If someone ever pops a hole in the deriviatives market, the world financial system will simply collapse, its that big of casino (estimated around $400 trillion). Of course we have another potential example of the illegal activity of our banking organizations.  I continue to believe sooner or later someone big enough is finally going to nail them.

 

Schwab sues banks for manipulating Libor rates

Says BofA, Citi, others conspired to depress Libor rates and profited by lowering their interest expenses

 

"The banks conspired to depress Libor rates by understating their borrowing costs, thereby lowering their interest expenses on products tied to the rates, according to the lawsuit filed Aug. 23 in federal court in San Francisco, where Schwab is based.

 

The banks “reaped hundreds of millions, if not billions, of dollars in ill-gotten gains,” Schwab wrote.

 

In separate suits in April, three European asset-management firms and the Carpenters Pension Fund of West Virginia sued the banks claiming they manipulated Libor. U.S. and U.K. officials are cooperating in a probe of possible Libor manipulation, a person close to the investigation said in March.

 

The Schwab suit seeks unspecified damages, which may be tripled under antitrust law. It also includes claims for racketeering and securities fraud."

http://www.investmentnews.com/article/20110825/FREE/110829958/-1/INDaily01&dailycount=1&issuedate=20110825

 

NS CEO doubts “significant” downturn

Tuesday, August 30, 2011

 

Norfolk Southern CEO Wick Moorman says he believes that despite a weaker second-quarter economy, “the causes are not necessarily indicative of larger problems,” and “we certainly don't see the likelihood of a significant economic slowdown.” Moorman made the comments in an interview posted Monday on the SmartMoney website.

 

Asked about the prospects of a long-term shift away from the burning of coal, a major contributor to NS revenue, Moorman (pictured at left) said: “This country is going to continue to burn a lot of coal. We have an enormous amount of coal, and it’s very cheap. Changes that may come will be over a long enough cycle that we believe we will be able to adapt. We are also trying to strengthen our franchise so we have good access to major coal supplies of all kinds.”

 

READ MORE AT:

http://www.railwayage.com/breaking-news/moorman-sees-no-significant-economic-downturn-3454.html

If this is old, sorry. I just saw this and had to share it.....

 

The economy is so bad that:

 

I got a pre-declined credit card in the mail. CEO's are now playing miniature golf. Exxon-Mobil laid off 25 Congressmen. Angelina Jolie adopted a child from America. Motel Six won't leave the light on anymore. A picture is now only worth 200 words. They renamed Wall Street " Wal-Mart Street..."Finally, I called the Suicide Hotline. I got a call center in Pakistan and when I told them I was suicidal, they got all excited, and asked if I could drive a truck.

If this is old, sorry. I just saw this and had to share it.....

 

The economy is so bad that:

 

I got a pre-declined credit card in the mail. CEO's are now playing miniature golf. Exxon-Mobil laid off 25 Congressmen. Angelina Jolie adopted a child from America. Motel Six won't leave the light on anymore. A picture is now only worth 200 words. They renamed Wall Street " Wal-Mart Street..."Finally, I called the Suicide Hotline. I got a call center in Pakistan and when I told them I was suicidal, they got all excited, and asked if I could drive a truck.

 

Maybe Sam Walton Way instead of Wal-Mart Street. It just sounds more high end. LOL

August private-sector jobs up 91,000: ADP

 

"Economists were predicting the ADP figure would rise by about 100,000. The expansion for July was revised down to 109,000 from a prior estimate of 114,000."

http://www.marketwatch.com/story/august-private-sector-jobs-up-91000-adp-2011-08-31

 

Chicago PMI slows in August

 

"WASHINGTON (MarketWatch) -- The Chicago business barometer, which also is called Chicago PMI, slowed in August to a 56.5% reading from 58.8% in July, as managers in the region reported slowing production and new orders and a shrinking in order backlogs. Though the reading was ahead of expectations -- economists polled by MarketWatch had anticipated a 53.0% reading -- the indicator is at a 21-month low."

http://www.marketwatch.com/story/chicago-pmi-slows-in-august-2011-08-31

 

U.S. factory orders jump 2.4% in July

 

"WASHINGTON (MarketWatch) - Orders for goods produced in U.S. factories rose 2.4% in July, the Commerce Department reported Wednesday. Economists surveyed by MarketWatch expected orders to rise a seasonally adjusted 2.0%. Factory orders fell a revised 0.4% in June, down from a prior estimate of a 0.8% decline. Orders for durable goods - products meant to last at least three years - climbed 4.1% in July. Orders for nondurable goods edged up 1.0%."

http://www.marketwatch.com/story/us-factory-orders-jump-24-in-july-2011-08-31

Amazing how just about every stat now days is always revised in the negative direction. Get as much out of the pumped number as possible, then revise in down later when everyone has moved on to the next number. Rinse, repeat.

 

U.S. initial jobless claims off slightly last week

Separate report shows sharper fall in second-quarter productivity

 

"New applications for unemployment compensation dropped 12,000 to 409,000 in the week ended Aug. 27, the Labor Department said Thursday. Initial claims from two weeks ago were revised up to 421,000 from an original reading of 417,000."

 

"In a newly revised data, meanwhile, the government said U.S. productivity fell by 0.7% in the second quarter instead of by 0.3% as initially reported last month. Economists surveyed by MarketWatch had forecast that the revision would show a 0.6% decline."

http://www.marketwatch.com/story/us-initial-jobless-claims-off-slightly-last-week-2011-09-01

 

Don't worry, it will be revised down in the future.

