Meltdown

[Coopmv]

DM,  This is a fair question to ask for many ...   

One Year After Near Financial Collapse, Americans Wonder: Where's MY Bailout?

[Coopmv]

DM,   the day of reckoning is closer than we thought ...   
Happy New Year!

Climate Plans May Cut China Exports 20%
A study from the World Bank says U.S. and EU proposals to cut greenhouse-gas emissions could slam Chinese exporters

[Coopmv]

DM,  Here is another good one ...

China Property Bubble May Lead to U.S.-Style Real Estate Slump

[BachQ]

DM,  Here is another good one ...

China Property Bubble May Lead to U.S.-Style Real Estate Slump

Good catch, Coop.  Apparently, the Chinese think that their real estate bubble(s) will be different than the bubbles that brought down the US, UK, Spain, Ireland, etc. ...  However, because of their loose credit and extensive over-lending during the past several years, China's banks have been setting the groundwork for the sort of irrational exuberance that creates EPIC bubbles.  (Funds were made readily available via artificially low interest rates, Beijing's massive stimulus plans, and Beijing's  official encouragement of bank lending).  Will China's bubbles be different?  Buckle your seatbelt, and let's find out!

"Once the bubble pops,  our economic growth will stop," warns Yi Xianrong, a researcher at the Chinese Academy of Social Sciences' Finance Research Center.

That's putting it mildly.   

In Beijing's Chaoyang district, which represents a third of all residential property deals in the capital, homes now sell for an average of almost $300 per square foot. That means a typical 1,000-square-foot apartment costs about 80 times the average annual income of the city's residents. *** Chinese consumers, fearing inflation will return and outstrip the tiny interest they earn on their savings, have pursued property ever more aggressively. Companies in the chemical, steel, textile, and shoe industries have started up property divisions too: The chance of a quick return is much higher than in their primary business.

Yikes!   Bubblemania of epic dimensions.

[Coopmv]

DM,  Here is an article you do not want to miss ...   

FDR kept deadly disease hidden for years - Some 65 years ago, as World War II raged in Europe and the Pacific, the American people faced an unprecedented constitutional crisis of which they were completely unaware -- and which has remained a secret ever since.

[drogulus]

Indeed, the US has been doing what the Romans were doing before the empire crumbled.  Somehow, we have to impose our way of lives on other people.  If we were so good, why did we have the housing meltdown and spread the near-depression economic condition to the rest of the road?  $200B was too big a price tag to fix the crumbling roads and bridges in the US but we spent some $2T to fight the war in Iraq alone.  I do not see much national interest to fight that war in Iraq, though a case could be made for Afghanistan since the Taliban sheltered the Al Qaeda.   

      Yes, we'll continue building our empire just like the Romans did, as long as we can. I'll do something similar by continuing to breathe until I die. Then a Doomster can say "see, what good did all that breathing do? He's dead, so it probably killed him."

     My problem with Doomer "analysis" is that it connects all phenomena to a one sided story. Everything counts as evidence of failure, and this stands in for a realistic estimate of what actually works. So, you're in the position of the stroke victim that doesn't have 2 sides, only one. While the real story is a mixed one of disaster narrowly averted and a long slow climb to prosperity and something like full employment (it will take years to get back to 4%) the Doomer Narrative has no room for a balanceed picture with winners and losers rising and falling. No, instead everything falls apart and nothing gets put back together, nothing is invented, discovered or improved. But then I shouldn't expect anything more, should I?

     It strikes me that the Doomer habit of seeing everything as bad resembles the bubble mania which sees prices going up forever. It's a kind of reversal of the boomtime optimism, and just as unrealistic in the long run.

     Poor Doomers, stuck in the same boat with the Bubbleheads. You want a simple world that reduces to a formula you can understand. There is no reason to think the world is like that. Rome fell, but was worth the effort. In a sense we're still Romans, still building our palisades on the frontier. I don't exactly know why but somehow I feel this is what we're supposed to do, if there's any such thing as that.

