Healthy economy equals quiet bulletin board

[Giant Communist Robot]

Coverage on the 3m and 6m Treasuries was strong; indicates demand is high. Yields were 0.practically nothing.

[Haggis@wk]

I think they are trying to gradually deflate it, rather than letting it pop.

That's what I was thinking. I'd be surprised if bankers were unaware of the situation or did not realize there are things they can do to save their necks.

And I think you are giving much more credit to the banks than they deserve. Several toney neighborhoods in Dallas had to sue the banks to get the banks to take care of the yards of foreclosed houses. Actually they only threaten to "sue," apparently the banks and the rich people all use the same lawyers.

Apparently all those neighborhood associations have more clout than the average neighborhood.

But my point is the banks aren't doing anything to maintain those houses’ values. If those houses remain off the market and without maintenance for years there will expensive consequences.

[Giant Communist Robot]

Strong coverage on the Treasury auctions today. Is this a sign of nervousness?

All housing market data to be released this week is expected to be down.

Richmond Fed Manufacturing Index was good--actually twice as good as economists were expecting. This strong report, combined with the positive reports from the Philly and Empire, point to growth. This data will first show up in April on the Q1a.

[Giant Communist Robot]

And I think you are giving much more credit to the banks than they deserve.

Ok. I saw your call. I'm going with:

things will be pretty much like they are for a couple of quarters, then we'll see gradual improvement in housing.

[Haggis@wk]

things will be pretty much like they are for a couple of quarters, then we'll see gradual improvement in housing.

Change "quarters" to "years" and I'll agree with you

[Shapley]

"But my point is the banks aren't doing anything to maintain those houses’ values. If those houses remain off the market and without maintenance for years there will expensive consequences."

I don't think that's the concern. Maintaining them will only add to their losses. I believe they are willing to write them off, but intend to do so over the course of several years, to make their books look better. If they dump them all at once, they not only lose their value, but turn extant mortgages upside down by devaluing current mortgaged homes. (More so, I suppose, than having run-down, vacant, mortgaged houses in the neighborhood devalues them.)

My point is, the losses are there, but they don't want them on the books just now. It sort of like hiding gambling debts from the wife. There is, perhaps, some hope that you'll win big and erase those debts, but the hope is you can spread them out over a long term so she doesn't catch on. Of course, the strategy only works if you're not racking up more gambling debts while hiding the old ones...

It's a strategy. I didn't say it was a good strategy. And I didn't say it would work... : )

[Giant Communist Robot]

Banks are in the banking business, not real estate. Some mistakes will be made. They'll balk at upkeep as it's throwing good money after bad. It's the nightmare they live with.

[Giant Communist Robot]

Here's a summary of the Fed's meeting announcement:

The economy is expanding "moderately" despite slowing in global growth.

The unemployment rate will decline but only gradually.

Inflation is expected to run at levels at or below the FOMC's mandate.

They have extended their policy of low rates through 2014. I guess this means they want us to believe they expect the economy will have robust growth in 2015, and they will need to apply the brakes.

[Giant Communist Robot]

Nouriel Roubini says Europe needs massive monetary easing. He said Greece will be the first European country to restructure it's debt (a sort of polite way of saying "default") and won't be the last. He added there is no decoupling, meaning EU still needs the U.S. for growth. The U.S. only has anemic growth, Europe is in recession (says Roubini), and China has had a slowdown. At least he's optimistic.

[Giant Communist Robot]

things will be pretty much like they are for a couple of quarters, then we'll see gradual improvement in housing.

Change "quarters" to "years" and I'll agree with you

I think it's going to be a long time before things are good in housing, but I expect to see incremental improvement sometime this year.

[Haggis@wk]

I think it's going to be a long time before things are good in housing, but I expect to see incremental improvement sometime this year.

The Federal Reserve on Wednesday, citing ongoing concerns for a global economic slowdown and a stubbornly weak U.S. labor market, said it expects to keep record low interest rates in place at least until late 2014.

ehhhh, maybe not so much

[Giant Communist Robot]

What the heck ?!! The Conference Board's new index shows growth...they're calling for "cautious optimism". So they are still at odds with ECRI.

The new index deletes M2 and instead uses a Leading Credit Index; probably a good idea as these transactions are much bigger than M2. A wider definition of the term "money".

[Haggis@wk]

THERE’S THAT WORD AGAIN: Sales of U.S. New Homes Unexpectedly Decline in December.

“Sales of new U.S. homes unexpectedly declined in December for the first time in four months, capping the slowest year on record for builders.”

And note that November was revised down.

[Giant Communist Robot]

Congress raised the debt ceiling without any problem. Next time to lift it is, uh, right around the election. Coincidence.


The BEA on the GDP:

The acceleration in real GDP in the fourth quarter primarily reflected an upturn in private
inventory investment and accelerations in PCE and in residential fixed investment that were partly offset
by a deceleration in nonresidential fixed investment, a downturn in federal government spending, an
acceleration in imports, and a larger decrease in state and local government spending.

Government spending was down big time--here's where I direct everyone to look at the GDP identity to see how Gov spending adds--and there's this

“Sales of new U.S. homes unexpectedly declined in December for the first time in four months, capping the slowest year on record for builders.”

Moan! The sector remains depressed; catastrophe is at hand! Let's ignore the three months previous that showed growth.

[Haggis@wk]

Let's ignore the three months previous that showed growth.

Let's inject some perspective into "the three months previous "

[Haggis@wk]

Do you believe that your rate of inflation during the last fiscal quarter of 2011 was 0.04%?

Because, unless you do truly believe it the annual GDP rate would probably be under 1%.

