• Tag Archives Recession
  • Secular Stagnation?

    In today’s Outside the Box my good friend Charles Gave shares an instructive ‘Tale of Two Countries.’ Since 1981 in the UK and France, structural growth rates have diverged: The rate has fallen by two-thirds in France, while in the UK it has risen. Why? Well, to begin with, in the UK Margaret Thatcher was elected prime minister in 1979 and almost at once reduced the role of the bureaucracy in managing economic activity and dialed back government spending as a percentage of GDP. Meanwhile, in France, Franois Mitterrand was elected president in 1981 on a platform that expressly aimed to expand the scope of government.
    The effects on growth were predictable, says Charles, having been explained by Joseph Schumpeter in his 1942 book Capitalism, Socialism and Democracy.
    More recently, in the US, when government spending as a percentage of GDP shot up from 33% to 39% during the Great Recession, our growth rate fell from 2.5% to less than one percent. And that, says Charles, is the story on US stagnation – not the more fashionable narrative of ‘secular stagnation.’

    This post was published at Mauldin Economics on JUNE 21, 2017.

  • 100% Chance of Recession Within 7 Months?

    We asked this question one week after Trump was elected:
    ‘What does history predict for the Trump presidency?’
    The answer we furnished – based on over a century of data – was this:
    A 100% chance of recession within his first year.
    Not a 90% chance, that is. Not even a 99% chance. But a 100% chance of recession.
    That answer came by way of a certain Raoul Pal. He used to captain one of the largest hedge funds in the world.
    And to prove his case he called the unimpeachable witness of history to the stand…
    Crunching 107 years worth of data, he showed the U. S. economy enters or is in a recession every time a two-term president vacates the throne:
    Since 1910, the U. S. economy is either in recession or enters a recession within 12 months in every single instance at the end of a two-term presidency… effecting a 100% chance of recession for the new president.
    Obama was a two-term president – if memory serves.

    This post was published at Wall Street Examiner on June 20, 2017.

  • 69 Percent Of Americans Do Not Have An Adequate Emergency Fund

    Do you have an emergency fund? If you even have one penny in emergency savings, you are already ahead of about one-fourth of the country. I write about this stuff all the time, but it always astounds me how many Americans are literally living on the edge financially. Back in 2008 when the economy tanked and millions of people lost their jobs, large numbers of Americans suddenly couldn’t pay their bills because they were living paycheck to paycheck. Now the stage is set for it to happen again. Another major recession is going to happen at some point, and when it does millions of people are going to get blindsided by it.
    Despite all of our emphasis on education, we never seem to teach our young people how to handle money. But this is one of the most basic skills that everyone needs. Personally, I went through high school, college and law school without ever being taught about the dangers of going into debt or the importance of saving money.
    If you are ever going to build any wealth, you have got to spend less than you earn. That is just basic common sense. Unfortunately, nearly one out of every four Americans does not have even a single penny in emergency savings…
    Bankrate’s newly released June Financial Security Index survey indicates that 24 percent of Americans have not saved any money at all for their emergency funds.
    This is despite experts recommending that people strive for a savings cushion equivalent to the amount needed to cover three to six months’ worth of expenses.

    This post was published at The Economic Collapse Blog on June 20th, 2017.

  • Trader: “We Need Another 20 Basis Points For The Entire Narrative To Change”

    As noted yesterday, Bloomberg trading commentator Richard Breslow refuses to jump on the bandwagon that the Fed is hiking right into the next policy mistake. In fact, he is pretty much convinced that Yellen did the right thing… she just needs some help from future inflationary print (which will be difficult, more on that shortly), from the dollar (which needs to rise), and from the yield curve. Discussing the rapidly flattening yield curve, Breslow writes that “the 2s10s spread can bear-flatten through last year’s low to accomplish the break, but I don’t think you get the dollar motoring unless the yield curve holds these levels and bear- steepens. Traders will set the bar kind of low and start getting excited if 10-year yields can breach 2.23%. But at the end of the day we need another 20 basis points for the entire narrative to change.”
    To be sure, hawkish commentary from FOMC members on Monday (with the semi-exception of Charles Evans) and earlier this morning from Rosengren, is doing everything whatever it can to achieve this. Here are the highlights from the Boston Fed president.

    This post was published at Zero Hedge on Jun 20, 2017.

