Relevant and even prescient commentary on news, politics and the economy.

Oh no, Walmart is not doing well? Danger, danger Economy Sucks! Not according to the flower shop.

Before this last recession, readers of a long time here might recall that I used my flower shop as a barometer for the economy.  I noted that things were not doing well as our sales had started to decline in August of 2006.    The smart boys and girls called it December 2008 as starting December 2007.

Well, today it seems some people are getting concerned.    I guess Macy’s did not do so well either.   And these smart ones are holding their breath for tomorrow’s Target numbers. 

The analysis?  It’s either the retailers have lost their way but, as noted not likely or the consumer is getting smart and not over spending or and this one just kills me: “The economy is in collapse. That’s what’s going on.”

Really?  The economy is in collapse? 

Disregard the government data. Jobs and GDP and all the rest are at best inaccurate measures of the economy and at worst flat out corrupt. Walmart is capitalism writ large. .. When Walmart misses estimates, it can only mean one of two things: either Walmart or the American economy is weaker than anyone thought.

Yup, that’s what it is the corrupt government numbers are not to be trusted.  Walmart et al are sucking big air right now and that means the economy is going down.  I mean, it certainly couldn’t be the consumer having wised up and got the message of stagnate or declining wages while working whacked out hours and accomplishing little other than having stopped the dehydration. 

I got news for these “smart ones”.  The flower shop says things are holding their own.  It’s not growing, but it’s looking like the first year since 2006 that we will stay even and maybe even up a bit.

“I don’t think we’re in a recession right now, but I think there’s a 50 percent chance we’ll be in one next year,” Davidowitz shouts, and there’s nothing the government is going to be able to do about it. “We’ve spent all the money, we’ve borrowed all the money, and we’re in the tank.”

Who do you believe?  My flower shop and Spencer’s job analysis with Ed’s explanations or Walmart and the “smart ones”?

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ANTHONY LEWIS, ADULTERATED MILK AND A TAINTED ECONOMY

By Jeff McCord

ANTHONY LEWIS, ADULTERATED MILK AND A TAINTED ECONOMY
March 28, 2013

In the early days of his brilliant career as legal journalist and commentator, Anthony Lewis, who passed at age 85 on March 25, referred to a vision of the Supreme Court that served as his touchstone:

“[W]hen the channels of opinion and of peaceful persuasion are corrupted or clogged, these political correctives can no longer be relied on, and the democratic system is threatened at its most vital point. In that event, the Court, by intervening, restores the processes of democratic government; it does not disrupt them . . .”

These comments by Justice Harlan Fiske Stone in a footnote to his opinion in U.S. v. Carolene Products Co., decided in 1938, profoundly influenced Mr. Lewis. In that case, Stone upheld a federal statute prohibiting the interstate sale of “filled milk” – that is, milk or cream reconstituted with fats or vegetable oils from non-dairy cow sources.
Propublica  Friend of the Court: How Anthony Lewis Influenced the Justices He Covered

“Lost my Faith in the Idea of Progress”

Yet, by the time the famously optimistic Lewis retired from his New York Times op-ed chair in December, 2001, he said this to his exit interviewer:

“I have lost my faith in the idea of progress. I mean that in the sense that it was used at the beginning of the 20th century, that mankind is getting wiser and better and all . . .”

New York Times   After 50 Years of Covering War, Looking for Peace and Honoring Law

Was Mr. Lewis’ journey a classic “coming of age” story of lost optimism after 50 years spent covering and opining on great matters affecting and defining the legal rights of people of color, consumers and all citizens in a free society? True, Mr. Lewis was being interviewed in the fateful months following the Bush v. Gore decision that placed in power an Administration in which fact-based governance had given way to rule by the certainties of religious dogma and class-driven anecdotal evidence. Indeed, Mr. Lewis said as much:

“[C]ertainty is the enemy of decency and humanity in people who are sure they are right, like Osama bin Laden and John Ashcroft [President Bush’s attorney general and a Christian zealot].

