Economy Media

The NYT: Where, oh Where Has Our Little Bubble Gone?

You’ve really got to hand it to the New York Times this time: this is the most clueless headline ever:

Builders of New Homes Seeing No Sign of Recovery

Ok, let me refresh your memory: the thing that got us into this mess in the first place was loosely-given credit that allowed a glut of new home purchases over the course of a decade and a half. That includes an artificially-inflated demand for new home construction, as anyone who has ever driven through Mendon can tell you. We currently sit on a huge unsold stock level in the housing market and even existing home sales are down by 28 percent, per the same article.

I can appreciate the fact that new home construction is an industry like any other, with lots of individual tradesmen and professionals relying on that industry for employment. But the tone of the article suggests that, without a consonant recovery of pre-recession home building, there is no recovery. My suggestion to anyone relying on *new* home construction would be to find another niche within which to ply your trade, because we cannot sustain another “recovery” such as that.


Space: Maybe Not, Indeed

Christian Science Monitor has an article up on their online edition featuring the top nine priorities for planetary exploration as expressed by the National Research Council. Perhaps the National Research Council should have cross-checked with the bean counters at NASA before they went to press with this info, as the top priority of a joint EU/US mission to Mars is already in jeopardy.

Europa or bust? Maybe not. Top 9 priorities for planetary research missions – Mars Astrobiology Explorer–Cacher: MAX-C –


911, Subprime and the Zero Bound: How the Terrorists Really Are Winning

Its an uncomfortable thought, to be sure. But reality is not rooted in our personal comfort levels and an honest assessment of the situation says that, while Osama bin-Laden certainly could not have imagined it would actually work out this way, the attack on 911 really did strike a far more serious blow to our nation’s economy than we knew.

Certainly it was the stated goal of al-Qaeda to disrupt our financial centers. Certainly, we know that this much happened at least for a few days: the Stock Market stayed shuttered for several days before finally reopening and air travel was disrupted for a full day. But what followed was a very clear overreaction on the part of the Federal Reserve, knocking interest rates down to never-before-seen levels, bottoming out very near to Paul Krugman’s “zero bound” even before our current economic crisis. And interest rates never really did get back to pre-911 levels, or even half that.

The actual sub-prime mortgage fiasco, however, was not of post-911 origins. It’s origins are rooted well before 911 in the mid-90’s when a President Clinton looking to find ways to work with an intractable Republican Congress signed deregulatory laws that removed fetters in place since the Great Depression. And the derivative markets feeding off mortgage-backed securities was gaining a healthy head of steam well ahead of President Bush’s election.

But look what happens when you put together a down economy, an increasingly hungry securities market based on mortgages and an extremely low interest rate! There is no other sector of the economy that improved so much or displayed so many pro-political statistics than the housing sector throughout The Aughts. Every single Bush SOTU address hyped the increasing numbers of home owners. Fanny Mae and Freddy Mac took steps to actively encourage lower income home-ownership – indeed, as has been their charter for decades. And in the midst of this, what possible reason did anyone have to raise interest rates? Sure, it’s a proof against inflation – and what gains the interest rate made were precisely for this reason – but pressure to keep the markets happy and the good news coming made the White House extremely interested in convincing the Fed to keep the rates as low as possible.

Neither do I especially blame the Bush White House for this: we see now in the Obama Administration what happens when the economy dives. The simple lizard brain of politicians has to find that prospect unacceptable when an easy solution is at hand.

But now that the derivatives bubble has burst, a recession falls upon us as many such recessions fall upon us. Though undoubtably, it is a much bigger recessionary event than any I’ve ever seen in my lifetime. And in such a recession, the solution to the problem is easy: have the Fed lower interest rates. Lowering interest rates makes borrowing money more attractive, businesses make capital investments, spend money, hire workers and before you know it, the economy is back on track. Lowering interest rates also tends to lower prices on consumer goods, making purchases easier for consumers and the lowered interest rates encourage them to buy houses, cars and televisions. All good news for an economy in trouble.

Except there’s no place for interest rates to go: they’re up against a nearly zero-percent interest rate and cannot possibly go lower. The primary tool in the fight against a recession is completely robbed from us. We are not powerless to stop the rising tide of unemployment nor to hold ourselves up against the looming threat of deflation that economists worry is the next step. But we certainly are without our best set of tools, and we certainly won’t be getting out of our current economic hole for a reasonably long period of time. I’d be amazed if we got anywhere near 5 percent unemployment in the next three years, though I’m not an economist.

And so I suspect that writers of history books a century from now will note with diminishing counter-argument that the events of September 11th were hugely developmental to the dark economic “Great Recession” or “Depression” that we now live in.


Is Halloween an Early Benchmark?

I’m sure like most of you, I’m watching the movements of the economy – from the daily news to much more local things like Monster searches of jobs in my industry in Rochester. And like most of you, I’m hearing the same whispers, “we’ve gotta have a good Christmas.”