 

ISM Aug. manufacturing gauge at 25-month low

Reading surprises economists that were prepared for sub-50% reading

 

"Outside the U.S., similar gauges said manufacturing in the euro zone dropped to two-year low, Brazil slumped to a 28-month low and the U.K. fell to 26-month low, while China’s rose for the first time in three months and Canada’s rose a four-month high."

http://www.marketwatch.com/story/ism-aug-manufacturing-gauge-at-25-month-low-2011-09-01

Stocks Decline, Treasuries Surge on Jobs Report

 

"Stocks extended losses, sending the Standard & Poor’s 500 Index down for a second day, while Treasuries and gold rose after a report showed American employers added no jobs in August."

 

"The Labor Department said U.S. payrolls were unchanged last month, the weakest reading since September 2010 and worse than the median economist forecast that called for growth of 65,000. Stocks sank and Treasuries surged in August as investors bet that the odds of a recession had increased."

 

“Another disappointing report that speaks to a severe unemployment crisis that, unfortunately, is becoming even more stubbornly embedded,” Mohamed A. El-Erian, the chief executive officer at Pacific Investment Management Co. in Newport Beach, California, wrote in an e-mail. Pimco is the world’s largest bond-fund manager. “Along with Europe’s dislocations, this fuels concerns about the global economic outlook and the growing risk of a recession.”

http://www.bloomberg.com/news/2011-09-02/asia-stocks-end-six-day-rise-as-u-s-futures-drop-franc-climbs-oil-falls.html

 

Its becoming more and more apparent, with each new lawsuit that is being filed, that some of our top banking friends may have not been very good friends to have.

 

U.S. said ready to sue big banks over mortgages

FHFA to seek billions in compensation: report

 

"WASHINGTON (MarketWatch) — A federal U.S. agency is ready to sue more than a dozen major banks, arguing that they misrepresented the quality of mortgage securities they put together and sold in the run-up to the bursting of the housing bubble, according to a published report."

http://www.marketwatch.com/story/us-said-ready-to-sue-big-banks-over-mortgages-2011-09-02

 

This is not a good sign for the longterm stability/survival of BoA.

 

Fed asks B.of A. to provide contingency plan: WSJ

 

"NEW YORK (MarketWatch) -- The U.S. Federal Reserve has asked Bank of America Corp., the nation's largest bank by assets, to provide a contingency plan to show what it would do should it face worsening conditions in its business, the Wall Street Journal reported on Friday. The report, citing people familiar with the situation., said that neither the Fed, nor the company would comment on the matter."

http://www.marketwatch.com/story/fed-asks-bof-a-to-provide-contingency-plan-wsj-2011-09-02

I am sure they will just create another computer code. But, it's at least a start in trying to stop some of the illegal/unethical trading that is going on by some of the big boys.

 

Goodbye High Frequency Trading - Regulators Seek Secret HFT Codes

 

"The crusade against High Frequency Trading which Zero Hedge started well over two years ago, is now coming to an end. Reuters reports that U.S. securities regulators have "taken the unprecedented step of asking high-frequency trading firms to hand over the details of their trading strategies, and in some cases, their secret computer codes." As everyone knows, the only thing of value within the sub-penny scalping HFT universe are the odd nuances in computer code. Which is why its supreme and undisputed secrecy is sacrosanct. As soon as anyone, especially a regulator, has a whiff of understanding how any given algorithm works, it becomes the equivalent of collapsing the wave function: observing the HFT theft-scalping duality in action eliminates the Schrodinger equation associated with any simplistic algo and collapses its "wave function" to a worthless series of ones and zeros. Said otherwise, this is the end for HFT."

http://www.zerohedge.com/news/goodbye-high-frequency-trading-regulators-seek-secret-hft-codes

 

For the Reuters link. Interesting this has not shown up in the US mainstream media, yet.

http://uk.reuters.com/article/2011/09/01/us-financial-regulation-algos-idUSTRE7806J420110901

Central bank flight to Federal Reserve safety tops Lehman crisis

 

"A key warning signal of global financial stress has shot above the extreme levels seen at the height of the Lehman crisis in 2008."

 

"This shows a pervasive loss of confidence in the European banking system," said Simon Ward from Henderson Global Investors. "Central banks are worried about the security of their deposits so they are placing the money with the Fed."

 

"Lars Tranberg from Danske Bank said European banks are reduced to borrowing dollar funds for "a week at a time" rather than the usual six to 12 months. "This closely resembles what happened in late 2008, though the difference this time is that the major central banks have dollar swap lines in place. If the dollar funding markets completely freeze up, the European Central Bank can act as a backstop."

 

"Investors do not fully believe EU pledges that the 21pc "haircut" agreed for private holders of Greek debt is the end of the story, or will remain confined to Greece, as the second Greek rescue is already unravelling. A Greek parliament report concluded that deep recession is pushing the country into a downward spiral, causing debt dynamics to fly "out of control". Public debt will reach 172pc of GDP next year."

http://www.telegraph.co.uk/finance/financialcrisis/8736204/Central-bank-flight-to-Federal-Reserve-safety-tops-Lehman-crisis.html

Italian, Spanish unions mobilise against cuts

 

"Parts of Italy's public transport network ground to a halt and major attractions such as the Colosseum in Rome were closed by the strike as tens of thousands of workers took to the streets across the country.

 

"This is a plan the country doesn't deserve," said Susanna Camusso, head of the largest CGIL union, as she led a march through Rome hours before Prime Minister Silvio Berlusconi's austerity package was to go before the Senate.