Another source of disappointment for Mr. Lewis, who as a student sympathized with the democratic socialist movement in Britain, must have been the outcome of a little noted (by average citizens) battle to preserve legal accountability for Wall Street and Fortune 500 magnates and the accountants and lawyers who work for them. The first battle in a war to hold corporate wrongdoers accountable that continues was fought over one of then House Speaker Newt Gingrich’s “Contract with America” legislative measures. He called it “common sense legal reform.”

This was in the early and mid-nineties when many in Washington were certain that global free trade and freely moving markets, unfettered by regulation, would inevitably lead to progress. Humans acting on behalf of their enlightened self-interest would lift all boats in a rising sea.

And in those days, Congress and President Clinton enacted the free trade agreement with China and tore down the Glass Steagall Act wall between consumer-oriented depository banking and lending and corporate-oriented merchant and investment banking. During this same period, Mr. Lewis witnessed Congress and his beloved Supreme Court act to slash the legal restraints upon regal CEOs and a new class of global financial entrepreneurs.

“Tilting the Scales of Justice”

To Mr. Lewis and other notable voices in the wilderness, including Congressman Ed Markey, them SEC Chair Arthur Levitt and distinguished Harvard Law Professor Arthur Miller (Harvard’s web Site claims he once taught Chief Justice John Roberts), Newt Gingrich’s “common sense” legal reform legislation would tilt the scales of justice away from ordinary consumers and investors. Here is how Mr. Lewis boiled down the issues at stake:

“Prevent victims of securities fraud from suing. Immunize company officials who manipulate the price of stock by false statements. Stop lawsuits against accountants and lawyers who were involved in savings-and-loan scams. Good ideas? Not many Americans would think so. But those are some of the things that would result from passage [of the legislation formerly known as the Private Securities Litigation Reform Act of 1995].”

New York Times  Abroad at Home; Tilting the Scales

In his February 3, 1995 op-ed (“Tilting the Scales”) Mr. Lewis ridiculed the description of “common sense legal reform” as “Orwellian”. “A more accurate title would be the Protect the Wrongdoers Act,” he said.

And, in prophetic words that haunt us to this day, Mr. Lewis added:

“[The bill’s provisions] real purpose, are to insulate the rich and powerful from being called to account at law.”

In the months and years following that op-ed, Mr. Lewis witnessed enactment of that “Orwellian” legislation and, later, the explicit confirmation by the Supreme Court (in Stoneridge Investment Partners v. Scientific-Atlanta, Inc.) that accountants, lawyers and corporate executives who knowingly aid, abet and collude in securities frauds cannot be sued by their victims to recover their losses. Other Congressional measures and Court decisions tilted the legal and political playing fields further away from citizens to favor corporations and wealthy oligarchs.

Mr. Lewis also lived to see the inevitable consequences of liberating the self-interested from legal restraints – the worst financial and economic crisis since the Great Depression. And, the rich and powerful perpetrators of the catastrophe have not been called to account at law.

“It’s Worth Appealing to Reason”

Twelve years ago, Mr. Lewis did conclude his exit interview on a somewhat upbeat note:

“I’m not willing to give up on rationality . . . Look, why have I been writing columns rather than jumping off the George Washington Bridge? I believe it’s worth appealing to reason.”

Like Mr. Lewis, most of us excluded from the ranks of the one-percent choose not to jump off bridges. Rather, we cling to the belief that rationality and fact-based decision-making will again hold sway within the halls of Congress and high precincts of the Judiciary; that, despite Bush v. Gore and Citizens United, the Supreme Court can and may again “intervene to restore the processes of democratic government” that are “clogged and corrupted” by the rich and powerful.
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Ok class, let’s review before the exam (election)

I’m sure you are all feeling kind of blah. You have this final exam for this session and I can tell by your performances on the quizzes that you are still confused. The problem solving portions of the quizzes have been very telling. So lets review.
 
You’re taxes are not too high. It’s your income that is too low! Remember this and you will be able to solve enough of the problems to obtain a passing grade and graduate. And class, no one running today for president gets this. It is why President Obama looked like such a dufus in the debate. Romney took a step to his left… right into Obama’s policy space. Where does one go to gain more space when they have walled up the door to the left of them as President Obama has?
 