And it is certainly true that many retail companies rely on Christmas for nearly a third of their total yearly income. Not simply down years but every year relies on the Christmas season to keep it afloat; with the economy in as much jeopardy as it is currently, we need some good news from the holidays to keep us from sliding off our tenuous perch at the edge of financial precipice.

But what is strange is the silence in the economic community about what is surely an early-warning bell-weather of our holiday mood, Halloween. Not to put too much of a damper on what is, after all, a pure-entertainment “holiday,” of course. But Halloween’s share of the marketplace has grown exponentially over the last decade. According to this article written in 2006, each of us is likely to spend as much as $60 dollars on Halloween stuff on average. That’s not Christmas territory by any means, but that’s a hell of a lot of money for a single two- to three-hour celebration. Halloween is getting close to Valentine’s Day, where we spend around $122 a person when the economy doesn’t suck.

But as that last link points out, such frivolous expenses can and are easily shed when the economy is bad. Valentine’s and Halloween are even more expendable celebrations than Christmas is. So the question is: what will Halloween sales look like this year and what does that say about the Christmas season?


Dawning on the Obvious

The Pew Research Center’s People Polling website shows that an increasing majority of Americans are becoming aware that the country’s serious slide into recession may end up being a slide into a Depression. Among the more interesting statistics are that four times the number of people report joblessness as the most serious issue facing us right now, a clear indication that the economic problems once shoved off by the media as simple a poor and irresponsible people issue in the Subprime Mortgage Crisis has hit home for a plurality of Americans.

And it is with this as a backdrop that Republicans choose to fight against the stimulus package. Bravo! Fight on, noble dipshits.


And the Whittling Begins in Earnest

I love Harry Reid. And by “love,” I mean, “want to punch in the face.”

We begin in a position of popular electoral strength and end in Gutless Gulch with Senator Harry Reid now proposing that we cut back the tax cut portion of the bill *as a compromise* to cutting the $100 billion dollars “centrist” Republicans want to cut out of the spending side.

Can we get back to reality, here? “Stimulus” is defined by government spending that replaces slacking spending by the American people for the sake of keeping jobs. We can’t keep cutting stuff out of an already inadequate spending package and hope to possibly stem the tide. We’ve lost a trillion dollars in spending on the consumer side alone, but we’ve got no more than half a trillion in new spending.

Let’s be crystal clear about this: there is no such thing as wasteful spending in a mega-recession!

Some spending that offends the sensibilities of Republicans is fine to remove. I think family counciling is good, but if you want to leave that to Jesus, so be it. But don’t make that an economic issue, because it isn’t.


Paul Krugman on Why Spending Can Outlast the Recession

As always, an interesting and enlightening post from Paul Krugman on why the stimulus spending can outlast the official recession without worrying about whether it’ll do more harm than good. In short, and lamentably: because the employment problems of the large mass of Americans are doubtless going to stick with us long after the bean counters declare the recession over. He puts it at about 2011.

By the way, while I realize that his Nobel prize was about actual theoretical economics, I think he deserves an extra reward for being that smart and still being able to explain it to the rest of us.


Wow! Busy Morning

Whoa. Puff, puff, puff.

I’ve been working on my news feed this morning, and there’s enough news for the day that I almost won’t need to fill up the feed with anything new for a while. But here’s a few stories I’m watching right now:

  • Sad news for all those poor suckers who got taken in by the Gen-See Capital Corporation. They won’t probably be getting any money back, and if they do, it won’t be for years.
  • the D&C is reporting this morning that Wilmot owes the city $18 million that the mayor says they will need to find “options” to recoup. Sounds like a lawsuit to me. And here they are, also asking for money to renovate East View Mall. Ain’t that some shit?
  • Double-banger, here. While the stimulus package reaches a whopping $850 billion dollars, a recent WSJ/CBS poll shows huge, unprecedented support for both President Elect Obama and the stimulus package which has grown so gargantuan. Hey, maybe this president will actually ask us to ante up and kick in this time, instead of telling us to go shopping like on 9/11.
  • And just because I think it’s interesting, it seems that the recession is starting to hit the fine dining establishments of New York and Chicago. I find this interesting in particular because I suspect this wouldn’t have been the case twenty years ago. My suspicion is that The Food Network and Bravo have created a new “foodie” culture of middle-class food enthusiasts who now make up more of the customer base of such restaurants than they ever have in the past.

These are Not Great Numbers

Oh, I’m about to get all numbers on yo ass. Don’t say you weren’t warned:

The New York State Association of Counties has released it’s latest numbers for the end of 2008, and what they predict for 2009 is probably not too surprising: recession at best.

Looking inside the numbers, the biggest one that jumps out at me is the NYS Consumer Price Index, which has fallen at its most extreme rate in twenty years. The CPI is a measurement the price people pay for goods and services on average. As consumers, we tend to think that lower prices are a good thing. But when prices fall precipitously across the board, that’s an indication that people are not buying products at the rate they used to, forcing retailers to lower their prices as a result. When you see a dip like this, its definitely a bad thing.