 

And in Spain, whose jobless rate is the highest in the industrialised world at nearly 21 percent, unions were taking to the streets in a show of force against a constitutional amendment to ensure that budgets are balanced.

 

The protests came a day after Europe's stock markets saw sharp falls in share prices, including by more than three percent in Italy and Spain, amid growing fears of recession. There was a slight rally on Tuesday.

 

The European Central Bank had to step in last month and buy tens of billions of eurozone bonds after investors fled Italian and Spanish debt and sent their borrowing costs to unsustainable levels."

http://msn.finance.com.my/index.php/rss/5237954

 

 

What I don't get about articles like the one below is that is there are 3 million new jobs posted, why is the unemployment rate still so high? It seems that if there were truly 3 million jobs the unemployment rate would be in the 6 or 7 percent range.

 

Businesses post most job openings in 3 years

 

WASHINGTON -- Companies advertised the most job openings in nearly three years, a hopeful sign after the worst month for hiring in nearly a year.

 

The Labor Department says employers posted 3.2 million jobs in July, up from 3.17 million in June. That is the largest number of openings since August 2008. Typically, it takes anywhere from one to three months to fill an opening.

 

http://www.cleveland.com/business/index.ssf/2011/09/businesses_post_most_job_openi.html

Note the time it takes to fill a position. And what's the size of the U.S. labor force?

 

 

What I don't get about articles like the one below is that is there are 3 million new jobs posted, why is the unemployment rate still so high? It seems that if there were truly 3 million jobs the unemployment rate would be in the 6 or 7 percent range.

 

Businesses post most job openings in 3 years

 

WASHINGTON -- Companies advertised the most job openings in nearly three years, a hopeful sign after the worst month for hiring in nearly a year.

 

The Labor Department says employers posted 3.2 million jobs in July, up from 3.17 million in June. That is the largest number of openings since August 2008. Typically, it takes anywhere from one to three months to fill an opening.

 

http://www.cleveland.com/business/index.ssf/2011/09/businesses_post_most_job_openi.html

 

That would be the equivalent of about 8 weeks of new unemployed people (400,000 per week). Glad to see more jobs being offered, but this trend must increase significantly if we want to start denting the unemployed numbers in the US.

If BoA is around this time next year, in its current form, it will be a big surprise.

 

Feds say Bank of America worse than Countrywide

Commentary: Federal lawsuit says even Mozilo was shocked

 

"NEW YORK (MarketWatch) — Bank of America Corp.’s story has long been that Countrywide did it. But a lawsuit filed last week by the Federal Housing Finance Agency tells a different tale.

 

The lawsuit claims that when former Countrywide Financial Corp. CEO Angelo Mozilo marveled at the dizzying recklessness of the mortgage-lending business, he was in fact looking at Charlotte-based Bank of America."

http://www.marketwatch.com/story/feds-say-bank-of-america-worse-than-countrywide-2011-09-07?dist=afterbell

 

I don't doubt that BofA is in some deep doo doo, much of it their own making, but this article is somewhat misleading, both in the volume of mortgages that BofA originated (its implication that it was originating more mortgages based on one email exchange is preposterous), and in the rationale for buying Countrywide. BofA was 'asked' by the Federal Gov't to buy Countrywide, as a means to try and stabilize a suddenly crumbling mortgage market. In hindsight this was nuts, both for BofA and for the Fed to get involved in the first place, but that was the thinking then. BofA was one of only a couple big banks with a strong enough balance sheet to conduct such a transaction. Ken Lewis wouldn't have bought BofA Countrywide without the government's 'suggestion'.

 

Same for Merrill.

 

When all is said and done, they still have a huge mess to clean up, but I always get a chuckle when writers like this (and the government as well) try to paint BofA as some criminal organization now, when in fact, they were one of the 'good guys' 3 years ago.

 

Edit: I had Ken Lewis buying his own company there. That really would have been a stupid transaction.

I don't doubt that BofA is in some deep doo doo, much of it their own making, but this article is somewhat misleading, both in the volume of mortgages that BofA originated (its implication that it was originating more mortgages based on one email exchange is preposterous), and in the rationale for buying Countrywide. BofA was 'asked' by the Federal Gov't to buy Countrywide, as a means to try and stabilize a suddenly crumbling mortgage market. In hindsight this was nuts, both for BofA and for the Fed to get involved in the first place, but that was the thinking then. BofA was one of only a couple big banks with a strong enough balance sheet to conduct such a transaction. Ken Lewis wouldn't have bought BofA without the government's 'suggestion'.

 

Same for Merrill.

 

When all is said and done, they still have a huge mess to clean up, but I always get a chuckle when writers like this (and the government as well) try to paint BofA as some criminal organization now, when in fact, they were one of the 'good guys' 3 years ago.

 

All part of the economic dynamics and political power play that is constantly changing daily on Wall Street and in DC. One moment you are the hero that took one for the team and the next moment you are the evil villian. Their stock is in the crapper and their debt problems are severe. These are two items that will probably determine their future, not the lawsuit(s).

Another Fed President Signals Recession

 

"One by one, Federal Reserve regional presidents have begun to admit that another recession has started, or at least is on the horizon. Some have made suggestions about what can be done, but none of these ideas seems compelling.

 

Charles Evans, the chief of the Chicago Fed, said in a speech recently that, “In the summer of 2009, the U.S. economy began to emerge from its deepest recession since the 1930s. But today, two years later, conditions still aren’t much different from an economy actually in recession.”

 

That is an odd way to frame the issue. Either the economy is in a recession or it is not."