  • South African Mining Stocks Crash To 5-Year Low Valuations After Policy Shock

    South Africa’s new mining charter (that all local mines should be 30% black-owned) is scaring away investors.
    The charter revision comes shortly after Africa’s most industrialised economy entered its first recession since 2009, with investor confidence already shaken by infighting within the ANC over the scandal-hit presidency of Jacob Zuma. The proposal was unveiled by the Department of Mineral Resources which said it intends to raise the minimum black-ownership level from the current 26% to ensure more proceeds from the country’s natural resources flow to the black majority, Mining Minister Mosebenzi Zwane told reporters on Thursday in Pretoria. The charter will also require companies to pay 1% of annual revenue to communities and new prospecting rights will require black control, Zwane said.
    ‘The mining sector does not exist in a vacuum,’ Zwane said as he unveiled the charter on Thursday. South African miners needed ‘strong legislative regimes’ to thrive, he added.
    ‘We have listened to miners who have not seen real economic benefit; people who don’t see benefit of transformation structures,’ he said.

    This post was published at Zero Hedge on Jun 19, 2017.

  • “Grouchy” SocGen Analyst: “Fed Will Be Buying Again Long Before They Finish Normalizing”

    Over the weekend, One River’s CIO Eric Peters said that last week’s announcement by the Fed marked the “end of the QE era.” At least one person, however, is not convinced: as the “increasingly grouchy” SocGen FX strategist Kit Juckes writes in his overnight note, slams calls that the Fed’s announcement was a “hawkish hike”, and says that “while we got more detail about the Fed’s plans to run down its balance sheet, these amount to a pace so slow that they’ll still have boatloads of bonds on board when the next recession strikes. My guess is they’ll be buying again long before they finish normalising the balance sheet (whatever that really means).”
    Looking at the Fed’s disclosed projections, which anticipate the Fed to continue normalizing until 2020, or well past the point the next recession is expected, his skepticism is certainly warranted.

    This post was published at Zero Hedge on Jun 19, 2017.

  • ‘Hawkish’ Dudley Sparks Bond, Stock Selling With Puzzling Comments

    With two comments this morning that seemingly fly in the face of all common-knowledge, Fed’s Dudley offered a hawkish tone that sparked selling pressure in stocks and bonds even as USDJPY spikes.
    Dudley proclaimed first that an inverting yield curve is not a problem…
    Which is odd because every time the curve has flattened this dramatically, the US economy has gone into recession..

    This post was published at Zero Hedge on Jun 19, 2017.

  • When Will The Fed Tighten Enough To Cause The Next Recession?

    In addition to the wildly popular topic of the market’s record low volatility, coupled with speculation what could break the current spell of “endemic complacency” and what its impact would be on asset prices (yesterday we posted a fascinating take by DB’s Aleksandar Kocic on the issue of the markets current “metastability”), another question that has fascinated the economic community is when will the next recession hit.
    As we discussed last weekend, according to one of the more popular contextual indicators, commercial bank C&I loan creation, the US economy is poised for a contraction as soon as months, if not weeks from now, as C&I loan growth has tumbled from 7% at the start of the year to just 1.6%, the lowest since 2011, and at the current rate is poised to go negative in the very near future.
    Loan creation, however, is just one of several “pre-recessionary” early indicators. Another one comes straight from the market, and specifically the Treasury yield curve which traditionally has always flattened sharply, and in some cases turned negative, going into a US recession.

    This post was published at Zero Hedge on Jun 18, 2017.

  • Week in Review: June 17, 2017

    The Federal Reserve this week raised the Federal Funds Rate a quarter point to 1.25 percent, bringing the rate to the highest it’s been in eight years. One might now say monetary policy has progressed from a policy of “ultra low” rates to simply a policy of low rates.
    How this will play out over time continues to depend quite a bit on how much the Fed shrinks its balance sheet and how soon a recession descends on the economy.
    Not surprisingly, then, many continue to discuss the best ways to reform the Federal Reserve. But, there’s definitely a wrong way to do this.

    This post was published at Ludwig von Mises Institute on June 17, 2017.

  • San Francisco Bay Area Sheds Jobs and Workers

    Commercial and residential real estate bubbles choke the economy. The upper bounds of hype and craziness have been reached.
    The San Francisco Bay Area has seen an astounding jobs boom since the Great Recession. The tsunami of global liquidity that washed over it after the Great Recession, central-bank QE and zero-interest-rate policies that sent investors chasing blindly after risk, a blistering no-holds-barred startup bubble with the craziest valuations, one of the greatest stock market bubbles ever – whatever caused the boom, it created one of the craziest housing bubbles ever, a restaurant scene to dream of, traffic jams to have nightmares over, and hundreds of thousands of jobs. But it’s over.
    In May, employment in San Francisco dropped to 542,600 jobs, the lowest since June 2016, according to the data released on Friday by the California Employment Development Department. The employment peak was in December 2016 at 547,200.
    The labor force in the City fell to 557,600. That’s below March 2016! This confirms a slew of other data and anecdotal evidence: People and businesses are leaving. It’s too expensive. They’re voting with their feet.

    This post was published at Wolf Street by Wolf Richter ‘ Jun 17, 2017.

