Central Perk

luni, 18 iulie 2011

Standing Up on Behalf of Consumers

Monday, July 18, 2011

Standing Up on Behalf of Consumers

A year ago, in the wake of the financial crisis that pulled the economy into the worst recession we've seen since the Great Depression, President Obama passed financial reform to help tackle the problems that led us into the recession in the first place.

As the President described today, the law did three things: "First, it made taxpayer-funded bailouts illegal, so taxpayers don’t have to foot the bill if a big bank goes under. Second, it said to Wall Street firms, you can’t take the same kind of reckless risks that led to the crisis. And third, it put in place the strongest consumer protections in history."

President Barack Obama announces the nomination of former Ohio Attorney General Richard Cordray, right, as the first director of the Consumer Financial Protection Bureau (CFPB) during a statement in the Rose Garden of the White House, July 18, 2011. At left is Elizabeth Warren, interim director of the CFPB. (Official White House Photo by Lawrence Jackson)

As part of financial reform, President Obama put one consumer watchdog, the Consumer Financial Protection Bureau, in charge with the sole task of "looking out for regular people in the financial system."

The President got the idea from Elizabeth Warren, who has spent the past year setting up the bureau and starting the process of setting up protections for consumers – like making sure loan contracts and credit card terms are simpler and written in plain English and ensuring men and women in uniform are protected against fraud and deception in financial practices.

Today, President Obama nominated Richard Cordray as Director of the Consumer Financial Protection Bureau. In his remarks, the President spoke about the tens of millions of dollars lobbyists and lawyers have spent this year trying to undo progress by weakening the laws that protect consumers:

The fact is the financial crisis and the recession were not the result of normal economic cycles or just a run of bad luck. They were abuses and there was a lack of smart regulations. So we’re not just going to shrug our shoulders and hope it doesn’t happen again. We’re not going to go back to the status quo where consumers couldn’t count on getting protections that they deserved. We’re not going to go back to a time when our whole economy was vulnerable to a massive financial crisis. That’s why reform matters. That’s why this bureau matters. I will fight any efforts to repeal or undermine the important changes that we passed. And we are going to stand up this bureau and make sure it is doing the right thing for middle-class families all across the country.

Middle-class families and seniors don’t have teams of lawyers from blue-chip law firms. They can’t afford to hire a lobbyist to look out for their interests. But they deserve to be treated honestly. They deserve a basic measure of protection against abuse. They shouldn’t have to be a corporate lawyer in order to be able to read something they’re signing to take out a mortgage or to get a credit card. They ought to be free to make informed decisions, to buy a home or open a credit card or take out a student loan, and they should have confidence that they’re not being swindled. And that’s what this consumer bureau will achieve.

Also, in case you missed it, today Elizabeth Warren published an op-ed endorsing Richard Cordray’s nomination and discussing the Consumer Financial Protection Bureau’s transition this week to a real, live agency with the authority to write rules and supervise the activities of America’s largest banks.

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A Big Week for the New Consumer Agency

Your Daily Snapshot for
Monday, July 18, 2011

A Big Week for the New Consumer Agency

Today the President will announce his intent to nominate Richard Cordray to serve as the first director of the Consumer Financial Protection Bureau. You can watch the announcement live at 1 p.m. EDT at WhiteHouse.Gov/Live.

Also, read an op-ed from Special Advisor Elizabeth Warren about Mr. Cordray and the Consumer Financial Protection Bureau's transition this week to a real, live agency with the authority to write rules and supervise the activities of America's largest banks.

Photo of the Day

President Barack Obama, Ruby Bridges, and representatives of the Norman Rockwell Museum view Rockwell’s "The Problem We All Live With,” hanging in a West Wing hallway near the Oval Office, July 15, 2011. Bridges is the girl portrayed in the painting. (Official White House Photo by Pete Souza)

Seth's Blog : From Asimov to Zelazny

From Asimov to Zelazny

When I was in high school, I read every single science fiction book in the Clearfield Public Library. Probably 250 books altogether.

I don't think I had a big plan, I was mostly looking for something to do. What I discovered, though, was that domain knowledge, edge to edge knowledge of a field, was incredibly valuable. It helped me understand where the edges were, and it gave me the confidence to be selective, to develop a taxonomy, to see what was going on.

As the deluge of information grows and choices continue to widen (there's no way I could even attempt to cover science fiction from scratch today, for example), it's easy to forget the benefits of acquiring this sort of (mostly) complete understanding in a field. I'm not even sure it matters which field you pick.