Let’s get something real clear from the beginning. Unless you are acquiring the majority of your money from money YOU ARE NOT A CAPITALIST 
 
 
Second: A MARKET IS NOT AN ECONOMY.

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The Effect of Individual Income Tax Rates on the Economy, Part 1: 1901 – 1928

by Mike Kimel

The Effect of Individual Income Tax Rates on the Economy, Part 1: 1901 – 1928

In 1913, the 16th Amendment to the Constitution led to the income tax system we know and don’t love today. Since that time, in fact, since way before that time, people have been arguing about the effect of taxes on the economy. Over the next few posts, I will take a systematic look at the relationship between individual tax rates and the economy going as far back as the data allows in the United States.

In most of these posts, I will measure the effect of the economy using growth in real GDP per capita. However, that series only dates back to 1929. So in today’s post, which will focus on the period up to December 1928, I will look at the recessions (using official dates from the NBER and compare that to top individual marginal tax rates as published in the IRS’ statistics of income historical table 23.

The graph below shows the top marginal tax rate (black line) and periods in which the economy was in recession (gray bars) going back to January 1901. (Note – the economy was in a recession from June of 1899 to December 1900, so January 1901 is a nice “clean slate” date at which to start.)

Figure 1.

I think the graph above lends itself to be division into three more or less discrete periods. The first is the pre-tax period from 1901 until 1912. The second is the “rising tax” period from 1913 through 1918, and the third is the “falling tax” period from 1919 to 1928.

Now, if you asked the typical economics professor or politician or conservative to rank three periods – no individual income taxes, rising individual income tax rates, and falling individual income tax rates – in terms of time spent in recession, you’d probably hear this back, “The economy will spend less time in recession when there are no income taxes, and the most time in recession when tax rates are rising.”

But that isn’t what the data shows. The time spent in recession is pretty comparable. The percentage of months under recession in the pre-tax period is 43.8%. The percentage of months under recession in the rising tax period is 40.3%. The percentage of months under recession in the falling tax period is 42.5%.

Now let’s talk some nuance. A recession is not a recession is not a recession. For instance, the recession that began in 1907 was pretty severe, and is often referred to as the Panic of 1907. The recession of 1918 was caused by the end of WW2. And then there’s one more detail worth mentioning, the elephant not in the room so to speak. The graph doesn’t show what happened in 1929, following just over a decade of tax cuts (in which time the top marginal rate fell from 77% to 24%), we had the Great Depression.

Next post in the series: The Great Depression and the New Deal

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It’s not the tax and spending cuts, it’s the destroyed trust that has doomed our economy

By Daniel Becker
In the comments to my post “A reminder from Obama’s February 2009 speech”, there is the following:
“I guess it relates to the fake Obama they had made up in their heads,…” 
This sums up the early comments to the post suggesting that those who trusted Obama have only themselves to blame.
I addressed that concept in Obama, is he or isn’t he real…?  In that post I presented transcripts of Obama’s speeches and responses to questions and then argued:
“Are those talking like Glen Greenwald correct in that people should not be surprised with Obama’s appointments? Maybe, but then based on the above Obama words, that would mean we (you and I) just plain have to approach our relationship with governing as suspect until proven otherwise. Unfortunately, that means we will always be a day late and a dollar short having never known at the time of the decision if we made the correct one because you can not go by what is said.”
I recommend people go and not only read the posting, but the comments. (History is always fun to review.)
I concluded that posting with:
“Do you know what happens to a person when they can never get a straight, no hidden agenda answer from one they count on? They go nuts.”


