Another quarter of this type of data and decline and a technical recession is almost a given within the next 9-12 months. Of course another big round of QE could juice commodities and the stock market enough to keep us just above 0, maybe.

 

Chicago business index at lowest level since 2009

"The compilers of the report noted that three consecutive declines in the monthly PMI or the three-month rolling average have occurred before each of the last seven recessions, with a lead time of about six to eight months."

http://www.marketwatch.com/story/chicago-business-index-at-lowest-level-since-2009-2012-05-31

 

U.S. weekly jobless claims jump to 383,000

Applications for unemployment benefits at highest level in 5 weeks

"Jobless claims rose by 10,000 to a seasonally adjusted 383,000 in the week ended May 26, the U.S. Labor Department said Thursday. Claims from two weeks ago were revised up to 373,000 from an original reading of 370,000, based on more complete data collected at the state level."

http://www.marketwatch.com/story/us-weekly-jobless-claims-jump-to-383000-2012-05-31

 

Hiring trend for private payrolls slows down: ADP

"WASHINGTON (MarketWatch) — The pace of hiring in private jobs is slowing down, according to an employment report released Thursday by payrolls-processor Automatic Data Processing Inc."

http://www.marketwatch.com/story/hiring-trend-for-private-payrolls-slows-down-adp-2012-05-31

 

U.S. GDP up 1.9% in first quarter, revised lower

"WASHINGTON (MarketWatch) — The U.S. economy ran into a deeper soft patch in the first quarter than initially estimated, a government report showed on Thursday."

http://www.marketwatch.com/story/us-gdp-up-19-in-first-quarter-revised-lower-2012-05-31

 

Kohl's shares stumble on weak May sales

"SAN FRANCISCO (MarketWatch) -- Kohl's shares fell 5% to $46.40 early Thursday after the retailer reported a 4.2% decline in same store sales for May. Analysts had estimated Kohl's would post a 1.2% decline."

http://www.marketwatch.com/story/kohls-shares-stumble-on-weak-may-sales-2012-05-31

 

Capital flight from Spain accelerates to record €66bn

"Spaniards are moving money out of their nation's banks faster than at any point since records began, as Fitch downgrades eight regions and ECB President Mario Draghi warns Europe's leaders must clarify their vision for the euro."

http://www.telegraph.co.uk/finance/debt-crisis-live/9301285/Debt-crisis-live.html

What is that I see falling out of the sky, its money from the next QE in an effort to boost commodities, wall street, and make main street think things are getting better again (and to get them to buy a house, a new car and another tv). The high from the printing of QE2 is now wearing off and the withdraw symptoms are starting to show. I also think we will see some 'new' massive idea and fund to save Europe very soon. It will be like the last 10 ideas, in that it will just kick the can down the road. But Europe is at a point where kicking the can is about their only option outside of a full depression for many (of course Greece and Spain are pretty much there).

 

Also, April's number was revised downward from 115,000 to 77,000. Huge revision.

 

U.S. economy creates 69,000 jobs in May

Unemployment rate rises to 8.2%

"Economists surveyed by MarketWatch had forecast a 165,000 increase in new jobs and they expected the jobless rate to hold steady at 8.1%."

http://www.marketwatch.com/story/us-economy-creates-69000-jobs-in-may-2012-06-01

 

 

U.S. May ISM factory index declines modestly

"WASHINGTON (MarketWatch) - Conditions for the nation's manufacturers slipped in May after reaching its highest level since last summer in April, the Institute for Supply Management reported Friday. The ISM index fell to 53.5% in May from 54.8% in April."

http://www.marketwatch.com/story/us-may-ism-factory-index-declines-modestly-2012-06-01

 

 

Euro-zone May manufacturing PMI falls to 45.1

"FRANKFURT (MarketWatch) -- Manufacturing activity in the 17-nation euro zone shrank at the fastest pace in three years in May, according to the Markit purchasing managers' index for the sector released Friday."

http://www.marketwatch.com/story/euro-zone-may-manufacturing-pmi-falls-to-451-2012-06-01

 

 

China manufacturing slows sharply, data show

Analysts urge more government spending

"The official PMI, released jointly by the China Federation of Logistics & Purchasing (CFLP) and the National Bureau of Statistics, fell to 50.4 on a 100-point scale, sharply lower than April’s 53.3 print."

http://www.marketwatch.com/story/china-manufacturing-slows-sharply-data-show-2012-05-31

I still believe that some new plan will allow the EU to slowly desolve or give them time to remove the weaker pieces. If the EU just collapses we are all in for a very nasty event since the EU is the largest economy in the world. Bigger than the US or China.

 

Eurozone is 'unsustainable' warns Mario Draghi

"The head of the European Central Bank hit out at the political paralysis gripping the region as he warned the eurozone's set-up was "unsustainable".

 

"Mario Draghi said the central bank could not "fill the vacuum" left by member states' lack of action as it was claimed the zone is on the point of "disintegration".

http://www.telegraph.co.uk/finance/financialcrisis/9304027/Eurozone-is-unsustainable-warns-Mario-Draghi.html

 

I think those funds loaned to the U.S. government would be much more productively used by the Cleveland Clinic, Eaton, Forest City Enterprises, Timken, Goodyear, FirstEnergy, and the hundreds of smaller companies looking to get financing for investments and operations in the area.

 

While I certainly agree that, historically, equity market and non-government debt obligations rates of return have outpaced those in the government sector, a flight of SS monies to the private sector would be disastrous for the U.S. government and even the world economy. The value of and demand for government securities would plummet (though the current holders' YTM would indeed go up), crippling the nation's ability to raise capital and obliterating the value of U.S. securities held by foreign governments and individual investors both domestically and abroad. The U.S. government would be severely downgraded by the ratings agencies -- which would lead to all manner of horrors for the Dollar e.g. oil being delineated in Euros instead of Dollars. That's why privatized Social Security will never happen in the form currently discussed.

