Monday, July 19, 2010

Double Dip? Seven Reasons Why Not

From Lord Abbett's senior economist Milton Ezrati in today's WSJ:

"It seems these days that half the headlines in the financial media fear a double-dip recession, as do half the conversations on Wall Street. There certainly are risks, not least in Europe’s financial difficulties. But still, there are reasons to question such widespread concerns. History, after all, offers only one true double-dip experience, and that grew out of a policy error. More, the actual data on the economy fly in the face of such an outlook. Following are seven reasons to doubt the double-dip outlook."

The reasons include: Consumer spending is firm, housing data are misleading, business spending and exports are awfully strong for a dip, overall production is good, employment is not so threatening, financial markets are healthier than the headlines imply, and China continues to grow.

Read the rest here.

31 Comments:

At 7/19/2010 1:35 PM, Blogger Benjamin said...

Yeah, yeah, but things have been looking anemic lately. I am seeing deflation setting in.

Unless the Fed gets creative and active, we are doing a Japan--except without Japan's culture and civility.

The assets of America are for sale at half-price. Do we need to see them down at one-quarter?

 
At 7/19/2010 2:05 PM, Blogger Junkyard_hawg1985 said...

The author makes 7 points, but he is not convincing:

1) On retail sales, he tries to explain away the May drop by seeing it as a pause, but completely ignores that June also dropped 0.5%. He is using Y-o-Y data when recessions are defined from the peak (April in this case). Since April, retail sales are down 1.9%.
2) On housing data he tries to explain recent weakness due to the expiration of the tax credit. Even accounting to the spike and drop in home sales (MBA Index), housing is still scraping bottom. He also references the drop in inventory in the past year, but fails to mention that unoccupied home (census data) are still running at historically high levels.
3) On exports being strong, I agree that this is a positive for the U.S. economy. Export growth helps. Unfortunately, this is a sign of healthier foreign economies than the U.S. economy.
4) "Overall production levels look good." - Manufacturing dropped 0.4% in June. Overall industrial production was up a whopping 0.1% which was attributed to hot weather for the utilities. Hardly an indication of growth.
5) "Employment does not look threatening" - Other than the minor detail that according to the BLS household survey, the total number of Americans working has declined for the past two months. This is a recessionary sign.
6) "Financial markets are healthier than headlines imply." Except for minor things like the ECRI weekly leading index at -9.1 which corresponds to recession.
7) "China continues to grow" - It is quite possible for one country to grow while another is in recession. Ask the Japanese about the 1990's.

 
At 7/19/2010 2:12 PM, Blogger juandos said...

Lord Abbet and Mr. Ezrati think this?!?! "Business Spending and Exports Are Awfully Strong for a Dip"...

Hmmm, why no real world examples?

Meanwhile on the 'doom & gloom' train over at the Business Insider we have this: Rosenberg: Still Not Convinced? Here's 13 MORE Signs The Recovery Has Hit The Skids

Its almost the exact opposite of Messers Abbet and Ezrati...

 
At 7/19/2010 2:34 PM, Blogger sethstorm said...

Thank the people that do everything to thwart a recovery. They just want all the perfect conditions before they'll do anything - no matter what harm they cause.

 
At 7/19/2010 2:56 PM, Blogger juandos said...

"They just want all the perfect conditions before they'll do anything - no matter what harm they cause"...

Says someone who's always willing to spend 'someone else's money'...

Regulation is taxation but it seems lots of folks forget that until it applies to them...

 
At 7/19/2010 3:27 PM, Blogger Benjamin said...

Juandos-

I think we should deregulate and let lead back into gasoline.

And what is this totally effed-up mandate for ethanol in gasoline? Did you know that ethanol lowers mpgs? And that you are forced to buy it? It can even shorten the life of engine components--did I tell you are forced to buy it?


And by ham-handed and jack-booted mandate, we may have to buy gasoline soon with 15 percent ethanol--despite risk to existing motors?

Rubbing salt in your sore-infested hide Juandos, you are actually subsidizing the ethanol industry, with your tax dollars--so that they can profit from this mandate, whichm, when all is said and done, may or may not save fuel.

Remember--regulation is a form of taxation.

 
At 7/19/2010 3:37 PM, Blogger bobble said...

that's pretty much a crock, given that economic stats haven't reflected the *real* economy for over a year.

most of the economic activity mentioned by the author has been supported/augmented by various government stimulus programs.

now, $.78 trillion of stimulus money is phasing out, unemployment benefits are running out, cash for clunkers and housing tax credits are finally just an ugly blot on history.

