Nouriel Roubini's Global EconoMonitor

Global Monetary Policy Outlook

In this week’s note, we take a look at some recent monetary policy trends in advanced economies. This content is excerpted from a longer piece, “Global Monetary Policy Review” (requires login), which includes in-depth analysis of when the world’s emerging markets might shift interest rate strategy. This longer piece is available exclusively for the use of RGE’s clients.

Last week was a busy one for the Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE). Policymaking is tricky when different asset classes are sending very different signals about the economy. However, those different signals are themselves a byproduct of policy. In the U.S., bond markets are discounting a sluggish U-shaped recovery or even a double-dip recession, while risky markets are signaling a strong V-shaped recovery ahead.

Which is right? While RGE leans towards the U-shaped camp, we do not expect risky assets to invert their course as long as the Federal Reserve commits to maintaining “exceptionally low levels of the federal funds rate for an extended period.”  So the policy dilemma is one of having to maintain “exceptionally low rates” given the still very difficult real economic conditions, but with the danger of an increasing disconnect between risky asset valuations and the economy–which could eventually snap back and compromise economic and financial stability in the medium term. While this environment reignites the debate on whether central banks should target asset prices or not, RGE maintains that Fed fund hikes are a story for end of 2010 or Q1 2011.

The Bank of England kept its rate on hold at 0.5% for the 8th consecutive month in November with another hold almost certain in December. As the UK economy failed to pull out of recession in Q3 2009, a rise in interest rates is unlikely to occur before Q2 2010; a view supported by evidence in the money markets. The Monetary Policy Committee did move to increase the program of quantitative easing, asking the Chancellor of the Exchequer, Alistair Darling, for an extra £25 billion to be pumped into the economy, bringing the total amount to £200 billion. With interest rates remaining at a historically low level and public finances precarious, quantitative easing has replaced traditional monetary and fiscal policy as the favoured tool of policy makers. The extra £25 billion is likely to act as the final push with the Bank of England attempting to revive an economy operating with spare capacity. It is unlikely that any further increase in quantitative easing will occur, barring a severe economic shock.

The ECB, meanwhile, stayed on hold at 1.0% in November. ECB president Jean-Claude Trichet expressed concern over the excess volatility and strength of the U.S. dollar. Nonetheless, further rate cuts seem unnecessary as signs of economic stabilization and a deceleration of deflation have emerged. Broad money supply growth continues to decelerate and credit to households and non-financial businesses is contracting. The ECB will continue conducting the QE operations it started July 6, but December may be the last tender for its 12-month refinancing operation. Trichet signaled as much, saying “not all our liquidity measures will be needed to the same extent as in the past.”

While global monetary policy easing was synchronized, tightening does not need to be.  Australia embarked on its rate tightening phase earlier than other developed world central banks. It raised rates twice, in October and November, by 25 basis points each. Australia avoided a recession in 2009 thanks to commodity restocking and prompt fiscal and monetary easing. Australia will likely remain on a gradual easing path, however, until the strength and sustainability of its recovery becomes clearer. Extra government subsidies for home purchases sparked a buying boom that raised Australia’s mortgage debt level to a new high. The expiry of those subsidies at the end of 2009 and the increases in interest rates could restrain the recovery of domestic demand. On the other hand, recovering export demand and the expansion of a Treasury program to buy resident MBS may help offset the decline in direct support to home buyers.

Following in the footsteps of the Reserve Bank of Australia, which was the first among advanced economies to hike rates, Norges Bank (Norway’s central bank) recently increased its key policy rate by 0.25 percentage points to 1.5%. The executive board’s strategy sets the key policy rate interval at 1.25% – 2.25% until its meeting in March 2010. Given the Norwegian economy’s mild downturn and strong recovery prospects, monetary tightening was expected. Norges Bank cautioned that a stronger krone could slow its expected pace of rate increases.

In October, the Bank of Japan (BoJ) adjusted its policy to reflect the modest improvements in credit markets and the economy. Due to thawing corporate credit markets and very weak demand* at the BoJ’s special facilities to purchase corporate bonds and commercial paper, the Bank of Japan decided to allow those programs to expire at the end of 2009 as planned. Further purchases would only distort corporate debt pricing as liquidity returns to the market. As a safety precaution against potential disruptions to corporate credit for businesses that cannot access market funding, the Bank of Japan extended until March 2010 its program to offer unlimited low interest rate loans to banks, collateralized with corporate debt. However, at the behest of the Ministry of Finance, the Bank of Japan will keep purchasing government debt. Like other central banks that engaged heavily in unconventional easing, the BoJ will roll back its targeted easing programs before resorting to the blunter tool of rate hikes. The BoJ reiterated its view that deflation will grip Japan until 2011, hence the policy rate will likely stay on hold throughout 2010. See Bank of Japan’s Exit from Monetary Easing: Strategies and Timing.

After having to hike interest rates aggressively in the 2006– 2008 period, most central banks from emerging market economies had to undo them rapidly from the end of 2008 to Q3 2009, as output gaps widened significantly and inflation and inflation expectations collapsed as a result of the global crisis. Moreover, currencies experienced strong appreciating pressures from the end of Q1 2009 onwards, facilitating the dovish monetary policy reaction. Now that the worst of the global crisis seems to have past, macroeconomic policies are loose, and economic activities are healing, central banks are facing the difficult task of carefully implementing exit strategies, while avoiding exacerbating appreciative pressures on their currencies and trying to control asset inflation and bubbles.

Asian central banks will be the first among emerging markets to tighten monetary policy as capital inflows and loose policies since late 2008 are raising liquidity and asset inflation. But goods inflation will remain within the central banks’ target in most countries amid a slow recovery in domestic demand, weak credit growth in Asia ex-China, and an output gap. This will delay interest rate hikes into 2010, especially in the export-dependent economies, and constrain aggressive tightening until domestic and external demand improve further. Until then, Asian central banks will continue to fight credit and asset bubbles via liquidity absorption and regulatory and prudential measures, such as in real estate.  Countries that are less export-dependent and have attractive asset markets—India, South Korea and Indonesia—will be the first ones to hike rates and allow currency appreciation. In November 2009, Taiwan banned foreign inflows in time deposits and might resort to further capital controls. If hot inflows maintain their momentum, other Asian countries might use enforcement or regulatory measures to manage capital flows.

In Latin America, there is a marked differentiation on the speed of the economic recovery; however, most countries will experience slow closing of the output gaps over the next year.  Moreover, stable if not strong currencies (BRL, CLP, COP, MXN, and PEN) and limited upward wage pressures should help in containing probable external supply-side shocks emerging from commodity prices and limit inflationary pressures sparked by recovering domestic demand. Although inflation and inflation expectations will bounce back, central banks will most likely achieve their inflation targets in 2010. Nevertheless, monetary authorities will start moving away from a very loose monetary policy stance toward a neutral one in 2010 in order to safeguard medium-term inflation expectations once the recovery has gained momentum.  In this light, central banks mainly will target the monetary policy rate.  However, upward adjustment in other monetary policy instruments (reserve requirements and margin reserve requirements) will likely be implemented.  Those central banks that have acted the most aggressively and face potential surprises to the upside in growth and inflation will initiate the mapping out of excessive accommodation sooner than the rest. 

