The Double Dip
The Nattering One muses... long ago in these pages we predicted the double dip.
We keep hearing all these stories about recovery from the pollyannas we know. We quip, what recovery?
The markets are jury rigged and contrived, witnessed by the stock market level and real estate prices being completely false.
As stated before, the equation is simple...
Bail out all you like... until real durable economic jobs are created domestically, there shall be no recovery.
We differ with Mr. Altman in only one aspect, inflation is anything but negligible and tame.
Much like the guvmints unemployment number at 9%, the inflation number at 3% is missing something... the truthful number one in front of it.
19% and 13% would be accurate numbers for unemployment and inflation respectively.
In Greece it's reported that something like 50% of ALL jobs are Government or Government related. Outside of tourism and olive oil they produce NOTHING.
Greece have been in technical default fo something like 100 of the last 150 years. They have no industry that exists anymore that they can even tax to make it look as if they are even trying.
We have institutionalized and fed a dysfunctional and corrupt, gluttonous, slothful, over-paid and under-performing Government for decades. WE ARE GREECE.
We have stated many times that globalization and outsourcing to labor at the margin are nothing more than euphemisms for global corporate rape and pillage.
This is what happens when the special interest lobbyists run everything, and our government is no longer for the people and by the people, but for the corporations and by the rich upper 2%....
you outsource everything and turn to globalization, you wind up with a soft non durable service based economy...
dependent on the largess of others to patronize you with loans and tourism.
We can't come to a budget deal because the layers of corruption overlap on so many levels, and we have no national will to self-correct.
Everything is broken, and the leadership we've elected whether they be Republican, Democrat, Tea Party, Libertarian or Independent...
are just spine-less jellyfish and pawns of groups that don't want to compromise on anything that they have control over.
It's a total catastrophe, a failure of epic proportion. We have failed at every level, Main Street, Wall Street, The Financial System, everybody and every institution is corrupt and lazy.
As Jonathan E.(James Caan) said in the original Rollerball: "It's like people had a choice a long time ago between having all them nice things or freedom. Of course, they chose comfort."
Bartholomew (John Houseman): "The game was created to demonstrate the futility of individual effort."
"Corporate society takes care of everything. And all it asks of anyone, all it's ever asked of anyone ever, is not to interfere with management decisions."
There are no heroes. We're just spineless sputem of our forefathers and we've squandered the whole deal.
Ladies and gentlemen, will you stand please for the playing of our Corporate Hymn.
America and Europe are on the verge of disastrous recession
Roger Altman
September 21, 2011
Interest rates on US, German and UK government bonds have fallen to all-time lows. Yields on 10-year US Treasury securities, for example, are below two per cent.
That is the lowest recorded since the Federal Reserve began publishing market data in 1953.
In addition, yields on the inflation-protected 10-year Treasuries are zero. These are nearly incomprehensible levels whose implications are profoundly negative. Namely that Tuesday’s International Monetary Fund report is quite correct to warn that America and Europe are on the verge of renewed recession.
It is only the anticipation of negligible demand for capital and negligible inflation ‑ both hallmarks of recession ‑ that could drive rates this low. For the American and western European economies to decline again, when unemployment levels are already so high, would be disastrous.
It would shock consumers, businesses and financial markets. Fearful, they would retrench further, causing the economic decline to accelerate. Weak labour markets would get even worse, as would the already swollen government deficits and debt.
Overall, we could be in for a repeat of the experience of 1937, when America fell back into recession after three years of recovery from the Great Depression.
How do we know that another recession is approaching? For starters, there is no other credible explanation for the relentless fall in interest rates.
Yes, monetary policy is on maximum ease and that controls short-term rates. Safe haven psychology also is at work. However, these cannot explain such low yields on longer-term government and corporate bonds.
Further, bond markets usually signal recession through an inverted yield curve, when long-term rates are lower than short-term ones. Technically, this is impossible now, as short-term rates are zero. But, the recent movement in long-term rates is the equivalent.
Moreover, recent US and European economic data conveys serious weakness. US household net worth has begun to fall again, and jobless claims have been rising for several weeks.
Retail sales are flat and consumer confidence is hovering around modern lows. Onshore corporate liquidity has reached a record $13,000bn, which signals that businesses are uncertain over the outlook.
Across the Atlantic, the trend is also poor. Neither Germany nor France grew in the second quarter. Household consumption in the eurozone actually fell during that period.
