In "Wall St. Sees Silver Lining," new New York Times economics reporter Peter Goodman (formerly of the Washington Post) made Saturday's front page with a "news analysis" that impressively managed to put last week's big stock market rally in the context of an "ailing economy" that was "imperiled by the crumbling housing market."
Just last Sunday, Goodman wrote the lead story in the Times Week in Review section, which featured the ominous graphic of a red sinking RECE$$ION sinking below the horizon, Titanic-style. That despite the fact that at absolute minimum the U.S. is two quarters away from a recession -- the definition of a recession being two consecutive quarters of negative Gross Domestic Product growth. Third quarter GDP was a robust 4.9%, the fastest growth in four years.
"As Wall Street rallied this week, it seemed that investors were taking comfort in the notion that the economy had become so imperiled by the crumbling housing market that it was forcing the government to finally mount an aggressive rescue effort."
....
"But even as investors took heart in palpable signs that the government was preparing to dole out more medicine for the ailing economy, a number of economists cautioned that the pain itself was still unfolding, with its ultimate magnitude far from known.
"Signs point to a slowdown in the creation of jobs and investments by companies. Consumers are clutching their wallets more tightly. Banks are denying loans to many businesses, unwilling to bet scarce capital in a time of risk and uncertainty. A glut of unsold homes keeps prices falling and the construction industry in distress."
....
"There are plenty of reasons, of course, to count on the economy's inherent countervailing forces to ultimately help restore it to health. Lower interest rates should indeed spur more economic activity. A falling dollar has helped spur American exports and curb imports, contributing to a narrower trade deficit. And if the banks really do sign on to the deal the Bush administration is pushing to keep lower rates in place for subprime mortgages, that should keep a lot of people from losing their homes.
"Yet many of the forces gnawing at the economy remain in place, and actually appear to be intensifying. The trajectory was reinforced by data released yesterday, which showed that Americans now have less money in their pockets and are less inclined to spend.
"Personal income grew at a seasonally adjusted rate of 0.2 percent in October compared with September, the Commerce Department reported. That was only half the rate expected. Consumption grew a paltry 0.2 percent, dropping from the 0.3 percent increase registered in September. Construction spending plummeted at double the anticipated pace.
"Perhaps more ominously, a government report released yesterday suggested that the number of jobs created in the spring was far smaller than previously assumed."
With inflation still under control, the unemployment rate near a historic low and even oil prices coming down a little, the Times is apparently reduced to searching for killer whales on the horizon.
—Clay Waters is the director of Times Watch, an MRC project tracking the New York Times.
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Comments Policy
A stopped clock is right
December 4, 2007 - 09:30 ET by MidAmericaA stopped clock is right twice a day. Eventually the economy will take a dip. Always has. When it does these brilliant economists of the NYT will claim they seen it months in advance.
'Ailing' economy? Unless
December 4, 2007 - 09:46 ET by Six String Spiff'Ailing' economy? Unless ailing means malls that are PACKED so tightly, the police detail has been tripled. Restaurants so full, and busy that we have had to wait an hour to be seated? The BIGGEST, EARLIEST boom of the Christmas season. Right. THAT kind of economic boom must be so ailing... good grief. Why are rich people that read the teleprompter continuously insisting things are bad for all of us? Tiring...
Islamic Religious Services Will Be Held at the Firing Range At 0800 Daily.
I think Black Friday proves
December 4, 2007 - 10:47 ET by pwozI think Black Friday proves our economy is fine.
Amazing... There were some
December 4, 2007 - 12:27 ET by Evil CapitalistAmazing... There were some black friday numbers other than the number of people with mark to model multipliers ( ShopTrak does not track sales. It tracks foot traffic and uses stores multipier to arrive at the number) and NRF's 'sales person are down'?
It really does not bode well for conservatives to pretend there are numbers that don't exist.
interesting...
December 4, 2007 - 13:41 ET by johnGone day of retail numbers proves it for you?
so much for housing, consumer confidence, credit availability let alone waiting for the entire Q4 retail numbers, i guess black friday seals the deal now...