If we were so good, why did we have the housing meltdown and spread the near-depression economic condition to the rest of the road?

      The answer is obvious: economies that "are so good" do experience these cycles and can't be entirely walled off from them. The best evidence is that boom psychology means there will be no technical fix. It's part of life, so we should take meliorative steps in the form of sensible regulation. That's it.

     

[BachQ]

DM,  This could be wishful thinking, as the US is the biggest export market for Asian goods and clearly no Asian countries want to believe the US may well be going through a rolling recession like Japan since the early 1990's ...

Good News! America Isn't Following the Same Path as Japan, Asia Expert Says

Japan's Return to '91 GDP Gives Markets Mega Risk Crisis (Update2)


By Aki Ito and Keiko Ujikane

Jan. 4 (Bloomberg) -- Japan's Prime Minister, Yukio Hatoyama, swept to power by a public seeking an end to economic and political stagnation, is failing to arrest the nation's decline.

Japanese gross domestic product shrank to an annualized 471 trillion yen ($5 trillion) in the third quarter, without accounting for changes in prices, the lowest level since 1991. The tumble is unprecedented among the biggest economies since the 1930s, according to Paul Sheard, global chief economist at Nomura Securities International Inc. in New York. As a result of the contraction, the Finance Ministry projects tax revenue this year will drop to a quarter-century low.

Hatoyama's 2010 budget, released Dec. 25, does nothing to rein in record deficits that threaten Japan's Aa2 rating, said Carl Weinberg, chief economist at High Frequency Economics. It avoided consumption-tax increases or deregulation to boost productivity; without policy changes, deflation and a shrinking population risk eroding the savings pool restraining Japan's bond yields.

"Japan's fiscal conditions are close to a melting point," said Takeshi Fujimaki, a former adviser to billionaire investor George Soros and now president of Fujimaki Japan, an investment advising company in Tokyo. "My biggest concern is whether the Japanese government will be able to sell all the bonds at auctions," he said, adding that such failures might send 10- year note yields climbing through 2.4 percent.

More than a fifth of Japanese are over 65, according to the National Institute of Population and Social Security Research. The nation's population began shrinking in 2006 from 127.8 million, and will drop by 3.2 percent in the coming decade, the Tokyo-based, state-sponsored institute estimates.

"National saving will soon decline," leading to higher interest rates, said Charles Horioka, a professor of economics at the Institute of Social and Economic Research of Osaka University and co-author of a paper with Harvard University's Martin Feldstein on international investment and savings patterns. "There is an urgent need to reconstruct the finances of the Japanese government." *** "Japan has never really escaped from the deflation situation of the 1990s," said Sheard at Nomura Securities, a unit of Japan's largest brokerage. *** The economic malaise may be creating another problem by eroding employment opportunities for the diminishing ranks of young Japanese.

[Coopmv]

Earth 'to be wiped out' by supernova explosion

This should be a fitting end ...

[Coopmv]

DM,  Here is an amusing email I received.  I certainly am not making excuses for the US ...

Subject: Government Math

It's a slow day in a little Vermont town. The sun is beating down, and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit...

On this particular day a rich tourist from back east is driving through town. He stops at the motel and lays a $100 bill on the desk saying he wants to inspect the rooms upstairs in order to pick one to spend the night.


As soon as the man walks upstairs, the owner grabs the bill and runs next door to pay his debt to the butcher.

The butcher takes the $100 and runs down the street to retire his debt to the pig farmer.

The pig farmer takes the $100 and heads off to pay his bill at the supplier of feed and fuel.

The guy at the Farmer's Co-op takes the $100 and runs to pay his debt to the local prostitute, who has also been facing hard times and has had to offer her "services" on credit.

The hooker rushes to the hotel and pays off her room bill with the hotel owner.

The hotel proprietor then places the $100 back on the counter so the rich traveler will not suspect anything.