 

This all speaks to the issue of growing our economy, because to promote distrust in a developed economy where 77% of our capital is intangible (via 2005 World Bank study) is to be destroying the prime driver of our growth. I wrote about the issue of were our true wealth comes from a few times. For this posting I am drawing on Attention Republicans/Blue Dog Democrates: Tax cuts as stimulus work against your goal.
February 5, 2009.
From the World Bank study:
“An economy with a very efficient judicial system, clear and enforceable property rights, and an effective and uncorrupt government will produce higher total wealth.”
I concluded:
“The republicans/blue dogs, and those helping them by lending their “professionalism”, think they are only effecting a political strategy. In truth, they are destroying the very basis for the wealth they desire. Their entire campaign for decades to discredit, to instill mistrust in the primary institution we have, the US (We the People) government, has been the primary cause to our economic decline. To increase the level of distrust is to decrease the available “intangible capital” which is 77% of our wealth generating power. “
Which brings us to what we just experienced with the debt ceiling issue. It’s not just the resulting budget changes, it’s the overall cognitive change being made in the people regarding trust of our ability to access a candidate and make the choice that will produce the desired results. Clinton, as for the Dems made the first blow to our trust with “triangulation”. I can and have on my own gone back and read speeches and answers to questions by Clinton during his first run and it shows the same as I note regarding Obama in “is he or isn’t he real”. Obama is (knowingly or not) bringing our trust close to death. 
Even the debt ceiling event is only the latest in a string of recent events that all drive an additional spike into the coffin of “trust”.
Last night on Racheal Maddow’s show, Chris Hayes, noted that we are now in a phase of governance where “created” crisis is the vehicle for results. Yes, Shock Doctrine governance level II.. It was presented from the perspective that the conservative mind set is the one employing such a tactic.

In my opinion, what he missed, and what makes this a unique form to this nation’s version of Naomie Klein’s Shock Doctrine is that there are enough economically conservative minded people in the opposing party (democratic party in this case) that the ruse can be played out with a more believable presentation than if just one side is playing along. Yes, both side play it differently, but would that not be expected based on the supposed “base party” paradigms? At no time during any of these “crisis” did the primary players on the democratic side resist the crisis by calling it out. Instead, they used it to get what the conservative faction of the party (a smaller faction since the last election) wants. These “wants” being very much inline with the republican non Norquist/Tea Party faction’s wants. Commonly referenced as Wall Street. In the end, no one to blame…It was the crisis.
This pattern has held true through out Obama’s current term.  In the latest example, the proposed budget from the house progressive caucus, the largest of the democratic party caucuses never was mentioned by the president. Recall the single payer health insurance issue?
The issue for this posting is not the “wants”. It is not about the resulting policy from the latest ruse played on We the People. The prime issue, the issue always suggested, implied, bandied about, but never out and out confronted: Public Trust.
This latest Obama/conservative policy process has brought us closer than ever to the demise of our economy and thus our democracy not primarily by the furthering of the financial disequilibrium, but by the perpetuation and enlarging of the perimeters of social order that will now be distrusted. I think we have approached, if not completely included the full boundaries of American culture in that which is to be distrusted with the completion of this debt crisis event. 
Sadly, I do not think Obama and those referred to as the “adults in the room” know what they have done. Instead. as I stated above, they believe they are just “effecting a political strategy”. 
There are 2 versions of distrust. First is the distrust nurtured by those who have made it a political tool of their strategy for political dominance, power and fortune. It is the “…most dangerous words in the English language: I am from the government and I am here to help you”. These people do not know that in essence their distrust is part of the ruse. The other distrust is those who see the ruse, have acted via those they trusted only to find they can no longer be trusted. I don’t believe one is worse than the other, but I do know having both means the solution will be slower in materializing. In both cases those in power can not be trusted and those who know it, presently have no one in power to represent their solutions.  It serves to make the what is the solution clear, it does not server to make it any easier or quicker in coming.
I do not believe this mode of operation is forever simply because we are not naturally selfish, self serving for survival sake creatures. We are not naturally so shallow in our collective thinking. It is only in our isolated, individual thought that we can and will be shallow. Of course this assumes that the concepts and application of virtual reality throughout our daily lives does not mutate us way from our natural self.  A big assumption considering “reality” is in the phrase “virtual reality” and the character dynamic is trust.

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Guest post: Mark Provost Why the Rich Love High Unemployment

Guest post by Mark Provost

Why the Rich Love High Unemployment
via Truthout

Christina Romer, former member of President Obama’s Council of Economic Advisors, accuses the administration of “shamefully ignoring” the unemployed. Paul Krugman echoes her concerns, observing that Washington has lost interest in “the forgotten millions.” America’s unemployed have been ignored and forgotten, but they are far from superfluous. Over the last two years, out-of-work Americans have played a critical role in helping the richest one percent recover trillions in financial wealth.