April U.S. factory orders decline 0.6%

 

"WASHINGTON (MarketWatch) - Orders for goods produced in U.S. factories decreased 0.6% in April, the Commerce Department reported Monday. Economists surveyed by MarketWatch expected orders to rise by 0.1%. Factory orders fell a revised 2.1% in March, down from a prior estimate of a 1.5% decline. Orders for durable goods - products meant to last at least three years - were flat in April. Orders for nondurable goods tumbled 1.1%."

http://www.marketwatch.com/story/april-us-factory-orders-decline-06-2012-06-04

I think those funds loaned to the U.S. government would be much more productively used by the Cleveland Clinic, Eaton, Forest City Enterprises, Timken, Goodyear, FirstEnergy, and the hundreds of smaller companies looking to get financing for investments and operations in the area.

 

While I certainly agree that, historically, equity market and non-government debt obligations rates of return have outpaced those in the government sector, a flight of SS monies to the private sector would be disastrous for the U.S. government and even the world economy. The value of and demand for government securities would plummet (though the current holders' YTM would indeed go up), crippling the nation's ability to raise capital and obliterating the value of U.S. securities held by foreign governments and individual investors both domestically and abroad. The U.S. government would be severely downgraded by the ratings agencies -- which would lead to all manner of horrors for the Dollar e.g. oil being delineated in Euros instead of Dollars. That's why privatized Social Security will never happen in the form currently discussed.

 

I'm not sure how you see that chain of events occurring.  Remember that the U.S. government debts that are purchased with existing SS revenues are special purpose, non-negotiable debt instruments that do not compete directly with existing ordinary U.S. Treasuries--in fact, they don't even count on the official debt stat (that's why you hear the two different figures cited for what the U.S. government debt "would be" if we counted debt the Treasury owes to other government entities, e.g., SS).  It is those special-purpose securities that would stop being "purchased" or issued if Social Security revenues were redirected to personal accounts rather than to intragovernmental shell game accounting.

 

You can say that the government might have to issue new ordinary Treasuries in order to pay off the special, nonmarketable securities, since the payroll tax revenue stream would no longer allow for paying them off with that revenue.  That might cause the government to have to borrow more heavily from the regular financial markets over the short term (effectively replacing the "special" debts with regular debts), which could have an adverse effect on our debt rating and/or necessitate tax increases.  I doubt that that would cause much difference, though, because all sophisticated financial players who might buy Treasuries in bulk are well aware of the fact that those special obligations exist; moving them "onto the balance sheet," so to speak, wouldn't come as a stunning revelation to any major capital markets players.

 

Also, on a completely separate note, by acknowledging that "demand for government securities would plummet," you're implicitly acknowledging that most, or at least many, people are *not* so enamored of the purported safety of U.S. government debt that they would repurchase such debts with the SS money committed to their personal accounts.  After all, if everyone simply wanted to continue on the existing system, buying U.S. Treasuries would largely accomplish that.

I need to take a closer look at the BLS monthlies, but this recent jobs number is worrisom.

 

Stalling employment growth in May and June was a signal that the 2008 recession was about to hit....tho I think there would have been leading indicators showing this, too, these particular numbers...the employment run-up in during spring and into early summer is an annual trend, and it noticeablly stalled in 2008. 

 

So if we are repeating this pattern we could well be getting a strong signal that something is up....

 

Need to take a closer look, and also at the June numbers....interesting stuff.....

 

"WASHINGTON (MarketWatch) - Orders for goods produced in U.S. factories decreased 0.6% in April, the Commerce Department reported Monday. Economists surveyed by MarketWatch expected orders to rise by 0.1%. Factory orders fell a revised 2.1% in March, down from a prior estimate of a 1.5% decline. Orders for durable goods - products meant to last at least three years - were flat in April. Orders for nondurable goods tumbled 1.1%."

 

I believe these are leading idnicators?  And awaaaay we go.....

 

>snark<(dont change that thread title just yet!)>/snark<

 

 

 

Vindication may be on the way boys... but let's not get too excited just yet ;)

 

This thread can be a bit like the bar you walk into everyday and it always has the same sign - "FREE BEER 2MORO!!"

 

Not saying this is right, but just to offer a different perspective........ one possible the-sky-isn't-falling explanation for the low rise in jobs in May is the high rise during our eerily warm winter months.  In other words, it's an off-set.

Vindication may be on the way boys... but let's not get too excited just yet ;)

 

This thread can be a bit like the bar you walk into everyday and it always has the same sign - "FREE BEER 2MORO!!"

 

Not saying this is right, but just to offer a different perspective........ one possible the-sky-isn't-falling explanation for the low rise in jobs in May is the high rise during our eerily warm winter months.  In other words, it's an off-set.

 

Hts121

I actually hope you are right. That we don't end up in another 'technical' recession and that europe doesn't end up in something more than a recession. At the end of the day all of these things mean more challenges, stress and for some, suffering.

 

But, I will continue to believe that printing a positive GDP and kicking the can down the road is not a good long term economic strategy.

It appears someone believed the wheels might be falling off in the not to distant future.

 

Banks Cut Cross-Border Lending Most Since Lehman: BIS

 

"Global banks scaled back cross-border lending to companies, governments and each other at the fastest rate since 2008 in the final quarter of last year, with lenders based in the euro area leading the way.

 

Lenders reporting to the Bank for International Settlements, the record-keeper of the world’s central banks, shrank their cross-border assets by $799 billion, or 2.5 percent, in the three months ended Dec. 31, data released by the BIS on June 3 show. The decline was the sharpest since the fourth quarter of 2008, when interbank lending markets froze worldwide following the collapse of Lehman Brothers Holdings Inc."

http://www.bloomberg.com/news/2012-06-03/banks-cut-cross-border-lending-most-since-lehman-bis.html

 

 

FHA Loan Problems Mounted in April as Foreclosure Starts Soar 73%

 

"The performance of FHA loans dominates the April Mortgage Monitor report released Thursday by Lender Processing Services (LPS).  While GSE and private loans saw significant drops in foreclosure starts and portfolio loans trended down slightly, foreclosure starts for FHA loans soared, jumping 73 percent in April.  While all 2005+ vintages of FHA loans had increased numbers of starts, the increases for loans originated in 2008 and 2009 were dramatic."

http://www.mortgagenewsdaily.com/06012012_foreclosures.asp

 

Hts121

I actually hope you are right.

 

Slow down there Chief.  I haven't predicted anything.

Renamed the thread so that those of you who want to share good economic news can also share it with the bad.

 

Carry on.

Hts121

I actually hope you are right.

 

Slow down there Chief.  I haven't predicted anything.

 

You haven't?