Rate hikes in Central and Eastern European (CEE) countries are expected to lag those in other emerging market regions given the particularly sharp downturn in the CEE and prospects for a weak recovery. Many central banks are still in easing mode, amid economic contractions and easing inflation. Uneven growth prospects across the region mean monetary policy paths will vary.

Aside from Israel, which in August became the first country globally to begin raising interest rates, Middle East and Africa will remain effectively on hold until late in 2010. Most of the GCC countries peg to the U.S. dollar and thus import U.S. monetary policy. Meanwhile despite the inflationary impact of a weak dollar, tight domestic credit conditions will restrain a liquidity surge.

 * As of Sept. 30, only 100 billion yen of commercial paper (CP) was offered for the BoJ to purchase – just 3% of the 3 trillion yen allocated by the BoJ for the CP purchasing program. Only 300 billion yen of corporate bonds was offered for the BoJ to purchase – just 30% of 1 trillion yen allocated for the corporate bond purchasing program.

84 Responses to “Global Monetary Policy Outlook”

MANovember 12th, 2009 at 10:16 am

If you hired the 16,000,000 unemployed at $49,000.00 to watch the sky and make sure it doesn’t fall… It would cost:$780,000,000,000.00The same amount we threw at the top, could’ve been just as meaninglessly thrown at the bottom, and what you’d see today would be less foreclosures, less defaults, and more consumption from now Non-unemployed sky watchers. Since our current trickle down approach is just buying time for “stability”, this would’ve achieved the same. Hell, even the government would’ve collected 33% of that $780billion ($258 billion) in freshly laundered tax revenue thatcould fund even more deficits….but no, it must go top down! It must be good to be on top?All the best,Miss America

Winston SmithNovember 12th, 2009 at 10:34 am

‘when you’re on the top your on the bottom’-words of America’s Pulitzer Prize winning poet.thanks for your post MA

wethepeepleNovember 12th, 2009 at 10:47 am

The “top” benefits the most from inflation. Inflation must be viewed as a tool, wielded by those who benefit the most from it, mainly the Federal Reserve Member Banks and the State, together known as the “top”. I keep going back to Garet Garett’s work, “The People’s Pottage”, where he decribes two types of inflation; Economic and Political. Today, the ground work has been laid for a sustained inflationary episode, which could be called a Political Inflation. Garett concluded: “It means in the end the cheapening of money and then inflation, whereby the middle class is economically murdered in its sleep. In the arsenal of revolution the perfect weapon is inflation.”That revolution being the creation of yet a larger Leviathan State. Ruled by beneficiaries of the inflation also known as: the top, the elite, or the priviledged. The State gets the taxes to thrive the Banks get the interest to thrive, both on the backs of the people.

MANovember 12th, 2009 at 12:37 pm

@ WTPWe aren’t facing inflation. Not even close. It’s been 100% deflation. (not stagflation either)There’s no way around it… and buttery #’s still don’t change the overall forces of nature here. Nor does massive printing. (at least not yet) It is deflation deflation deflation.You can’t cure something that isn’t properly diagnosed.It may boggle the mind, to think that with all the Quantitative easing that we have seen, that it is not inflationary… ..but when compared to the destruction of overall credit from leverage and fractional banking, the QE is minimal. The crime was just how much fake cash/credit was added to the system for so long by the financial system outside of the government (aka Wall St) …and their subsequent cash outs (bonuses and paychecks) that were based on overinflated expansion of said cash/credit.All the best,Miss AmericaHow do you cure deflation when you net-owe and net-import?

ChrisLNovember 12th, 2009 at 2:05 pm

“The cure for deflation is very simple. Print money.” Milton Fiedman, WSJ – Nov 6 2002″Thus, as I have stressed already, prevention of deflation remains preferable to having to cure it. If we do fall into deflation, however, we can take comfort that the logic of the printing press example must assert itself, and sufficient injections of money will ultimately always reverse a deflation.” Ben Bernanke, Speech before the National Economists Club, Nov 21, 2002… Bernanke and Friedman sounding just like Hugo Stinnes, the monster who engineered the German hyper-inflation in the early 1920s, and starved thousands of people on fixed incomes, and quite a few families too, whose breadwinner could not push the wheelbarrow of inflated deutschmarks to the store fast enough to buy a loaf of bread, or stay strong enough to bike out to the fields on the outskirts of Berlin and steal a few turnips.

MANovember 12th, 2009 at 3:17 pm

Yes, “Print money” solves deflation… but not when you owe and import.Sure, you pay back cheaper dollars, but the collateral on that loan drops in value, thus leaving you with a more worthless asset. Then to buy everything we import, costs us more on the exchange.It’s well said that we are suffering from deflation on the things we have and inflation on the things we need.That is the direct result of printing money in a deflationary state where we net-owe and net-import. A double edged sword.All the best,Miss America

PeteCANovember 12th, 2009 at 8:02 pm

The root problem … is that these people feel that deflation is a “problem” that needs to be fixed. Deflation is a condition of the economy – it is not something that needs to be interfered with. The economy is perfectly capable of fixing itself, thank you.PeteCA

wethepeepleNovember 12th, 2009 at 3:15 pm

@MA, I have studied Minsky, Fisher, Von Mises, and Keen and you are right, debt deflation is a naturally powerful force. My point is we are starting into a political inflation which is defined as longer term, granted we may not be seeing economic or short term inflation now, but just wait. Think about it, the State fails in deflation. The State needs inflation created growth and gains to tax, it needs incomes to rise to tax etc. That’s why I have only recently recognized that we are laying the foundation for political inflation to keep the State growing. I don’t like it, but I have come to a realization that those in power, as we have seen will stop at nothing, have extraordinary manipulative influence over a sadly ignorant and disillusioned public. We are putty in their hands. Again just wait, its’ coming. It the only answer to feed the State.