Obama’s advisers often congratulate themselves for avoiding another Great Depression – an assertion not amenable to serious analysis or debate. A better way to evaluate their claims is to compare the US economy to other rich countries over the last few years.

On the basis of sustaining economic growth, the United States is doing better than nearly all advanced economies. From the first quarter of 2008 to the end of 2010, US gross domestic product (GDP) growthoutperformed every G-7 country except Canada.

But when it comes to jobs, US policymakers fall short of their rosy self-evaluations. Despite the second-highest economic growth, Paul Wiseman of the Associated Press (AP)reports:“the U.S. job market remains the group’s weakest. U.S. employment bottomed and started growing again a year ago, but there are still 5.4 percent fewer American jobs than in December 2007. That’s a much sharper drop than in any other G-7 country.” According to an important study by Andrew Sum and Joseph McLaughlin, the US boasted one of the lowest unemployment rates in the rich world before the housing crash – now, it’s the highest.[1]

The gap between economic growth and job creation reflects three separate but mutually reinforcing factors: US corporate governance, Obama’s economic policies and the deregulation of US labor markets.

Old economic models assume that companies merely react to external changes in demand – lacking independent agency or power. While executives must adapt to falling demand, they retain a fair amount of discretion in how they will respond and who will bear the brunt of the pain. Corporate culture and organization vary from country to country.

In the boardrooms of corporate America, profits aren’t everything – they are the only thing. A JPMorgan researchreportconcludes that the current corporate profit recovery is more dependent on falling unit-labor costs than during any previous expansion. At some level, corporate executives are aware that they are lowering workers’ living standards, but their decisions are neither coordinated nor intentionally harmful. Call it the “paradox of profitability.” Executives are acting in their own and their shareholders’ best interest: maximizing profit margins in the face of weak demand by extensive layoffs and pay cuts. But what has been good for every company’s income statement has been a disaster for working families and their communities.

Obama’s lopsided recovery also reflects lopsided government intervention. Apart from all the talk about jobs, the Obama administration never supported a concrete employment plan. The stimulus provided relief, but it was too small and did not focus on job creation.

The administration’s problem is not a question of economics, but a matter of values and priorities.  In the first Great Depression, President Roosevelt created an alphabet soup of institutions – the Works Progress Administration (WPA), the Tennessee Valley Authority (TVA) and the  Civilian Conservation Corps (CCC) – to directly relieve the unemployment problem, a crisis the private sector was unable and unwilling to solve. In the current crisis, banks were handed bottomless bowls of alphabet soup – the Troubled  Asset Relief Program (TARP), the Public-Private Investment Program (PPIP) and the Term Asset-Backed Securities Loan Facility (TALF) – while politicians dithered over extending inadequate unemployment benefits. 

The unemployment crisis has its origins in the housing crash, but the prior deregulation of the labor market made the fallout more severe. Like other changes to economic policy in recent decades, the deregulation of the labor market tilts the balance of power in favor of business and against workers. Unlike financial system reform, the deregulation of the labor market is not on President Obama’s agenda and has escaped much commentary.

Labor-market deregulation boils down to three things: weak unions, weak worker protection laws and weak overall employment. In addition to protecting wages and benefits, unions also protect jobs. Union contracts prevent management from indiscriminately firing workers and shifting the burden onto remaining employees. After decades of imposed decline, the United States currently has thefourth-lowest private sector union membershipin the Organization for Economic Cooperation and Development (OECD).

America’s low rate of union membership partly explains why unemployment rose so fast and, – thanks to hectic productivity growth – hiring has been so slow.

Proponents of labor-market flexibility argue that it’s easier for the private sector to create jobs when the transactional costs associated with hiring and firing are reduced. Perhaps fortunately, legal protections for American workers cannot get any lower: US labor laws make it the easiest place in the word to fire or replace employees,according to the OECD.