The newest drama on TV. As Europe Turns.

Even if they come up with the ultimate bailout, structural damage is now in place for most of the worlds economy's and will play out with slow growth/negative growth for the next 6-9 months.

 

Spain makes plea for EU aid for troubled banks

"Spain has admitted for the first time that it needs European Union support to prop-up its ailing banks, saying rising borrowing costs had shut the country out of bond markets."

http://www.telegraph.co.uk/finance/financialcrisis/9312326/Spain-makes-plea-for-EU-aid-for-troubled-banks.html

 

 

Nein! Nein! Nein! Again

No, Germany has not agreed to a "banking union".

 

"It has not agreed to mutualise the costs of bank bail-outs, knowing perfectly well that this means 'Eurobonds lite' and the start of a slippery slope towards debt pooling.

 

It has not cleared the way for use of the EU rescue machinery (EFSF and ESM) for direct recapitalisation of banks – which is what Spain wants to avoid having to bear the contingent liabilities of its crumbling lenders on sovereign shoulders.

 

Germany has not moved one inch towards fiscal union of any kind. It may do so (I make no prediction). It has not done so yet. Europe faces exactly the same problem it has had since the start of the crisis."

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100017648/nein-nein-nein-again/

Hts121

I actually hope you are right.

 

Slow down there Chief.  I haven't predicted anything.

 

You haven't?

 

Nope.  I don't pretend to have a chrystal ball.

 

Actually.... I think a few years back I predicted that China's bubble would not be sustainable, but was jumped all over for it because it didn't fit the narrative being trumpeted at that time.

 

I think looking at the past is more informative than trying to predict the future.....

 

We had the "Red" scare where communism was going to devastate civilization

 

Then Japan was going to take over our economy

 

Then the Euro was going to reign supreme

 

Then China was going to be the next great superpower

 

We are always threatened by something.  Don't underestimate American perserverence.  We find a way.  I suppose the fear is healthy.  It may be our driving force.  Carry on.   

So current shareholders in the banks would basically be wiped out and it creditors would have to take manditory writedowns (much like Greece - a form of default) or become new shareholders after the other shareholders are eliminated. This should be interesting.

 

Barroso: EU bank plan a step toward banking union

 

"FRANKFURT (MarketWatch) -- European Commission President Jose Manuel Barroso on Wednesday said new proposals for dealing with failed banks move Europe a step closer to a "banking union." "Today's proposal is an essential step towards banking union in the EU and will make the banking sector more responsible. This will contribute to stability and confidence in the EU in the future, as we work to strengthen and further integrate our interdependent economies," he said, in a statement. The proposals unveiled Wednesday would require tighter coordination among national regulators. A "bail-in" tool would see banks recapitalized with shareholders wiped out or diluted, while creditors would see claims reduced or converted to shares."

http://www.marketwatch.com/story/barroso-eu-bank-plan-a-step-toward-banking-union-2012-06-06

 

Not as good as originally posted. Also the average worker saw their income fall 2.0% when factoring in inflation. So, unless you got a 2%+ raise last quarter you are poorer than you were in December. The decline in gas prices should reduce next quarters numbers, if gas prices stay down.

 

First-quarter productivity revised to 0.9% decline

"WASHINGTON (MarketWatch) - The productivity of U.S. workers and businesses fell more sharply in the first quarter than originally estimated, as output was revised lower and hours worked rose slightly faster, the Labor Department said Wednesday. Productivity dropped 0.9% in the first three months of the year, compared to an initial estimate of a 0.5% decline. Economists surveyed by MarketWatch projected a revised 0.8% decrease. Output - the amount of goods and services produced - was revised down to a 2.4% increase from 2.7%. The increase in hours worked was revised up to 3.3% from 3.2%. As a result, unit-labor costs climbed 1.3% in the first quarter instead of 0.9% as originally reported. Adjusted for inflation, hourly wages fell 2.0% in the first quarter, more than double the initial estimate of a 0.9% decline."

http://www.marketwatch.com/story/first-quarter-productivity-revised-to-09-decline-2012-06-06

One thing that I have learned doing this thread is just how long we can/will kick the can down the road. Maybe we can keep doing this for decades?

 

Lockhart Says Extending Operation Twist ‘Option on the Table’

 

"Federal Reserve Bank of Atlanta PresidentDennis Lockhart said extending Operation Twist, the program to lengthen maturities of debt on the central bank’s balance sheet, is an “option on the table.”

 

“There is capacity to do more, so it is an option on the table,” Lockhart said today in response to audience questions after a speech in Fort Lauderale, Florida. “It is certainly an option. I’m not going to speculate on what the FOMC will do,” he said, referring to the Federal Open Market Committee."

http://www.bloomberg.com/news/2012-06-06/lockhart-says-extending-operation-twist-option-on-the-table-.html

Stocks Rise as Euro Rallies on Central Bank Optimism

 

“There’s always hope that some magic tool would be found,” Ron Florance, managing director of investment strategy for Wells Fargo Private Bank, said in a telephone interview from Phoenix. His firm manages $169 billion. “There’s no sense of any economic recovery on the near-term horizon for Europe. Things could get worse. Investors tend to be optimists. So they are always hoping for something better.”

http://www.bloomberg.com/news/2012-06-06/asian-stocks-rise-on-u-s-data-spain-aussie-oil-gain.html

 

I wonder if the agreed to plan includes added a lot more heat to the German's to take on more of the Eurozone debt.

 

David Cameron and Barack Obama agree on 'immediate plan' to resolve eurozone crisis

"David Cameron and US president Barack Obama have agreed on the need for "an immediate plan" to resolve the eurozone crisis as the Prime Minister prepares to fly to Germany for crisis talks."

http://www.telegraph.co.uk/news/politics/9313461/David-Cameron-and-Barack-Obama-agree-on-immediate-plan-to-resolve-eurozone-crisis.html

 

 

Debt crisis: Eurozone under increasing threat, warns ECB

"Six German banks have been downgraded, including the country's second largest lender Commerzbank, as concern grows over further shocks emanating from the euro area debt crisis."

http://www.telegraph.co.uk/

 

 

You mean creditors get 'concerned' when the terms of the game keep changing! I wonder if this uncertainty has anything to do with capital flight from many european nations and the significant increase in their cost to borrow?