Read more: Another Fed President Signals Recession - 24/7 Wall St. http://247wallst.com/2011/09/08/another-fed-president-signals-recession/#ixzz1XNiIxcgO

 

 

What I don't get about articles like the one below is that is there are 3 million new jobs posted, why is the unemployment rate still so high? It seems that if there were truly 3 million jobs the unemployment rate would be in the 6 or 7 percent range.

 

Businesses post most job openings in 3 years

 

WASHINGTON -- Companies advertised the most job openings in nearly three years, a hopeful sign after the worst month for hiring in nearly a year.

 

The Labor Department says employers posted 3.2 million jobs in July, up from 3.17 million in June. That is the largest number of openings since August 2008. Typically, it takes anywhere from one to three months to fill an opening.

 

http://www.cleveland.com/business/index.ssf/2011/09/businesses_post_most_job_openi.html

 

I bet many of those are for positions for which the current labor pool as a whole is underqualified. Much as the same way a military is equipped to fight the last war after it has ended, our labor force is equipped properly for the careers of a generation ago since it takes a while for society to recognize the need for a skill then train and educate people for it.

 

 

What I don't get about articles like the one below is that is there are 3 million new jobs posted, why is the unemployment rate still so high? It seems that if there were truly 3 million jobs the unemployment rate would be in the 6 or 7 percent range.

 

Businesses post most job openings in 3 years

 

WASHINGTON -- Companies advertised the most job openings in nearly three years, a hopeful sign after the worst month for hiring in nearly a year.

 

The Labor Department says employers posted 3.2 million jobs in July, up from 3.17 million in June. That is the largest number of openings since August 2008. Typically, it takes anywhere from one to three months to fill an opening.

 

http://www.cleveland.com/business/index.ssf/2011/09/businesses_post_most_job_openi.html

 

I bet many of those are for positions for which the current labor pool as a whole is underqualified. Much as the same way a military is equipped to fight the last war after it has ended, our labor force is equipped properly for the careers of a generation ago since it takes a while for society to recognize the need for a skill then train and educate people for it.

 

Another thing that I wonder about in counts of 'jobs posted'...  Since I'm in IT I see a lot of job postings on the online job sites by different companies that are in effect, the same job.  Company A will want to hire an IT person, either direct hire, long-term contract, or contract-to-hire.  They put the proposal out to 3 or 4 recruiters in the area, and each of those recruiters posts the job online, worded slightly differently. 

 

So if you count job postings as a direct reflection of the number of job openings, you can get grossly inflated numbers.

 

(not sure how prevalent this practice is in non-IT/engineering fields, but I suspect it does happen to some extent in accounting, finance, corporate sales, etc.)

Looks like that contingency plan the FEDs asked for, from Bank of America, last week is going to be announced next week.

 

Bank of America restructuring puts 40,000 jobs at risk

 

"A radical cost-saving plan that may put up to 40,000 jobs at risk at Bank of America (BoA) is expected to be announced next week. "

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8753643/Bank-of-America-restructuring-puts-40000-jobs-at-risk.html

 

When they first started to 'kick the can' (Greece) they would get 4-6 months of calm, then as time went on market calm would only last 2-3 months, then 1-2 months, now when they 'kick the can' they seem to only buy a 1-2 weeks at most. Are they nearing a point where they 'kick the can' and it simply won't move? If they 'officially default' its will ripple through the system at a level much like Lehman Brothers and clearly weaken Spain and Italy's financial position.

 

ECB’s Stark steps down, markets hit

Move said to stem from disagreement over bond-buying program

 

"Stark is the second German ECB Governing Council member to leave this year. Axel Weber, the former Bundesbank president once tipped to replace Trichet as ECB chief, resigned his post earlier this year due in part to unhappiness with the ECB’s bond purchases, which critics say erode the bank’s independence."

http://www.marketwatch.com/story/ecbs-stark-steps-down-markets-hit-2011-09-09?dist=countdown

 

Germany preps support if Greece defaults: report

 

"CHICAGO (MarketWatch) -- The German government may re-introduce a fund to recapitalize its banks if Greece defaults on the terms of the loans it received, according to a Bloomberg report that cited three unnamed sources close to the situation. German banks face as much as a 50% loss on Greek bonds if Greece does default, Bloomberg reported. Germany is worried that the debt dilemma will worsen because Greece has been unable to meet its obligations to cut its national budget, the news agency said."

http://www.marketwatch.com/story/germany-preps-support-if-greece-defaults-report-2011-09-09?dist=countdown

I am sure there will be a price to be paid in the future for China's support. But, this is one of the only countries that could afford to provide support that is not just new debt.

 

China sees Europe as ‘too important to fail’

 

"HONG KONG (MarketWatch) — Speculation that China may help rescue peripheral European debt markets is consistent with Beijing’s strategic interests in the region and a prudent backstopping of its euro-denominated investments, analysts say.

 

Reports on Monday from The Wall Street Journal and Financial Times said Italy’s finance minister met last week with a delegation of Chinese officials — including the head of China’s sovereign-wealth fund — in an attempt to persuade Beijing to buy a large amount of Italian sovereign debt."

http://www.marketwatch.com/story/china-sees-europe-as-too-important-to-fail-2011-09-13

China's got its own credit bubble looming, combined with enormous levels of questionable assets on their bank balance sheets....sound familiar? That house of cards is propped up by exports. They know where their bread is buttered, and if their customer base is unravelling into recession, they'll do what they can to keep them afloat (and make a nice return in the process)

We are clearly on our way to having our version of the lost decade or more. The disconnect between Wall Street's wealth and Main Street's wealth (or lack of) continues to grow.