Another consequence of labor-market flexibility has been the shift from full-time jobs to temporary positions. In 2010,26 percent of all news jobs were temporary– compared with less than 11 percent in the early 1990’s recovery and just 7.1 percent in the early 2000’s.

Fight the lies and misinformation! Please make a tax-deductible donation to Truthout today and keep real independent journalism strong.

The American model of high productivity and low pay has friends in high places. Former Obama adviser and General Motors (GM) car czarSteven Rattner arguesthat America’s unemployment crisis is a sign of strength:

Perversely, the nagging high jobless rate reflects two of the most promising attributes of the American economy: its flexibility and its productivity. Eliminating jobs – with all the wrenching human costs – raises productivity and, thereby, competitiveness.

Unusually, US productivity grew right through the recession; normally, companies can’t reduce costs fast enough to keep productivity from falling.

That kind of efficiency is perhaps our most precious economic asset. However tempting it may be, we need to resist tinkering with the labor market. Policy proposals aimed too directly at raising employment may well collaterally end up dragging on productivity.

Rattner comes dangerously close to articulating a full-unemployment policy. He suggests unemployed workers don’t merit the same massive government intervention that served GM and the banks so well. When Wall Street was on the ropes, both administrations sensibly argued, “doing nothing is not an option.” For the long-term unemployed, doing nothing appears to be Washington’s preferred policy.

The unemployment crisis has been a godsend for America’s superrich, who own the vast majority of financial assets – stocks, bonds, currency and commodities.

Persistent unemployment and weak unions have changed the American workforce into a buyers’ market – job seekers and workers are now “price takers” rather than “price makers.” Obama’s recovery shares with Reagan’s early years the distinction of being the only two post-war expansions where wage concessions have been the rule rather than the exception. The year 2009 marked the slowest wage growth on record, followed by the second slowest in 2010.[2]

America’s labor market depression propels asset price appreciation. In the last two years, US corporate profits and share prices rose at the fastest pace in history – and the fastest in the G-7.    Considering the source of profits, the soaring stock market appears less a beacon of prosperity than a reliable proxy for America’s new misery index. Mark Whitehouse of The Wall Street JournaldescribesObama’s hamster wheel recovery:

From mid-2009 through the end of 2010, output per hour at U.S. nonfarm businesses rose 5.2% as companies found ways to squeeze more from their existing workers. But the lion’s share of that gain went to shareholders in the form of record profits, rather than to workers in the form of raises. Hourly wages, adjusted for inflation, rose only 0.3%, according to the Labor Department. In other words, companies shared only 6% of productivity gains with their workers. That compares to 58% since records began in 1947.

Workers’ wages and salaries represent roughly two-thirds of production costs and drive inflation. High inflation is a bondholders’ worst enemy because bonds are fixed-income securities. For example, if a bond yields a fixed five percent and inflation is running at four percent, the bond’s real return is reduced to one percent. High unemployment constrains labor costs and, thus, also functions as an anchor on inflation and inflation expectations – protecting bondholders’ real return and principal. Thanks to the absence of real wage growth and inflation over the last two years, bond funds have attracted record inflows andinvestors have profited immensely.

The Federal Reserve has played the leading role in sustaining the recovery, but monetary policies work indirectly and disproportionately favor the wealthy. Low interest rates have helped banks recapitalize, allowed businesses and households to refinance debt and provided Wall Street with a tsunami of liquidity – but its impact on employment and wage growth has been negligible.

CNBC’s Jim Cramerprovides insightinto the counterintuitive link between a rotten economy and soaring asset prices: “We are and have been in the longest ‘bad news is good news’ moment that I have ever come across in my 31 years of trading. That means the bad news keeps producing the low interest rates that make stocks, particularly stocks with decent dividend protection, more attractive than their fixed income alternatives.” In other words, the longer Ben Bernanke’s policies fail to lower unemployment, the longer Wall Street enjoys a free ride.

Out-of-work Americans deserve more than unemployment checks – they deserve dividends. The rich would never have recovered without them.

1. “The Massive Shedding of Jobs in America.” Andrew Sum and Joseph McLaughlin. Challenge, 2010, vol. 53, issue 6, pages 62-76. 