At that moment the traveler comes down the stairs, picks up the $100 bill, states that the rooms are not satisfactory, pockets the money, and leaves town.

No one produced anything. No one earned anything. Everyone is happy!!

The whole town is now out of debt and now looks to the future with a lot more optimism.

And that, ladies and gentlemen, is how the United States Government is conducting business today.

[Coopmv]

DM,  Bankruptcy filing is just a matter of time ...

Official: Owners in huge NYC deal to miss payment
NYC councilman: Company that paid $5.4B for apartment complexes will miss loan payment

[Coopmv]

DM,   You should check out this article in its entirety.  I think James Chanos is onto something.  In the investment business, the majority is usually wrong ...

Contrarian Investor Sees Economic Crash in China
by David Barboza
Friday, January 8, 2010

James S. Chanos built one of the largest fortunes on Wall Street by foreseeing the collapse of Enron and other highflying companies whose stories were too good to be true.

Now Mr. Chanos, a wealthy hedge fund investor, is working to bust the myth of the biggest conglomerate of all: China Inc.

As most of the world bets on China to help lift the global economy out of recession, Mr. Chanos is warning that China's hyperstimulated economy is headed for a crash, rather than the sustained boom that most economists predict. Its surging real estate sector, buoyed by a flood of speculative capital, looks like "Dubai times 1,000 -- or worse," he frets. He even suspects that Beijing is cooking its books, faking, among other things, its eye-popping growth rates of more than 8 percent. More from NYTimes.com:

[Coopmv]

DM,    Harry Reid could be history after the next November election.  Another Democratic Senate majority leader, Tom Daschle lost his re-election bid in 02 and is now a lobbyist.

Reid Apologizes for Racial Remark About Obama, and Also Sinks in a Poll

[Coopmv]

DM,  This is a big deal, JAL going under ...     

JAL, One Of The World's Largest Airlines, Set To Go Under

[BachQ]

Coop, for the first time in US history, the number of employees in the GOVERNMENT SECTOR has exceeded the total number of employees in the GOODS-PRODUCING SECTOR.  This is the clearest example yet of the effects of the erosion of the US productive capacity (which is seemingly being replaced by inefficient government jobs).


"The decline of the jobs in goods producing sectors of the economy -- construction, manufacturing, mining and agriculture -- has largely been met with an increase in jobs on the government payroll. [The US has] gone from providing jobs in profit-making private industry to providing jobs in profit-eating government work. ... Welcome to the government payroll economy."

[BachQ]

ZeroHedge: Why The Staggering U.S. Debt Load Is Sure To Prevent Economic Growth -- "...as debt levels rise towards historical limits, risk premia begin to rise sharply, facing highly indebted governments with difficult tradeoffs. Even countries that are committed to fully repaying their debts are forced to dramatically tighten fiscal policy in order to appear credible to investors and thereby reduce risk premia...[C]ountries that choose to rely excessively on short term borrowing to fund growing debt levels are particularly vulnerable to crises in confidence that can provoke very sudden and "unexpected" financial crises..."


Reuters -- U.S. growth prospects deemed bleak in new decade -- A dismal job market, a crippled real estate sector and hobbled banks will keep a lid on U.S. economic growth over the coming decade: "It will be difficult to have a robust recovery while housing and commercial real estate are depressed," said Martin Feldstein, a Harvard University professor and former head of the National Bureau of Economic Research.

[Coopmv]

Coop, for the first time in US history, the number of employees in the GOVERNMENT SECTOR has exceeded the total number of employees in the GOODS-PRODUCING SECTOR.  This is the clearest example yet of the effects of the erosion of the US productive capacity (which is seemingly being replaced by inefficient government jobs).


"The decline of the jobs in goods producing sectors of the economy -- construction, manufacturing, mining and agriculture -- has largely been met with an increase in jobs on the government payroll. [The US has] gone from providing jobs in profit-making private industry to providing jobs in profit-eating government work. ... Welcome to the government payroll economy."