Moreover, the European Commission is forecasting only 0.2 per cent and 0.1 per cent growth across the region for the third and fourth quarter respectively. The worsening of the sovereign debt crisis surely means that actual results will be worse.
It is the debilitating sovereign debt crisis in Europe that is pushing both regions back towards the brink. It is causing credit conditions to tighten again for sovereign credits, weaker borrowers and small and mid-sized business. It also is suppressing consumer and business confidence and the export outlook.
The never-ending nature of this crisis was avoidable. At every opportunity Europe’s leaders have delayed, taken the tiniest steps possible and generally averted their eyes to the elephants in the room.
Yes, everyone knows that the country-by-country politics are difficult, starting with Germany. But the risk of another Lehman-like market collapse and subsequent economic contraction is huge.
Faced with this, European leaders must confront the politics. Instead, their grudging incrementalism is deepening the risks. Implicitly, this was the message behind Treasury Secretary Geithner’s presence in Poland last week.
A single currency representing 17 separate nations inevitably requires a unified balance sheet behind it and, following that, a form of fiscal union. The time for denying the latter is over.
The European financial stability facility must be enlarged exponentially so that it can stand behind nations such as Italy or Spain. In addition, the mandate of the European Central Bank must be expanded.
Just like the Federal Reserve, it should be responsible for maintaining a sound banking system and stable capital markets. This requires a permanent capacity to finance banks directly, just as a group of central banks did last week.
It also requires the flexibility to buy and sell sovereign debt securities in secondary markets. These reforms must be accompanied by tighter, eurozone-wide bank regulation and supervision.
It also requires IMF-like conditionality to accompany direct EFSF loans to member nations. Finally, the ECB should ease monetary policy now as there is no visible inflation risk.
America also must stop its own partisan bickering and undertake one last round of fiscal stimulus. The $447bn job-creation plan by President Obama, or another quick-acting plan of similar magnitude, should be enacted immediately. The Fed should also initiate further moves to promote credit availability and lending.
Another recession would be profoundly damaging to labour markets and public confidence. It would take years to fully overcome.
We must try to avoid such an outcome at all costs. That requires the type of far-sighted leadership that we haven’t seen much of lately.
The writer is founder and chairman of Evercore Partners and former US deputy treasury secretary under President Bill Clinton.
Roger Altmans Financial Times Op-Ed (Registration Required)
We keep hearing all these stories about recovery from the pollyannas we know. We quip, what recovery?
The markets are jury rigged and contrived, witnessed by the stock market level and real estate prices being completely false.
As stated before, the equation is simple...
Bail out all you like... until real durable economic jobs are created domestically, there shall be no recovery.
We differ with Mr. Altman in only one aspect, inflation is anything but negligible and tame.
Much like the guvmints unemployment number at 9%, the inflation number at 3% is missing something... the truthful number one in front of it.
19% and 13% would be accurate numbers for unemployment and inflation respectively.
In Greece it's reported that something like 50% of ALL jobs are Government or Government related. Outside of tourism and olive oil they produce NOTHING.
Greece have been in technical default fo something like 100 of the last 150 years. They have no industry that exists anymore that they can even tax to make it look as if they are even trying.
We have institutionalized and fed a dysfunctional and corrupt, gluttonous, slothful, over-paid and under-performing Government for decades. WE ARE GREECE.
We have stated many times that globalization and outsourcing to labor at the margin are nothing more than euphemisms for global corporate rape and pillage.
This is what happens when the special interest lobbyists run everything, and our government is no longer for the people and by the people, but for the corporations and by the rich upper 2%....
you outsource everything and turn to globalization, you wind up with a soft non durable service based economy...
dependent on the largess of others to patronize you with loans and tourism.
We can't come to a budget deal because the layers of corruption overlap on so many levels, and we have no national will to self-correct.
Everything is broken, and the leadership we've elected whether they be Republican, Democrat, Tea Party, Libertarian or Independent...
are just spine-less jellyfish and pawns of groups that don't want to compromise on anything that they have control over.
It's a total catastrophe, a failure of epic proportion. We have failed at every level, Main Street, Wall Street, The Financial System, everybody and every institution is corrupt and lazy.
As Jonathan E.(James Caan) said in the original Rollerball: "It's like people had a choice a long time ago between having all them nice things or freedom. Of course, they chose comfort."
Bartholomew (John Houseman): "The game was created to demonstrate the futility of individual effort."
"Corporate society takes care of everything. And all it asks of anyone, all it's ever asked of anyone ever, is not to interfere with management decisions."