 
At 7/19/2010 3:52 PM, Blogger sethstorm said...

Re: juandos

Enough excuses?

Perhaps you dont get the idea that aiming for the people does not hurt the bureaucrat. By refusing a recovery and placing risk on the unemployed and marginally employed, you suggest that the ones that do that are not the problem.

The question is, how long can capital go on strike before strikebreakers of said capital succeed in having it deployed? That is, when there is a push for a recovery in a politically unfavorable time for the uncooperative holders of said capital? That is, people start getting back into employment and the economy recovers despite attempts prevent an ill-timed recovery.

 
At 7/19/2010 4:37 PM, Blogger Irrippi said...

You only need one reason to doubt a double dip: knowledge of how the Business Cycle Dating Committee works.

If the recovery is sustained through the remainder of the year the NBER will declare the recession over sometime between last summer and early this year. No double dip.

If the economy declines again in the second half of 2010 the NBER will declare it the continuation of the existing recession. No double dip.

The only people using the term "double dip" are those who hastened to call an end to the recession. They believed the positive signs, all of which were buoyed by government or accounting gimicks, was a sustainable indicator of recovery.

If there is a true double-dip, it won't occur until 2011 or 2012 and we won't know it until 2013.

 
At 7/19/2010 4:38 PM, Blogger Benjamin said...

Ethanol is really, really a bad idea.
Maybe Dr. Perry can hound the pinko softies behind this terrible program.

"BY DAVID NICKLAUS • dnicklaus@post-dispatch.com > 314-340-8213 | Posted: Friday, July 16, 2010 5:14 pm | 1 Comment

A new report from the Congressional Budget Office is providing plenty of fuel for critics of federal ethanol subsidies. The CBO added up the tax subsidies designed to encourage ethanol production, and calculated that they come to $1.78 for each gallon of gasoline replaced by corn-based ethanol. For cellulosic ethanol, an industry that is in its infancy, the subsidy comes to $3 per gallon of gasoline replaced.

 
At 7/20/2010 2:46 AM, Blogger PeakTrader said...

The best stimulus? Spend less, borrow less
June 25, 2010

Allan Meltzer's half-century as a distinguished monetarist -- advising Presidents Kennedy and Reagan, producing celebrated books on John Maynard Keynes and the history of the Federal Reserve.

"If Obama announced a strategy to deal with the long-term debt and stopped doing things to increase the uncertainty that businesses face, it would do a great deal to stimulate the economy," declares the 82-year old Meltzer.

Meltzer is right, and most of the "experts" -- from Paul Krugman to Ben Bernanke -- are wrong. The best stimulus is a solid, credible plan to radically reduce government spending, starting right now.

"Keynes championed temporary deficits to stimulate consumption during recessions," says Steve Hanke, an economist at Johns Hopkins. "But he also insisted that deficits disappear during recoveries, so that budgets would be balanced or in surplus during most of the business cycle."

Today, the administration is pursuing a totally different policy. It's sharply raising expenditures when the U.S. already faces gigantic, chronic deficits that barely shrink even in a recovery, and burgeoning debt.

"Keynes specifically warned against structural deficits when both U.S. and British economists were pushing for them at the end of World War II," says Meltzer. "He never said that more spending on top of chronic deficits was a stimulus. Just the opposite, in fact."

The confidence factor

Right now, many investors and managers are simply terrified by the absence of a roadmap to avoid ruinous debt. "We need to know that Washington can make tough choices, that our leaders are willing to do things that are unpopular," says Paul Willen, an economics professor at MIT. "More than anything, people need to feel that this is not out of control."

 
At 7/20/2010 7:45 AM, Blogger Paul said...

Benji,

"Ethanol is really, really a bad idea.
Maybe Dr. Perry can hound the pinko softies behind this terrible program."

Maybe you should mention this to your Big Ag whoring boyfriend next time you are cuddling. Perhaps he'll mention your news to Ag Secretary Vilsack, Senator Harkin, Franken, Durbin, Burris, Feingold, and the rest of the Blue State Socialists who waste our money on rural boondoggles.

 
At 7/20/2010 8:01 AM, Blogger Hydra said...

I was out and about last weekend, for a change, and traffic was heavy everywhere.

All those people must be doing something.

 
At 7/20/2010 8:41 AM, Blogger Hydra said...

"In a society that seeks to preserve and promote liberty of the individual, it's generally assumed that government's role is mainly that of guaranteeing enforcement of contracts, protecting private property rights, adjudicating disputes, and the provision of certain public goods as an economist would define them."

