U.S. economy GDP contracts 6.2% in 4Q

February 27, 2009 by · Leave a Comment
Filed under: Economic News 

This is pretty bad news. By some definitions, a decline of 10% or more in national GDP is considered the signal of a country entering into a depression.  I believe we will have a “soft depression” that would have a slow decline with a longer period of a harsher economic environment.  It is not clear if that is the correct path to take if it is clear we are entering into a depression.  This unprecedented amount of governmental intervention has soften the decline a little, but at the same time, we have more uncertainty and volatility.

Having a quick and severe decline in my opinion would be preferable even though we may have a short period of economic crisis.  This would noticeable restore confidence in our markets by getting these bad debts to market and into the light.  This is turn would allow us to start rebuilding our economy in a manner that is more productive with a long-term outlook to prevent from being so vulnerable to these cyclical crisis-es.  The more we decide to intervene in this important market function, the longer it will take to sort this mess out and move on to even more important issues at hand.

News:

The U.S. economy contracted at its sharpest rate since early 1982 in the fourth quarter, revised data showed on Friday, as exports plunged and consumers cut spending by the most in more than 28 years.

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U.S. Recession will be worst since 1930s according to Greenspan

February 20, 2009 by · Leave a Comment
Filed under: Stock Market News 

Well are we just waking up to this fact?  I would also add that it should be the worst “depression” since the 1930s.  We broke some important technical supports on the Dow Jones Index today so I believe we will here markets technicians declare we have officially entered into a “bear” market and we should see a sell-off that will bring us to the next support levels which I believe are below 7,000.  Thanks Alan for allowing us to get into this environment by keeping interests so low after the tech bubble.  We should taken our recession like a man and not the easy way out.

News:

 Former U.S. Federal Reserve Chairman Alan Greenspan said on Tuesday the current global recession will “surely be the longest and deepest” since the 1930s and more government rescue funds are needed to stabilize the U.S. financial system.

“To stabilize the American banking system and restore normal lending, additional TARP funds will be required,” Greenspan said in a speech to the Economic Club of New York. The U.S. Treasury’s Troubled Asset Relief Program designed to help bail out banks has been partially successful, he said.

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Ex-Federal Reserve chief Paul Volcker says U.S. now in recession

October 14, 2008 by · 1 Comment
Filed under: Opinion 

Ahh, my hero ex-chairman Mr. Volcker. If only others would have the discipline you displayed to contain inflation.  I think if you talked to the average business person that you would agree we are in recession.   In the article he talks about some of the same issues that have been discussed here daily. We are looking too short-term in our goals for this financial crisis.

Many times the short-term gains you have, may not be worth the lasting long-term effects you cast on an economy. At some point we will have to deal with this debt, trade imbalance, credit creation/inflation and destruction of the middle class in the U.S. and not amount of credit will fix those problems. We have a system and culture that is not sustainable and will fall apart at some point in the future. It is good to take some punches on lip so you know what it feels like. The goal of life, atleast in my book is not to achieve ultimate convenience but to affect change and leaving life better than it was left to me.

Press Release:

Former Federal Reserve Chairman Paul Volcker said on Tuesday the U.S. housing sector faced more losses and the economy was in recession even as authorities moved to stabilize the financial system.

Volcker said the priority for U.S. authorities in the credit crisis was to stabilize the financial system even though that meant heavy government intrusion.

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Corporate and Government Bailouts Will Push US into Depression

September 11, 2008 by · Leave a Comment
Filed under: Economic News 

Heck I even think 10-11% inflation is being nice. I think the 12-18% are a bit more fair and a correct reflection in the rise in prices of the most essential goods. We can not think that we are going to inflate our way from the acute economic problems that are beginning to manifest and in my opinion be masked by the current political election season that includes a new President.

We can not think that deficit spending without actual productivity growth and expansion of real goods is going to solve these problems, it is more like a band-aid that has the side effect of inflation of prices.

Article:

The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.

“We expect a depression in the United States. We expect a depression, very possibly, also in Europe,” Hennecke said on “Worldwide Exchange.”

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