  • What Housing Recovery? Real Home Prices Still 16% Below 2007 Peak

    Since the financial crisis, home equity has gone from being America’s biggest driver of (illusory) wealth to one of the biggest sources of economic inequality.
    And while the post-crisis recovery has returned the national home price index to its highs from early 2007, most of this rise was generated by a handful of urban markets like New York City and San Francisco, leaving most Americans behind.
    To wit: home prices in the 10 most expensive metro areas have risen 63% since 2000, while home prices in the 10 cheapest areas have gained just 3.6%, according to Harvard’s annual State of the Nation’s Housing report. And while nominal prices may have returned to their pre-recession levels, when you adjust for inflation, real prices are as much as 16 percent below past peaks.

    This post was published at Zero Hedge on Jun 16, 2017.

  • Reflation, Deflation and Gold

    One of the most important economic debate today is whether the economy will experience reflation or deflation (or low inflation) in the upcoming months. Has the recent reflation been only a temporary jump? Or has it marked the beginning of a new trend? Is the global economy accelerating or are we heading into the next recession? It goes without saying that it is a key investment issue because of the implications for different asset classes, including the precious metals. Let’s try to outline the macroeconomic outlook.
    As one can see in the chart below, inflation has recently risen both in the U. S. and the euro area. And inflation in the UK has really accelerated recently. It’s true that there was a slowdown in the U. S. after a peak in February, but the level of inflation rates remains much higher than in 2014-2015.
    Chart 1: The CPI rate year-over-year for the U. S. (blue line), the Eurozone (red line), and the UK (green line) over the last ten years.

    This post was published at GoldSeek on 16 June 2017.

  • The Pin To Pop This Mother Of All Bubbles?

    Global macro economic data has been weak for many years, but there’s now a very real chance of a world-wide recession happening in 2017.
    Why? A dramatic and worsening shortfall in new credit creation.
    The world’s major central banks have, again, done the world an enormous disservice. Instead of admitting that maybe/perhaps/possibly the practice of issuing debt at more than twice the rate of underlying economic growth was a very bad idea over the past several decades, they instead doubled down and created an even larger debt monster to be dealt with.
    The resulting global asset price bubble — or, more accurately, set of nested and incestuously intertwined bubbles — can collectively be called the Mother Of All Bubbles (MOAB). None has ever been larger in history.
    As with all prior bubbles, it shares the collective delusion that there’s such a thing as a free lunch. History has seen many attempts to eat this elusive meal, with each generations convinced that they were the chosen ones who could finally crack that nut.
    So, dutifully, our central bankers have tried, and tried again, to deliver that free lunch — i.e. to print up prosperity.
    But, alas, prosperity cannot be printed out of thin air. All that can be accomplished by central bank slight of hand is a transfer of wealth. Central banks steal from the many to give to the few. They are the reverse Robin Hoods of our day.

    This post was published at PeakProsperity on Friday, June 16, 2017,.

  • We Are Getting Very Close To An Inverted Yield Curve – And If That Happens A Recession Is Essentially Guaranteed

    If something happens seven times in a row, do you think that there is a pretty good chance that it will happen the eighth time too? Immediately prior to the last seven recessions, we have seen an inverted yield curve, and it looks like it is about to happen again for the very first time since the last financial crisis. For those of you that are not familiar with this terminology, when we are talking about a yield curve we are typically talking about the spread between two-year and ten-year U. S. Treasury bond yields. Normally, short-term rates are higher than long-term rates, but when investors get spooked about the economy this can reverse. Just before every single recession since 1960 the yield curve has ‘inverted’, and now we are getting dangerously close to it happening again for the first time in a decade.
    On Thursday, the spread between two-year and ten-year Treasuries dropped to just 79 basis points. According to Business Insider, this is almost the tightest that the yield curve has been since 2007…
    The spread between the yields on two-year and 10-year Treasurys fell to 79 basis points, or 0.79%, after Wednesday’s disappointing consumer-price and retail-sales data. The spread is currently within a few hundredths of a percentage point of being the tightest it has been since 2007.
    Perhaps more notably, it is on a path to ‘inverting’ – meaning it would cost more to borrow for the short term than the long term – for the first time since the months leading up to the financial crisis.

    This post was published at The Economic Collapse Blog on June 15th, 2017.

  • The Next Economic Crisis Is Going To Leave The Majority Of People In Shock – Episode 1307a

    The following video was published by X22Report on Jun 15, 2017
    EU has decided to put Greece further into debt. It is becoming clear that Greece will never get out of this debt hole. 70% of the people support the BREXIT. Canada’s existing home sales has declined rapidly. Bitcoin dropped on worries about cyber attacks and regulations. Nike cutting 1500 people. The US manufacturing industry declines once again. Illinois is worse now than back in the great depression of the 30s. Bloomberg’s Mike Cudmore says the Fed has just pushed us into a recession, what he really means a collapse of the economy. Japan has decided that they will look into joining China’s belt and road trade system. The Fed is now pushing the collapse is not holding back, most of the people are going to be shocked when this hits.