Expertise is a posture as much as it is a volume of knowledge.

Reading every single trade journal, for example, or understanding the marketing, engineering and sales of your field--there are countless ways to go deep instead of merely paying lip service to the current flavor of the moment.

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duminică, 17 iulie 2011

Mish's Global Economic Trend Analysis

Trichet Repeats Nuclear Threat to Reject Greek Bonds as Collateral; Verbal Discipline or Big Bluff?
Details Cast More Suspicion on Latest European Bank "Stress Tests"
Ireland Deputy Prime Minister Requests "Nanny State" Common Bond Solution to Solve Crisis; ECB Policymaker Weidmann, Opposes Common Bond Solution

Trichet Repeats Nuclear Threat to Reject Greek Bonds as Collateral; Verbal Discipline or Big Bluff?

Posted: 17 Jul 2011 08:18 PM PDT

For the nth time, Trichet says ECB would reject Greek bonds as collateral.

"If a country defaults, we will no longer be able to accept its defaulted government bonds as normal eligible collateral," he told the newspaper in an interview to be published in its Monday edition.

"The governments would then have to step in themselves to put things right ... the governments would have to take care the Eurosystem is presented with collateral that it could accept."

"There is an absolute need to improve 'verbal discipline'. The governments need to speak with one voice on such complex and sensitive issues as the crisis," Trichet said.

Verbal Discipline or Big Bluff?

Does anyone believe Trichet? Would the ECB dump its holdings of Greek bonds in a panic market?

I am suspicious about the wording "normal eligible collateral".

What about abnormal collateral, conditional collateral, temporary collateral?

The idea that verbal discipline works is nonsense. One look at sovereign debt yields in Greece, Ireland, Spain, Portugal, and Italy is proof enough.

I believe Trichet will look for some excuse to not dump Greek bonds into a panicked market should the rating agencies rule Greek debt in default. Regardless, the sooner the market puts Trichet's verbal discipline to the test, the better off Europe will be.

If Trichet is really serious, so be it. A Greek default will not be the end of the world.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Details Cast More Suspicion on Latest European Bank "Stress Tests"

Posted: 17 Jul 2011 03:36 PM PDT

As stress test detail come in, the more ridiculous the latest results look.

For example, the four largest French banks have $425 billion in loans to institutions and individuals in Portugal, Ireland, Italy, Greece and Spain. That is on top of whatever sovereign debt they are holding.

Please consider the Wall Street Journal report It Isn't Just Sovereigns Stressing Europe's Banks

During Europe's 15-month financial crisis, investor and analyst fears have centered largely on banks' holdings of sovereign debt issued by governments in financially shaky countries such as Greece, Ireland and Portugal. If those countries were to default, it could saddle banks and other holders of their bonds with big losses.

But Friday's test results shed light on another potential problem for Europe's banks: huge piles of residential mortgages, small-business loans, corporate debt, and commercial real-estate loans to institutions and individuals from ailing countries. As those economies struggle, the odds of rising defaults grow.

As of Dec. 31, its four largest banks—BNP Paribas SA, Crédit Agricole SA, BPCE Group and Société Générale SA—were holding a total of nearly €300 billion ($425 billion) in loans and other debt issued to institutions and individuals in Portugal, Ireland, Italy, Greece and Spain, the countries that are among Europe's most troubled. That's largely a result of some of the French banks having big retail- and commercial-banking operations in Greece, Italy and Spain.

The French banks' portfolios of commercial and retail loans in those countries dwarf their holdings of sovereign debt. For example, the four banks have a total of about €51 billion of loans to Spanish customers, according to the Journal's analysis. That compares with about €15 billion of Spanish sovereign debt, according to a separate analysis of stress-test data for the Journal by research firm SNL Financial. In Greece, whose economy is in a tailspin, the French banks have €33 billion of various types of loans, more than three times their sovereign-debt holdings.

It's a similar story in Germany. The dozen German banks that disclosed their stress-test results were exposed to €174 billion of commercial and retail loans to Greek, Irish, Italian and Spanish borrowers as of Dec. 31. They are holding an additional €70 billion of sovereign debt issued by those countries, according to SNL.

Some banks opted not to disclose details of their loan portfolios. For example, Lloyds Banking Group PLC is in the process of shutting down its Irish banking business, which has cost the big British bank billions of pounds in loan losses. But in its stress-test materials on Friday, Lloyds didn't provide a breakdown of loans to countries other than the U.K. and the U.S.

