always thinking...
These are my select thoughts as I find the time to transcribe them here…
You never know what may appear here…but, rest assured there will be many random categories and topics (each of which are open for discussion). I will offer anecdotal material as well as statistical and timely informational content, as well. My intent is to open the eyes and minds of you who venture here and that all who come also leave with something of value! Stop by NT Services Home Page.
17Sep08
In light of the state of our economy, I am going to attempt to steer blame in the right direction…and i don’t mean to the “Right”. Plain and simple: our illustrious media, feeding on the rhetoric spewed forth from the mouths of self-serving, far left politicians and other doomsayers (and Vice-versa) has been promulgating Mass-Hysteria. Mass Hysteria over the possibility of a recession which in turn created a recession. Think about it: the ‘news’ stories go something like this…
“…The next major piece of data comes Friday, when the government is to release its monthly snapshot of the job market. Analysts expect the report to show a loss of 75,000 jobs, signifying the seventh straight month of declines…But the snapshot of disappointing economic growth released by the Bureau of Economic Analysis on Thursday morning provided no comfort to Wall Street, where a broad sell-off commenced. By the end of business, the Dow Jones industrial average was down 206 points to close at 11,378, a drop of nearly 2 percent…Consumer spending, which amounts to 70 percent of the economy, grew at a 1.5 percent annual rate between April and June, after growing at a meager 0.9 percent clip in the previous quarter…Adding to the improving trade picture, imports dropped by 6.6 percent, as Americans tightened their spending. Imports are subtracted from economic growth, so the effect was positive.
Over all, trade added 2.42 percentage points to the growth rate from April to June. Without that contribution, the economy would have contracted.
But many economists are dubious that consumer spending and exports can keep growing robustly in the face of substantial challenges that are now entrenched in the United States and are gathering force in many other major economies. Japan and much of Europe appear headed into downturns, damping demand for American-made products.
“The trade improvement doesn’t look sustainable,” said Jan Hatzius, an economist at Goldman Sachs in New York. “In an environment where the global economy is clearly slowing, you’re not being able to get that export growth in future quarters.”…Economists said the sharp drop in imports was largely a function of retailers delaying wholesale purchases in the midst of acute fears about declining American spending power — a dynamic that will eventually give way to new spending…“This reflects sheer panic by retailers about what the next Christmas buying season is going to look like,” said Mark Zandi, chief economist at Moody’s Economy.com.
The tax rebates have mostly been distributed. While the checks appear to have bolstered spending, they have failed to generate activity that is likely to carry on even after the cash has cycled through the economy, say economists.
“They slowed the downturn, but it’s clear they didn’t really provide any spark,” Mr. Baker said.
Employers have not hired much, even as shopping has picked up, cognizant that the rebate checks are a one-time event. Businesses have not shelled out for new machinery. Indeed, investment for equipment fell 3.4 percent in the spring months, dropping for the second consecutive quarter.
Rather than stockpile more goods, businesses generally tried to sell what they already had on hand. Business inventories declined in the second quarter by $62 billion, a factor that shaved nearly 2 percent off the overall rate of economic growth.
As the impact of the rebate checks continues to wear off in the coming weeks, households will be left confronting the same set of troubles that have been dragging on the economy for many months: a deteriorating job market, rising prices for food and gas and plummeting housing values.
Tens of millions of Americans have in recent years borrowed aggressively against the value of their homes to finance trips to the mall, dinners out, vacations and new cars. As housing values continue to fall, that artery of finance is rapidly constricting.
Since last summer, when the mortgage crisis provoked panic on Wall Street and many Americans saw access to credit diminish, consumer spending on so-called durable goods like appliances, cars and furniture has been sliding. This spending barely grew in the last three months of 2007, fell at a 4.3 percent clip in the first three months of this year and dropped at a 3 percent pace in the second quarter.
Meanwhile, joblessness is growing, with new unemployment claims filed in the week that ended July 26 swelling to 448,000 — up 44,000 from the previous week. And the purchasing power of wages is being eroded by higher prices for food and energy. Prices paid for goods by Americans surged at a 4.2 percent annual rate in the second quarter, after climbing at a 3.5 percent annual clip over the first three months of the year, according to the report on Thursday.
Higher prices, fewer paychecks and less household wealth: It is not a recipe for free-spending abandon.
“Now, consumers have to sing for their supper,” said Alan D. Levenson, chief economist at T. Rowe Price Associates in Baltimore. “Spending growth is slowing and income growth is slowing.”…“Looking forward, I don’t think there’s anything to change the lousy trend for the domestic economy,” said Joshua Shapiro, chief domestic economist at MFR, a research firm.
With the last three months of 2007 now officially revised down — from an initial 0.6 percent annual rate of growth to a 0.2 percent decline — many economists expect that these tough times will officially be declared a recession. That label is affixed by a panel of economists at a private research institution, the National Bureau of Economic Research, though typically well after the fact.
…“All my cousins already know it’s a recession,” said Mr. Barbera, the ITG economist. “They have the luxury of not having Ph.D.’s. The auto companies are in dire straits, the airlines have been shutting down flights and firing pilots. The truckers are in near hysteria because of the price of diesel. If you round up the usual suspects, this is a bad circumstance. And the word we usually use for a bad circumstance is a recession.” referenced and quoted from NY Times article “More Arrows Seen Pointing to a Recession” Published: August 1, 2008–Michael M. Grynbaum and Floyd Norris contributed reporting.
I know this is a lengthy series of excerpts from that article; but my point in doing so is this: to cite one example of a plethora and to demonstrate how the mass media hype driven by speculator greed and self-serving politicians has such a profoundly negative effect on consumer confidence. The dynamic of our current economy as it appears to me, follows…
1. Speculators watching and hoping for higher prices on oil add to the fray with dire predictions of shortages and more hard times to come cause the price of crude oil to sky-rocket…distributors all over capitalize on this and claim inflation on goods is due to the cost of transportation and shipping. Driven by greed alone, Investment Banker E invests the majority of their funds (borrowed at that) to sub prime, high interest loans they know cannot be repaid banking on the fact they will recoup a large portion of the funds before then foreclosing on the properties and reselling them to more ineligible borrowers make potentially even more money…credit ratings of those who could not make the payments (Jump to 4.) now in the toilet.
2. investors in Major Manufacturing Corporation A and others follow the breaking news blurbs quoting “statistical analysis” released by Private Economist F. In a panic the investors sell off their stock in anticipation of devaluation of their stock portfolios creating a cascade of panic sells across the board on the market.
3. The market plummets, Consumers C take note of this and the dire economic outlook predictions and don’t buy the big ticket items they ordinarily would have or had even planned to. (e.g. An acquaintance of mine who owns a surveying service business of his own, has seen a dramatic reduction of revenue from the public he had become accustomed to last year had planned this year to purchase a $1400 log splitter…in light of the current local economy and virtual cessation of cash flow, he has opted and is indeed not able to fork out the extra cash…instead, he struggles to pay off loans and regular business debt with the limited revenues he has seen to date this fiscal year. Many businesses, including NT Services are feeling the pinch).
Responding to a downturn in consumer spending, the Major Manufacturing Corporation A ceases production and lays off a major portion of its workforce (Jump to 4.)
4. The Consumer C is the factory worker who is laid off due to lack of demand, the delivery driver now has no product to deliver, catalog press operator, the merchant, the sales-person, and so on down the line who are now unemployed, credit is damaged, are losing their homes due to unscrupulous financial institutions’ practices and cannot find other work nor can they afford to commute or move elsewhere (Jump to 2.).
This is the F.A.C.E. of our economy IMO–Noel Rusnell
21Sep08
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