Sorry, I know it's Friday and it should be all fun and giggles, but...

[luzribeiro.livejournal.com]

Recovery in peril as double-dip threatens

Some excerpts:

"I do not believe we're heading for a whole world double-dip recession, but parts of the world certainly are," he said. "Much of Europe is and the UK has a one-in-three chance [of doing so]."
...
"Government spending cuts "will affect employment in US markets, exacerbating an unemployment rate already above 9 per cent. That will affect industrial companies [and lead to] less production, less export and less money coming in".
...
"The consequences for world trade could be huge. Trade volumes have surged back to above pre-financial crisis levels since bottoming out in 2009, according to an Organisation for Economic Cooperation and Development index, but the health of global commerce is dependent largely on demand from hard-pressed consumers in the US and Europe."
...
"Weak demand from the States is obviously negative, but intra-Asia, Middle East and Africa demand has been solid and that's making up the difference for the time being."


Time to Say It: Double Dip Recession May Be Happening

Some excerpts:

"If this is the beginning of a new double dip, it will have two significant things in common with the dual recessions of 1980 and 1981-82. In each case the first recession was caused in large part by a sudden withdrawal of credit from the economy. The recovery came when credit conditions recovered."
...
"And in each case the second recession began at a time when the usual government policies to fight economic weakness were deemed unavailable. Then, the need to fight inflation ruled out an easier monetary policy. Now, the perceived need to reduce government spending rules out a more accommodating fiscal policy."


The writing is on the wall. There are strong indications pointing to a return to crisis. S&P-500 plunged by 9% in a fortnight, and despite the drop of prices for the US government borrowing after the "Deal" was reached, there are several moments that shouldn't be overlooked. The "Deal" didn't improve the financial framework at all. It only partially dealt with some of the most pressing symptoms of the disease. Equities are still plunging. The expectations for inflation are rising. The expectations for the yields from the Treasuries were downgraded severely just within a couple of days. Commodities are dropping fast (oil), which causes concerns in OPEC. The dollar is climbing up as well, which will put a further blow on exports.

You wonder why is this all happening, why now? Many reasons. The post-crisis growth was minute, and it stopped before this year was halved. Now what the US government considers the best option is to just tighten the belts. Meanwhile, Europe is hanging over a cliff with several ulcers gaping (Greece) while most of its politicians are spending nice time on holidays. Confidence in the markets is suddenly falling again. It's all like a self-fueling spiral that leads straight back to where we were in 2009.

To add to that, basically the US has committed a seppuku with the "Deal" which will echo throughout both sides of the Atlantic in the next months, possibly affecting East Asia as well (in fact that has started yesterday), but much less the Middle East, Africa and least of all the emerging economies from the BRICS. Whether this will lead to some major shifts in the balance of power on the economic (and then the geopolitical) chessboard, is yet to be seen, but I'd say: Yes.

Comments

Not that surprising

[tridus.livejournal.com]

A double-dip wouldn't be that surprising. The "recovery" was all smoke and mirrors to begin with, created with nothing but government stimulus. The private economy didn't improve a whole lot, and the fundamental problems remain the same.

The orgy of debt building by the government over the last couple decades has become the main driver of the problem now. There's no room to act when you're already up to your eyeballs in deficit spending just to pay the day to day bills. It's kind of interesting that consumers have gotten the message on this (America's consumer debt is going down because people are trying to strengthen their financial positions) but the politicians until very recently have been blissfully ignoring it (and how serious they are now is up for debate).

The other mistake is trying to characterize it as a crisis. A recession is not a crisis. It's a recession. They happen. Trying to pretend like the economy will just grow endlessly is silly and ignores history.

Re: Not that surprising

[gunslnger.livejournal.com]

The other mistake is trying to characterize it as a crisis. A recession is not a crisis. It's a recession. They happen. Trying to pretend like the economy will just grow endlessly is silly and ignores history.

This is the main problem right now, I think.

Re: Not that surprising

[montecristo.livejournal.com]

The economy does grow almost endlessly even after setbacks like war and corrections. The capital base has risen steadilly at an average rate of about 2% since the start of the Industrial Revolution. In adition, the division of labor network is growing in its extent and its interconnections are increasing in complexity.

Even so, periods of capital consumption and even capital destruction have occurred, usually caused by either collectivist or authoritarian meddling in the market or the mass collective insanities called wars.

