Forty three months after the recession began in January 2008, almost 5% of the labor force remains unemployed. In 7 of the eleven recessions since World War II, all the jobs lost during the recession were filled within 24 months. What’s happening in this ‘recovery’ is simply unprecedented.
The Great Debt Scare – Robert J. Shiller – Project Syndicate
The Consumer Sentiment Survey of Americans, created by George Katona at the University of Michigan in the early 1950’s, and known today as the Thomson-Reuters University of Michigan Surveys of Consumers, has included a remarkable question about the reasonably long-term future, five years hence, and asks about visceral fears concerning that period:
“Looking ahead, which would you say is more likely – that in the country as a whole we’ll have continuous good times during the next five years or so, or that we will have periods of widespread unemployment or depression, or what?”
That question is usually not singled out for attention, but it appears spot-on for what we really want to know: what deep anxieties and fears do people have that might inhibit their willingness to spend for a long time. The answers to that question might well help us forecast the future outlook much more accurately.
Those answers plunged into depression territory between July and August, and the index of optimism based on answers to this question is at its lowest level since the oil-crisis-induced “great recession” of the early 1980’s…..
This is a much bigger downswing than was recorded in the overall consumer-confidence indices. The decline occurred over the better part of a decade, as we began to see the end of debt-driven overexpansion, and accelerated with the latest debt crisis.
The timing and substance of these consumer-survey results suggest that our fundamental outlook about the economy, at the level of the average person, is closely bound up with stories of excessive borrowing, loss of governmental and personal responsibility, and a sense that matters are beyond control. That kind of loss of confidence may well last for years.
via The Great Debt Scare – Robert J. Shiller – Project Syndicate.
The Dow tests key support at 10600
Dow Jones Industrial Average is testing support at 10600; failure would add final confirmation of the bear market signaled by 63-day Twiggs Momentum (holding below zero).
* Target calculation: 11000 – ( 12000 – 11000 ) = 10000
Loonie turns, will Aussie follow?
Canada’s Loonie broke parity against the greenback, confirming a primary down-trend and offering an initial target of $0.94*.
* Target calculation: 1.00 – ( 1.06 – 1.00 ) = 0.94
The Canadian and Aussie Dollars have tracked each other closely over the last year and it seems inevitable that the Aussie will follow the Loonie below parity.
QE Can’t Save the Day… We’ve Done a Version of It For Over 10 Years | ZeroHedge
While most commentators proclaim that QE is a completely new phenomenon, we have in fact seen a version of it in the form of the Fed’s and Asia’s (especially China’s) purchases of US Treasuries/ currency pegs over the last decade or so.
Indeed, today, the Fed, China, and Japan collectively hold 61% of the $10 trillion of US debt held by “the public.” When you add in the additional $4.6 trillion in US debt held by “intragovernmental holdings” (basically the Federal Government buying Treasuries by raiding Social Security and other pension funds) you find that Asia and the Feds have monetized $10.7 trillion of the US’s total $14.6 debt (roughly 73%) over the last 20 years.
via QE Can’t Save the Day… We’ve Done a Version of It For Over 10 Years | ZeroHedge.
The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com
As the stock market moves down into the next daily cycle low and the selling pressure intensifies, this should drive the dollar index much higher. It remains to be seen if gold can reverse this pattern of weakness in the face of dollar strength, especially since the dollar will almost certainly be rallying violently during the intense selling pressure that is coming in the stock market.
via The Next Selling Wave Is About to Begin | Toby Connor | Safehaven.com.
When the dollar strengthens, gold normally falls. Except in times of high uncertainty (like the present), when demand for gold as a safe haven overcomes downward pressure from a stronger dollar. Buying gold at current prices is a bet that either Greece will default — a pretty safe bet — or that the Fed is again forced to use its printing press (not quite as certain).
FRB: Press Release–Federal Reserve issues FOMC statement–September 21, 2011
The Committee continues to expect some pickup in the pace of recovery over coming quarters but anticipates that the unemployment rate will decline only gradually toward levels that the Committee judges to be consistent with its dual mandate. Moreover, there are significant downside risks to the economic outlook, including strains in global financial markets.
………The Committee discussed the range of policy tools available to promote a stronger economic recovery in a context of price stability. It will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate.
via FRB: Press Release–Federal Reserve issues FOMC statement–September 21, 2011.
Fed Shifts Bond Portfolio – WSJ.com
The Fed is trying to ease financial conditions without taking the more controversial step of increasing the amount of money that it’s pumping into the financial system, since it will be using money already generated from other programs. A bond buying program the Fed completed in June was widely criticized internally and externally because it pumped $600 billion of newly printed money into the financial system, sparking fears of inflation……..
The more potent step of launching a new round of bond purchases that would further expand the Fed’s $2.867 trillion balance sheet remains a possibility, but inflation likely would need to slow much further to spur Fed officials to take that step……..
Economists aren’t so sure that the Fed’s latest gambit will do much to spur growth.
“The odds are ‘Operation Twist’ won’t work,” Anthony Sanders, a real-estate finance professor at George Mason University, said before the Fed action. The housing market has shown no reaction to interest rates that are already at record-low levels, he said. Freddie Mac’s latest survey finds the average rate on 30-year, fixed-rate mortgages at 4.09%, the lowest level in more than 50 years.
Of course it’s right to ringfence rogue universals – Martin Wolf
Thank you, UBS. As a member of the UK’s Independent Commission on Banking, under Sir John Vickers, I could not have asked for a better illustration of the unregulatable risks to which investment banks are exposed than Thursday’s announcement of a loss of $2bn in “unauthorised trading”. No sane country can allow taxpayers to stand behind such risks.
That is the kernel of the case for ringfencing of retail banking from investment banking, recommended in the ICB’s final report.
via Of course it’s right to ringfence rogue universals – FT.com.
Barack Obama, Home Alone – Rich Lowry
In his new book on the Obama economic team, Ron Suskind quotes former administration official Larry Summers complaining: “We’re home alone. There’s no adult in charge. Clinton would never have made these mistakes.”
via Barack Obama, Home Alone – Rich Lowry – National Review Online.
Larry Summers “We’re home alone” comment could damage Barack Obama’s already slim chances of re-election. Already slim because there is little he can do that will create jobs before November next year.