MANovember 12th, 2009 at 4:26 pm

I agree on many levels… …but at the same time, I don’t think we’ve seen the true power of debt deflation. We saw the engine of debt deflation start up last fall, when our over leveraged ponzi economy stared collapse in the face, and our “leaders” threw everything including the kitchen sink at it to stop it! If that engine got running, it would’ve quickly been realized just how insolvent we are against our future obligations.We’ve maximized our current mass income to produce enough to pay people their current wages and meet soon to come obligations. Any disruptions and the wheels fall off.Our economy is like a 25 year old stock broker who is living paycheck to paycheck, with a million dollar mortgage and a million dollar lifestyle. There is NO rainy day fund.All the best,Miss America

wethepeepleNovember 12th, 2009 at 3:47 pm

@MA #2: You may have seen this quote/saying in your intellectual travels: “Ignotas nulla curatio morbid – do not attempt to cure what you do not understand.” The problem we face is that the (imperial/colonial)State fully understands and defines the problem in their own context… that deflation will destroy their political power. That is why this is a no holds barred, long-term i.e. political inflation. Just now underway. They are just finishing setting the foundation. This has squarely entered the realm of political and social psychology. You may enjoy Garet Garett’s book: The People’s Pottage.

amacflyNovember 13th, 2009 at 1:20 am

Great comments by all three of you. If I understand the consequences of the viewpoints here correctly WTP says inflation is a must for the Fed/Banksters who own/run Washington to survive, and they will do everything in their power to engineer it regardless of how much it hurts the people/voters, while MA & PCA are suggesting that the car is already out of control on the ice, and we’re just witnessing the frantic over reactions of the kids at the wheel who think they can save it.Can you help me see what life might be like if the double edged sword falls, and the car goes over the cliff.How do we correctly and sensibly plan for turbulence that is beyond the structural ability of the system we’re flying in?

The AlarmistNovember 13th, 2009 at 2:18 am

BTW, hidden in the various bills wending their way through Congress are several provisions that have the effect of reducing or eliminating the indexation of taxation levels to inflation. I guess Big O can say it was Congress, not he, who raised taxes on the vast majority of Americans under $250k, but it is a vacuous argument to worry about who is doing it (though he would be signing these provisions into law) when the real issue is what is being done.The net effect is a clear signal that the current regime is specifically aiming to use inflation as a tool to finance their efforts.

GuestNovember 12th, 2009 at 11:36 am

“anyone notice the last post went away this morning?Guest on 2009-11-12 10:37:53″What, exactly, are you referring to?

FEDupNovember 12th, 2009 at 12:08 pm

yes, I made 2 comments and the post is gone. Also, notice how this post has no “first”. I wonder who exactly is monitoring things?

MM CANovember 12th, 2009 at 12:23 pm

I posted about 6 different new or replies- all gone… guess they were not wlecome, as they were all more bad news on NO JOBS, Housing, Corrupt Banks. One was even an interview with Roubini saying “Dr Doom is back” and predicting the Stock market to crash…

ChrisLNovember 12th, 2009 at 12:55 pm

I think this has more to do with a technical bug than a deliberate act of censorship…ALL comments that were written prior to what is currently the first comment (from MA) suddenly dissapeared.I sent an email to the support desk, let’s see if they can find those lost comments in their database.Does anyone from RGEMonitor actually reads this blog ?

MANovember 12th, 2009 at 3:06 pm

They usually do monitor it. …and contrary to popular belief NR reads it. (or so I’ve been told) I’m not sure if he still does???Probably a system glitch. I wouldn’t doubt if they could recover the blogs, but I don’t know if it’s “worth it” to them??? (time, effort, cost?)I write 99% of my posts in word, save them and then paste them. It’s a great practice as I never lose anything and I’ve created an enormous library that I can reference back to. (especially when quoting myself!)All the best,Miss America

MM CANovember 12th, 2009 at 12:36 pm

More Green shoots – lol! The New Normal! Thanks Wall Street, Obama, Bush, Giethner, Bernanke, GS, the big banks, et al, – you continue to Screw all 300 million of us!!!!!NOVEMBER 12, 2009.Returning Workers Face Steep Pay CutsMany Bouncing Back From Layoffs Struggle to Recoup Earning Power as Wage Erosion Threatens to Slow Economic Recovery.By IANTHE JEANNE DUGANNearly a year after losing his job at a Vermont plywood maker, 40-year-old Robert Hudson is back at work. Here is the catch: His paycheck is half that of his old job — and the same as when he was 18 years old.In the past year, more than five million people exhausted their unemployment benefits, according to the government. Now, some are returning to work at jobs that pay considerably less than what they were earning before, a trend that threatens to slow an economic recovery.Robert Hudson inspects a truck at his Rutland, Vt., workplace on Wednesday. His new job pays much less than his old one..Wages and benefits paid by private companies increased just 1.2% — adjusted for inflation — for the year ended September 2009, the smallest change since the U.S. began measuring in 1975, the government reported last week. Some economists expect the figure to continue downward in coming months and to turn negative for the first time since such records have been kept.”These losses can become permanent because you have to start again and work your way up,” said Till von Wachter, an economics professor at Columbia University in New York.The wage cuts come as the unemployment rate, at 10.2%, is at its highest level in more than 26 years. To help those who can’t find jobs after extensive searches, President Barack Obama has signed a measure adding 20 more weeks of federal unemployment benefits.Those returning to work are taking an average 40% pay cut from their old jobs, estimated Kenneth Couch, an economics professor at the University of Connecticut. He based the number on the experiences of Connecticut residents during the 2001 recession and similar studies elsewhere during the 1981 recession.In the past, Prof. Couch said, it has taken six years before people were earning an average of 80% of their old paycheck, with younger workers creeping closer to their old wages more quickly than older workers..The decline in wages is affecting people in all sectors of the economy. Lynn Felske, 45, a certified public accountant in Pleasanton, Calif., took more than a 20% cut in pay after being out of work for 9½ months. She typically works on one job for several months and moves quickly to the next, without ever more than a week off in between.”I used to get what a controller would get,” Ms. Felske said. “Now, I’m getting paid the same grade as an accounting manager. A year ago, I would have said no to this salary.”Catina Martin, 37, was laid off in January as an assistant in the sales department at Hartford Insurance in Charlotte, N.C. She recently took a job at a warranty company and took a pay cut of $13,000 — about 25% — setting her back to the same salary she was earning when she joined Hartford a decade ago.After 30 days, she will get health insurance benefits. But she said: “In terms of the money situation, it’s going to be hard to get that back.”For Mr. Hudson, the new job marks his first economic step backward since he began working. Two years ago, he sold his Boston home to take a job at Rutland Plywood Corp. in Vermont, running the night shift in a mill, supervising 50 people. His salary was $45,000, plus a bonus of as much as $8,000. His wife stayed at home with their two children.Last November, he was laid off. He said he sent his resume to 1,000 employers, while collecting weekly unemployment checks of about $420.”Eventually, I had to lower my sights to something that I could turn into reality,” said Mr. Hudson.Over the summer, he took an entry-level job at U-Haul Co., earning $9.50 an hour, the same wage he had at age 18 driving a truck delivering industrial supplies. Health insurance will kick in if he stays six months.Since getting the new job, he has continued to cut back on spending to adapt to his new reality. He shut off his home phone, using a less-costly cellphone, and sold his second car. “I’m spending money only on essential bills,” he said

FEDupNovember 12th, 2009 at 1:34 pm

true and this while our politicians attend lavish fundraisers, receive annual pay increases and have access to the best health care and retirement plans in the free world. This has got to go down as democracy’s finest hour!