 

Record poverty last year as household income dips

Median household income declines; families ‘doubled up’

 

"WASHINGTON (MarketWatch) — A record number of people were in poverty last year as households saw their income decrease, according to data from the Census Bureau Tuesday, demonstrating the weakness of the economy even after the official end of the recession.

 

The 46.2 million people in poverty in 2010 was the most for the 52 years that estimates have been published, and the number of people in poverty rose for the fourth consecutive year as the poverty rate climbed to 15.1% — the highest since 1993 — up from 14.3% in 2009."

 

"Meanwhile, real median household income in 2010 was $49,445, down 2.3% from the prior year and below pre-recession levels."

http://www.marketwatch.com/story/record-poverty-last-year-as-household-income-dips-2011-09-13?dist=countdown

This should be more than enough good news to send the stock market up nicely today.

 

Data says it all about economy: flat, flat, flat

Commentary: Corporate America signals they don’t expect uptick soon

 

"WASHINGTON (MarketWatch) — So it’s official: In August there was no jobs growth, no sales growth and no price growth."

http://www.marketwatch.com/story/data-says-it-all-about-economy-flat-flat-flat-2011-09-14

 

End game approaches for Greek crisis

 

"FRANKFURT (MarketWatch) — Financial markets indicate Greece’s chaotic sovereign-debt saga is moving inevitably toward default, economists said, leaving European leaders and policy makers scrambling to avert a potentially disastrous domino effect that could wreck the euro and send the global economy into a tailspin."

http://www.marketwatch.com/story/end-game-approaches-for-greek-crisis-2011-09-14

 

China willing to expand investments in Europe

 

"HONG KONG (MarketWatch) — China views Europe as a strategic partner and stands willing to expand its investments in the region, Premier Wen Jiabao said Wednesday, urging that Europe acknowledge China’s status as a market economy."

http://www.marketwatch.com/story/china-willing-to-expand-investments-in-europe-2011-09-14

Coming to a market near you, with Cincy leading the way in the region.

 

US seeking to unload foreclosed homes

 

"The government wants to unload 677 foreclosed single-family homes in the 15-county Greater Cincinnati region that it or government-sponsored Fannie Mae and Freddie Mac now own.

 

Washington is so stumped about a list of 92,000 properties that it holds nationally that it’s asking investors and others to send in ideas on what to do. The Cincinnati region has more government-owned foreclosures on the list than any market in Ohio, Kentucky or Indiana. In fact, the region’s total is higher than those for 19 states, including Kentucky."

http://news.cincinnati.com/article/20110913/BIZ01/109140315/US-seeking-unload-foreclosed-homes?odyssey=tab|topnews|text|News

I am sure they will just create another computer code. But, it's at least a start in trying to stop some of the illegal/unethical trading that is going on by some of the big boys.

 

Goodbye High Frequency Trading - Regulators Seek Secret HFT Codes

...

http://www.zerohedge.com/news/goodbye-high-frequency-trading-regulators-seek-secret-hft-codes

 

Thanks for the links.  The high frequency trading story has irked me since I saw it on 60 Minutes.

Tyler Durden's opinionating about Chairman Bernaike at the end was pretty embarrassing, though.  He ruined his article with it.

Interesting read, I think many on Urban Ohio will be interested in this article.

Could these changes also show that manufacturing in the US continues to decline and that decline is now becoming more pronounced in the South that had become the 'new' manufacturing center for America?

 

Deep Recession Sharply Altered U.S. Jobless Map

 

"When the unemployment rate rose in most states last month, it underscored the extent to which the deep recession, the anemic recovery and the lingering crisis of joblessness are beginning to reshape the nation’s economic map.

 

The once-booming South, which entered the recession with the lowest unemployment rate in the nation, is now struggling with some of the highest rates, recent data from the Bureau of Labor Statistics show.

 

Several Southern states — including South Carolina, whose 11.1 percent unemployment rate is the fourth highest in the nation — have higher unemployment rates than they did a year ago. Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession.

 

For decades, the nation’s economic landscape consisted of a prospering Sun Belt and a struggling Rust Belt. Since the recession hit, though, that is no longer the case. Unemployment remains high across much of the country — the national rate is 9.1 percent — but the regions have recovered at different speeds."

 

"In Pennsylvania, the analysis found, the Pittsburgh area — which is heavily reliant on education and health care — is weathering the downturn better than the Philadelphia area. In New York, areas around long-struggling upstate cities like Buffalo and Rochester are recovering faster by some measures than the New York City metropolitan area. And the rate of recovery in Rust Belt areas around Youngstown and Akron, two Ohio cities that were hit hard, has outpaced that of former boomtowns like Colorado Springs and Tucson."

http://www.nytimes.com/2011/09/27/us/unrelenting-downturn-is-redrawing-americas-economic-map.html?_r=2&ref=business

Welcome to the bizarro economy: The Midwest is up and the South is in decline

Blog entry: September 27, 2011, 11:30 am    |    Author: SCOTT SUTTELL

 

No region of the country's exactly thriving in this economy, but The New York Times crunches some numbers and finds a reversal of fortune in which the Midwest is up and the South is down.

 

“Unemployment in the South is now higher than it is in the Northeast and the Midwest, which include Rust Belt states that were struggling even before the recession,” the newspaper reports. “For decades, the nation's economic landscape consisted of a prospering Sun Belt and a struggling Rust Belt. Since the recession hit, though, that is no longer the case.”