Private property rights are a derivative of your right to live and make a living. We banned lead in gasoline to protect those rights. Sometimes regulation is a tax for good reason.

Ethanol lowers MPGs but it also lowers CO2, NOX, and smog inducing organic compounds. It is also an effective anti-knock compound. Ethanol reduces smog forming emmissions by as much as 50% compared to gasoline.

Ethanol also increases water vapor, which is also a greenhouse gas. Ethanol probably was responsible for some early failures in engines due to its high polarity: it attacked some rubber and plastic fuel components and gaskets, but there is no current evidence that ethanol damages modern engines. However ethanol in gasoline absorbs water which can cause engine damage if the fuel is stored for long periods.

One reason diesel engines last longer is that diesel is a better lubricant than gasoline.
Some of the same effect might be expected comparing gasoline to ethanol where excess cleanliness might lead to more wear.

Finally, a pure ethanol fire is almost invisible, and therefore more dangerous.

Farming and distilling ethanol also use considerable amount of greenhouse gas producing fuels so the net reduction in greenhouse gas production of ethonol over gasoline that would be used otherwise is around 13%, net net.

Then there is the issue of where ethanol jobs are located relative to oil jobs.

The price of ethanol fluctuates and it produces less MPGs than gasoline. Even if the price is lower at the pump, it may not be cheaper overall. However, when you buy ethanol you are also buying some benefits that gasoline does not provide.

The question, then, is whether the fuel plus the benefits are worth the extra cost, not whether the cost of the fuel alone is worth the extra cost.

Ethanol might be a bad idea but in my mind the pros and cons are not so stark as to classify it as a really, really bad idea as Benji suggests.

 
At 7/20/2010 9:14 AM, Blogger juandos said...

pseudo benny says: "I think we should deregulate and let lead back into gasoline"...

Well personally I don't see a problem with it...

"And what is this totally effed-up mandate for ethanol in gasoline?"...

Wasn't that something that was initially floated in California about twenty plus years ago?

Aren't you from California pseudo benny?

"Rubbing salt in your sore-infested hide Juandos, you are actually subsidizing the ethanol industry, with your tax dollars--so that they can profit from this mandate blah blah blah"...

You're just figuring that out now or are you parroting what has been commented on at this blog site for many months?

sethstorm says: "Perhaps you dont get the idea that aiming for the people does not hurt the bureaucrat"...

What?!?!

What are you ranting on about?

"By refusing a recovery and placing risk on the unemployed and marginally employed, you suggest that the ones that do that are not the problem"...

This makes no sense either...

sethstorm do you think the laws of supply and demand can somehow be abrogated because 'YOU' don't like the results?

The cost/value of labor is governed by the laws of supply and demand...

"That is, when there is a push for a recovery in a politically unfavorable time for the uncooperative holders of said capital?"...

Again I see you're more than willing to spend someone else's money or tell them by some form of force majeure how the owners of said capital must spend their money...

Well sethstorm if you really feel that theft of other people's property or earnings is somehow a good thing why don't you just your words into action and physically go out and rob those people you're jealous of...

 
At 7/20/2010 9:22 AM, Blogger Paul said...

Juandos,

I think Sethstorm sees a conspiracy of the productive class. He's angry they aren't banging on his door begging him to come work for them, so he's sitting on the couch out of principle.

Or something.

 
At 7/20/2010 9:39 AM, Blogger rufus said...

The new Buick Regal, coming out this fall, with the 2.0L 220 HP Direct Injected Turbocharged Engine takes advantage of Ethanol's Very High Octane (114 vs gasoline's 84) to give approx the same mpg on E85 as on gasoline.

The Next iteration, according to GM, will give the Same mpg on ethanol as on gasoline.

Meantime, you can buy ethanol (with No Subsidies having been given) from the biorefinery for approx. $1.45/gal.

This fuel replaces some of the approx $300 Billion/Annually Imported Oil.

No Marines are deployed (at a cost of $1 Million/Yr per troop) defending the fields, and No Naval Carrier Groups are assigned to protect the barges on the Mississippi River.

BTW, the Subsidies for ethanol blending (which go to the Oil Companies, not the Ethanol Producer) are "Going Away," but, not to worry, the $500 Billion/Yr Fossil Fuel Subsidies (number from the IEA) will still be with us.

No Modern Cars (cars built in the last 20 years) have any problems with a 15% blend of ethanol, and what is requested is not a Mandate.

