December 2008

Today's Nominees for being Truly, Utterly, Spectacularly Wrong are ...

The internet is a wonderful thing in the department of making a permanent record. While looking for some data for another post, I came across this gem, from a 2007 article excerpting a chapter in a forthcoming book, “The Economics of Housing Bubbles,” in America’s Housing Crisis: A Case of Government Failure, edited by Benjamin Powell and Randall Holcombe:

There are three basic views of bubbles that are held by economists. The dominant view among modern mainstream economists, including the Chicago school and proponents of Supply-Side economics, is to deny the existence of bubbles and to declare that what is thought to be “bubbles” is really the result of “real” factors....

A full fledged Deflationary Bust

This morning the NAPM reported a record low reading on their services index. This is the vast majority of the economy. Yesterday we learned that auto sales also declined by a record amount in November.
What both auto sales and services have in common is a continuing worsening of monthly measures compared with 2007. For example, in August car sales were down about 19% YoY. In September the loss was 21%. In October it was 23%. November's number, released yesterday,was more than 30% off from 2007.

Some time ago, I summarized Prof. Leamer's research on typical business cycle contractions: first housing, then durables (mainly cars and furniture), then non-durables, and finally services. When services go, you are in the full force of the recession. That's where we are now.

In the services report was another bomb: the prices index has also declined dramatically, also to a new all-time low -- from an all-time high only four months ago.

Manufacturing Tuesday: Week of 12.02.08


(editor's note: I was planning on publishing this morning, but some major personal business involving a sick wiener dog to one of those emergency vets had to take precedence. )
Ladies and Gentlemen, welcome to another edition of Manufacturing Monday...er Tuesday! Originally I wanted to post this on Monday morning, but I wanted to include the latest development from the Boeing SPEEA talks. Outside of this we got news from the steel industry, unfortunately not the good kind. Sticking with steel for a moment, there's an op-ed piece I wish to highlight that I thought you should look at. We have news or alarm bells I should say about pensions. Of course we also have some Green news, some ominous, but some good.

But before we get to those, let's take a look at the Numbers!

The Numbers

Auto Sales Plunge

Submitted by on

We all expected auto sales to be anemic but this is pretty god awful. In Auto Sales down over 30%, CNN reports:

Ford: 31% down from 1 year ago in November, 7% down from October, last month. Worst sales in 25 years.

Toyota: 34% drop from last year and a 14% drop from last month.

GM: 41% down, 44% cars, 39% light trucks.

Chrysler: 47% drop. A whopping 57% on cars and 42% on trucks.

These numbers are worse than analysts expected.

AP on GM details.

CBS Market Watch on Chrysler Sales.

How the EP Promotion/Demotion Rating System Works

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The Economic Populist has a content promotion and demotion system. Literally your vote can push an Instapopulist, or forum post to the front page or remove a blog post from the front page.

In other words, EP registered users control the content on the site, including the publication and placement of the content.

If enough people vote down a post, it will be unpublished, in other words, removed from the site.

When a post is unpublished, all comment trees attached to that post are also unpublished.

EPers please use the content system when you see an obvious spammer or someone posting a promotional item for another website, glorified advertising! These are hand spammers and they try to get free advertising as well as manipulate site rankings by spamming other sites with their advertisements. These posts are not real bloggers, so please treat them as such.

The U.S. can't survive on services alone

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This post is taken from my post at Grist.org that I put up a few months ago.

Rebuilding the manufacturing sector would not only provide millions of direct jobs, it would transform the entire economy, because manufacturing is the foundation of an economy.

No large nation, not even the U.S., can survive by only producing services. The vast majority of services consist of the economic activity that surrounds manufactured goods. In order to see why this is so, we need to take a stroll through the main sectors of the service economy; consider this an exercise in economic natural history.

Did the 2005 Bankruptcy “Reform” cause the world financial collapse?

Did the 2005 Bankruptcy “Reform” cause the world financial collapse?

Federal Reserve Bank of New York Staff Report No. 358 - Seismic Effects of the Bankruptcy Reform.

Remember the Bankruptcy Abuse [sic] Reform act of 2005? Yeah, the one that the credit card companies and banks got passed by buying the very best Congress money can buy. Turns out, according to the New York Fed's research, that since people going bankrupt after the BAR found it more difficult to stop paying their unsecured debts - i.e. credit cards - they were forced to stop paying their mortgages instead. Over 120,000 of them a year, according to the NY Fed researchers.

Is a 2009 recovery still possible?

This is a follow up on my previous posts in which I discussed whether we were heading for a deflationary recession or a recovery in 2009. As we found out within the last couple of weeks, the deflationary recession is already here. But are there still grounds to believe a recovery in 2009 is possible? Money supply indicators (m1 [red, green] and monetary base[orange]) continue to indicate so as of this week's update:

It is now virtually certain that the Kasriel indicator will predict a recovery in the first half of 2009.

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