SoftwarengineerNovember 12th, 2009 at 1:56 pm

Good Article MM CA, As UsualI’d add too and its documented in an article states in part:”…Growing painsThis latest stint at home is Schneider’s second, the first coming right after college, making her one of 77 percent of college grads to move back home after school, according to a August 2008 survey. (In 2006, that number was 67 percent.) In recent years, though, returning 20-somethings, sometimes dubbed “boomerangers,” have been joined by adults in their 30s and 40s — sometimes with a spouse and kids in tow. From 2000 to 2008, multigenerational households increased by 24 percent, up to 6.2 million, according to AARP….”The rest of the 6/2009 MSNBC News URL: a slam dunk assumption that the numbers of incomes per American household is on a horrifying rising curve since 2006 too, making any small household income rise the elites calculate and put on teh media an anomaly and a likely a moot point too.In other related news, the American houses are getting jammed with more people but we’re paying less and less income tax too. About half of Americans PAY NO INCOME TAX, per this 10/09 CNN story:

The AlarmistNovember 13th, 2009 at 2:27 am

Half of US households pay no federal income tax at this juncture, but the various provisions to remove indexation of tax brackets for the effects of inflation will correct that state of affairs over time. You will also most likely see increases to Soc Sec and Medicare ‘contribution rates’ in the near future to fix their systemic funding shortages, and there is little doubt that aside from jail-time for non-payors, the contribution rates for the new ‘health care insurance reform’ will also be stiffer than anyone expected.That also ignores the proposed VAT as well as hundreds of hidden excise taxes (telephone access charges, etc) that are already milking the average US resident.The US was often held up as the paragon of lower taxes for the average citizen, but if you add all the hidden taxes up with the other ‘contributions’ you quickly realise the average US resident is every bit as taxed as his counterpart in Europe.

GuestNovember 12th, 2009 at 1:33 pm

That’s the plan, lower wages. Friedrich von Hayek was a prophet.”Over the summer, he took an entry-level job at U-Haul Co., earning $9.50 an hour, the same wage he had at age 18 driving a truck delivering industrial supplies. Health insurance will kick in if he stays six months.”

AnonymousNovember 12th, 2009 at 1:55 pm

Americans are overpaid

bNovember 13th, 2009 at 7:00 pm

a,if you’re talking FIRE, sure. if so, why were theybailed out and why do they deserve massive bonuses?to maintain bifurcated markets and class control,economic and political. yes, there are those whoare overpaid and those who remain underpaid and those who are overpaid make sure that those who are underpaid remain so and remain unable to affordhousing, food and health care…etc. Finance, insurance, real estate..add pharma and health care industry and you can see these special interestwill destroy everyone including themselves. why not?overpaid. sure.

GuestNovember 12th, 2009 at 2:01 pm

The American Economy in One Chart to for the linkThis chart re-enforces my belief that ultimately inflation and higher taxes are likely to result as we must reset. Check out the link above it is clear were much of the growth over the last 30 years came from.Jobs in the green energy likely to pencil out better if oil skyrockets, enabling Obama to keep the green economy promise. [Buffet: I’m willing to bet a lot of money that more and more goods will be moved by rail.] Watch buffet and Gates on CNBC later today. He always talks about growth, the pie getting larger.With most of the stimulus money waiting to be put in place, we know the administration is trying to figure out how to increase wages while putting people back to work.Long before the election it was clear the dye had been cast and the next administration was likely to last only one term. If Obama gets a 2nd term, and completes the reset (higher taxes and interest rates), perhaps another republican will come along with the wind at his/her back looking like the hero as he/she reduces taxes and the fed lowers interest rates, just like Reagan.Seems it is only a matter of time before inflation or default (hyperinflation) occurs.Why will we not re-set through inflation?MA, Perhaps trickle up is in the planning stages? After all, we need inflation for your “buy land” call to pan out :)LB, it would great if you could update Deflation has become inevitable. Or note any changes you see.

GuestNovember 12th, 2009 at 7:43 pm

From our esteemed Professor.”He predicted that global inflation will become a problem next year due to the effects of high budget deficits, while the weak dollar will continue to lead to higher oil and other commodities prices.”

PeteCANovember 12th, 2009 at 8:09 pm

That particular chart ($TYX over 30-year period) is probably the strongest argument that bolster’s Rob Kirby’s accusation that the whole game is fixed. You are looking at out-and-out manipulation of interest rates to get that kind of result. There is no practical way that interest rates on 30-year bonds would not have reversed by now – without serious intervention by the Dark Force of the Fed (and its proxies). Ultimately all he** will break loose when the global market factors in that this debt cannot be repaid.PeteCA

MANovember 13th, 2009 at 10:26 am

Hey there Hlowe.Hope things are well. I’m still a buy land guy. I think all the things we’ll want and need will come from better use of land. Localizing food markets rather then massive shipping, inevitable use of land for alt-en projects, etc… Unlike fictional book assets. I like this as my favorite “hard asset”I don’t know how much you were willing to follow my calls, but my last “major call” was back on January 29th when I said I’d go 100% equities. (I’ve taken a huge step back this year from writing/posting. The work I was putting in wasn’t healthy nor was it returning anything that made the effort worth while.) I said: sell gold and move to equities. For 2 solid months I looked utterly foolish. …but I did continue to say, we’d have to wait 3-6 months for it to play out. (You had to have brass balls to stick with equities through that March, especially in the face of gold rising!!!)…but if you go back and look, (take a second to chart this) look at the S&P starting January 29th, and directly compare it to gold at the 3 month mark, at the 6 month mark and current.You’ll notice that at all 3 points from a start date of January 29th, you’d be ahead if you went S&P. …and that includes the March S&P bottom, and gold’s powerful run. (I’ve deemed this my “worst call” since it didn’t play out the way I envisioned/calculated… but none the less, the call held.)It’s nearly amazing that the equity market could still be trumping gold during this same time period… but look at the facts.Back to land… unlike both gold and equities, I don’t see the same market manipulation, propping, or sizable risk of crash that these hold. …thus, why I’m still a “buy land” guy. I feel land has dropped significantly, and could even continue to fall… but not nearly the way equities or gold could.All the best,Miss Americap.s. I miss LB

GuestNovember 13th, 2009 at 7:17 pm

Can I assume Recent S&P performance and it’s correlation to dollar weakness was an unexpected benefit to your January call, or did you expect gold to move down with the dollar?Hard to get land loans these days unless it produces income and/or the owner carries, thus I expect further declines. I have long loved land, I see it as the foundation of all wealth, not so sure about it in this deflationary environment however.By the way, took four years to find some piece of mind and some laughter. Thanks for your kind words earlier last year. You and LB’s comments were actually quite therapeutic, strange I know.hlowe

2centsNovember 12th, 2009 at 9:09 pm

Holy TARP!We now have stories floating around the wire that WhiteHouse says open to using TARP to ease debt and the unsurprising TARPwatchdog sees loss on U.S. bailout program. So what we have is a revolving slush fund to be used as needed until it’s all gone umpteen times over! How stupid do they think we are? (pretty stupid obviously)Once these jokers get access to our money they can’t help themselves but to put it to their best use, and all the while telling us that they are paying down the debt with money they haven’t even milked out of us yet!Some say that TARP was a shinning moment for the FED/Treasury. Others say that it might be the biggest lead balloon the US has ever seen. What do you think?