 

Debt crisis: Live

"Wall Street and European markets rise after ECB leaves rates unchanged at 1pc, extends unlimited short-term cash offering to keep money flowing to banks and Draghi says downside risks far from Lehman turmoil."

 

"A banker who was involved in the Greek debt haircut negotiations that ultimately saw investors lose the majority of the value of their bonds has pleaded for other countries to avoid similar tactics. Jean Lemierre of French bank BNP Paribas told a conference in Copenhagen hosted by the Institute of International Finance:

 

Don't do it again, please, in the official sector. Once is enough. Stick to your word, stick you commitments, and pay back the creditors.

 

I'm very grateful to the heads of state in Europe (for having) promoted a negotiated solution. We are not happy about the haircut at the end of the day, of course, but negotiation has great value.

 

It is very crucial when you have a process to understand what is going to happen, otherwise you have a systemic crisis. I hope in the future we shall stick to that principle of negotiation. This is key."

http://www.telegraph.co.uk/finance/debt-crisis-live/9312612/Debt-crisis-Live.html

 

 

Initial Claims Beat Expectations, With Prior Revised Higher, As Whopping 105 Thousand Lose Extended Benefits

 

"While it is a number which nobody will care about today, especially if it is better than expected, initial claims printed at 377K on expectations of 378K, the first beat of expectations in 5 weeks. Of course, the claims number next week will be revised to over 380K. Why? Because, as now happens every single week, last week's initial claims number was revised higher from 383K to 389K. As a reminder, last week this number was expected to print at 370K. So only a 19K miss when all is said and done. But at least the mainstream media has its bullish for general consumption headline: "Initial Claims drop by 12,000" even as market participants realize this is still QE-promoting. Continuing claims printed at 3,293K, missing expectations of 3,250K, and down from an upward, of course, revised 3,259K. But the most disturbing observation is that in one week alone, a whopping 104,600 people hit the 99-week cliff, and stopped collecting extended unemployment benefits, the most since December 2011, as those on EUCs dropped by -45,808 while those on Extended benefits dropped by a astounding -58,829."

http://www.zerohedge.com/news/initial-claims-beat-expectations-prior-revised-higher-whopping-105000-lose-extended-enefits?tw_p=twt

Very interesting read....

 

U.S. debt load falling at fastest pace since 1950s

 

By Rex Nutting | MarketWatch

 

WASHINGTON (MarketWatch) — Everyone knows America has too much debt. What they don’t know is that things are getting better, not worse.

 

Little by little, our economy is reducing its debt burden, slowly repairing the damage caused by 10, 20 or 30 years of excess.

 

If you want to know why economic growth has been so tepid, here’s your answer. Four years after the storm hit, the economy is still deleveraging. And it’s very hard for any economy to grow when everyone is focused on increasing their savings.

 

Total domestic — public and private — debt as a share of the economy has declined for 12 quarters in a row after surging over the previous decade.

The rapid rise in federal debt over the past four years has distracted us from the big picture. The level of public debt is indeed worrisome, but it’s not as big a worry as the economy’s total level of debt — public and private.

 

Although we have a whole cottage industry devoted to warning us about the dangers of too much public debt, we don’t have any comparable Cassandras telling us about the dangers of too much private debt. Yet the history of the past 30 years (or 300) clearly shows that too much debt, of whatever variety, can pose a systemic risk to the national and global economies.

 

As much as we hear politicians, pundits, tea-party patriots and the Congressional Budget Office obsessing about government debt, it was excessive private debt — not public debt — that caused the 2008 financial meltdown. And it was private debt — some of it since transferred to the public — that lies behind the current European debt crisis. (Greece is unique in having a public sector that ran up spending while its private sector is rather conservative.)

 

READ MORE: http://finance.yahoo.com/news/u-debt-load-falling-fastest-040045522.html

I wouldn't go quite so far as to say that "we don't have any comparable Cassandras telling us about the dangers of too much private debt."  There have been many warnings over that span of time about increasing private debt loads.  First, however, they never seemed to get the ear of the media or political classes in a world of irrational exuberance and in a country obsessed with consumer spending as the primary economic activity.

 

Second, however, the warnings were most commonly subdivided by category, because private debt comes in many more and variegated flavors than public debt.  First and foremost, you have the separation between commercial credit and consumer credit.  Within each of those, you have countless varieties of debt: secured and unsecured, fixed and revolving, etc.

 

With public debt, you have general obligation bonds and special-purpose revenue bonds (tied to the income from a water/sewer system, for example).  You have the distinction between the various levels of government (federal/state/local).  Those distinctions aren't generally as big as the distinctions between the kinds of private debt, though.  At the end of the day, though, you're looking at government borrowings against streams of future tax revenue.  There is no "security" in any meaningful sense in government debts; even if a municipality falls into financial distress, creditors are forbidden from repossessing the fire trucks, police cars, school buses, schools, and city hall, much as the thought of the latter is sometimes hilarious.  Governments do not even have revolving credit lines, though the federal government effectively mimics it by constantly refinancing old debt securities with new ones.

 

All that aside, I'm generally happy to see the private sector deleveraging, particularly on the consumer side.  Any given increment of debt-financed consumer spending might temporarily make the national economic figures look better, but it comes with both tangible and intangible costs that I'm just as glad to see people starting to take more seriously (even if it's not always completely voluntary).  The same applies to the massive consumer debts taken on for home purchases, which still form a massive share of consumer debt even with the partial deflation of home prices over the past few years.  (Remember that that home-price deflation has actually only brought us back to the historical average, not a historical trough.  There is still room for prices--and, thus, private debts to finance those prices--to fall further.)  The private debt issue that I consider the most worrisome right now, though, is student loans, because of the combination of a government guaranty and nondischargeability in bankruptcy.

Very interesting read....

 

U.S. debt load falling at fastest pace since 1950s

 

By Rex Nutting | MarketWatch

 

WASHINGTON (MarketWatch) — Everyone knows America has too much debt. What they don’t know is that things are getting better, not worse.

 

Little by little, our economy is reducing its debt burden, slowly repairing the damage caused by 10, 20 or 30 years of excess.

 

If you want to know why economic growth has been so tepid, here’s your answer. Four years after the storm hit, the economy is still deleveraging. And it’s very hard for any economy to grow when everyone is focused on increasing their savings.