If the inflation figure used in last Friday’s GDP figure had just remained the same as the 2.6 percent rate from the third quarter, Washington would have had to report fourth-quarter annualized growth of just 0.6 percent.

(Calculation: Inflation was lowered by 2.2 percentage points. So subtract 2.2 percent from the 2.8 percent growth to get 0.6 percent.)

And that’s an annualized rate. So divide the 0.6 percent by four quarters and the economy expanded at an itsy-bitsy, teeny-weeny 0.15 percent in the fourth quarter.

Did I mention that 75 percent of that 2.8 percent growth involved businesses restocking inventories all during 2011 and not consumer purchases?

I can’t honestly accuse the U.S. government of fiddling the numbers since all the numbers are available for any critical review, just that our MSM is totally uninterested in a “critical” review.

[Giant Communist Robot]

Do you believe that your rate of inflation during the last fiscal quarter of 2011 was 0.04%?

The consensus is that inflation is overstated because of a number of biases. Most economists believe it's overstated by about 1%.

Did I mention that 75 percent of that 2.8 percent growth involved businesses restocking inventories

No, you didn't. I did read this elsewhere and it is truly a sign of weakness.
Here's a quote from a quote in my post a little while back:

The acceleration in real GDP in the fourth quarter primarily reflected an upturn in private
inventory investment

Here's something interesting from Q1 09:

Gross private domestic investment... -46.7
Fixed investment.................. -32.2
Nonresidential.................. -31.3
Structures.................... -32.1
Equipment and software........ -30.8
Residential..................... -35.4

and then from the last release:

Gross private domestic investment... 20.0
Fixed investment.................. 3.3
Nonresidential.................. 1.7
Structures.................... -7.2
Equipment and software........ 5.2
Residential..................... 10.9

I think today's data indicates housing prices have not yet hit bottom.

[Haggis@wk]

The CBO's latest economic projections should be causing a lot of heartburn for American Citizens.

The Congressional Budget Office on Tuesday predicted the budget deficit will rise to $1.08 trillion in 2012. CBO also projected the jobless rate would rise to 8.9 percent by the end of 2012, and to 9.2 percent in 2013. These are much dimmer forecasts than in CBO's last report in August, when the office projected a $973 billion deficit. The report reflects weaker corporate tax revenue and the extension for two months of the payroll tax holiday.
A rising deficit and unemployment rate would hamper President Obama's reelection effort, which in recent weeks has seemed to be on stronger footing. If the CBO estimate is correct, it would mean that the United States recorded a deficit of more than $1 trillion for every year of Obama’s first term. The deficit was $1.4 trillion in 2009, $1.3 trillion in 2010 and $1.3 trillion in 2011. The largest deficit recorded before that was $458 billion in 2008.

CBO had forecast an 8.5 percent unemployment rate for the end of 2012 in its August report. It now expects the jobless rate to be higher, and to still be at 7 percent in 2015. The higher unemployment numbers are due to lower economic growth than previously estimated. Gross domestic product for 2011 is now estimated to have grown 1.6 percent in 2011, down from the 2.3 percent forecast in August. CBO a year ago had predicted 3.1 percent growth for 2011. The outlook for 2012 has also worsened. GDP is forecast to grow only 2 percent this year, compared to a previous estimate of 2.7 percent.

That's one ugly stat piled atop the next.
While the US economy officially grew at 1.7 percent in 2011, which is roughly half of the final 2010 number I believe, based on my earlier post, it was probably south of 1% if a reasonable inflation number was calculated into the mix.

CBO is pegging our growth target at a measly 2.0 percent for 2012 (anyone here that optimistic?). Incidentally, these 2012 debt projections are actually lowball estimates:

The deficit will be much higher if Congress takes several actions that many expect. If the Bush tax rates are extended, for example, the deficit would rise. It will also rise if Congress patches the Alternative Minimum Tax, which lawmakers have routinely done to prevent higher taxes from being imposed on middle class taxpayers. It would also rise if Congress continues to pass the “doc fix” that prevents a cut to Medicare payments to doctors, something that Congress has done on a near annual basis.
Finally, if Congress does not follow through on cuts mandated by the failure of the debt supercommittee, the deficit will grow. Lawmakers are already talking about cancelling scheduled cuts to the Pentagon’s budget. In the “alternative fiscal scenario”where these things happen, the national debt rises to $23 trillion by 2022. Total ten-year deficits amount to $11 trillion compared to $3 trillion in the current law scenario.

Remember that Obamacare kicks in beginning 2013 and as a result the CBO predicts 1% annual GDP growth.

Anyone else here think CBO’s magic ball is so precise that it can predict 0.20% average growth per quarter while being confidant that we won’t slip (re-slip?) into recession?

One percent growth in 2013….and that’s an optimistic projection.

[Haggis@wk]

The consensus is that inflation is overstated because of a number of biases. Most economists believe it's overstated by about 1%.

Because, Lord knows nobody thinks that food prices (up 4.7% for 2011) and gas prices (up 9.9% for 2011) or heating oil prices (up 18% for 2011) actually affect normal people or have any effct on their spending decision like those 'approved" inflation indicators.

[Giant Communist Robot]

Because, Lord knows nobody thinks that food prices (up 4.7% for 2011) and gas prices (up 9.9% for 2011) or heating oil prices (up 18% for 2011) actually affect normal people or have any effct on their spending decision

If you are going to reject the notion of noise within data that's fine, as long as you have a good reason for doing so. Do you? We all know food and energy are costing more and that it leaves us for less to spend elsewhere. Usually inflation is defined as "a general rise in prices" yet you point to specifics. This implies you are using a non-standard definition for inflation. Are you?