Wednesday, November 12, 2008
As in "Where the bottom is in the markets, how bad unemployment numbers are going to be for this month, how bad will holiday retail sales really be, who Obama will get to fill his empty cabinet positions, when universal health care will finally get passed, when will we start to actually get out of Iraq and Afghanistan, when will we get Bin Laden, and who is going to run in 2012" stuff, just like now...only the lack of answers would be pretty depressing then.
The fact that I can come up with an entirely plausible scenario where we still don't have answers to any of those eight questions by November 12, 2009 is enough to make me go to bed now.
US markets lost another 5% across the board today, the Dow alone having lost 1,400 points in six sessions.
Roubini's outlook is nothing short of catastrophic:
That's just leading off. It gets worse: predictions of stag-deflation (a nasty combination of stagnating GDP and deflation), Fed rates hitting zero basis points, the S&P 500 going at low as 500, Credit market losses approaching $2 trillion, more deleveraging and downgrading of long-term corporate bonds, the collapse of the commercial real-estate market, a $1 trillion deficit in 2009 and 2010, the dollar dropping off the cliff, and the markets crumbling as the year-end rally that the economic press is betting on failing to materialize.
- The U.S. will experience its most severe recession since WWII, much worse and longer and deeper than even the 1974-75 and 1980-82 recessions. The recession will continue until at least the end of 2009 for a cumulative GDP drop of over 4%; the unemployment rate will likely reach 9%. The US consumer is shopped out saving less and debt burdened and now faltering: this will be the worst consumer recession in decades.
- The prospect of a short and shallow 6-8 months V-shaped recession is out of the window; a U-shaped 18-24 months recession is now a certainty and the probability of a worse multi-year L-shaped recession (as in Japan in the 1990s) is still small but rising. Even if the economy were to exit a recession by the end of 2009 the recovery could be so weak because of the impairment of the financial system and of the credit mechanism (i.e. a growth rate of 1-1.5% for a while well below the potential of 2.5-2.75%) that it may feel like a recession even if the economy is technically out of the recession.
- Obama will inherit and economic and financial mess worse than anything the U.S. has faced in decades: the most severe recession in 50 years; the worst financial and banking crisis since the Great Depression; a ballooning fiscal deficit that may be as high as a trillion dollar in 2009 and 2010; a huge current account deficit; a financial system that is in a severe crisis and where deleveraging is still occurring at a very rapid pace, thus causing a worsening of the credit crunch; a household sector where millions of households are insolvent, into negative equity territory and on the verge of losing their homes; a serious risk of deflation as the slack in goods, labor and commodity markets becomes deeper; the risk that we will end in a deflationary liquidity trap as the Fed is fast approaching the zero-bound constraint for the Fed Funds rate; the risk of a severe debt deflation as the real value of nominal liabilities will rise given price deflation while the value of financial assets is still plunging.
- The world economy will experience a severe recession: output will sharply contract in the Eurozone, UK and the rest of Europe, in Canada, Japan, and Australia/New Zealand; there is also a risk of a hard landing in emerging market economies. Expect global growth – at market prices – to be close to zero in Q3 and negative by Q4. Leaving aside the effects of the fiscal stimulus China could face a hard landing growth rate of 6% in 2009. The global recession will continue through most of 2009.
General Growth Properties, the second largest US mall operator, saw their stock hit 33 cents today. Bankruptcy is all but certain for this company as it's already looking for a deal.
Ford, GM, and Chrysler will not survive as independent companies. The Big Three Automakers are almost dead and if they all go under, unemployment in this country will double overnight. We're talking the cascading losses of eight to ten million jobs, that would devastate the country for a decade.
Throw in the airlines falling apart and retail stores crumbling across the country, and you have an idea of just how bad the worst case scenario is.
A recession...a bad one lasting into 2010...is assured. A depression is still very possible. A lot will depend on what Obama does. If he and his administration recognize that we're facing a second Great Depression, we have a chance.
If not...we'll all find out just how likely the depression scenario is.
