Some scary figures on the US economy from The Market Oracle website;
“The continuing claims data leaped over 500,000 to (again, not a typo!) 5,832,746. The length of time people are staying unemployed is also rising rapidly. We are up almost 1.5 million new continuing claims in just the last five weeks. That is a stunning rise of over 30% in unemployment claims in just over a month. The data is truly ugly, but it is what it is.
The US likely just experienced a 4th quarter with GDP down over 4%. Some estimates suggest 5%. For all of 2009 we are likely going to be down at least 1-2%, which will make this the longest recession since the Great Depression. Unemployment is headed to at least 9%. Consumer spending will be off by at least 3% this year and again in 2010, as consumers start to find virtue in savings, which should rise in the US to 6% within a few years. Housing prices are going to drop another 10-15%, taking homes back to a level where they may be more affordable.”
Let’s add it up. In the US, we have seen massive wealth destruction on personal balance sheets. At the end of the third quarter the losses totalled $5.6 trillion, between housing and stocks. They could be over $10 trillion at the end of the fourth quarter. (Source: Hoisington) The losses will almost certainly top $12 trillion by the middle of the year as housing continues to deteriorate…”
Some incredibly disturbing figures which show just how dire the current economic situation is in the US, and in turn, the rest of the ‘developed’ world. I’m not sure the Obama administration have any real idea of what they’re going to do long term or the outcome of their current policy (throwing gov money into the economy in a hope to increase demand). The $1 tn promised to the IMF at the G20 summit earlier this month certainly highlighted that developed nations realise several of their number will very likely end up asking for IMF loans within the next 18 months or so (highly likely in the case of the United Kingdom).
In both the UK and US there seems a strategy of buying up toxic bank assets and quantitative easing, which for now pretty much translates into throwing money down a black hole (the banks need many trillions more to clear their balance sheets). What would boost consumer demand and limit unemployment (and the civil unrest that will ultimately come with it once figures get higher) would be real large scale public works. The UK government is currently borrowing to maintain levels of public service spending, but not creating jobs or wealth.
If the government wish to go down the Keynesian route, they shouldn’t be half hearted about it. National infrastructure projects, the taking over of failing industries to maintain jobs and innovate production (re-tooling car manufacturers to make them greener and more competitive) as well as nationalising the largest banks/financial groups and allowing the most toxic branches (the financial product arm of AIG for example) to go to the wall, while saving the rest of the company could all help. This may limit the government’s liability and get rid of the dead wood.
Either way you look at it, the UK and US govs are overseeing economies in cardiac arrest, and which may well be DOA by the this time next year. This will almost certainly shift the global economic balance of power, and will perhaps lead to a slight limit on the worst aspects of neoliberal economics we’ve seen in these two countries for the past few decades.
I had a Death, Doom, and Destruction comment all reared up and ready to ride for this post, but it is currently too virulent (pun intended) even for me (but not for you, Penidee, old pal
).
I need to let it finish percolating and then distill for a while.
The AP reported that consumer spending was down, but so was unemployment… slightly. They’re also reporting months of record personal savings rates.
http://news.yahoo.com/s/ap/20090430/ap_on_bi_go_ec_fi/us_economy
When you say unemployment is down, I assume you mean it’s not going up at such a high rate as it was previously (for the last quarter or whatever)? I think it depends on whether economists use seasonally adjusted figures etc which can make a difference. Unemployment claims are definitely up at their highest rate in years, and that’s for people who have registered unemployed alone.
The article showed that personal savings rates were up .2% from February, but were down .2% from Jan, which seems a little weird. People saving is all well and good, but slightly counter productive when the economy as it is is based on spending and consumption (as was made most clearly when G W Bush told Americans to ‘go shopping’ after the 9/11 attacks). Also, God knows what will happen to the banks in the long term if they can’t clear their balance sheets, so perhaps putting money in them is insecure in the short to medium term, unless they turn themselves round quickly.
But, if you read that paragraph, it says that savings so far this year have been over 4%, which is the highest in over a decade.
It also says that there were fewer new jobless claims.
I think the most important part of the article though, is further down where it says that the economic data is showing “shades of gray” whereas before it was “all black.”
I’m not too sure about that last bit…I mean, things will turn around at some point, but I think we’re looking at several years, not months;
http://business.timesonline.co.uk/tol/business/economics/article5837897.ece – Times Online ‘Global recession will be ‘worse than forecast’ according to IMF
http://online.wsj.com/article/SB124040469973043357.html – Wall Str Journal 23/4 ‘IMF says global recession is deepest since Great Depression’
“Overall, the world economy is now expected to contract 1.3% this year — a sharp reduction from the IMF’s January estimate of 0.5% growth for 2009 — and then grow just 1.9% in 2010, well below the global growth rate before the economic crisis hit. “By any measure,” the IMF’s twice-yearly World Economic Outlook concluded Wednesday, “this downturn represents by far the deepest global recession since the Great Depression.”
http://www.bloomberg.com/apps/newspid=20601087&sid=a6aaWZ8ab8yU&refer=home
Bloomberg.com “IMF Says Adavanced Economies Already in Depression”
http://www.google.com/hostednews/ap/article/ALeqM5iR9tcKfHeTSvcKp45fumd68LVchwD97SQKD05 -AP “Consumer spending falls by 0.2% in March” (while income growth slipped as well)
http://www.insidearm.com/go/arm-news/u-s-economy-shrinks-at-6-1-percent-pace-in-first-quarter – InsideArm, “U.S. Economy Shrinks at 6.1% Pace in First Quarter”
Fair enough Ken, I just thought it ironic considering your last post was about how everyone’s going on about how the end is neigh over the swine flu thing when it’s not the apocalypse. For me there’s a bit of a parallel with this situation. It’s not a good situation, but we’re not in the depression yet.
Yeah, I get what you’re saying and I don’t wanna big up the whole dooms day scenario obviously… the difference between the Flu thing and the economic crisis, is that one is very real and will cause major problems for people in ‘developed’ world, and probably lead to the deaths of a large number of people in the developing world (due to increased poverty etc). The flu pandemic does not yet exist (in that there are a few hundred confirmed/unconfirmed cases world wide out with a global population of 6bill+), but the worst aspects of global capitalsm and its cyclical failure does. For that reason, I thought it is legit and they’re not quite parrallel.
Of course most people in the media, politics etc will believe that the (short term) reinvigoration of capitalism in a couple of yrs time will be an end to all our problems. If there is another 10-15 yr ‘boom’ people will be writing about the end of boom and bust (as Gordon Brown would bang on about at every oppurtunity until v recently) and how capitalism will have come to some kind of nautral equalibrium. That while millions world wide continue to die through the effects of poverty inherent in the current system.
-End of rant-