On the other hand, as the report cites, much of this decline is as a result of gasoline prices falling. The report does not go on to state what percentage of the CPI gasoline represents, so it’s hard to judge how accurate that explanation is. This page deals with the methodology of the study and does make mention of the fact that gasoline prices are rolled into “Transportation,” which is itself one of eight criterion product groups. So, do each of those get rated evenly? If they do or don’t, I’ve missed it in the methodology.

Either way, one troubling factoid from the report’s methodology is the fact that the baseline – the number to which each year’s CPI is compared – is based on an average price index through the years 1982-1984. Does this mean that the CPI was first reported around this time? Because if so, a 1.6% drop in the CPI is only the largest drop in the history of the report, not in the history of U.S. consumer markets. Hard to know in that case where the bottom is. . . .

Looking at the national numbers reported in December, it appears as though the CPI decline in New York has outpaced that of the National average, 1.1%. And isn’t it nice to be ahead of the curve? Looking down farther in this report, the average declines in each category are indeed listed for your perusal. And indeed, the chart tells the whole story: transportation down by 8.9%, more than counterbalancing the biggest increase on the chart, food and drink at 5.9%.


Back Online! Items of Interest This Morning

Whoa, did that suck! I switched hosts to a new VPS service, which rocks, but unfortunately found myself bested by Apache2 and the site went down for a few days. Sorry for the interruption! A big thanks to Rottenchester of The Fighting 29th, who was able to straighten out the mess with my configuration and get my back online. Thanks!

And in items of interest this morning, whilst I work on updating the news section:

As a sign of the times, the NYT is reporting that office space in Manhattan is rapidly emptying out ahead of the looming recession. I hope they cleared out the upper floors first. Those are some nice streets to have to wipe the Investor Class off of.

And here in Rochester, the Irondequoit Town Board will be meeting on plans to make the Medley Center – known on this site as the Diddly Center – even less useful than it was as a mall. Don’t miss the comments section on this one.

I find it sort of ironic that they want a movie theatre in the Medley Center when they already have one down on Culver where you can catch a movie, eat some popcorn and watch teenagers knife-fight in the parking lot. We really need another one of those in town? Seriously?


Xerox Underperforms, DFE Rounds it Up For You

Xerox has underperformed Wall Street’s expectations, citing slacking demand for their products among big businesses worried over recession.  I’ve put together some of the basic facts, gleaned from a number of news sources, in one convenient package.  Enjoy.

One thing I found interesting: Xerox doesn’t want to say yet how their plans will affect Rochester.  Fair enough, and probably expected, but they say they’re waiting to hear about voluntary exits – basically, retirees and people quiting of their own accord – before they make any decisions.  Given the fact that they’ve already gotten rid of 600 people thus far this year, wouldn’t they already know about retirements at this point?

Not the best defense, Xerox.  And while the D&C seems to want to shine up the story, stating that the company’s profits are up and they outperformed expectations, neither of those two things are true and the comment section is going nuts with the false pretense their reporting creates.


Recession: Do We Need Another Word?

Generally where economic discussions are concerned, I tend to think that the last thing we need to better inform the public is more terms and phrases.  I said God Damn, but they just love the jargon, don’t they?

Still, with Senator Phill Gramm’s “Whiner” talk as context, it seems like perhaps there is a much wider chasm between the words we use to describe our economy and the reality.  Because the word “Recession” doesn’t quite cover what we’re seeing.

As Phil Gramm and George Will both correctly point out, we are not precisely in a recession: a recession is generally marked by economists as a period of two consecutive quarters where GNP falls.  We seem to be see-sawing our way through our current economic crisis, losing one quarter and gaining the next.  But whether or not that actual threshold has passed is immaterial to the pain felt by most average Americans as a result of our current economic situation.  See-sawing we may indeed be doing, but it’s been going on for the last eight years and the trend is generally downward.

One problem that might account for the disparity between economic indicators and public sentiment may be that since American companies produce oil all over the world, $145 a barrel pricing doubtless has some buoying effect on our GNP, obviously without the economic upside for the rest of us.  For the rest of us, that same boon to the oil industry is a hardship.  Another problem is that when the economy does well, we worker bees tend to expect pay raises and such.  But in the stagnant economy of the 21st century, many of us work in companies that have long-since frozen wages.

So, if we’re not in a recession by precise standards, what is it?  Clearly, Phil Gramm’s comments are not well-received, but perhaps more importantly, they depict a very real difference between how Wall Street tycoons and others see the economy as compared to those of us actually living in it.  On a purely political level, I think it’s fantastic that McCain’s camp had to dance around this issue, but it’s the truth of what he said that is most troublesome.

What that word aught to be, I don’t know.  Perhaps “Economic Orphanage” is more appropriate?