A recession is not a crisis. This is true, but recessions can turn into crises or be turned into crises, or merely herald the onset of crises. I think the fiat currency system is getting ready to collapse. This is not something that "just happens" like weather, desptite the economy being an unpredictable chaotic system. These corrections are driven by understandable cause and effect factors. The Keynesian "animists," with their "animal spirit" beliefs are desperate to evade such knowledge and deny it.

Re: Not that surprising

[underlankers.livejournal.com]

This idea has not a historical metatarsal bone, let alone a leg to stand on. Name three specific instances where economies grew despite war and corrections.

Re: Not that surprising

[montecristo.livejournal.com]

Engage brain then comment. It works so much better that way. Over the last millenium world GDP has multiplied by a factor of about 300. That is not a controversial statement. You'd be hard pressed to find an economist who wouldn't agree with the idea that world GDP is growing and has grown for the last thousand years despite there being periods of capital consumption and capital destruction. Read what I said again, this time without being quite so eager to engage your unthinking fingers in the effort to refute me. No doubt you wanted me to have said that growth continues during recessions and wars but that is not what I actually said. I said growth has continued (long term) despite periods of capital consumption. Don't be so eager; it makes you look desperate.

Re: Not that surprising

[underlankers.livejournal.com]

Actually I would find this statistic extremely questionable. Over the last millennium almost a fifth of the human race went extinct, there have been wars since the Crusades that level repeatedly vibrant economic centers and colonialism for all areas affected by US and European rule has produced a net loss, not a neg gain. The most recent example is the Democratic Republic of the Congo, where the largest war since WWII has left the place a hellhole. Same with Afghanistan and Iraq.

Re: Not that surprising

[montecristo.livejournal.com]

Ah, now I'm hearing some reasoning that has more meat in it. I agree. The results of human activity have been marred by episodes of great theft and destruction and these have occurred disproportionately, with some people being victims and others being victimizers. Injustices have been and are being done. Nevertheless, the capital base is growing. The latter phenomenon happens despite the former, not because of it. I propose that we each work toward seeing the systemic violence, theft, and fraud is lessened or even eliminated and the capital base will grow much faster and much more equitably.

Re: Not that surprising

[montecristo.livejournal.com]

Recessions are driven. They don't just "happen." See Austrian Business Cycle Theory (http://wiki.mises.org/wiki/Austrian_business_cycle_theory).

Re: Not that surprising

[luzribeiro.livejournal.com]

You're always full of citations and references. Do you have an opinion of your own? Sometimes?

Re: Not that surprising

[montecristo.livejournal.com]

Unlike most of the "speshul snowflakes" that come out of the public education system, I don't believe an unfounded opinion is worth much. Anyone can have an opinion and most people are not shy about them. I have found that many if not most individuals though, could neither explain where they got their opinion nor why they hold it, let alone who introduced the ideas they support or what debate surrounds those ideas. When I cite something and do not specifically state that I disagree with it, it can be inferred that for the most part, if not entirely, I agree with the ideas, conjectures, theories, knowledge, or facts presented in the citation. The first sentence of my comment: "Recessions are driven," is a positive assertion. We can debate about how much of that assertion is fact, conjecture, knowledge, theory, intuition, or invalid reasoning etc. but that is not the same thing as not presenting or not having "an opinion of my own". The link is the support, the grounding for the assertion that recessions are not merely the result of Keynesian "animal spirits" but are instead driven by cause and effect phenomena operating in the economic sphere.

Re: Not that surprising

[luzribeiro.livejournal.com]

Founding one's opinion on facts is fine, but regurgitating someone else's thoughts is another thing.

Re: Not that surprising

[montecristo.livejournal.com]

Most people are regurgitating someone else's thoughts; they just don't understand that they are, don't remember that they are, or they don't care that they are and plagiarize capriciously. That isn't me.

In addition to that, I don't believe that you can achieve any kind of depth in a discussion with a 4500 word limit, so I like to provide links to the things about which I am talking so people can read more and examine the ideas in more detail for themselves.

Re: Not that surprising

[tridus.livejournal.com]

All the recessions that have happened over the past century tend to suggest that recessions are a fact of life, until someone figures out how to re-engineer the economy into something that doesn't suffer recessions.

So I don't really feel all that wrong.

Re: Not that surprising

[montecristo.livejournal.com]

Interesting. From that perspective I am going to agree with you. People will naturally meddle in the economy in ways that produce boom-bust cycles and in that sense, they are rather like "natural" phenomena. Heh. Of course, politics, and the power that people allow into the political sphere, is a human problem and as such it is something about which people can do something.