In a CNN/Opinion Research Corporation survey released Tuesday, 59 percent of those questioned think that Democratic control of both the executive and legislative branches will be good for the country, with 38 percent saying that such one-party control will be bad.Get that? Fifty-nine percent.
The Village is full of crap. America is ready for Obama and the Democrats to try it their way.
Now, Jim is right when he assumes the economy is going to be bad for the next four years. He's dead right about that. He is wrong however in assuming that Obama will be kicked out of office because of it.
Just "one and done" for Barack Obama's presidency? Recall an ominous passage in his otherwise joyous election-night speech: "The road ahead will be long. Our climb will be steep. We may not get there in one year or even in one term." Maybe the tone was suggested by one of Obama's economic advisers like Jason Furman or Austan Goolsbee. It's the battered economy, after all, that will be President Obama's greatest domestic policy challenge. As such, it will also be his greatest political challenge, too -- but one where failure may already be baked into the cake.
That's right, the "O" in "Obama" may stand for "One Term." For starters, there's a strong chance that when voters head to the polls on Nov. 2, 2010, they likely will still think the economy is awful. Not much debate about that. (Good chance the Democrats' two-election winning streak comes to an end.) And while voters may be somewhat patient for two years, patient for four years? Really unlikely. If history is any guide at all, voters may still be terribly cranky about the economy when they cast their ballots on Nov. 6, 2012 and thus likely choose the 45th president of the United States -- be it Mitt Romney, Sarah Palin, Bobby Jindal or some other Republican without "Bush" for a last name. Once again a "change" election for an impatient America. The same bad economy that doomed John McCain in 2008 will have sunk Obama, as well.
If Obama is able to convince voters that he's actively doing something about the economic disaster, and that he can say "Look, I'm doing everything I possibly can to fix this" and he has a specific plan ready to go on January 20, the public will work with him.
It was GOP's insistence that the economy was fine that killed John McCain's chances, not the economy itself. Bush made the same mistake, as did his father.
John Cole of Balloon Juice (himself a reformed wingnut turned Stupid Fighter) takes BTD to task and names his many crimes against reason, logic, and his fellow bloggers.
With Democrats like this, who needs Red State? If there was anyone who was more tedious during this last election cycle than Armando, aka Big Tent Democrat, let me know. Besides turning one of my favorite sites, TalkLeft, into a pseudo-Puma cess-pool during the primaries (But he supports Obama, dont’cha know- speaking for him only!), BTD’s bigger sin was dispensing bad advice to the Obama campaign on an almost daily basis. If concern trolling was an art form, BTD would be Michelangelo and the 2008 Democratic primary his Sistine Chapel.Not proud of some of the folks on the Left, but Teh Stupid plays all sides of the political spectrum, and it's about time somebody called BTD out on the most egregious of his wrongnosity.
Because I am short on patience, and, at heart, a compassionate person, I am not going to go through the TalkLeft archives and dig up where BTD gravely intones that Obama can not win the white vote, can not win the Jewish vote, can not win the Hispanic vote, and on and on. I will not dig up all the stupid god damned advice he gave to the Obama campaign (which they, thank GOD, ignored). I will not look up the umpteen posts where the left’s own pompous village idiot warned that Obama could not win without Hillary on the ticket. I will not dig up the polling data that he consistently misread and always curiously interpreted as showing a need for Hillary on the ticket. I will let you do that for yourself, and you can enjoy your own historical retrospective into BTD’s idiocy. Yes, I voted for Bush twice, but I proudly state I am not as stupid as BTD. Period.
It won't be the last time, either.
- President Bush says he has a few regrets about what he said over the course of his two terms.
- HBO releases the entire Sopranos series on DVD in one huge box set.
- Treasury's vaunted plan to rescue homeowners facing foreclosure will only help less than ten percent of them.
- The world's first ovary transplant is a success as a healthy baby is born to the recipient.
- With the real estate crash now hitting retail properties, America's second-largest mall operator is facing bankruptcy.