A Lloyds spokeswoman said the bank's Irish loans are included in a catch-all category marked "other."

Banks can only get away with the catch-all "other" bucket if loans represent 5% or less of a bank's portfolio. So why does Lloyds want to hide the details?

Regardless, the main problem is a mountain of debt in all the wrong places: Greece, Ireland, Portugal, and Spain. The odds of all of that debt being paid back when the economies of those countries are in shambles is roughly zero percent.

For more on the stress test sham, please see More BullSweet Stress-Free Tests of European Banks

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Ireland Deputy Prime Minister Requests "Nanny State" Common Bond Solution to Solve Crisis; ECB Policymaker Weidmann, Opposes Common Bond Solution

Posted: 17 Jul 2011 06:54 AM PDT

The battle lines are forming for and against "nanny state" common bond solutions that would have German taxpayers covering the liabilities of other countries in a so-called "transfer union".

Please consider Ireland seeks euro bonds as part of crisis solution

Ireland would like to see the euro zone issue common bonds as part of the solution to the bloc's debt crisis, the Irish deputy prime minister said on Sunday.

Euro zone leaders will meet in Brussels on Thursday to discuss ways of halting the threat of contagion to Italy and Spain from Greece's rumbling debt crisis.

Gilmore said it was to Ireland's advantage that European leaders were now looking at the crisis as a euro zone problem rather than an issue for individual countries.

"I believe that will work to Ireland's advantage because solving the European problem will help solve the Irish problem."

Ireland hopes a new plan to tackle the crisis will mean the terms of its own 85 billion euros ($120 billion) EU-IMF bailout package will be loosened, including a cut in the average 5.8 percent interest rate on its European loans and longer loan maturities.

Euro zone finance ministers agreed last week to make the European Financial Stability Fund (EFSF), the euro zone's rescue fund, more flexible, but the details have yet to be worked out.

ECB Policymaker Weidmann, Opposes Common Bond Solution

Please consider Greek debt cut won't solve problem: ECB's Weidmann

Cutting Greece's debt will not solve the country's problems, ECB policymaker Jens Weidmann was quoted as saying on Sunday, adding Athens needed to raise its productivity instead.

"Greece consumes considerably more than it produces, the public budget shows high deficits," Weidmann, head of Germany's Bundesbank and who sits on the European Central Bank's Governing Council, was quoted as saying.

"As long as that doesn't change, a hair cut will not really improve anything," he said, Bild am Sonntag newspaper reported.

On Saturday, German magazine Der Spiegel reported -- citing unnamed German finance ministry sources -- Greece could cut its public debt by 20 billion euros ($28.2 billion) if it bought back sovereign bonds at market prices as part of a rescue.

Wolfgang Franz, head of Germany's "wise men" economic advisers, told Focus magazine on the weekend a hair cut was "inevitable and justified."

"One possibility would be that the current EFSF euro rescue mechanism swaps -- at a significant discount -- Greek bonds into bonds it issues and guarantees," Franz was quoted as saying.

The ECB has signaled it remains fiercely opposed to any form of default. The bank is fearful the problems that have hurt Greece, Ireland and Portugal could spread to other indebted euro zone members if a default were triggered.

Weidmann also said he opposed common euro zone bonds.

"The result would be that European, especially German, taxpayers must cover Greece's state debt. That would be a step into the transfer union that Germany has rightly rejected so far," he said.

Right Place to Crash the Plane

I have talked about the European Nanny State Eurocracy on several occasions, mist recently yesterday, so it is interesting to see these stories today. For an up-to-date recap of the growing support for the Nanny State, please see Right Place to Crash the Plane; Time Running Out for Europe; Nanny State or a Breakup?

In general, Germany is opposed and countries deep in trouble are for common bonds. However, common bond and fiscal unions are against the Maastricht Treaty that created the European Union.

So far Jean-Claude Trichet has treated the treaty like toilet paper, but Trichet will be gone in October, and changes like common bonds and a fiscal union are well beyond rule changes the ECB could get away with.

The big Nanny State clash is coming.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Seth's Blog : What you should worry about

What you should worry about

You''ve heard this question a lot. It's what a novice asks an expert. He's planning something or launching something and he wonders, "Should I worry about..."

Actually, it doesn't pay to worry about anything.

It might benefit you to pay attention to something or to learn about something, because that will help you make a better decision when then time comes.

If it's not something you can decide about, if it's not something you can avoid, then all you can do is worry. And what's the point of that?