Benny, you know this, but continue posting an Untruth. Why is that?

 
At 7/20/2010 11:51 AM, Blogger Benjamin said...

Rufus, aka "Mr Ethanol"

Well, if anyone is still reading, the point of this post was how much hysterical wailing we have to endure from the R-Party minions about regulation and federal subsidies--unless it is mandates and subsidies for ethanol, in which case it is not an issue that is ever raised.

If Obama had proposed we make ethanol from urban waste streams, and that that process be subsidized, and that drivers be forced to put that ethanol into the gasoline, whether they like or not--oh, the howling and wailing that would ensue.

Paul and Jaundos would lose their bowels on each other. For days. Maybe Dr. Perry too.

But ethanol from corn? Oh, let's change the topic.

 
At 7/20/2010 1:15 PM, Blogger Paul said...

What are you blathering about, Benji? It's your boyfriend, not me and not Juandos, who is up to his neck in the ethanol boondoggle. It's just amazing how selective is your criticism. What color is the sky in your world where Democrats aren't feeding at the Big Ag trough?

 
At 7/20/2010 3:21 PM, Blogger Hydra said...

The ethanol isue should not be a conservative or liberal one, it should be whether it makes sense in the end.

It will make sense in the end if subsidies are no longer required. speaking of which, I thought the Buick brand was being retired, because it was leaching off the rest of the franchise.

Some subsidy to jump start the ethanol industry may not be a bad thing, so long as it does not become a permanent entitlement.

On the other hand, if the price of fuel includes the price of fuel and some additional cost for, say, keeping the troops at home, then we sould recognize that the additional cost is for additional goods and services and is not a subsidy.

At the end of the day, we either get the lowest TOTAL costs or we don't. Having continual pissing contests over teensy tiny parts of the whole doesn't get us any closer to the truth.

Cars are probabluy no longer seriously affected by ethanol, but small engine mechanics swear up and down that ethanol is increasing their business. Maybe it is because small engines depend on fuel that has been sitting around for months. If the small engine mechanics are right, then there is a problem that costs us a lot of wasted money.

Should we blame it on the Republicans or the Democrats?

 
At 7/20/2010 3:40 PM, Blogger rufus said...

Unbelievably, some small engines are still built with non-ethanol compatible seals, etc. Strange, but true.

It's an easy fix; just replace the seal, etc, with one that is ethanol compatible. I've seen no evidence that E10 deteriorates any worse than straight gas when stored.

The DOE tested for this. Their conclusion was that all the small engines were crap, regardless of what they were burning.

 
At 7/20/2010 5:07 PM, Blogger juandos said...

"I think Sethstorm sees a conspiracy of the productive class"...

Well you know there is a bit of 'conspiracy' on the part of the productive class, the conspiracy to keep what they've worked for...

Most folks in the 'ownership' class (house and lot in the burbs, property in the city, a ranch, etc) understand that feeling of being robbed by government politicos so said politicos can buy yet another turn in office being supported by those who mainly don't own, haven't earned, or don't care what its all about...

I'm NOT a property but the obviousness of it all isn't beyond my grasp...

I can't help but wonder if sethstorm and his fellow travelers thinking that by taking other peoples' money it'll work out the best for everyone?

Maybe a small dose of Josh Barro of the Manhattan Institute would point the flaws of that sort of thinking to sethstorm, then again maybe not...

Millionaire's Taxes Hit a Reality Roadblock

In this commentary Barro mentions Prof. Barry Poulson...

You might find this interview of Poulson interesting...

 
At 7/20/2010 5:32 PM, Blogger sethstorm said...

This comment has been removed by the author.

 
At 7/20/2010 5:32 PM, Blogger sethstorm said...


What?!?!

So all those people purposefully going Galt don't exist? That purposely parked (monetary) capital is not parked?

Start bring the jobs back by the millions, or pay infinite tiers of extensions.


Again I see you're more than willing to spend someone else's money or tell them by some form of force majeure how the owners of said capital must spend their money...

Unfortunately, if it takes that to break that strike, it is no worse than breaking a strike at a public sector labor union.

They want to see people suffer until the favored politician is in. At this point, there is enough to start a recovery - despite the people who don't want one at the wrong political time.

 
At 7/20/2010 7:12 PM, Blogger juandos said...

"So all those people purposefully going Galt don't exist? That purposely parked (monetary) capital is not parked?"...

They are, are they?!?! You of course have something credible to back that statement, right?

How many is 'all'?