And when Slick Boy was
December 4, 2007 - 10:31 ET by mattmAnd when Slick Boy was slinking out of office and the economic growth rate had bottomed out at .8, and the stock market was in free-fall and the econ forecasts were looking bleak, the same people were complaining that the Republicans were "talking down" the economy. I guess they're the experts...
N.Y.T Blues
December 4, 2007 - 10:55 ET by American TaxpayerOnce again the N.Y.T has been confused with a legitamate news outlet. The N.Y.T would not recognize a good news story if it flew up and bit them in the ass, they have a practice of making the news and not reporting any news that does not fit into the left wing liberal agenda. N.Y.T circulation is down because credibility is non exsistant. I do not watch the big three or read the times, I want real news in a timely mannor not the latest propaganda from editors with little or no brains...
dollar
December 4, 2007 - 11:12 ET by sajc05I continue to worry about this maybe some body can explain: how is cutting taxes (which i love) while increasing spending by the hundreds of billions and not cutting out anything good for us?
Deficits are good? borrowed money from china to help pay for an unending war good? increasing debt for future generations good? sinking dollar good?
what is good about this economy?
1) Deficits are good as long
December 4, 2007 - 12:37 ET by Evil Capitalist1) Deficits are good as long as they are properly managed.
2) Yes, spending money on war is good. Even if it is simply to demonstrate that in 21st century flogging someone for naming a terry bear Mohammed is not acceptable. Accidently, because of this war every union schmuck working for defense industry gets paid.
3) Borrowing money from China is good. As long as our cost of borrowing is lower than the return we get in investing the borrowed money, we come out ahead. This is econ 101. It is why debt is good.
4) Biggest reason for debt increase for future generations are ponzi schemes known as Social Security and Medicare.
5) From my, Evil Capitalist, point of view sinking dollar is not good. However, from the Mr. Socialist point of view sinking dollar is terrific as it makes non-competitive union labor competitive not by limiting their wages but by making the currency they are paid in worthless. For Mr. Socialist weak dollar is magic bullet to bring back the useless industries that we finally shipped to other countries. Of course it also presumes that Mr. Socialist does not wnt to drink French wine or munch on Italian cheese.
More questions?
I've got one...
December 4, 2007 - 12:54 ET by sarcasmoDid "Wonder Woman" do us any real fiscal good, or was it all the financial equivalent of heroin, as I've always maintained. And will Citi (doubtful, IMO) or US taxpayers (likely, considering Citi's "too big to fail" history) clean up the mess? And will this, which should be a regulatory scandal, ironically lead to more tax money for regulators & even-more regulations, despite the failure?
JMR
Rally online with fans of Dr. Ron Paul.
Nearly universally usable
December 4, 2007 - 13:26 ET by Evil CapitalistNearly universally usable consumer credit ( aka credit one can access via clearing network such as Visa, MC, Amex, etc ) is one of the best things ever invented. It led to immediate margin contractions among the prop. credit industry ( think Fingerhut and similiar stores ) creating price stability. It is the silly idea of a single credit score used to assert credit worthness of an individual that is highly insane. For example, realize that a both individual that declared bankruptcy and individual who is sometimes late on his bills can have a credit score of 680 in Fair Isaac credit scoring system.
Citi is in interesting position due to HSBC's move two weeks ago. While Citi, JPM and others infused money into their SIVs to shore up SIVs while maintaining that its SIV is non-linked to Citi, HSBC actually transferred its SIV onto HSBC's books publically challenging other banks to do the same. Of course HSBC is the largest bank in the world and its US exposure is quite small compared to the US exposure of Citibank, JPM and others. If Citi, JPM, BOA etc are forced to transfer SIVs onto their books all of them are going to be bankrupt. The other interesting this is that banks currently are running around claiming that since there is no market for large number of their ABS, the banks are allowed to book them as Level 3 assets at a face value instead of marking them to market. The issue here of course is that deals such as Citadel/Etrade would suddenly make the level3 into level2 with the mark to market of 30 cents on a dollar, causing run on a bank.
Will Citi fail? I dont think so. Its equity will be pounded and maybe shareholders would get wiped out. The deal that they did is a typical toxic financing - convertible debt at 11% allows one to short the common stock and use proceeds to buy the convertible debt. At 11% interest with the margin rate of 8 1/4% makes it a nearly arbitrage for investor.
