Beyond Bull (The economic recovery)

http://www.guardian.co.uk/economicdispatch/story/0,12498,1098229,00.html

Beyond bull

The US economy may look buoyant but sky-high balance of payments deficits point to a coming crisis, writes William Keegan

Tuesday December 2, 2003

The markets are bullish, the US economy is booming and everything is fine and dandy in the world economy. Or is it?

An economist visiting from outer space might take a very different view when considering the background to this latest US recovery. Indeed, if any US or International Monetary Fund economist were to look at the trend of the US balance of payments (all flows of money in and out of the US) as a case study, not knowing it was the US, he or she would be advising very severe measures, which would not fit in too well with the presidential election timetable.

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brought us the Bush I recession. The worse recession in the past 60 years. The same is going to happen again. There is no doubt. Timing is everything though.

Jim Paulsen, Chief Investment Officer, Wells Capital Management
gives his "ingredients for a mean batch of Inflation":--

"I would flood the system with money far in excess of economic
growth. I would take Interest Rates to the lowest levels possible.
I would have the Government spend like a banshee. I would drop
the value of the Dollar, and finally, I would take any capacity
growth or additional supply growth and stop it. As a
garnish, I'd add rising commodity prices and a growing Trade
Deficit, mixed with some rising Trade tensions".

timer set 2 go off for the current batch?

What else?

worried about the bond market. That could bust the dam open, short of some other catastrophy on US soil. Tis a fine line we are walking these days....

http://www.financialsense.com/Market/wrapup.htm

The Fed needs to keep all of the financial bubbles inflated—from stocks to bonds and from mortgages to real estate. However, the more money and liquidity it injects into the financial system the greater danger there is of that ocean of money spilling over into the real economy.

Bond investors are becoming uncomfortable with rising commodity prices, rising gold prices, an expanding government budget deficit, expanding trade deficit and a falling dollar. All of these factors are a negative for the bond market. Up until this point the Fed has managed to assuage the fears of bond investors. As written in past Wrap Up’s it has now become a question of time to see who flinches first--the Fed or the bond markets?

And, one too many ingredient given the current situation. They can't stop supply growth, since we are at 74% of industrial capacity now. So, the supply growth potential is already there.

But, i would add the impact of gov't red ink which pushes the bond market up as the gov't needs to compete for the investible dollars. When that happens, the risk premium in venture capital and equity markets is insufficient to draw money away from guaranteed principal.

So, the equity markets fall and reinvestment in industrial infrastructure slows, unemployment rises, and consumption drops.

Sound familiar? It should. It's exactly what happened in 1986 to 1989!
The Professor

The women of "the gentry" are known for their vocals, not for wastral ways!
But otherwise, it sounds remarkably like a cry before a coming death...

So saith Challenger, Gray & Christmas, Chicago outplacement firm, on the CNBC financial show this morning. The CG&C guy was quite downbeat. Yes, orders are up, yes GNP is up, but all the jobs are overseas. He predicts more white collar jobs will be heading that way soon. Lay-offs are way down because American firms have cut all the fat they can cut. And they are not rehiring in America. I'm surprised they let him on the air. Don't know why he pinpointed 2008 as the recovery date. Maybe because that's when we'll be rid of Chimp for sure.

How could he possibly make a prediction for 2008? What's going to happen between now and then? I could see someone who doesn't buy the current "ggod news" cycle we've been seeing as any real lasting economic upturn... and I can EASILY see that person saying "I don't expect any job recovery over the next twelve months." In erally tough times I bet there would be someone willing to go out on a limb and say 18 months. But four years?!?

Not only is that not possible to predict (and highly unlikely given recession history), it sets the bar remarkably low for Bush. Remember those two debates he "won"??? Everyone knows that what e really did was fail to choke himself to death on his tie accidentaly and that got counted as "exceeding expectations". Predict we won't see any new jobs for at least four years and the minimal job growth just about every economist expects over the next few months will look like a miracle.

miracle worker. "Exceeding expectations".

And, CNBC doesn't give him a whole lot of time to explain himself.
I thought 2008 was a long way off, too, but -- Challenger, Gray & Christmas is the bellweather for job data, so this guy is no boob. T

He made the point that jobs NOW being created now are low-paying, for the most part. He may have been targeting 2008 as the year for the kind of spectacular job growth we saw under Clinton -- i.e., work that paid you a living wage.

Bush and his Neocons are resposible for a reccession lasting 3 years and styfling the economy. He lost 4 million jobs. Now that a few is coming back, they are yelling like we won the game already.

The Pubs are in delusion.

He represents an outplacement firm? Is it a publicly traded outplacement firm? On CNBC?

I think he was just trying to hint to investors "business is going to be GREAT for my company for the forseable future - so you should buy our stock"


Just another guy trying to boost his stock value on CNBC. You see it all the time. What should we expect? "we're going to start losing money any day now" He probably has his 401(k) in that stock.

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This helps explain why I wouldn't be too disappointed if we lost 2004. Winning in 2004 will be like catching a falling sword. Imagine the spin that we'd have to use. But, but, ..., it was Bush's fault.

Let Bush take all the credit for the recovery, as he is proclaiming now. 2008, when the economy bottoms out, that will be the ultimate dem opportunity, the easy way out.

But, I'm a falling sword kind of guy, and I say, take the shambles of an economy (and democracy) back in 2004 and restore it.