 

Total domestic — public and private — debt as a share of the economy has declined for 12 quarters in a row after surging over the previous decade.

The rapid rise in federal debt over the past four years has distracted us from the big picture. The level of public debt is indeed worrisome, but it’s not as big a worry as the economy’s total level of debt — public and private.

 

Although we have a whole cottage industry devoted to warning us about the dangers of too much public debt, we don’t have any comparable Cassandras telling us about the dangers of too much private debt. Yet the history of the past 30 years (or 300) clearly shows that too much debt, of whatever variety, can pose a systemic risk to the national and global economies.

 

As much as we hear politicians, pundits, tea-party patriots and the Congressional Budget Office obsessing about government debt, it was excessive private debt — not public debt — that caused the 2008 financial meltdown. And it was private debt — some of it since transferred to the public — that lies behind the current European debt crisis. (Greece is unique in having a public sector that ran up spending while its private sector is rather conservative.)

 

READ MORE: http://finance.yahoo.com/news/u-debt-load-falling-fastest-040045522.html

 

I wonder how much of this drop in private debt is due to default (bankruptcy)? Anyone have a chart showing how much debt has been 'removed' do to default?

So they added another $100 million to their debt obligations. With an economy that is in free fall and is struggling to cover their current debt obligations. This will not kick the can very far down the road for them and Europe.

 

Debt crisis: live

 

"Spain faces supervision by international lenders after a €100bn bailout for its banks, EU and German officials said, contradicting Prime Minister Mariano Rajoy who had insisted the cash came without such strings."

 

"Kathleen Brooks, research director at Forex, gives us her take:

The markets have whimpered to the finish line today after a bout of knee jerk euphoria post the announcement of the Spanish banking bailout at the weekend. The markets haven’t perceived the bailout as way to reduce credit risk in the periphery, in fact Spanish bond yields rose to their highest level since the end of May as investors digested the prospect they may not get all of their money back in the event of a Spanish default. And it didn’t stop there. Italian 10-year yields are rising at an alarming rate, and have ended the European session above 6pc, for the first time since January."

http://www.telegraph.co.uk/finance/debt-crisis-live/9323444/Debt-crisis-live.html

 

^^I would guess that it has more to do with a much tighter lending environment than default.  Just a guess.  Either way, it is good news.  It doesn't matter if you bake, broil, grille, smoke or fry a chicken as long as its cooked.

I've had baked chicken and I've had fried chicken.  If you can't tell the difference, your palate is somewhat lacking. :P

OK, smartypants...... ever had raw chicken?? 

Nah ... the economy isn't that bad yet.

That's only because we keep kicking the chicken down the road.

^^I would guess that it has more to do with a much tighter lending environment than default.  Just a guess.  Either way, it is good news.  It doesn't matter if you bake, broil, grille, smoke or fry a chicken as long as its cooked.

 

The impact on the economy are very different when debt is being paid off verse when debt is being defaulted on. One can create more growth and wealth the other creates reduced growth and loses. Both for the holder of the debt and the debtor.

 

It appears that a lot of the reduction in debt is from default (at least up to 2010 it was). Something tells me it hasn't changed that much.

 

 

Defaults Account for Most of Pared Down Debt

 

"The sharp decline in U.S. household debt over the past couple years has conjured up images of people across the country tightening their belts in order to pay down their mortgages and credit-card balances. A closer look, though, suggests a different picture: Some are defaulting, while the rest aren’t making much of a dent in their debts at all.

 

First, consider household debt. Over the two years ending June 2010, the total value of home-mortgage debt and consumer credit outstanding has fallen by about $610 billion, to $12.6 trillion, according to the Federal Reserve. That’s an annualized decline of about 2.3%, which is pretty impressive given the fact that such debts grew at an annualized rate in excess of 10% over the previous decade.

 

There are two ways, though, that the debts can decline: People can pay off existing loans, or they can renege on the loans, forcing the lender to charge them off. As it happens, the latter accounted for almost all the decline. Our own analysis of data from the Fed and the Federal Deposit Insurance Corp. suggests that over the two years ending June 2010, banks and other lenders charged off a total of about $588 billion in mortgage and consumer loans.

 

That means consumers managed to shave off only $22 billion in debt through the kind of belt-tightening we typically envision. In other words, in the absence of defaults, they would have achieved an annualized decline of only 0.08%."

http://blogs.wsj.com/economics/2010/09/18/number-of-the-week-defaults-account-for-most-of-pared-down-debt/

Recession crushed middle-class wealth: Fed survey

Median net worth fell by $49,100, erasing 18 years of gains

 

"WASHINGTON (MarketWatch) — The recession crushed the net worth of middle-class families as real estate values tumbled, according to a survey released by the Federal Reserve on Monday.

 

The Fed’s survey of consumer finances between 2007 and 2010, which is adjusted for inflation, showed median income fell 7.7% from $49,600 in 2007 to $45,800 in 2010 and that median net worth fell 38.8% from $126,400 in 2007 to $77,300 in 2010, approximately the level recorded in 1992."

http://www.marketwatch.com/story/recession-crushed-middle-class-wealth-fed-survey-2012-06-11?dist=afterbell

 

The impact on the economy are very different when debt is being paid off verse when debt is being defaulted on.

 

I did not suggest otherwise.  But there is a third 'cause' you are not considering.  That 'toxic' debt, or whatever you want to call it, that the financial industry was playing hot potato with is not being replaced with more toxic debt.  Sure, the family of four that bought a house they can't afford is being foreclosed upon, but their private debt (although defaulted on) is (hopefully) not being replaced by the debt of another family that will default 10 years from now.  And then there is also some educational value to this recession in that people are probably/hopefully more mindful of the debt they are accumulating whether it be through mortgage, car loans, student loans, etc.  One would also hope that lending restrictions/regulations are in place which would prevent private debt to be inflated as a result of simply awful deals. 

May retail sales fall as gas purchases tumble

April sales revised lower to mark first back-to-back drop in two years

 

"Sales were also revised lower for April and March, with April’s revision now showing a decline instead of an increase. Lower sales over the past two months marked the first back-to-back drop since May and June 2010."

http://www.marketwatch.com/story/may-retail-sales-fall-as-gas-purchases-tumble-2012-06-13

^Headline is a bit misleading.  Sales fell as gas "prices" tumbled..... which most people would see as a good thing for the economy.  The headline makes it seem like the drop was due to people buying less gas.  Sorry for the interruption.  Carry on.