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sâmbătă, 16 iulie 2011

Mish's Global Economic Trend Analysis

Right Place to Crash the Plane; Time Running Out for Europe; Nanny State or a Breakup?
3-D "Printing" Technology Will Blow Your Mind
Consumer Spending On Hold

Right Place to Crash the Plane; Time Running Out for Europe; Nanny State or a Breakup?

Posted: 16 Jul 2011 06:53 PM PDT

Steen Jakobsen, chief economist for Saxo Bank in Copenhagen, pinged me with a personal thought regarding Europe:

"I am just back from Italy and Russia and what really strikes me is how people have given up, and I mean totally given up. To my mind we are entering extremely difficult time where balancing EU, US debt and social tension makes for a black Swan event."

On his blog, Steen writes: Time is Running Out for Europe

Europe is close to losing a generation of youth in Spain, Ireland, Portugal and Italy, with between 20 and 45 per cent youth unemployment. To avoid losing this generation, European politicians and the ECB need to come up with a radically new game plan.

First, we need to stop pretending we can dance around the word "default" Let me help: if your income is less than your expenses and you can't borrow money, you are done, finito, insolvent and in default.

That is another lesson from Greece; the longer you avoid facing the truth, the more you solve debt with debt, the deeper the hole you are digging as your new beginning necessitates a larger and large initial trauma.

Politicians tend to underestimate their voters ability to deal with a crisis. If the population at large knows it's coming, they can and will deal with it. Many of today's generation of politicians forget that their grandparents lived through two wars, the depression and several stock market crashes only to create the most robust growth era in modern history.

Yes, there will be some contagion and some short-term high volatility if Greece goes the default rout, but as they say in the world of sports: no pain, no gain.

In fact, a crisis 2.0 could be what is needed to create both the economic and political platform that will solve Europe's problems: namely, a fiscal union. Do not misunderstand me – I am agnostic on the EU's existential question, but the EU was created as a political institution, not an economic one. Europe is a house without a financial foundation: no ministry of finance.

The time has come for some major decisions if the great European experiment is to survive. The Euro Zone needs a Ministry of Finance, one that should probably issue Euro Bonds from EFSF/ESM.

The idea that one day the voters of Europe will rise up and embrace the EU idea is fading fast. The rising social tension in all of Europe shows us that – similar to my impatience with the Danish national football team – time is running out. Let's for once hear some straight talk from the EU and the ECB and let's put an end to the extend-and-pretend nonsense and attempts to pull the wool over the public's eyes. Otherwise, Europe will continue to score own goals. That's a pity, as a new start – even if painful at first – could set up decades of sustainable growth as more transparency and less leverage would bring more stable financial markets.

Nanny State or a Breakup?

Steen says " I am agnostic on the EU's existential question, but the EU was created as a political institution, not an economic one. Europe is a house without a financial foundation: no ministry of finance."

That is precisely the problem. Unfortunately, the only solutions I see are as follows:

Breakup of the Eurozone
Creation of the European Nanny State

I have written about the "Nanny State" several times.

Support Rises for "European Nanny State"

...Is Germany unfit for the Euro or is the Euro unfit for the PIIGS? Isn't that the real question?

Such discussions are the consequences of a currency union with a one size fits all interest rate policy combined with widely varying fiscal policies, pension structures, union benefits, and other problems.

Arguably, the Euro experiment was never meant to work in the first place, at least for such a complicated heterogeneous mix.

Trichet Calls for Creation of European "Nanny-State" and Fiscal "Nanny-Zone"

Rather than admit the innumerable mistakes has has made, ECB president Jean-Claude Trichet has continually upped the ante on taxpayers with increasingly risky measures such as loading up the ECB with junk bonds from Greece and Ireland in clear violation of the Maastricht Treaty.

Today, in the wake of still more failures of the bond market to follow his wishes, Trichet openly calls for a bold new initiative, one that would effectively transform the Euro-Zone, into a fiscal Nanny-Zone as well. ....

My friend "HB" commented
This is what the fools that rule the Eurocracy want - a huge centralized nanny state in which taxes are 'harmonized' and citizens can no longer choose between low and high tax nations.

It is the absolutely worst thing that could possibly happen. It would be better for the euro-area to break up.
Trichet was one of the architects of the Maastricht Treaty, and he has violated that treaty at will ever since.

Now he wants to completely trash the treaty, effectively transforming the Euro-Zone into a nanny-zone "Eurocracy".

When will Germany finally step up to the plate and tell Jean-Claude Trichet in no unmistakable terms where to shove it?