The AlarmistNovember 13th, 2009 at 2:12 am

OK, so we’re going to use TARP to close the deficit. Right. That’s like my wife writing me a check so I can pay down my gambling debts … it might work in a technical sense, but the underlying problems are not fixed and the overall net worth of the household has not changed. The really do think we are stupid … they must be thinking that we will buy their argument that we are paying interest to ourselves rather than to the Chinese.BTW, I think you mean “Shining,” but the concept of “shinning” connotes a mob- heavy taking a baseball bat to our shins ala Goodfellas. Great imagery.

AnonymousNovember 12th, 2009 at 9:09 pm

all the compassionate capitalist lines drawn in the historical sands of our great country were really drawn in fantasy land, health care coverage, NATO leadership, social welfare,TBTF, free market economics, compensation, tax policies etc. We really do not have a clue nationally, environmentally, scientifically, fiscally, socially how to proceed.

Pecos BankerNovember 12th, 2009 at 9:12 pm

Why we love those positive second derivatives: See how from mid-1991 to 2004 Japanese house prices had a positive second derivative–that’s positive news, right? So when we hear Roubini and others talking about positive second derivatives, we know we should feel encouraged–things are looking up, baby! was taken from an article in today’s zero-hedge by Reggie Middleton:

GuestNovember 13th, 2009 at 7:30 pm

Thanks for the post. Reggie provides a great wealth of information. Those who ask about similarities to Japan may want to check out the link.hlowe

GuestNovember 12th, 2009 at 10:51 pm

those who holds dollar, what can they buy from USA? the moment they want to buy, boom, ban by USA congress. better take the money and invest in resources around the world. China gets their strategy right.

The AlarmistNovember 13th, 2009 at 2:32 am

And if you feel/believe the Chinese aren’t clever enough (and I believe they are), they still have brute force and the willingness to use it.This is not your father’s planet earth.

GuestNovember 14th, 2009 at 7:28 pm

they still have brute force and the willingness to use itSpoken like a true militarist (hiding the fact that the US is by FAR the biggest disruptive force on the planet, making, buying and selling weapons).

MM CANovember 13th, 2009 at 7:52 am

Another Green Shoot! A solid 4 Million foreclosure annual run rate….. now by my estimate thats about 12 million men, woman and Children that got booted from thier home…. how long before they all recover from that shock? How much pain? Obama, Bush, Congress, Wall Street, Bernanke, Giethner, GS, Et al could care less about all of you, as well as the rest us 295 Million Average Joe americans….U.S. Foreclosure Filings Surpass 300,000 for 8th Straight MonthShare Business ExchangeTwitterFacebook| Email | Print | A A A By Dan LevyNov. 12 (Bloomberg) — U.S. foreclosure filings surpassed 300,000 for an eighth straight month as unemployment made it tougher for homeowners to pay their bills, RealtyTrac Inc. said.A total of 332,292 properties received a default or auction notice or were seized by banks in October, up 19 percent from a year earlier, Irvine, California-based RealtyTrac said today. One in every 385 households received a filing. The tally fell 3 percent from September, the third consecutive monthly decline.“The foreclosure problem is still with us and will keep prices down,” Stephen Miller, chairman of the economics department at the University of Nevada at Las Vegas, said in an interview. “The real issue is we don’t know what inventory banks are holding that they have yet to put on the market.”Distressed real estate transactions accounted for 30 percent of all home sales in the third quarter as the median price fell 11 percent from a year earlier to $177,900, according to the National Association of Realtors. U.S. unemployment surged to a 26-year high of 10.2 percent in October as payrolls fell by 190,000 workers, the Labor Department said last week.Housing will reach a bottom by March 2010, with lower- priced properties recovering value more quickly than expensive homes, First American CoreLogic said last month.“The fundamental forces driving foreclosure activity in this housing downturn — high-risk mortgages, negative equity, and unemployment — continue to loom over any nascent recovery,” James Saccacio, chief executive officer of RealtyTrac, said in the statement. “We continue to see foreclosure activity levels that are substantially higher than a year ago in most states.”RealtyTrac sells default data collected from more than 2,200 counties representing 90 percent of the U.S. population.Coming on MarketAbout 7 million properties likely to be seized by lenders haven’t yet hit the market, Amherst Securities Group Managing Director Laurie Goodman wrote in a Sept. 23 report.Housing indicators that show price increases in some areas of the U.S. are being distorted by government efforts to reduce foreclosures, which are temporarily limiting sales of seized homes, said Scott Simon, managing director at Pacific Investment Management Co. in Newport Beach, California.“Part of that is the back end of the foreclosure moratoriums and people trying to work through modifications” of their home loans, Simon said in an interview. “At some point, these have to come through the pipeline.”Nevada had the highest foreclosure rate for the 34th consecutive month, with one in 80 households receiving a filing. The number of filings fell 4 percent from the previous year, the first year-over-year decrease since January 2006. The total declined 26 percent from September.California, FloridaCalifornia ranked second, with filings for one in every 156 households. Florida was third, at one in 168, RealtyTrac said.Arizona, Idaho, Illinois, Michigan, Georgia, Maryland and Utah rounded out the top 10 highest foreclosure rates.California led in total filings, with 85,420, up 50 percent from a year earlier. Default notices in the most populous state more than doubled and auction notices rose 73 percent, according to RealtyTrac.Florida ranked second with 51,911 filings, down 4 percent from October 2008, the first year-over-year decrease since July 2006. Filings fell 6 percent from the previous month.Illinois was third at 19,946, up 57 percent year-on-year and 56 percent from September, making it the only state with a foreclosure rate in the top 10 to have a monthly gain in filings. The total for Illinois was the highest in RealtyTrac records dating to January 2005.Michigan ranked fourth with 16,468, up about 45 percent from a year earlier, RealtyTrac said.Nevada, Arizona, Georgia, Texas, Ohio and New Jersey completed the 10 states with the most filings.East CoastFilings fell 12 percent from a year earlier in New Jersey, which had the 13th highest rate. They dropped 26 percent to 2,306 in Connecticut, and rose 28 percent to 4,797 in New York.Las Vegas had the highest foreclosure rate among metropolitan areas with populations of 200,000 or more. One in every 68 households got a notice, more than five times the national average. Even so, filings decreased 27 percent from September.California had seven cities among the top 10. Vallejo- Fairfield ranked second and Modesto was third, both with a rate of one in 81 households. Riverside-San Bernardino was fourth and Bakersfield, Merced and Stockton ranked sixth through eighth, respectively. Sacramento came in 10th.Cape Coral-Fort Myers and Orlando-Kissimmee, both in Florida, ranked fifth and ninth, respectively.To contact the reporter on this story: Dan Levy in San Francisco at