^Headline is a bit misleading.  Sales fell as gas "prices" tumbled..... which most people would see as a good thing for the economy.  The headline makes it seem like the drop was due to people buying less gas.  Sorry for the interruption.  Carry on.

 

Maybe you should check the details a little more. Plus, retail sales went negative in April when gas prices were still high. Something more than gas prices are impacting spending. Carry on.

 

Retail Sales Show Economy Flirting With Recession

"Lower gas prices, as expected, did contribute to the drop in retail sales; however, sales of consumer basics, such as groceries, health and personal care products, and general merchandise sold in department and variety stores were also down. Restaurants and bars saw a drop too. Overall, retail sales were down by 0.2% in both April and May.

 

Regarding the broader economy, flagging retail sales in April and May, should be evaluated alongside stagnant wages for the last three months, falling productivity and factory orders, and declining prices reported by many manufacturers and service establishments polled by the Institute for Supply Chain Management.

 

Businesses are slashing prices to maintain volumes, cutting back on new orders and likely have more workers than they need. Consumers are trimming revolving credit and becoming more cautions. Overall, if sentiment and spending does not turn up in June and July, the economy is headed for a period contraction -- negative growth and a mild recession.

 

Particularly alarming, these data do not bear the full weight of the slowdown in Europe which will grip the U.S. economy more significantly in the summer months."

http://business-news.thestreet.com/denver-post/story/retail-sales-show-economy-flirting-with-recession/11579515

^Headline is a bit misleading.  Sales fell as gas "prices" tumbled..... which most people would see as a good thing for the economy.  The headline makes it seem like the drop was due to people buying less gas.  Sorry for the interruption.  Carry on.

 

Maybe you should check the details a little more. Plus, retail sales went negative in April when gas prices were still high. Something more than gas prices are impacting spending. Carry on.

 

Touchy.  I wasn't tyring to mess with your narrative...... I was simply saying that the headline was misleading, which it is.  Although I'm sure the drop in gas prices was manipulated by TPTB to kick the can down the road yet again, even Fox News reported on it....

 

 

A sharp drop in gas prices pulled down overall sales in both months by 0.2 percent, the Commerce Department said Wednesday.

........................

 

Cheaper gas also lowered a measure of wholesale prices by the most in nearly three years.

.........................

 

The decline at the pump could bode well for consumers in the coming months, too. The average national price for a gallon of gas was $3.54 Wednesday — 40 cents cheaper than the year's peak price in early April.

 

And while overall retail sales barely budged in May, Americans did spend more on big purchases.

 

Auto sales rose sharply, and sales of furniture and appliances also increased. That suggests consumers may already be seeing some benefit from lower gas prices.

 

"The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items," said Paul Dales, senior U.S. economist at Capital Economics. "So although real consumption growth looks set to slow in (the second quarter), we doubt it will grind to a complete halt."

 

http://www.foxnews.com/us/2012/06/13/us-retail-sales-dropped-02-percent-in-may/

It's a powerful (and sad) commentary on our lifestyle that the news of the prices at the pump command so much national media attention in the 24-hour news cycle.  For example, the prices of many food products have increased as much as gas, or even more.  Cotton and other textile staples have also seen significant price increases (or at least had as of many months ago now--I admit I haven't checked recently).  We apparently care more about gas than about food and clothing.

 

Based on this, I always assume that my personal household budget is significantly outside the norm.  I fill up my gas tank around twice a month for $50 at about $3.75/gallon, so ~$100/month.  A 25% increase in gas prices therefore costs me about $25/mo. and a 25% decrease likewise saves me about $25/mo.  Up or down, that's a drop in the bucket.

 

By far my largest expenses are rent and food.  My student loan payments come next, and then comes basically everything else (though health care would also be up there with my student loan payment if I were completely out of pocket for that).  Since any given percentage change means more in absolute terms the larger the absolute number already was, the economic trends that really affect me are the costs of housing, food, education (not that my student loans would get any cheaper or more expensive at this point, of course) and health care.  Gas is a tertiary concern.

 

Menu prices at restaurants have ticked upward with the prices of their inputs.  Given that wage growth/labor costs have been fairly muted, I'm pretty sure that almost all such price increases are due to commodity price increases.  Ditto the prices of groceries: the deli and meat counters at Acme are a lot pricier than they used to be, and loaves of bread that used to be $3 are now $4.30 or $4.50.  Eggs used to sell for under $1 a dozen on a good day; you never see that anymore.  The list goes on.  I would think that these would be putting an even larger strain on household budgets than fuel price increases, particularly for families with multiple mouths to feed.

^Headline is a bit misleading.  Sales fell as gas "prices" tumbled..... which most people would see as a good thing for the economy.  The headline makes it seem like the drop was due to people buying less gas.  Sorry for the interruption.  Carry on.

 

Maybe you should check the details a little more. Plus, retail sales went negative in April when gas prices were still high. Something more than gas prices are impacting spending. Carry on.

 

Touchy.  I wasn't tyring to mess with your narrative...... I was simply saying that the headline was misleading, which it is.  Although I'm sure the drop in gas prices was manipulated by TPTB to kick the can down the road yet again, even Fox News reported on it....

 

 

A sharp drop in gas prices pulled down overall sales in both months by 0.2 percent, the Commerce Department said Wednesday.

........................

 

Cheaper gas also lowered a measure of wholesale prices by the most in nearly three years.

.........................

 

The decline at the pump could bode well for consumers in the coming months, too. The average national price for a gallon of gas was $3.54 Wednesday — 40 cents cheaper than the year's peak price in early April.

 

And while overall retail sales barely budged in May, Americans did spend more on big purchases.

 

Auto sales rose sharply, and sales of furniture and appliances also increased. That suggests consumers may already be seeing some benefit from lower gas prices.

 

"The continued fall in gasoline prices should support consumption by freeing up cash to be spent on other items," said Paul Dales, senior U.S. economist at Capital Economics. "So although real consumption growth looks set to slow in (the second quarter), we doubt it will grind to a complete halt."