Right Place to Crash the Plane

The quote of the week can be found in the Yahoo!News article Rising euro pressure could force Merkel U-turn

"At the moment we are just trying to win time in the hope of preventing contagion to other weak countries," said one senior lawmaker from a party in Merkel's conservative coalition.

"The truth is that for Greece, what we are really looking for is the right place to crash the plane. It should not be over a city, but in the countryside if possible."

Deutsche Bank chief economist Thomas Mayer wrote this month that if political leaders did not offer bold new solutions, the outcome could be determined by grass-roots events -- a rebellion by Greek or German lawmakers, or a Greek bank run.

"Given the recent momentum in the political debate, we would give such an outcome over the coming 6-12 months the highest probability," he wrote.

We all realize the plane is going to crash. The debate now is when, where, and how big the crater.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

3-D "Printing" Technology Will Blow Your Mind

Posted: 16 Jul 2011 09:34 AM PDT

3-D printing has been around for a while but most have probably not seen or heard of it. The term "printing" is a misnomer. The results are something more akin to what you might see out of a Star-Trek replicator.

URL if above video does not play: http://www.youtube.com/watch?v=ZboxMsSz5Aw&feature=player_embedded

The video will stun you if you have not seen this technology before.

Manufacturing Revolution

3-D "printing" can create artificial limbs for $1,000 that have more features and functionality than $60,000 limbs.

Please consider this New York Times article from last year: 3-D Printing Spurs a Manufacturing Revolution

Businesses in the South Park district of San Francisco generally sell either Web technology or sandwiches and burritos. Bespoke Innovations plans to sell designer body parts.

The company is using advances in a technology known as 3-D printing to create prosthetic limb casings wrapped in embroidered leather, shimmering metal or whatever else someone might want.

Scott Summit, a co-founder of Bespoke, and his partner, an orthopedic surgeon, are set to open a studio this fall where they will sell the limb coverings and experiment with printing entire customized limbs that could cost a tenth of comparable artificial limbs made using traditional methods. And they will be dishwasher-safe, too.

A 3-D printer, which has nothing to do with paper printers, creates an object by stacking one layer of material — typically plastic or metal — on top of another, much the same way a pastry chef makes baklava with sheets of phyllo dough.

A California start-up is even working on building houses. Its printer, which would fit on a tractor-trailer, would use patterns delivered by computer, squirt out layers of special concrete and build entire walls that could be connected to form the basis of a house.

A typical 3-D printer can cost from $10,000 to more than $100,000. Stratasys and 3D Systems are among the industry leaders. And MakerBot Industries sells a hobbyist kit for under $1,000.

As 3-D printing machines have improved and fallen in cost along with the materials used to make products, new businesses have cropped up.

Freedom of Creation, based in Amsterdam, designs and prints exotic furniture and other fixtures for hotels and restaurants. It also makes iPhone cases for Apple, eye cream bottles for L'Oreal and jewelry and handbags for sale on its Web site.

"We used to take two months to build $100,000 models," said Charles Overy, the founder of LGM. "Well, that type of work is gone because developers aren't putting up that type of money anymore."

Now, he said, he is building $2,000 models using an architect's design and homegrown software for a 3-D printer. He can turn around a model in one night.

Mr. Summit and his partner, Kenneth B. Trauner, the orthopedic surgeon, have built some test models of full legs that have sophisticated features like body symmetry, locking knees and flexing ankles. One artistic design is metal-plated in some areas and leather-wrapped in others.

"It costs $5,000 to $6,000 to print one of these legs, and it has features that aren't even found in legs that cost $60,000 today," Mr. Summit said.

"We want the people to have input and pick out their options," he added. "It's about going from the Model T to something like a Mini that has 10 million permutations."

3-D Printers, Your Next Home Accessory

CNNMoney reports 3-D printers will be your next home accessory

Imagine being able to print your own shoes or keys. Some top engineers are betting that home fabrication machines could soon be as common in the household as toaster ovens.

They sound cutting-edge, but 3-D printers have been around for more than 20 years. Until recently, they've been multimillion-dollar machines used mainly by manufacturers like automobile and aerospace companies. Now, the technology has evolved far enough that cheap devices are making 3-D printing accessible to the masses, spurring all types of creativity. Hobbyists are printing their own action figures, doctors have used the systems to print artificial organs, and chefs are testing out ways to print gourmet meals.

Rajeev Kulkarni, vice president of global engineering at 3D Systems, estimates that the cheapest printers five years ago ranged from $25,000 to $50,000. Now, they're available for as little as $1,000.