What worries me is that a republican administration is trying to "fix" the mess by allowing public not just not perform under the contracts, but get tax breaks for non-performing under them.
Statistics Must Lie
December 4, 2007 - 11:55 ET by PawpawNLet's see: 1)Dow up from 11,426 in late Nov 2006 to 13.284.98 as we type; 2)Nasdaq up from 2431.77 late Nov 2006 to 2630.01 as we type; S&P up from 1363.98 late Nov 2006 to 1465.50 as we type. That's in 1 year. In March 2001 Dow was at 9878.78, and that was before 9/11 which changed everything, in fact, in 9/2002 Dow was 7591.93. In March 2001 Nasdaq was 1840.26, in 11/2002 was 1335.51. S&P was 944.75 in 9/2001, in 3/2003 was 788.90. Well, I guess Stats Must Lie!!
MSM: We don't need no stinkin 'statistics'!
December 4, 2007 - 12:00 ET by MightyMouth"There are two types of people in this country; those who provide freedom and those who enjoy it." MM says...
Dollars BP is down a lot
December 4, 2007 - 12:39 ET by Evil CapitalistDollars BP is down a lot more than stock market is up. Best case scenario, we are where we were.
stock markets aren't the economy
December 4, 2007 - 13:31 ET by johnGstock markets returns aren't economic indicators. just because stocks rise doesn't mean our economy is strong. the recent swell has had more to do with the hope that the Fed will cut rates.
you should look to: labor market indicators, consumer spending, global economic conditions, corporate profits, consumer credit availability, monetary police, housing conditions, etc...
Banks are denying loans to
December 4, 2007 - 12:02 ET by dscottBanks are denying loans to many businesses, unwilling to bet scarce capital in a time of risk and uncertainty. A glut of unsold homes keeps prices falling and the construction industry in distress."
That is the core issue of real estate for the moment, credit terms are so tight on mortgage borrowers that it has become a vicious cycle. If a buyer can not get a mortgage, they can't buy the house. If a seller can't sell their house, inventories of unsold homes rise and the price must fall to attrack buyers. Because of declining prices, when the appraiser goes out to value the home for the mortgage, the appraisal is based on the distressed sale of those homes that were priced to sell quickly, which means, the LTV of 80% now dictates the amount a house is worth. This leaves the buyer and seller in a lerch since the bank will only lend 80% of the "appraised value" even though the buyer values the house at a higher figure.
You can thank these jerks who ran a scam on the banks. They would get an appraiser to value a house higher than it reasonably should be, the LTV then would be based on an unrealistic figure, if the buyer defaulted on the loan, the bank got stuck with an overvalued house which would not cover the loan. The scam artists would have straw buyers, who would buy the over priced house, flip it a few times to inflate the value of the house because the appraisal is based on the recent recorded sales and then once the price was really high default on the mortgage. Of course the straw buyer and the seller were colluding to walk off with the settlement money (bank's loan) and then dissappear. Legally, nothing could be done the seller since they weren't a party to the loan between the bank and the buyer. Hence now the tight credit terms on the buyer. The last one holding the bag gets stuck with the bill.
The current housing debacle is purely one of excessive regulation against a con game. They (government regulators) should have approached the problem differently to come up with a solution that wouldn't prevent legitimate buyers from getting a mortgage. As usual, the road to Hell is paved with good intensions. This is what happens when you interfere in the market. The Banks should have done a due diligence on the buyers to see if they were flipping houses and then assessed a much higher interest rate and lower LTV on the buyer to reflect the risk. If a person is not moving into the house as a residence then that should be a red flag to the bank officer. If a house goes back on the market within months of the purchase, that should be a red flag to the next bank officier being asked for a new loan. Apprasals of homes should not be based on comps. where the home in the area has been flipped. A short term flip of a house should only be legit if the owners can document they are moving out of the area due to job reassignment or someother reasonable excuse.
Hanlon's Razor: Never attribute to malice that which can be adequately explained by stupidity. dscott's corollary: The line between malice and stupidity is called depraved indifference.