It is the folly of de-industrialization, i.e. outsourcing of all manufacturing jobs whenever there is chance that got the US into this jam.  With the service economy that concentrates heavily in finance and legal and when these two sectors were crippled by the credit crunch, the engine of economic growth just sputtered.  Germany does not have the same problem since 40% of its economy is still in manufacturing and mostly value-added manufacturing.  Unfortunately, it took the US over a decade to decimate its industrial base, the rebuild cannot be done quickly enough to bail out its overall economy ...   

[Coopmv]

ZeroHedge: Why The Staggering U.S. Debt Load Is Sure To Prevent Economic Growth -- "...as debt levels rise towards historical limits, risk premia begin to rise sharply, facing highly indebted governments with difficult tradeoffs. Even countries that are committed to fully repaying their debts are forced to dramatically tighten fiscal policy in order to appear credible to investors and thereby reduce risk premia...[C]ountries that choose to rely excessively on short term borrowing to fund growing debt levels are particularly vulnerable to crises in confidence that can provoke very sudden and "unexpected" financial crises..."


Reuters -- U.S. growth prospects deemed bleak in new decade -- A dismal job market, a crippled real estate sector and hobbled banks will keep a lid on U.S. economic growth over the coming decade: "It will be difficult to have a robust recovery while housing and commercial real estate are depressed," said Martin Feldstein, a Harvard University professor and former head of the National Bureau of Economic Research.

I think the US may well be in the same jam Japan found itself in after the crash of its stock market in 1989 that took the Nikkei from close to 40,000 down to under 10,000.  The Japanese also had a real estate market crash as well.  For the US, it was the real estate market that took the stock market down.

[BachQ]

It is the folly of de-industrialization, i.e. outsourcing of all manufacturing jobs whenever there is chance that got the US into this jam.  With the service economy that concentrates heavily in finance and legal and when these two sectors were crippled by the credit crunch, the engine of economic growth just sputtered.  Germany does not have the same problem since 40% of its economy is still in manufacturing and mostly value-added manufacturing.  Unfortunately, it took the US over a decade to decimate its industrial base, the rebuild cannot be done quickly enough to bail out its overall economy ...   

Agreed ... and it's an ominous sign when the non-productive public sector begins replacing the productive manufacturing & goods-producing private sector.  And the Obama-Pelosi-Frank-Reid juggernaut is eager to further expand the public sector even more ... 



Washington Post -- "There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well."


For most of the past 70 years, the U.S. economy has grown at a steady clip, generating perpetually higher incomes and wealth for American households. But since 2000, the story is starkly different.The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation's growth.  It was, according to a wide range of data, a lost decade for American workers.


U.S. consumers and businesses are filing for bankruptcy at a pace that made 2009 the seventh-worst year on record, with more than 1.4 million petitions submitted, an Associated Press tally showed Monday.

[BachQ]

Bloomberg -- Silicon Valley 'Bloodbath' Leaves Entire Office Buildings Empty (More than 43 million sq ft -- the equivalent of 15 Empire State Buildings -- stood vacant at the end of 3Q; "commercial property foreclosures will at least double in 2010")

[BachQ]

Forbes: -- Total US debt + unfunded liabilities exceeds 840% of GDP ... placing the US in the company of Lebanon & Zimbabwe.  "The world has not seen such debt levels in modern history. This debt is not serviceable. Imagine that total debt is 557% of GDP, without considering entitlements. The interest on the debt will consume all the tax revenues of the country in the not-too-distant future. Then there will be no way out but to create more debt in order to finance the old debt.  It assures a period of economic devastation. In a last, desperate attempt, politicians at the federal and local levels will raise taxes to astronomical heights to raise revenues. And that only assures destruction of the economy. Forget the fable of economic recovery. Unless there is a change in Washington by next year's election, there will be no way to turn back."