2. David Wessel, Wall Street Journal, January 30, 2010.“Wage and Benefit Growth Hits Historic Low”; Chris Farrell, Bloomberg Businessweek, February 5, 2010.” US Wage Growth: The Downward Spiral.”

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Feeling Hopeful About the Recovery

Crossposted at The Street Light.

The more I get to know this recovery, the more I’m starting to like it.

Yes, it’s been rather standoffish, giving the cold shoulder to millions of unemployed Americans. And true, through much of 2010 it was maddeningly elusive, never giving us confidence that it was here to stay. But the more data I review from the second half of 2010, the more I start liking what I see. Particularly because the data suggests to me that this recovery, while not roaring, is being built on a solid foundation, and therefore has the potential to grow into something pretty meaningful as this year progresses.

There are four things in particular that make me guardedly happy about this recovery.

1. The manufacturing sector.
I’ve spent a lot of time over the last week explaining why I am bullish on US manufacturing. The manufacturing sector is too small to make a significant dent in the US’s vast unemployment problem. However, it has been the source of some net job creation (see table), and more generally is a good indicator of the competitiveness of the US economy in terms of international trade. Which brings us to…

2. US exports.
Exports from the US did very well in the second half of 2010, which helped to give the US economy a substantial boost toward the end of the year. Best of all, this strong export performance was driven by sales to the growing, dynamic, developing countries of the world like China. That makes it likely that continued rapid growth in China and other developing countries will actually provide a noticeable boost to the US economy in 2011 and going forward. Compare this with what happened during the recovery from the previous recession. As shown in the chart below, in 2002-03 US export growth only provided a modest 0.45% boost to GDP. This time around, however, US export growth has been adding over a full percentage point to US GDP growth.


3. Business purchases of investment goods.
Unlike the recovery from the last recession, when businesses were extremely slow to begin purchasing new equipment and machinery, in 2010 business spending on things other than buildings grew at a healthy rate. In fact, investment spending in “equipment and software” (the “e&s” in the chart above) added over a full percentage point to GDP growth through 2010. The best part of this kind of spending is that it provides a much greater boost to productivity, and thus long-term economic growth, than personal consumption spending. The fact that in 2010 far more of the growth in real GDP came from business investment (and less from residential investment) than was true during the previous recovery is a very good sign for medium and long-term economic growth in the US.

4. Household financial retrenching.
The biggest drag on economic growth during this recovery has been the ongoing financial rebalancing that US households have been doing by paying down debt. But while this has meant that consumption has not grown as rapidly as it might have, it also means that this recovery is not (unlike the previous one) being built on borrowed money. Household debt levels have fallen dramatically over the past two years (see the chart below), and while arguably still higher than they should be, the fact that households have been reducing their debt in a pretty determined way suggests that households will be able to increase, and sustainably increase, their spending in 2011 and beyond as incomes grow faster.


Yes, all in all, I think there are some very nice things to like about this recovery. Now we just need it to set to creating new jobs in a serious way. But based on the strong foundations on which this recovery is being built, I think it won’t be much longer before we see meaningful falls in unemployment levels in the US.

I must say: after being very bearish on the US economy through all of the 2000s (and particularly during my previous stint writing for Angry Bear, 2003-06), it’s nice to finally have something hopeful to write about this surprisingly alluring recovery…

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Foreclosures and key to economic upturn??

If you have the stomach for it and want to learn more about the gory details about the policy side of all this, there are a bunch of good writers you can turn to, including Yves Smith, David Dayen, and Marcy Wheeler, all of whom have put up great pieces worth looking at in the last couple of days. Numerian has a great post I have already linked to a couple times in past pieces this week on the truly scary implications of what is going down.

via Alternet

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Mc Cain sinks the Dow!

by Divorced one like Bush

Concerned about the cause of the Dow? Not to fear. Many have been working on it such as Glenn Greenwald.The market does not like someone who is not like them so goes the Mc Cain clan. It is possible, but then Glenn asks for proof and finds an economist of his nature who has discovered it is all due to McCain! He has produced a chart proving it.

I’m convinced. But, I’m going to wait for Cactus’ review of this man’s work.

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