Georgia Tech research scientist Grant Schindler is already building tools for the wave of home 3-D hobbyists he sees emerging. He recently released an iPhone app that allows users to scan and print models of their faces on home fabrication machines.

He thinks 3-D printers will really take off when average people find the right use for them.

"It's more like 10 years before it comes really common," he said. "And there has to be a killer app -- maybe jewelry is it. There needs to be something that everyone wants, that everyone says 'I need this 3-D printer.'"

Small Business Opportunities for Designers

CNN Money did a follow-up article 3-D printers launch small businesses

They are machines straight out of ''Star Trek'' or ''The Jetsons.''

It's now possible for anyone with an idea to create tangible items -- flowerpots, cell phone cases, jewelry, or nearly anything -- from 3-D printers. All the person has to do is send a design for a product to a 3-D printer and out pops a real 3-D object.

Most 3-D printer owners are big businesses or tinkerers, because the machines are so expensive. But some innovators are using this technology to start new businesses and earn money.

Andreas, an IT guy in Austria who didn't want his last name used for this article, started out as a hobbyist. He customizes Lego ''minifigs'' -- the plastic characters that come with a Lego toy set -- to create historically accurate dioramas, or three-dimensional models.

Lego had stopped making a specific hat that made his Napoleonic figures accurate. With no experience in product design and no access to a factory, he designed a new hat and had it 3-D printed.

The resulting product was so popular among other Lego customizers, he now sells the hats along with hundreds of other items through a service called Shapeways, which manufactures items with its 3-D printers and sells and distributes them through its website.

About 10% of the 2,000 designers selling through Shapeways are making ''decent money'' -- with the most popular bringing in excess of thousands of dollars a month, says CEO Peter Weijmarshausen. He concedes that's not really a lot of money yet, "but I see this year, the more successful designers will make a living at it.''

This is damn cool. It is obviously price deflationary as well. What used to be extremely expensive to model and work through design changes in terms of both price and time, is now easy and inexpensive.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Consumer Spending On Hold

Posted: 15 Jul 2011 10:26 PM PDT

A Gallup Poll shows Americans Continue to Keep a Close Hold on Spending

Overall self-reported daily consumer spending in stores, restaurants, gas stations, and online averaged $69 per day during June -- unchanged from May, and essentially the same as the $67 average of June 2010.

Upper-income spending (among Americans making $90,000 or more annually) averaged $124 per day in June -- essentially the same as the $126 of May and not much better than the $119 average of June 2010. Although these Americans are likely to have more disposable income to spend freely when they choose, they continue to hold back and to spend within the "new normal" range -- which is far below what they were spending three years ago.

Implications

Flat consumer spending is consistent with today's low level of economic confidence. It also squares with the idea that the U.S. economy remained in a so-called "soft patch" during the second quarter. Further, even though gas prices have declined -- which would theoretically help increase consumer spending -- pump prices remain far above year-ago levels, and continue to reduce other spending.

The U.S. economy could regain momentum as Japanese auto plants in the U.S. return to building cars in the months ahead. Some economists feel the overall impact of the crisis in Japan on the supply chain worldwide, and on U.S. jobs in particular, has been greatly underestimated. If gas prices continue to decline, they should also have a positive, tax-cut-like effect. However, to this point, consumer spending shows no signs of such a rebound.

Soft Patch Myth

I believe this soft-patch, blame-Japan theory is not "greatly underestimated" but rather "greatly overestimated" and dreams of a huge second-half recovery will soon be shattered.

Regardless, it is illogical to blame high gasoline prices for lack of consumer spending when gasoline prices are part of consumer spending!

High gasoline prices may effect other spending, but Gallup includes gasoline in its daily consumer spending survey.

That said, consumers have a lot to be concerned about including a dearth of jobs and lack of real wage gains. Both of those negatives are likely to continue. Moreover, there is no pent-up demand for autos, and housing remains in the gutter. Therefore, there is little reason reason to believe in second-half miracles.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

luni, 18 iulie 2011

Standing Up on Behalf of Consumers

A Big Week for the New Consumer Agency

Seth's Blog : From Asimov to Zelazny

From Asimov to Zelazny

More Recent Articles

duminică, 17 iulie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

Seth's Blog : What you should worry about

What you should worry about

More Recent Articles

sâmbătă, 16 iulie 2011

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis

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luni, 18 iulie 2011

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duminică, 17 iulie 2011

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