The bottom line is that:
- Lending is down.
- There is no reliable source of demand. Who, exactly, is going to buy lots of new stuff from American businesses?
- The stimulus last year was inadequate and badly designed. Yes, it created some jobs and saved others, no, it didn’t create enough.
- The 15 billion stimulus just passed is a bad joke which will do, for all intents and purposes, nothing.
- State and municipal taxes receipts are still dropping, meaning states and municipalities are reducing spending. They don’t have the ability to print money the way the Federal government does.
- Oil prices are still too high, hoving around $75/barrel. If there is any sort of recovery, that price will soar even higher, and will strangle said recovery.
- The debtor states, aka: Europe and the US, are floundering and going through a period of Hooverism. Meanwhile China, a creditor state, is trying to moderate its growth so it’s only 8%.
- It is not in China’s interest for the US to have a robust recovery, because then oil and other commodity prices will spike. Sure they can sell Americans more Walmart crap if the US recovers, but all their inputs go up as well, and why not sell crap to their own people and other Asians, instead of Americans?
- China is using this period to continue snapping up as much real wealth in terms of resources which are in short supply or which will be in short supply in the forseeable future. They have the money, after all, and there’s no point in spending it on most US assets.
I still think there will probably be a jobs recovery of sorts in the spring. But I wouldn’t be surprised if I’m wrong. And I expect the next economic down-leg to happen by the fall.
PurpleGirl
Items whose purchase is on hold until I get a job: queen-sized mattress, reclining chair, office chair, microwave, toaster oven, TeeVee, sound system of some sort, new computer (whole unit, not a piece-by-piece upgrade). Unemployment is keeping my rent paid, most of the other monthly bills, but food and health care is coming from savings/retirement money. I’m able to buy some magazines for my hobbies but not many.
gtash
Ian–the “Green Shoots” optimists are saying this:
http://www.nytimes.com/2010/03/06/business/economy/06charts.html?hpw
I know your overall analysis runs counter to this. What is your opinion of the article when it cites “options” trading as an indicator of “normalcy?
jumpjet
A clear response to this crisis presents itself: decouple from the game of global economic imbalances. Raise tariffs and trade barriers to keep out competing imports. Rebuild domestic manufacturing. If possible, do a strategic default on U.S. debt.
Suspenders
That’s an interesting thing about China you mentioned (” trying to moderate its growth so it’s only 8%”). I’ve read some other articles lately that paint a similar picture of considerable amounts of concern about the current course of the Chinese economy;
http://chinatrade.foreignpolicyblogs.com/2010/01/27/ominous-signs-in-chinas-new-loan-growth-figures-for-2010/
“[Yu] believes China is trapped in a cycle where constantly rising growth in investment is constantly increasing China’s supply, but consumption has conspicuously failed to grow fast enough to absorb it. And so China is forced to increase investment in order to provide enough demand to absorb the previous round of increased supply, thus creating ever-widening cycles of oversupply.
In this manner, the investment share of gross domestic product has increased from a quarter of GDP in 2001 to at least half.
“There is sort of a chase – demand chasing supply and then more demand is needed to chase more supply,” he says. “This is of course an unsustainable process.””
And this piece http://mpettis.com/2010/01/the-myth-of-china%E2%80%99s-blithe-consensus/ which the above is largely based on, talking mostly about the illusion most foreigners have on debates (or lack of) among Chinese economists over the course of Chinese economic policy.
Cujo359`
The only point I don’t understand is #8. Most of the Asian countries that China is likely to sell to also are net importers of oil. If their economies expand, so will their need for oil. Is our need so much greater that it makes a difference?