"Start bring the jobs back by the millions, or pay infinite tiers of extensions"...

Ahhh, are the Democrats going to craft a law to pander to your desires?

"They want to see people suffer until the favored politician is in"...

Who is this alledged 'they'?

Name names sir, name names!

You still haven't offered up a rationale of why you think people actually deserve a job on someone else's money whether the job is needed or not...

Ask yourself how many jobs headed overseas due to excessive taxes, excessive regulations, or excessive legal hassles with the unions?

 
At 7/20/2010 9:28 PM, Blogger Irrippi said...

Oh, I assure you that my eight year old vehicle gets significantly lower gas mileage on ethanol blends.

The question isn't whether a gallon of ethanol blend emits less than a gallon of straight gasoline. The question is whether, for a given number of miles driven, ethanol blends emit less. Since it takes more fuel to go the same distance, that's not immediately clear. You also have to ask whether ethanol is cost-effective at reducing those emissions.

You're also not taking into account the additional energy, emissions, and fresh water it takes to make ethanol.

We have never gone to war over oil nor do we expend military resources to secure it, in particular.

How much oil was there in Afghanistan, the Balkans, Somalia, Haiti, Panama, Grenada, the Dominican Republic, Honduras, Vietnam, South Korea, Europe, or Japan?

There are only two US conflicts in the last 100 years which could even possibly be related to oil. In the Gulf War, we retaliated against an invasion of an ally; we were joined by many other countries in a UN sanctioned expedition. In the Iraq War we invaded a brutal dictatorship which violated the 1991 peace treaty for 12 years, supported terrorism, fired on US aircraft, and murdered its own people.

How many oil contracts did we squeeze out of liberated Iraq? Less than 10%.

 
At 7/21/2010 4:38 AM, Blogger sethstorm said...


You still haven't offered up a rationale of why you think people actually deserve a job on someone else's money whether the job is needed or not...

To break the witholding due to regime uncertainty, and to allow the economy to recover in a politically inconvenient time.

Using the word "deserve" really misses the mark.

To suggest that you would not know of people parking their 1.2t+ of assets, waiting for a better political time is very disingenuous on your part.


Ask yourself how many jobs headed overseas due to excessive taxes, excessive regulations, or excessive legal hassles with the unions?

That practice really needs to be reversed or stopped cold, with the jobs going here.

 
At 7/21/2010 9:14 AM, Blogger juandos said...

sethstorm this is your rationale for theft: "To break the witholding due to regime uncertainty, and to allow the economy to recover in a politically inconvenient time"...

The economy isn't going to recover if stealing the wealth of private citizens is an ongoing affair...

The government has no money of its own other than what it extorts from the private sector...

"To suggest that you would not know of people parking their 1.2t+ of assets, waiting for a better political time is very disingenuous on your part"...

I see you still don't have an credible source of information to bolster your previous and thoroughly dubious claims...

"That practice really needs to be reversed or stopped cold, with the jobs going here"...

Well dang sethstorm now here's something we seem to have an agreement on...

 
At 7/22/2010 5:04 AM, Blogger sethstorm said...


I see you still don't have an credible source of information to bolster your previous and thoroughly dubious claims...

You can repeat the line all you want, but you are not looking for an answer. You are looking for something that is nothing more than a loaded question where you determine the "correct" answer.

You seem to think that you can't find this 1.2trillion figure of parked assets somewhere. You already know about it. You'll feign ignorance about it. Then you bring up something completely unrelated to the subject.

Free up those assets to get people back to work, on a more permanent and direct basis in all of the United States. Unless you like the status quo, painting targets on the people who hold back for political expediency.

If you want to deal with the bureaucrat, don't hold back jobs to starve people to your ways.

 
At 7/22/2010 8:35 AM, Blogger juandos said...

"You can repeat the line all you want, but you are not looking for an answer"...

Why would I be looking for it sethstorm, I wasn't the one that made the factless statement, you did...

"You'll feign ignorance about it. Then you bring up something completely unrelated to the subject"...

'something different' like facts?

"Free up those assets to get people back to work, on a more permanent and direct basis in all of the United States"...

Ahhh sethstorm, still wanting to spend someone else's money on his silly ideas...

Hey sethstorm, how about freeing up YOUR assets and putting people to work?

One way to start that is by shopping at Walmart for instance...

Just a thought...

 
At 7/22/2010 3:54 PM, Blogger sethstorm said...


juandos said...

...and more baseless accusations by juandos while avoiding the questions I ask.

 

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