  • Cudmore: Yellen Just Made A Big Mistake

    One of the lingering questions to emerge from yesterday’s FOMC meeting, after Yellen’s “first dovish, then hawkish” statement rocked the dollar and markets, is whether the Fed chair has some more accurate way of forecasting inflation than the rest of market to justify her optimistic outlook, and to explain why the divergence between the Fed’s dot plot and the market’s own FF forecasts is nearly 100%. And, if not, is the Fed about to make another major policy mistake by forecasting a far stronger economy than is possible, culminating with a recession.
    According to Bloomberg’s Mark Cudmore, the answer is that while Yellen is desperate to infuse confidence in the market, the Fed, which “hasn’t been correct for seven years”, remains as clueless as ever, which is why the Fed’s hawkishness is actually a signal to buy long-end bonds, which will add to further curve tightening and ultimately precipitate the next recession.
    Put otherwise, “if Yellen had acknowledged that the policy frameworks she and her colleagues have been using since the crisis have all been incorrect, then we might believe she has a chance of now applying a more appropriate framework and has a credible plan to sustainably hit the inflation target. Instead, traders can’t help but feel that no lessons are being learned and will have to raise the probability of a major policy mistake in market pricing. This means that the yield curve will need to flatten further through long-end yields dropping.”
    In simple words: the Fed has just brought the next recession that much closer, which shouldn’t come as a surprise. As we showed before, every Fed tightening akways ends with a recession. The only question is when.

    This post was published at Zero Hedge on Jun 15, 2017.

  • Around the world, beer consumption is falling

    THE world appears to have passed peak booze. The volume of alcoholic drinks consumed globally fell by 1.4% in 2016, to 250bn litres, according to IWSR, a research firm. It is the second consecutive year of decline, and only the third since data started to be collected in 1994. The drop-off is caused by people drinking less beer, which accounts for three-quarters of all alcohol drunk by volume. Worldwide beer consumption shrank by 1.8% to 185bn litres last year. Yet because the drinking-age population of the world grew by 1% in that time, beer consumption per drinking-age adult declined even more, by 3.2%. The overall decline is almost entirely because of downturns in three of the five biggest markets. China, Brazil and Russia accounted for 99.6% of the global decrease in the volume of beer drunk in 2016.
    Both economics and changing tastes play a part. China overtook America to become the world’s biggest market for beer by volume in 2001. It now quaffs a quarter of all beer. But consumption per person peaked in 2013 and dropped further last year. One reason is that Chinese drinkers are turning away from cheap local brews towards premium products and imported beers. Beer’s appeal is also waning among older drinkers. Over-30s are moving to wine and over-40s favour baiju, the national spirit. Elsewhere, recessions have hit beer-drinkers’ pockets. In both Brazil and Russia, consumption by the average adult fell by 7%.
    Beer-drinking patterns also change as countries grow richer. In a study in 2016, Liesbeth Colen and Johan Swinnen of the University of Leuven examined the effects of income growth and globalisation on beer consumption in 80 countries between 1961 and 2009. They found that as GDP per person increased in poorer countries, beer became more popular. But when it reached around $27,000 per person, consumption began to fall again.
    For decades, consumers in emerging markets have driven beer sales ever upwards. The latest figures suggest that the froth is coming off.

    This post was published at The Economist

  • 2017 Is Going To Be The Worst Retail Apocalypse In U.S. History – More Than 300 Retailers Have Already Filed For Bankruptcy

    Not even during the worst parts of the last recession did things ever get this bad for the U. S. retail industry. As you will see in this article, more than 300 retailers have already filed for bankruptcy in 2017, and it is being projected that a staggering 8,640 stores will close in America by the end of this calendar year. That would shatter the old record by more than 20 percent. Sadly, our ongoing retail apocalypse appears to only be in the early chapters. One report recently estimated that up to 25 percent of all shopping malls in the country could shut down by 2022 due to the current woes of the retail industry. And if the new financial crisis that is already hitting Europe starts spreading over here, the numbers that I just shared with you could ultimately turn out to be a whole lot worse.
    I knew that a lot of retailers were filing for bankruptcy, but I had no idea that the grand total for this year was already in the hundreds. According to CNN, the number of retail bankruptcies is now up 31 percent compared to the same time period last year…
    Bankruptcies continue to pile up in the retail industry.
    More than 300 retailers have filed for bankruptcy so far this year, according to data from BankruptcyData.com. That’s up 31% from the same time last year. Most of those filings were for small companies – the proverbial Mom & Pop store with a single location. But there are also plenty of household names on the list.

    This post was published at The Economic Collapse Blog on June 13th, 2017.