There are no heroes. We're just spineless sputem of our forefathers and we've squandered the whole deal.
Ladies and gentlemen, will you stand please for the playing of our Corporate Hymn.
America and Europe are on the verge of disastrous recession
Roger Altman
September 21, 2011
Interest rates on US, German and UK government bonds have fallen to all-time lows. Yields on 10-year US Treasury securities, for example, are below two per cent.
That is the lowest recorded since the Federal Reserve began publishing market data in 1953.
In addition, yields on the inflation-protected 10-year Treasuries are zero. These are nearly incomprehensible levels whose implications are profoundly negative. Namely that Tuesday’s International Monetary Fund report is quite correct to warn that America and Europe are on the verge of renewed recession.
It is only the anticipation of negligible demand for capital and negligible inflation ‑ both hallmarks of recession ‑ that could drive rates this low. For the American and western European economies to decline again, when unemployment levels are already so high, would be disastrous.
It would shock consumers, businesses and financial markets. Fearful, they would retrench further, causing the economic decline to accelerate. Weak labour markets would get even worse, as would the already swollen government deficits and debt.
Overall, we could be in for a repeat of the experience of 1937, when America fell back into recession after three years of recovery from the Great Depression.
How do we know that another recession is approaching? For starters, there is no other credible explanation for the relentless fall in interest rates.
Yes, monetary policy is on maximum ease and that controls short-term rates. Safe haven psychology also is at work. However, these cannot explain such low yields on longer-term government and corporate bonds.
Further, bond markets usually signal recession through an inverted yield curve, when long-term rates are lower than short-term ones. Technically, this is impossible now, as short-term rates are zero. But, the recent movement in long-term rates is the equivalent.
Moreover, recent US and European economic data conveys serious weakness. US household net worth has begun to fall again, and jobless claims have been rising for several weeks.
Retail sales are flat and consumer confidence is hovering around modern lows. Onshore corporate liquidity has reached a record $13,000bn, which signals that businesses are uncertain over the outlook.
Across the Atlantic, the trend is also poor. Neither Germany nor France grew in the second quarter. Household consumption in the eurozone actually fell during that period.
Moreover, the European Commission is forecasting only 0.2 per cent and 0.1 per cent growth across the region for the third and fourth quarter respectively. The worsening of the sovereign debt crisis surely means that actual results will be worse.
It is the debilitating sovereign debt crisis in Europe that is pushing both regions back towards the brink. It is causing credit conditions to tighten again for sovereign credits, weaker borrowers and small and mid-sized business. It also is suppressing consumer and business confidence and the export outlook.
The never-ending nature of this crisis was avoidable. At every opportunity Europe’s leaders have delayed, taken the tiniest steps possible and generally averted their eyes to the elephants in the room.
Yes, everyone knows that the country-by-country politics are difficult, starting with Germany. But the risk of another Lehman-like market collapse and subsequent economic contraction is huge.
Faced with this, European leaders must confront the politics. Instead, their grudging incrementalism is deepening the risks. Implicitly, this was the message behind Treasury Secretary Geithner’s presence in Poland last week.
A single currency representing 17 separate nations inevitably requires a unified balance sheet behind it and, following that, a form of fiscal union. The time for denying the latter is over.
The European financial stability facility must be enlarged exponentially so that it can stand behind nations such as Italy or Spain. In addition, the mandate of the European Central Bank must be expanded.
Just like the Federal Reserve, it should be responsible for maintaining a sound banking system and stable capital markets. This requires a permanent capacity to finance banks directly, just as a group of central banks did last week.
It also requires the flexibility to buy and sell sovereign debt securities in secondary markets. These reforms must be accompanied by tighter, eurozone-wide bank regulation and supervision.
It also requires IMF-like conditionality to accompany direct EFSF loans to member nations. Finally, the ECB should ease monetary policy now as there is no visible inflation risk.
America also must stop its own partisan bickering and undertake one last round of fiscal stimulus. The $447bn job-creation plan by President Obama, or another quick-acting plan of similar magnitude, should be enacted immediately. The Fed should also initiate further moves to promote credit availability and lending.
Another recession would be profoundly damaging to labour markets and public confidence. It would take years to fully overcome.
We must try to avoid such an outcome at all costs. That requires the type of far-sighted leadership that we haven’t seen much of lately.
The writer is founder and chairman of Evercore Partners and former US deputy treasury secretary under President Bill Clinton.
Roger Altmans Financial Times Op-Ed (Registration Required)
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