 

The collapse of the housing bubble left Nevada with the highest jobless rate, 13.4%, followed by California with 12.1%. Michigan has the third-highest rate, 11.2%. But of the states with the 10 highest unemployment rates, six are in the South, The Times notes, as the region has been hit hard by the downturn in construction.

 

READ MORE AT:

http://www.crainscleveland.com/article/20110927/BLOGS03/110929845

Id expect the South to be hammered by offshoring to low-wage markets in Asia and elsehwere.  Their only selling point was low labor costs (and maybe low energy costs)...not quality of life and not a skilled or even somewhat well-educated workforce. 

 

Take away low wages and why bother continue operations in Dixie? 

 

 

As I've written in other threads, the boom of the past generation in the "sunbelt" has been largly speculative.  Unless the speculation is replaced with something concrete, the bubble will eventually burst.  Especially when that bubble is largly credit driven.  the well has run dry.

Here is some potential help, create financial funds/tools that flow money into smaller banks and small businesses instead of feeding Wall Street and the Big banks all the time. That will help with job growth and then, allow home prices to actually adjusted to income levels so that housing becomes affordable and its cost returns to a historic level of 30% of a households income or less. Until housing finally comes in line with income levels at reasonable historic costs, the amount of forclosures and debt burdens households will continue to pull the US economic down.

 

Bernanke calls unemployment a 'national crisis'

 

"WASHINGTON (MarketWatch) -- The nation's weak labor market was "a national crisis" that required attention from the White House and Congress, Federal Reserve Chairman Ben Bernanke said Wednesday. "We've had close to 10% unemployment now for a number of years, and of the people who are unemployed, about 45% have been unemployed for six months or more. This is unheard of," Bernanke said in a question-and-answer session following a speech in Cleveland. He called for policies "that could help them find work, train for work and retain their skills." Bernanke also urged policy makers to consider "strong housing policies to help the housing market recover." Better housing policies would "clearly be very useful," and would allow the low mortgage rates stemming from easy Fed policy to have more effect and help the economy recover."

http://www.marketwatch.com/story/bernanke-calls-unemployment-a-national-crisis-2011-09-28

 

Just what we need.  More houses.  We have a three year glut of supply right now. 

 

What are people supposed to do, live in two houses?

 

Maybe we should have taken all the TARP money, given it to the 14 million illegal aliens and forced them to buy forclosed homes.  I think it would have penciled out just about right.

 

When are people going to wake up and understand that Keynseian economics is non-sense.

 

tedolph

I don't think this situation reflects poorly on Keynesian economics.  The unnecessary-housing boom was caused by private sector forces run amok.  And since we aren't allowed to do straight-up jobs programs, because that would be socialist, Bernanke thinks our only option is to get all those McMansion contractors working again.

You really think that "private sector forces run amok" were more responsible for the "unnecessary-housing boom" (nice turn of phrase, BTW) than deliberate government policy choices that encouraged building and buying real estate far in excess of what the market equilibrium would otherwise have been?  Combine the federal, state, and local levels and you have fiscal policies encouraging building with regulatory policies all but mandating that such building be largely in sprawling hinterlands (combined with yet more fiscal policies providing for building expensive infrastructure out to those hinterlands).

I don't think this situation reflects poorly on Keynesian economics.  The unnecessary-housing boom was caused by private sector forces run amok.  And since we aren't allowed to do straight-up jobs programs, because that would be socialist, Bernanke thinks our only option is to get all those McMansion contractors working again.

 

This is almost reminiscent of the Hoover Administrations response to the deepening econ collapse in 1930-31.  The Administration did everything that conventionl economic theory prescribed.  Raised taxes to balance the budget, etc.  However, nobody thought "out-of-the-box" until it was almost too late.  And then, the democrat controlled congress stonewalled what remedies were proposed until RDR became president (alot of the "new deal" was actually Hoover in origination).  Does this sound familiar to today?  And because there was a actually a nascent recovery at the time of FDR's inauguation, alot of the new deal legislation that was finally passed may have impeded further recovery.  Now, does that sound plausible for 2012?

Poverty affects 46 million Americans

 

http://www.usatoday.com/news/nation/story/2011-09-28/millions-of-Americans-are-suddenly-poor/50593610/1

 

LEESBURG, Va. – Billy Schlegel plunged from middle class into poverty in the time it took his daughter to play a soccer season

 

In January 2010, he was making $50,000 a year as a surveyor, meeting the mortgage payments on his three-bedroom home in the nation's wealthiest county and paying for his children to play hockey and soccer.

 

Then came February. Schlegel, 45, was laid off. During the next 18 months, the divorced father of three almost lost his house, had to stop paying child support and turned to the local food bank for basic necessities.

 

"You've got to swallow your pride," Schlegel says. "Especially around here, people lose their status and they feel they don't fit in."

I really fear that the worst is yet to come. 

 

 

If interest rates ever go up we are fininshed.

 

Tedolph

In January 2010, he was making $50,000 a year as a surveyor, meeting the mortgage payments on his three-bedroom home in the nation's wealthiest county and paying for his children to play hockey and soccer.

 

He earned just $50,000 a year, owned a 3-BR house in tony Leesburg (certainly had to have a car out there), AND had to pay child support + other expenses? I figured he'd have to be living out the food bank BEFORE he lost his job!

 

No wonder he, like so many people, is in financial trouble. Too many Americans are living WAY beyond their means.

What are people supposed to do, live in two houses?

 

A lot of people have two cars, so why not?  :-D

I really fear that the worst is yet to come. 

 

It is.

In January 2010, he was making $50,000 a year as a surveyor, meeting the mortgage payments on his three-bedroom home in the nation's wealthiest county and paying for his children to play hockey and soccer.