MM CANovember 13th, 2009 at 7:57 am

Great article on why housing will not recover for at least 20 years… lots of numbers and data… excerpts:In the United States we have approximately 129,000,000 housing units. These are made up of owner-occupied, rented, and vacant units. The largest of these three categories is the owner-occupied category and most of the media focuses on this number. Yet the other categories carry as much weight in determining a housing recovery. Let us look at the vacant housing units:75 million Americans own their home. The homeownership rate is derived from only looking at occupied units. That is why it is important to also keep in mind the vacant units sitting on the market.You’ll notice that the ownership rate does not factor in the vacant units. The vacancy rate is at historical highs and this is another factor that will drag on the housing market for years to come. 37 million Americans rent their housing. This can be apartments or actual detached homes. The number of renters has recently increased as homeownership has fallen:

GuestNovember 13th, 2009 at 8:12 am

Peak Gold – Barrick shuts hedge book as world gold supply declinesAaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run….Mr Norman said the “false mine of central banks” had been the only new source of gold supply this decade as they auction off reserves, but they are switching sides to become net buyers….Barrick produced 1.9m ounces of gold last quarter, down from 1.95m a year earlier. Costs have been “trending down” to $456 an ounce, though rising energy prices pose a fresh threat. Total reserves are 139m ounces, far ahead of rival Newmont Mining at 86m.The hedge book venture has not been a happy one, but those who predicted that Barrick would eventually “blow up” on its contracts may owe the company an apology.

PeteCANovember 13th, 2009 at 10:08 am

A couple of good quotes this week …—————————————————–The first from Karl Denninger …”When the market degenerates down to a handful of trading houses with high-frequency trading computers passing the same 100 shares back and forth between themselves as the remainder of the market participants have gotten tired of getting reamed on a daily basis due to the cheating and decide to take their ball and go home, how do the “big trading houses” make money?We’re witnessing the destruction of the capital markets as the system is imploding from within as a direct and proximate consequence of willful blindness and outright fraud.”——————————————————–The second quote from Liam Halligan writing in the Telegraph:”This latest dose of QE (Quantitative Easing = Printing Money by Central Bank) isn’t the end of this age of deeply-damaging policy-making by the British political elite. It isn’t even the beginning of the end of this ghastly episode in our history, in which our leaders throw all caution to the wind, ignoring centuries of accumulated wisdom and make a bad situation even worse.I fear we have reached, merely, the end of the beginning of an extremely difficult period in our history, when living standards plunge, our public finances deteriorate further and enterprise stagnates. And as a UK citizen and taxpayer, I write that with a very heavy heart.——————————PeteCA

JLarkinNovember 13th, 2009 at 11:02 am

That was a wonderful debate between WTP and MA. We need more of those! I had a similar debate with a bond trader friend of mine. I believe he is on the MA side of things and says that all asset prices are coming down (no more expansion of credit), therefore sell what you have and stay in cash! I’m afraid of the “no-holds barred” actions from Washington that will continue to reinflate the bubbles. Stock Market (done); Housing (next to do); Wages (after housing?).

MANovember 13th, 2009 at 11:49 am

@ JLa… I think the term political inflation is interesting. If it is what I imply it to be? (power rather then money)I’ll give it more thought. I’ll have to read up a little on The people’s pottage/Garret – as I am not familiar with it.Miss America

MorbidNovember 13th, 2009 at 12:13 pm

In CA we have Prop 13 which says property taxes cannot increase by more than 1% per year – and that is a good thing for the homeowners. There is now unfolding a strong deflation in property tax revenue due to the bubble bursting – and I am not talking about the lost taxes due to foreclosures although that is substantial. What I am talking about is that the county assessor must by law reassess property values every year – and guess what – its all downwards. Further, all new purchases are at almost half price compared to the bubble times.The point is, even if the FED is able to reinflate the housing bubble all these downward reassessments will take a very long time to catch up. This means a very large shortfall in State property taxes for many years to come. Don’t expect CA to bounce back because of the stupid FED policies.I guess CA property tax accounts for about 50% of CA State income, so…

GuestNovember 14th, 2009 at 7:46 pm

History says that shufflings takes place, that paradigm shifts happen. Some things lose their value because of this shift, while other things gain value.We are now facing one of the great turning points in all of human history, were a vast amount (majority?) of things see their valuations change. The very things that we use to measure value are, in themselves, becoming worthless, thereby producing wildly conflicting results.

NoviceNovember 13th, 2009 at 12:53 pm

Just doing a little survey here- how many of you bloggers are planning on cutting back on holiday gift giving??? I know I am, just wondering who else might be doing the same?

PeteCANovember 13th, 2009 at 1:02 pm

My family will probably try to limit Christmas gifts to a few “very good gifts”. Our spending won’t be as high as in the good old bumper years, but we will be willing to purchase a few good items.PeteCA

GuestNovember 13th, 2009 at 2:13 pm

AAAhh, protectionism.Wasnt it some of the mistakes at GD 1?But, what US good would you buy today?Missiles?Some pumpguns?What is 100% US?The US is producing nothin but financial innovations and weapons.If there is somethin left– it is crap.So good luck.

11b40November 13th, 2009 at 3:26 pm

Not sure how much a survey of participants here would mean, but here is a good question to contemplate. How will all the changes from the credit card companies affect holiday shopping? It’s hard to imagine many folks wanting to rack up fresh debt at 20-30% interest, and multitudes of shoppers simply don’t have the extra cash to dole out on the spot. Many who do have the cash don’t want to spend it. Note the murky guidance from both WalMart & Khols yesterday.But to answer your question, both my immediate family and extended family will be cutting back. It was discussed some months ago. Some in the family are doing well, while others are not. We are shifting away from material gratification anyway, and with the shift comes a more clear understanding of just how hollow the materialistic Christmas orgy really is. I do not believe we are alone in this line of thinking.Independent Contractor

tutterfrutNovember 13th, 2009 at 3:56 pm

In our little country of Belgium the media is preparing us that on average we will be spending 580 euros per person, which will be 2% less than last year. In France they try to go for 630 euros which would also be 2-3% less than last year.I stopped spending any kind of money on Santa or other fairytale gifts long ago. I just hate to be considered a ‘consumer’. We will just have a nice meal, a good laugh and I may even sing a caroll as alcohol and candless hit some nostalgic nerve.By the way shouldn’t we start celebrating other ‘holy’days. The day Blankfein and his disciples took over from some people’s God? Or the day gold hit a 1,000? The days the stimuli got into the postbox? Or the days unemployment hit 10%, while getting out of recession?Just so many reasons to go out and spend(or spill). Better spend now before they run out of holy-days to spend on.

