November 2008

Sen Nelson to Detroit 3: You can have the money, but you're fired

Senator Nelson is on record now saying that any cash the Detroit automakers get will come with a very big string attached:

Sen. Bill Nelson of Florida said a $25 billion bailout of the industry may be necessary given the state of the economy but it must be conditioned on the loans being paid back and the senior management of General Motors, Ford Motor Co. and Chrysler LLC being removed.

He said there needs to be assurances the money is being used to create a new, sustainable auto industry in the U.S. and that means “new eyes, new ears to steer us out of this mess.”

Nelson also said executive compensation must be limited, sweetheart deals for retiring or departing executives curtailed and a halt to dividends while the companies are still losing money.

Senator Sanders Trying to Stop the Bail out, Introduces Legislation

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Senator Bernie Sanders is introducing legislation to Stop the Bail Out of the rest of the $350 billion dollars that hasn't been given to banks.

Senator Bernie Sanders said today he will introduce legislation to stop the release of a $350-billion second round of the Wall Street bailout. Sanders, who voted against the $700-billion package Congress approved in October, said he has serious concerns about how the Bush administration and Treasury Secretary Henry Paulson are spending the bailout money that was already released. He also said it was unacceptable that the oversight provisions in the bill were ignored. “I have very serious concerns as to how the Bush administration is spending the first $350 billion they were provided. The second $350 billion tranche must not be spent in the same way,” Sanders said.

Manufacturing Monday: Week of 11.17.08

Greetings ladies and gentlemen and welcome to a new installment of Manufacturing Monday. Now I would like to do something a tad different this week. You see today we get two important economic indicators released. So, instead of waiting a whole week for me to reprise them here, I would go ahead and write about then today! I will still go over last week's indicators, but figured you deserve to get something more up to date as well. The numbers get released around 9:30 Eastern, so they will be covered first, then last week's stuff.

Money Aggregates, PPI, GDP

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PPI History of the Producer Price Index. What this shows is a virtual quadrupling in 30 years. The important question at this point relates to monetary aggregates and the unimaginable effect of stuffing several hundred billion dollars into one quarter.. The analogy is like a pig moving through a python.

A number of scenarios are possible

- Banks loan out the aggregates (they refuse)

- Banks are the mattress and a deflationary spiral ensues (there is other credit sourcing in smaller banks)

- Ever more bailouts bail out the bailouts. Weimar America.

There is no parallel to the monetary aggregate formation to the period of 1929 to 1932. In that time, the Fed stopped lending to stop speculation. The Fed is behaving the opposite now. Deflation is the present, but inflation is the future.

In the last few months have seen greater M3 growth then seen in US History. M3 spikes, as data show, tend to precede a major recessions.

Industrial production, capacity utilization rebound

From Bloomberg:

U.S. industrial production rose more than forecast in October, led by a jump in mining as work resumed at oil rigs in Gulf of Mexico following shutdowns caused by Hurricanes Gustav and Ike.

The 1.3 percent increase in production at factories, mines and utilities followed a revised 3.7 percent drop in September that was the biggest since 1946, the Federal Reserve said today. Excluding the effect of the storms and a strike at Boeing Co., output would have shrank about 0.7 percent in October and September, the Fed said.
...
Capacity utilization, which measures the proportion of plants in use, climbed to 76.4 percent from 75.5 percent the prior month.

There Goes Japan. It's Official, they are in recession

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Japan's Economy Is in Recession:

The country's gross domestic product contracted at an annual rate of 0.4 percent from July to September, marking the second consecutive quarter of negative growth -- the technical definition of a recession. Japan's previous recession was in 2001, after the collapse of the dot-com bubble in the United States.

Japan's economy minister warned that the situation could worsen: Collapsing sales of Japanese goods in the United States and Europe amid the global downturn threaten to make the country's export-dependent economy even weaker in coming months.

"Downside risks to the economy are growing further, and Japan is in a very serious situation," Kaoru Yosano said at a news conference.

Obama Interview on Economy

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Below is the President-Elect Obama 60 Minute Interview.

From the transcripts Obama is pretty much backing Hank Paulson even though the interviewer tried to point out the $300 Billion hasn't done much.

Kroft: Are you in sync with Secretary Paulson in terms of how the $700 billion is being used?

Mr. Obama: Well, look, Hank Paulson has worked tirelessly under some very difficult circumstances. We've got an unprecedented crisis, or at least something that we have not seen since the Great Depression. And I think Hank would be the first one to acknowledge that probably not everything that's been done has worked the way he had hoped it would work. But I'm less interested in looking backwards than I am in looking forwards.

Kroft: The government has spent almost $300 billion out of the TARP program.

Mr. Obama: Right.

UN to China - Be More Socialist to Spur Economic Growth

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The irony of this story ...

The United Nations is telling China to Spend More on Public Services in order to sustain economic growth and notes the economic disparity of the Nation.

China needs to spend more on education, health care and social welfare to sustain economic expansion as a global recession looms, the United Nations said in a report today.

The fruits of China's rapid growth haven't spread equally, and disparities limit continued expansion, according to the China Human Development Report. Shanghai and Beijing compare in development to European countries such as Cyprus and Portugal, while inland provinces like Guizhou in the southwest are closer to African economies like Botswana and Namibia, it said.

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