 

http://www.foxnews.com/us/2012/06/13/us-retail-sales-dropped-02-percent-in-may/

 

So why did retail sales drop in April?

 

I never understood America's obsession with consumer spending as the seemingly be all end all economic indicator.  Who cares about consumer spending?  Consumer spending may have been fantastic in the early to mid 2000's, but too much of that spending was with borrowed money and then it all came crashing down.  I don't get it... but I'm not an economist either.

 

Like what Gramarye said, shouldn't we be more focused on prices of commodities like grain, cotton, pork, corn, and yes, gasoline?  Shouldn't we also be MUCH more focused on exports and the trade deficit?  I'm not sure I care if consumer spending is up if we have a large trade deficit.  I'd be much happier knowing that we were running a trade surplus and making money instead of knowing that Americans are simply shuffling their money around with no real added value to the economy.

 

Am I totally off base here?

So why did retail sales drop in April?

 

Did they drop if you eliminate the sales drop assigned only to gasoline?  I honestly don't know.  But if you believe Fox News and the Commerce Department, it seems like the drop in gas sales pulled down the overall sales by 0.2 in both May and April.  Since April has now been revised down to a 0.2 drop overall, it seems like a wash, no?  You're the expert. 

 

Best thing for all of the "handbasket" folks is that it is a win-win scenario.  If gas prices fall, then the ride gets quicker because retail sales will fall and that will be a lead indicator we are on our way to hell.  On the other hand, if gas prices rise, then those increases will be a burden on the economy and, again, we are on our way down.

 

Gramarye and Hoot - agreed totally.  But we all know we can't pass up a good opportunity to panic. 

So why did retail sales drop in April?

 

Did they drop if you eliminate the sales drop assigned only to gasoline?  I honestly don't know.  But if you believe Fox News and the Commerce Department, it seems like the drop in gas sales pulled down the overall sales by 0.2 in both May and April.  Since April has now been revised down to a 0.2 drop overall, it seems like a wash, no?  You're the expert. 

 

Best thing for all of the "handbasket" folks is that it is a win-win scenario.  If gas prices fall, then the ride gets quicker because retail sales will fall and that will be a lead indicator we are on our way to hell.  On the other hand, if gas prices rise, then those increases will be a burden on the economy and, again, we are on our way down.

 

Gramarye and Hoot - agreed totally.  But we all know we can't pass up a good opportunity to panic. 

 

Actually gas prices were at their highest in April. So they should have been juicing the retail numbers, yet they came in negative. (showing that the consumer doesn't have the ability to absorb these increases)

 

Food etc.

I agree as well, the problem is that on items that are more of a necessity (food, medicine, etc..) spending is dropping yet the cost of the items are rising. This is a real problem for the economy and main street. The consumer is showing they are unable to absorb price increases on the many needed things.

 

This has been a major topic throught this thread. What is happening in America (and many other places) is on items that are of necessity prices are rising (inflation). Oil jumps in and out of this issue. Then on things that are not on the necessity list, prices are falling (tv's, electronics, etc. (deflation). Then you add in the biggest wealth item for most American's, their house, which is also deflating. This creates what CincyDad talked about a lot, stagflation. Stagflation really hurts middle income America more than just about any other income bracket. Stagflation has proven in the past to be a very ugly beast.

I never understood America's obsession with consumer spending as the seemingly be all end all economic indicator.  Who cares about consumer spending?  Consumer spending may have been fantastic in the early to mid 2000's, but too much of that spending was with borrowed money and then it all came crashing down.  I don't get it... but I'm not an economist either.

 

Like what Gramarye said, shouldn't we be more focused on prices of commodities like grain, cotton, pork, corn, and yes, gasoline?  Shouldn't we also be MUCH more focused on exports and the trade deficit?  I'm not sure I care if consumer spending is up if we have a large trade deficit.  I'd be much happier knowing that we were running a trade surplus and making money instead of knowing that Americans are simply shuffling their money around with no real added value to the economy.

 

Am I totally off base here?

 

Very good points. We do need to focus on commodities and many of them have been going up in prices. What to watch is how much/if any they start declining. If they start declining (like oil has) this means demand is falling and the world economy is in decline. Trade surplus are important to watch as well.

 

US trade deficit shrinks in April even as exports drop

 

"Exports saw their first fall since November as the deepening crisis in the eurozone hit demand for goods.

US imports, however, also shrank dramatically due to weak domestic demand meaning the trade deficit overall fell 4.9% to $50.1bn (£32.5bn)."

http://www.bbc.co.uk/news/business-18369532

 

So if this type of news continues it means we have a problem.

The US consumer is consuming less (remember consumptions makes up a large part of our economy and GDP) and the world is also consuming less of our items that we produce. If this keeps up you start having less jobs being create (which the data is now showing) and if it continues we will start seeing job losses again.

 

Some times commodities can go up do to other external forces (nature - big droughts or floods in regions that produce certain commodities). They also can change (oil does this a lot) when political tensions rise or wars break out. So there are times when commodities prices are rising do to other things besides demand.

"even Fox News reported on it...."

 

Hts121

I will say, you may be one of the most politically consumed individual I have every posted with. Let the politics go to a political thread, both sides are a joke.

I will say, I think you would do better with a blog.  That way you wouldn't have to spend so much effort deflecting any challenge to your narrative.  Btw, it is impossible to discuss the US Economy without bringing in the politics of it.  You certainly do it all the time, whether you realize it or not. 

I will say, I think you would do better with a blog.  That way you wouldn't have to spend so much effort deflecting any challenge to your narrative.  Btw, it is impossible to discuss the US Economy without bringing in the politics of it.  You certainly do it all the time, whether you realize it or not. 

 

I can tell you are determined to believe that I have a political undertone to my comments. I guess there is not much more I can say except this is not true. The only 'political' opinion I have presented in this thread is that I believe both parties are bought and do whatever wall street/banks/FED want them to do. I also believe you absolutely can have and economic discussion without bring politics into the conversation.

U.S. current account deficit hits 3-year high

First-quarter gap tips $137.3 billion, in part on goods and services

 

"WASHINGTON (MarketWatch) — The nation’s current account deficit widened to a three-year high of $137.3 billion in the first quarter, the Commerce Department reported Thursday.