MANovember 13th, 2009 at 3:27 pm

Christmas has been cancelled!It has been replaced by Stimul-mas.Bonuses for risk takers who keep our economy running. lend, borrow, lend, borrow, buy, sell, buy, sell, back and forth, back and forth.coal for the savers.MA

tutterfrutNovember 13th, 2009 at 4:07 pm

Stimulmas with a lot of evaporflation-candles on the table, a good roasted Tarp and some Roubinite Whine…mmmmmmmm

bNovember 13th, 2009 at 4:14 pm Hedges’ ColumnsAfghanistan’s Sham ArmyPosted on Nov 9, 2009By Chris Hedges…..”The American military has been largely privatized, although Gen. Stanley McChrystal, the commander of U.S. and NATO forces in Afghanistan, has still recommended a 40,000-troop increase. The Army’s basic functions have been outsourced to no-bid contractors. What was once done by the military with concern for tactical and strategic advancement is done by war profiteers concerned solely about profit. The aims of the military and the contractors are in conflict. A scaling down of the war or a withdrawal is viewed by these corporations as bad for business. But expansion of the war, as many veterans will attest, is only making the situation more precarious.“American and Afghan soldiers are putting their lives at risk, Afghan civilians are dying, and yet there’s this underlying system in place that gains more from keeping all of them in harm’s way rather than taking them out of it,” the officer complained. “If we bring peace and stability to Afghanistan, we may profit morally, we might make gains for humanity, but moral profits and human gains do not contribute to the bottom line. Peace and profit are ultimately contradictory forces at work in Afghanistan.”..“We as Americans do not help the Afghans by sending in more troops, by increasing military spending, by adding chaos to disorder,” he said. “What little help we do provide is only useful in the short term and is clearly unsustainable in the face of our own economic crisis. In the end, no one benefits from this war, not America, not Afghans. Only the CEOs and executive officers of war-profiteering corporations find satisfactory returns on their investments.”.”Peace and profit are ultimately contradictory forces at work in Afghanistan.”.that is simply it. it is not the only possibilityas the contradictory forces are not actuallycontradictory in themselves. they are actuallycompatible. it is the application of our methods,approach, attitude, paradigm, mentality, mind thathas perverted these two ideas, peace and profit,and framed them as contradictory, as if we haveto choose between them. this kind of thinkingjust seems to avoid comprehension.yes, peace would eliminate the financial profitof the war industrial complex, but is that “profit”? what profit would be available ifpeace was pursued and the resources currently being otherwise implemented were redirected / employed?by the way, where are the “religious leaders” inamerica on the war / peace issue today?”they have no ….. to lose and ….. know it” b.d.they all need more money!where are the ……ists, the philo……., prof… etc.? no s..l, no h…t, no m..d, no b…bone. no v….n. we don’t even have the stuff of good fish: maybe jellyfish, back to the sea with uswhere we can float with the current and we may,most likely,………… just sink..”we pretend”………and then we have these facts, enough to make youreally question just whether there is any intelligence at all with regards to man’s alleged attempt to live on this planet. idiocy has becomethe only ideal worthy of our attention! read closelyand you will see the extraordinary stupidity that rules the day!.'s Guide to FCPAFOREIGN CORRUPT PRACTICES ACT Report Reveals US Indirectly Funding the TalibanThursday 12 November 2009by: Amy Goodman and Juan Gonzalez, Democracy Now!. journalist Aram Roston traces how the Pentagon’s civilian contractors in Afghanistan end up paying insurgent groups to protect American supply routes from attack. The practice of buying the Taliban’s protection is not a secret. US military officials in Kabul told Roston that a minimum of ten percent of the Pentagon’s logistics contracts consists of payments to the Taliban.AMY GOODMAN: That translates into millions of dollars being funneled to the Taliban. This summer, anticipating a surge of US troops, the military expanded its trucking contracts in Afghanistan by 600 percent to a total of over $2 billion.Well, Aram Roston joins us now here in our firehouse studio, the author of the book The Man Who Pushed America to War: The Life, Adventures, and Obsessions of Ahmad Chalabi. His latest piece, “How the US Funds the Taliban,” was supported by the investigative fund at the Nation Institute.We welcome you to Democracy Now! When did you return from Afghanistan?ARAM ROSTON: About three weeks ago.AMY GOODMAN: So, tell us what you found. How does the US fund the Taliban?ARAM ROSTON: Well, it’s bizarre, but the US has to maintain, obviously, all these bases, these forward operating bases and combat outposts throughout Afghanistan. They have to supply them. The way they supply them is trucking convoys, civilian trucking convoys. They call it “Host Nation Trucking,” and what they mean is that Afghan-owned trucks and Afghan drivers drive everything. They drive all the supplies, the guns, the MRAPs, the ammunition. Just everything needs to get to these—every part of Afghanistan. And they’ve issued these large contracts, but they don’t protect the convoys. By definition, these convoys are driving through some very tough terrain, controlled by warlords, by the Taliban, by insurgents.And what they’ve ended up doing—and this is apparently unanimous, with some small exceptions—is the security companies reach arrangements with the local Taliban, the local warlords and various insiders to pay them off for protection. It’s very much like an extortion racket and very much like a protection racket, and it amounts to huge amounts of money. Some say ten percent, some say far more than ten percent, of the convoys. Some say that most of the security budgets are going towards these payments to the Taliban and to the tribal leaders and the warlords. The fact is the US often doesn’t even know who they’re paying off. These contractors don’t necessarily know who they’re paying off. They just know they’re bad guys. So they’ve ended up with this bizarre situation, and there’s nothing they can really do about it.”….comment: i have none. these facts speak forthemselves, no, they swear. think aboutit.