 

He earned just $50,000 a year, owned a 3-BR house in tony Leesburg (certainly had to have a car out there), AND had to pay child support + other expenses? I figured he'd have to be living out the food bank BEFORE he lost his job!

 

Agreed. Sort of a ridiculous person to focus on. He makes 50k in the wealthiest county in the US and he's paying child support for 3 kids? He's had his home for 20 years--it cost over $1,000 for his mortgage. He really should be paying much less but for some bad refis and poor home equity loan decisions.  Why is the USAToday trying to make it seem like this guy was living the good life before he lost his job? Not to dump on this guy's situation, but I'm sure you can find much salient personal tragedies to focus on.

In January 2010, he was making $50,000 a year as a surveyor, meeting the mortgage payments on his three-bedroom home in the nation's wealthiest county and paying for his children to play hockey and soccer.

 

He earned just $50,000 a year, owned a 3-BR house in tony Leesburg (certainly had to have a car out there), AND had to pay child support + other expenses? I figured he'd have to be living out the food bank BEFORE he lost his job!

 

Agreed. Sort of a ridiculous person to focus on. He makes 50k in the wealthiest county in the US and he's paying child support for 3 kids? He's had his home for 20 years--it cost over $1,000 for his mortgage. He really should be paying much less but for some bad refis and poor home equity loan decisions.  Why is the USAToday trying to make it seem like this guy was living the good life before he lost his job? Not to dump on this guy's situation, but I'm sure you can find much salient personal tragedies to focus on.

 

As an aside, this article points out another problem in our society today.  The loss of the traditional family and breakup of marriages is expensive.  If he was still married to the mother of his children, suppose she made $50,000.  Together they would be sharing expenses on one house in that area.  When the family breaks up suddenly the court orders you to supply a home for your children, pay support etc--dividing up already limited resources.  Perhaps together their choices on the area they lived in made sense.

 

I speak from experience--have been paying well over $1,000 a month in child support for nearly 10 years now and maintaining my own separate home for my children.

In January 2010, he was making $50,000 a year as a surveyor, meeting the mortgage payments on his three-bedroom home in the nation's wealthiest county and paying for his children to play hockey and soccer.

 

He earned just $50,000 a year, owned a 3-BR house in tony Leesburg (certainly had to have a car out there), AND had to pay child support + other expenses? I figured he'd have to be living out the food bank BEFORE he lost his job!

 

No wonder he, like so many people, is in financial trouble. Too many Americans are living WAY beyond their means.

 

In January 2010, he was making $50,000 a year as a surveyor, meeting the mortgage payments on his three-bedroom home in the nation's wealthiest county and paying for his children to play hockey and soccer.

 

He earned just $50,000 a year, owned a 3-BR house in tony Leesburg (certainly had to have a car out there), AND had to pay child support + other expenses? I figured he'd have to be living out the food bank BEFORE he lost his job!

 

Agreed. Sort of a ridiculous person to focus on. He makes 50k in the wealthiest county in the US and he's paying child support for 3 kids? He's had his home for 20 years--it cost over $1,000 for his mortgage. He really should be paying much less but for some bad refis and poor home equity loan decisions.  Why is the USAToday trying to make it seem like this guy was living the good life before he lost his job? Not to dump on this guy's situation, but I'm sure you can find much salient personal tragedies to focus on.

I was waiting for someone to mention this.  People living above their means to save face.

 

In January 2010, he was making $50,000 a year as a surveyor, meeting the mortgage payments on his three-bedroom home in the nation's wealthiest county and paying for his children to play hockey and soccer.

 

He earned just $50,000 a year, owned a 3-BR house in tony Leesburg (certainly had to have a car out there), AND had to pay child support + other expenses? I figured he'd have to be living out the food bank BEFORE he lost his job!

 

Agreed. Sort of a ridiculous person to focus on. He makes 50k in the wealthiest county in the US and he's paying child support for 3 kids? He's had his home for 20 years--it cost over $1,000 for his mortgage. He really should be paying much less but for some bad refis and poor home equity loan decisions.  Why is the USAToday trying to make it seem like this guy was living the good life before he lost his job? Not to dump on this guy's situation, but I'm sure you can find much salient personal tragedies to focus on.

 

As an aside, this article points out another problem in our society today.  The loss of the traditional family and breakup of marriages is expensive.  If he was still married to the mother of his children, suppose she made $50,000.  Together they would be sharing expenses on one house in that area.  When the family breaks up suddenly the court orders you to supply a home for your children, pay support etc--dividing up already limited resources.  Perhaps together their choices on the area they lived in made sense.

 

I speak from experience--have been paying well over $1,000 a month in child support for nearly 10 years now and maintaining my own separate home for my children.

 

Sorry they were still living above their means.  Child support is a wash.  When you have life changing events on X salary, you need to adjust for that, and it appears he didn't.

Our regulatory system is so broke and so manipulated by the big boys is just a joke. So they wanted taxpayer money, but once they got it they didn't want to follow the rules that were set for that money and didn't want their big bonuses reduced. So, they 'pressured' the regulators to ignore the rules for them and they did. It must be great to be a big bank in today's environment. The system just bends and flexes to their desires and needs. This house of cards will one day crash and burn and that burning will be so big that it will be visible from outerspace.

 

Watchdog: Regulators bowed to banks on bailout

Regulators bowed to big banks by easing rules for repaying bailout money, watchdog report says

 

"WASHINGTON (AP) -- Federal regulators bowed to pressure from big banks seeking a quick exit from the financial bailout program and did not uniformly apply the government's own conditions set for repaying the taxpayer funds, a new watchdog report says."