 

The wider gap reflected a decrease in the surplus on income and a greater deficit on goods and services. It’s the largest U.S. deficit since the fourth quarter of 2008."

http://www.marketwatch.com/story/us-current-account-deficit-hits-3-year-high-2012-06-14

 

 

U.S. weekly jobless claims climb to 386,000

Applications for unemployment benefits rise for 5th time in 6 weeks

 

"Jobless claims climbed by 6,000 to a seasonally adjusted 386,000 in the week ended June 9, the Labor Department said. Claims from two weeks ago were revised up to 380,000 from an original reading of 377,000, based on more complete data collected at the state level.

 

Economists surveyed by MarketWatch had projected claims would fall to 376,000."

http://www.marketwatch.com/story/us-weekly-jobless-claims-climb-to-386000-2012-06-14

 

 

Italian borrowing costs soar at bond auction

Sentiment sours toward euro zone’s third largest member

 

"LONDON (MarketWatch) — The Italian government’s borrowing costs soared at a bond auction Thursday, a development that will make it more difficult for Prime Minister Mario Monti to avoid having to seek financial help from other euro-zone members."

http://www.marketwatch.com/story/italian-borrowing-costs-soar-at-bond-auction-2012-06-14

I will say, I think you would do better with a blog.  That way you wouldn't have to spend so much effort deflecting any challenge to your narrative.  Btw, it is impossible to discuss the US Economy without bringing in the politics of it.  You certainly do it all the time, whether you realize it or not. 

 

I can tell you are determined to believe that I have a political undertone to my comments. I guess there is not much more I can say except this is not true. The only 'political' opinion I have presented in this thread is that I believe both parties are bought and do whatever wall street/banks/FED want them to do. I also believe you absolutely can have and economic discussion without bring politics into the conversation.

 

I find your last two sentences contradictory.  You're an admitted conspiracy theorist.  That's your political undertone and the more extreme points you choose to emphasize along that line of thought (through personal opinion or continual references to patently bias sources like zerohedge) is where I usually step in to comment.  We can challenge each other without the personal attacks you want to continually lobby to try and undermine my points in lieu of substantive debate.

I know people that just love these HGTV housing shows.

 

"House Hunters:" Subjects say it's fake

"The blog Hooked on Houses is giving fans a dose of reality about the HGTV series "House Hunters." According to an interview with a former participant, Bobi Jensen, much of the popular show, which has been on the air since 1999, is faked."

http://shine.yahoo.com/at-home/8216-house-hunters-8217-fake-172000660.html

I will say, I think you would do better with a blog.  That way you wouldn't have to spend so much effort deflecting any challenge to your narrative.  Btw, it is impossible to discuss the US Economy without bringing in the politics of it.  You certainly do it all the time, whether you realize it or not. 

 

I can tell you are determined to believe that I have a political undertone to my comments. I guess there is not much more I can say except this is not true. The only 'political' opinion I have presented in this thread is that I believe both parties are bought and do whatever wall street/banks/FED want them to do. I also believe you absolutely can have and economic discussion without bring politics into the conversation.

 

I find your last two sentences contradictory.  You're an admitted conspiracy theorist.  That's your political undertone and the more extreme points you choose to emphasize along that line of thought (through personal opinion or continual references to patently bias sources like zerohedge) is where I usually step in to comment.  We can challenge each other without the personal attacks you want to continually lobby to try and undermine my points in lieu of substantive debate.

 

Moving back to the economic discussion.

Thought I would add some fresh 'conspiracy' to the thread.

 

Senate treats JPMorgan CEO Dimon with kid gloves

"It was billed as a tough grilling but ended up more like a light sauté.

 

JPMorgan CEO Jamie Dimon lived up to his reputation for steadfastness and tough dealing Wednesday in a forthright, and sometimes combative, performance before the Senate Banking Committee.

 

Dimon was expected to receive a frosty reception in his first congressional appearance since he announced the bank sustained a trading loss some analysts now estimate is at least $3 billion. It was a massive loss for the nation's biggest financial institution.

 

Instead, Dimon, who has won praise for bringing JPMorgan (JPM) through the financial crisis relatively unscathed, was treated cordially by most of members of the Senate Banking Committee. They peppered him with questions about regulation and risky practices at the bank, but did not press him to give an update on the losses resulting from the trade."

http://marketday.msnbc.msn.com/_news/2012/06/13/12205211-senate-treats-jpmorgan-ceo-dimon-with-kid-gloves?lite

 

 

Fox Watching Chicken Coop? Senate Banking Committee and Dimon

"MINYANVILLE ORIGINAL The Senate Banking Committee will meet today to question Jamie Dimon about JPMorgan's (JPM) $2-plus billion trading loss. So, will these be Mike-Wallace-for-60-Minutes pointed and informed hardballs, or will they be Barbara-Walters-10-Most-Fascinating-Financiers softballs, gently lobbed over the Senate aisle?"

 

"Now the Senate Banking Committee has a few questions for Mr. Dimon. Exactly how much of a show will this be? That's hard to say but -- and thank you American Banker for running the numbers -- given that Senators on the committee have collectively been given at least $13 million in campaign contributions from the financial services sector, few are expecting them to bite the hand that feeds them too hard.

 

A few tidbits from American Banker:

• JPMorgan is Banking Committee Chairman Tim Johnson's second-largest contributor.

• JPMorgan is third- and fourth-largest contributor to Banking Committee Members Mike Crapo and Charles Schumer.

• Former JPMorgan chief lobbyist Naomi Campter is a top aid to Chairman Johnson.

• In-house JPMorgan lobbyists include Kate Childress, a former aide to Senator Schumer."

Read more: http://www.minyanville.com/business-news/editors-pick/articles/JPMorgan-Banking-Committee-Senate-Banking-Committee/6/13/2012/id/41696#ixzz1xmVmy02G

 

I know people that just love these HGTV housing shows.

 

"House Hunters:" Subjects say it's fake

"The blog Hooked on Houses is giving fans a dose of reality about the HGTV series "House Hunters." According to an interview with a former participant, Bobi Jensen, much of the popular show, which has been on the air since 1999, is faked."

http://shine.yahoo.com/at-home/8216-house-hunters-8217-fake-172000660.html

 

I enjoy House Hunters International.  In House Hunters it always seems like the couples end up buying the cheap house, miles from their jobs, family, etc.  They seem to always base their decision on outdoor space.