11b40November 13th, 2009 at 5:03 pm

We are collectively a fat, lazy, stupid society filled with greedy cowards. We the people have now, and have always had, the power to get the kind of government we deserve, and I believe we actually have it – we deserve it.In every direction we look, our leadership has failed us. The draft should never have been eliminated. We should have a call for universal service. Outsourcing military functions should be banned 100%. An 8th grader could figure this out, and anyone pushing for privatization is either a coward, an undeserving citizen, or a war proffiteer. Dick Cheney was all 3, with war criminal added to the list for him. He started sticking his fingers in the Defense Department in the early 70’s, and the Iraq war was the crown jewel for Mr Privatization.In the immortal words of Forest Gump – Stupid is as stupid does.Independent Contractor

bNovember 13th, 2009 at 5:52 pm

1,i think we see eye to eye, as it were. someextra thoughts. the ci…a works for the bankersand mi…c. war is easy money and population culling to them. they care not for humanity. power is their thing. the power to control technology and culling and they have that and will never give it up willingly. they are the ignoranti and guilty by choice..the people will never see, the brainwashing has been accomplished. only suffering will heal us, and that may not. we are basically an inept species as our promise and potential is eternally broken and unfulfilled. i think the french have a word for this but i don’t know the language, french. perhaps se la vi?.more extra thoughts….obama is now in china, or thereabouts, receivinghis marching orders from the chinese oligarchsconcerning his next move in afghanistan, currentphysical reality concerning humanity be finance is their thing.????????????????????end of this particular nightmare, thought, for now.have you heard of the term…”spatialization of time”? a term that is likened to the sting ofthe scorpion, but the venom has beneficent as well as tragic capacity. freedom/responsibility.i digress, as always, some have termed it blithering.?

GuestNovember 14th, 2009 at 7:57 pm

As attributed to A. Tytler (a scottish lawyer):”From bondage to spiritual faith;From spiritual faith to great courage;From courage to liberty;From liberty to abundance;From abundance to complacency;From complacency to apathy;From apathy to dependence;From dependence back into bondage.”

bNovember 13th, 2009 at 5:11 pm

Group seeks heroin detox help for teens from PTA, stateNovember 11, 2009 By STACEY ALTHERR”Parents have a sense of urgency,” said Gail Grenzig, Sachem’s assistant superintendent for personnel and a member of the group. “We realize across Long Island that this is something affecting our adolescents.”..Suffolk Legis. Lynne Nowick (R-St. James) said she backs the resolution. “Parents are absolutely at their wit’s end,” she said…question: where does all this new found heroin come from? god knows? but he ain’t tellin’. too much money in it! the taliban eradicated it but they had to go. karzai, karzai. he’s our man! mutual assureddestruction in progress. “pays’ your ticket, takesyour ride.” hunter s. thompson..”wits end”. that is despicable. they have noteven begun to employ their wits. sign of the times!as we feed our children into the jaws of …..!hmm “leadership”. “parenting”. rehab my baby!why? so i can send “it” off to war!

11b40November 13th, 2009 at 5:12 pm

@MM Ca – here’s another angle on the same NO JOBS story…and it’s bleak.From Simon Maierhoffer 11/13/09Dissecting The Prospects Of A Jobless RecoveryThe labor force of currently 15,975,000 will increase by about 150,000 each month (9,000,000 over 5 years) because of “newbies” entering the job market. By 2014, the labor force will number roughly 163,000,000. A 5% U-3 (NOT U-6) unemployment rate would equate to 8,150,000 workers without job. 7,550,0000 jobs will have to be created to reduce the number of job-less workers from today’s 15,700,000 to 8,150,000. This equates to 125,833 new jobs each month over the next five years. A look at history shows that this is nearly impossible. Why?The average monthly job growth over the past 10 years has been about 50,000. The average monthly job growth over the past 20 years has been about 90,000.To create an environment where the U-6 unemployment rate drops to 5%, 333,583 new jobs would have to be created each month. Either way, a miraculous reversal would be needed considering that 558,000 jobs were lost just in October.As if the unemployment picture wasn’t dim enough, there are additional auxiliary factors that will act like a wet blanket. Aside from the fact that jobs are scarce, the average week for the lucky ones that still have a job has shrunk to 33 hours (6.6 hours per day). The average worker is not working at full capacity. Employers are likely to increase work hours per employee, before they start to take on the extra expense of hiring and training new ones. The initial spike in demand, whenever this will happen, is likely to be absorbed by increased hours, not increased hires.Proponents of the “jobless recovery” claim that cost-cutting and work force reductions by U.S. corporations, results in higher corporate profits. True, this quarter’s corporate profits were less bad than the previous quarter’s. However, unless those profits are channeled to increase consumer demand, corporations will be forced to slash more jobs. Without jobs, consumers remain financially strapped.By slashing jobs simply to keep alive, corporations are and have been, biting the very hand that feeds them. Today’s laid off employee is tomorrow’s missing consumer.According to White House estimates given earlier in 2009, the various stimulus packages were supposed to cap the unemployment rate at 8.5%. Those who remember the big ordeal surrounding the bank stress test know that the worst-case scenario stress test was based on the assumption that unemployment would go no higher than 8.9% in 2009, and 10.3% in 2010. It seems like unemployment has jumped ahead, while the stock market is still stuck in a dream-like state. While cash for clunkers and first-time home-buyer credits seem to have made a temporary difference economically, unemployment rates were unfazed by the government’s efforts. Chances are that the real effects of the deteriorating job market will become much more visible once the government stimulus wears off. The issue at hand is too big even for the U.S. government, especially when trying to use bandages to prevent a jugular blood flow.All the quoted numbers and featured charts were taken directly from the Bureau of Labor Statistics website and are available to the public – Contractor

11b40November 13th, 2009 at 5:24 pm

The Jobless Recovery: more from the BLS.Labor Force 16 Years Of Age And Over: 153,975,000U-3 Unemployed: 15,700,000 = 10.2%U-4 Unemployed: 16,508,000 = 10.7%U-5 Unemployed: 18,881,000 = 11.6%U-6 Unemployed: 28,165,000 = 17.5%Independent Contractor

bNovember 13th, 2009 at 6:39 pm

1,there is no statistic for the percent ornumber of persons employed to degrade the qualityof life. if there was such a thing i imagineit would be a revealing and disturbing percentageor number. very high! maybe more than tolerable.

bNovember 13th, 2009 at 7:47 pm

so. Waits)The Earth Died Screamin’.Rudy’s on the midwayAnd Jacob’s in the holeThe monkey’s on the ladderThe devil shovels coalWith crows as big as airplanesThe lion has three headsAnd someone will eat the skin that he shedsAnd the earth died screamingThe earth died screamingWhile I lay dreaming of youWell hell doesn’t want youAnd heaven is fullBring me some waterPut it in this skullI walk between the raindropsWait in Bug House SquareAnd the army antsThey leave nothin’ but the bonesAnd the earth died screamingWhile I lay dreaming of youThere was thunderThere was lightningThen the stars went outAnd the moon fell from the skyIt rained mackerelIt rained troutAnd the great day of wrath has comeAnd here’s mud in your big red eyeThe poker’s in the fireAnd the locusts take the skyAnd the earth died screamingWhile I lay dreaming of you.