfer of $378.4bn – a sum equivalent to one-third of Mexico's gross national product – into dollar accounts from so-called casas de cambio (CDCs) in Mexico, currency exchange houses with which the bank did business. "Wachovia's blatant disregard for our banking laws gave international cocaine cartels a virtual carte blanche to finance their operations," said Jeffrey Sloman, the federal prosecutor. Yet the total fine was less than 2% of the bank's $12.3bn profit for 2009. On 24 March 2010, Wells Fargo stock traded at $30.86 – up 1% on the week of the court settlement." http://www.guardian.co.uk/world/2011/apr/03/us-bank-mexico-drug-gangs

If oil prices can come down I think it will have a direct effect on the overall economy in a positive way. I guess we will have to see if/how much they come down by.

This just can't be true. The honorable GS and some of the other big boys on Wall Street would never artifically manipulate the markets for a profit at Main Street and other expense. Wall Street Gets Eyed in Metal Squeeze Some Say Warehousing Inflates Prices "Goldman Sachs Group Inc. and other owners of large metals warehouses are being scrutinized by the London Metal Exchange after being accused by users like Coca-Cola Co. of restricting the amount of metal they release to customers, inflating prices." “The situation has been organized artificially to drive premiums up,” said Dave Smith, Atlanta-based Coca-Cola’s strategic procurement manager. “It takes two weeks to put aluminum in, and six months to get it out.” "In recent years, major investment banks like Goldman and J.P. Morgan and commodities houses like Glencore have been snapping up warehouses around the world, turning the industry from a disperse grouping of independent operators into another arm of Wall Street. The LME has licensed about 600 warehouses around the world." http://online.wsj.com/article/SB10001424052702304186404576389680225394642.html

This 'little' issue seemed to have be swept under the rug for the MSM over the last 6 or 9 months but, it doesn't mean it has went away. I know through my job that many banks continue to extend and pretend on the commercial side in an effort to not have to show the true lose by foreclosing. How long they will kick this can down the road has become anyone guess. I will say a 49% hair cut across the board is pretty severe and its appears to not be a the bottom. U.S. Commercial Property Prices Decline on Distressed Sales, Moody’s Says "U.S. commercial property prices fell in April as sales of distressed assets made up a large share of transactions, according to Moody’s Investors Service. The Moody’s/REAL Commercial Property Price Index dropped 3.7 percent from March and 13 percent from a year earlier. It’s now 49 percent below the peak of October 2007 and at its lowest point in data going back to December 2000, the company said in a report today." http://www.bloomberg.com/news/2011-06-22/u-s-commercial-property-index-falls-to-record-on-distressed-properties.html?cmpid=yhoo

More easing is probably going to happen in the not to distant future. But, if they can get oil prices back down they may be able to hold on longer than many expect. Let hope Bernanke predication that the economy will pick up in the second half of the year comes true. Of course this is the same guy who told us subprime was contained, and we would not go into a recession. Bernanke Leaves Door Open to Further Easing "Federal Reserve Chairman Ben S. Bernanke left the door open to a fresh shot of monetary stimulus should the economic rebound he’s predicting fail to materialize. The economy will probably overcome constraints from elevated energy prices and Japan- related disruptions to manufacturing, he said. Still, declining home prices, high unemployment and weaknesses in the financial system may restrain the recovery in the longer term, he said." "While Bernanke and his Fed colleagues are predicting growth will pick up in the second half of this year, the slowdown in the first six months forced them to mark down their projection for all of 2011." http://www.bloomberg.com/news/2011-06-23/bernanke-leaves-door-open-to-easing-if-economy-weakens-further.html The amount of people becoming unemployed continues to far exceed our ability to create new jobs. Until the economy can fix this issue a true recovery is going to be very hard to achieve. Jobless Claims Rise, Confidence Falls "Applications for unemployment benefits increased 9,000 in the week ended June 18 to 429,000, Labor Department figures showed today. The level of claims exceeded the highest estimate in a Bloomberg News survey in which the median projection called for 415,000 filings. The Bloomberg Consumer Comfort Index dropped to minus 44.9 last week from minus 44." http://www.bloomberg.com/news/2011-06-23/initial-jobless-claims-in-u-s-rose-9-000-last-week-to-429-000.html Can they get oil prices back to a level they will not cause a negative effect on the economy? Reserves Tapped, Oil Price Plunges to 4-Month Low http://www.bloomberg.com/news/2011-06-23/crude-oil-tumbles-to-a-four-month-low-after-iea-says-it-will-tap-reserves.html?cmpid=

Thought some might be interested in the following chart. It shows the retail deliveries for gas in the US and how its at its lowest level in the last 30 years. http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=M

As we have discussed many times, this is just one measurement of the economy, but I would agree, this 'recession' was a massive one.

As a huge supporter of smart growth/sustainability principles I agree. Unfortunately I believe the main reason this number has dropped so low is because of economic contraction, not people truly changing how they live, where they live and how they move from one location to another. Some of that has happened, but no way near enough to explain this type of decline.

Thought some might be interested in the following chart. It shows the retail deliveries for gas in the US and how its at its lowest level in the last 30 years. http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=A103600001&f=M