 

"Meanwhile, the banks wanted to get out quickly from the so-called Troubled Asset Relief Program, or TARP, because they wanted to avoid its limits on executive compensation and the stigma associated with receiving rescue money, according to the report."

 

"Because the regulators failed to enforce the policy for repayments set by the Federal Reserve, the new report says, "the process to review a TARP bank's exit proposal was ... inconsistent." That policy required banks to issue at least $1 in new common stock for every $2 in bailout money they repaid."

 

"But the banks doggedly resisted the regulators' demands to issue common stock, seeking instead to use cheaper and "less sturdy" alternatives such as selling assets or issuing preferred stock, the report found. Issuing common stock is a better way to shore up a bank's capital base, it said."

http://finance.yahoo.com/news/Watchdog-Regulators-bowed-to-apf-3217329384.html?x=0&sec=topStories&pos=main&asset=&ccode=

US Economy Tipping Into Recession, says ECRI.

 

ECRI’s recession call isn’t based on just one or two leading indexes, but on dozens of specialized leading indexes, including the U.S. Long Leading Index, which was the first to turn down – before the Arab Spring and Japanese earthquake – to be followed by downturns in the Weekly Leading Index and other shorter-leading indexes. In fact, the most reliable forward-looking indicators are now collectively behaving as they did on the cusp of full-blown recessions, not “soft landings.”

 

...and there is a macro look at an notional new regime of economic dysfunction and viscious cycles near the end of the piece.

 

Hmph.

 

 

New orders continue to be at contraction levels.

 

ISM reading picks up in September to 51.6%

 

"WASHINGTON (MarketWatch) -- The Institute for Supply Management's manufacturing index picked up a bit in September, rising to 51.6% from a 50.6% reading in August. Economists polled by MarketWatch had anticipated an unchanged reading. Of key components, the new orders reading stayed at 49.6%, production rose 2.6 points to 51.2% and employment rose 2 points to 53.8%."

http://www.marketwatch.com/story/ism-reading-picks-up-in-september-to-516-2011-10-03

Do you ever get the feeling they may actually be running out of 'ammo'. Way back in this thread I made a comment that if the FEDs were going to go down this liquidity route then they better not run out of options before they had things stable or all %@*%@ was going to happen. I think they are getting closer to this edge. I hope they can avoid falling over the cliff, but the options are absolutely getting less and less.

 

Bernanke says Twist equals half-point rate cut

 

"WASHINGTON (MarketWatch) — Federal Reserve Chairman Ben Bernanke Tuesday said the central bank’s new policy of swapping bonds is not a “game-changer” but should help the economy avoid a new downturn."

 

“I would just put it as a moderate support, not something that is expected to radically change the picture, but should be helpful” to support growth while keeping prices stable, Bernanke told the Joint Economic Committee of Congress."

http://www.marketwatch.com/story/bernanke-downbeat-about-job-outlook-2011-10-04

 

Europe recession fears mount

Goldman Sachs, S&P see rising risks

 

"FRANKFURT (MarketWatch) — A long-running, home-grown debt crisis and further evidence of slowing growth continues to stoke doubts about Europe’s ability to avoid slipping into recession."

http://www.marketwatch.com/story/europe-recession-fears-mount-2011-10-04

Robert Reich has another op-ed in the NYT on growing inequality.  Neat graphic comes along with the article

 

 

 

 

..and aslo compares the US to Germany:

 

Some say we couldn’t have reversed the consequences of globalization and technological change. Yet the experiences of other nations, like Germany, suggest otherwise. Germany has grown faster than the United States for the last 15 years, and the gains have been more widely spread. While Americans’ average hourly pay has risen only 6 percent since 1985, adjusted for inflation, German workers’ pay has risen almost 30 percent. At the same time, the top 1 percent of German households now take home about 11 percent of all income — about the same as in 1970. And although in the last months Germany has been hit by the debt crisis of its neighbors, its unemployment is still below where it was when the financial crisis started in 2007.

 

How has Germany done it? Mainly by focusing like a laser on education (German math scores continue to extend their lead over American), and by maintaining strong labor unions.

 

THE real reason for America’s Great Regression was political

 

...which I disagree with.  The US business community was chasing low costs.  They did this by automation and moving work to...first...the low wage Southern states, then to Mexico and now to Asia.  And by busting the unions. 

 

Since US politics is driven by $$$ the people with money...the buisness community (which includes the FIRE sector).....influenced policy to facilitate this.  The Business of America is Business, and the "politics" reflects this....Riech says the reason was politics, but I think  the politics was just the symptom or reflection of an economic imperative.

 

 

 

 

If this thread has shown nothing else but one thing, I hope it is that there really isn't one elephant under the rug, its herds and herds of elephants hiding under the living room rug and the longer we continue to ignore the rug the worse it gets.

 

Jeffery,

Once again thank you for the valuable chart.

Random anecdote: I was sitting in a college lecture the other day and a middle aged woman in the class was stumped on the concept of evolutionary adaptation, specifically as it applied to the recessive sickle cell gene and the malaria resistance it provides. After several fruitless minutes of discussion the professor said "Just see me after class about it."

 

She, like I and several others in this class, are way past college age and trying to change careers into health care. She's diligent and well spoken, but she's clearly from a low to middle economic background and is struggling with the material. I can't help but think of the tens of millions of Americans just like her who are trying to occupy themselves in an increasingly technologically advanced society where even very intelligent people are struggling with extreme levels of job specialization and intellectual complexity.