Friday, February 27, 2009

Last Call

California's unemployment rate in January? A nasty 10.1 percent. Counting all the underemployed and those who have given up looking for work, I'm betting the "real unemployment rate" is closer to eighteen percent or so...if not twenty. One in six, perhaps even one in five Californians are either out of work, are working only part time, or have given up on finding a job.

California represents 1/7th of the country by itself. It is far over the national average of 7.6% and the tarnished Golden State numbers are dragging it way up. The bad news is that the national average is then well under the actual numbers and will be revised upwards next week when the February numbers come out.

If the February numbers are where I think they are going to be, we'll be well into 8% plus nationally on Thursday, and it's entirely possible the February numbers could hit as high as 8.5% with a strong upwards revision on the January numbers to 8% even.

I don't want to be right on this one. Those revised GDP numbers are f'ckin terrifying. I fully expect 1Q 2009 to be a 7% contraction or so, if not (Flying Spaghetti Monster help us) 8%.

We're honestly getting to the point now where we have to start calling this what it is.

Economic Depression.

Kenneth The Governor Is Done

Bobby Jindal is toast, kids.

Not only did he come in dead last in CNN's 2012 GOP hopeful poll (taken before his disastrous speech), not only has Tom Tancredo pronounced his career DOA, but it turns out he lied about his Hurricane Katrina story in that widely panned speech.

Jindal had described being in the office of Sheriff Harry Lee "during Katrina," and hearing him yelling into the phone at a government bureaucrat who was refusing to let him send volunteer boats out to rescue stranded storm victims, because they didn't have the necessary permits. Jindal said he told Lee, "that's ridiculous," prompting Lee to tell the bureaucrat that the rescue effort would go ahead and he or she could arrest both Lee and Jindal.

But now, a Jindal spokeswoman has admitted to Politico that in reality, Jindal overheard Lee talking about the episode to someone else by phone "days later." The spokeswoman said she thought Lee, who died in 2007, was being interviewed about the incident at the time.

This is no minor difference. Jindal's presence in Lee's office during the crisis itself was a key element of the story's intended appeal, putting him at the center of the action during the maelstrom. Just as important, Jindal implied that his support for the sheriff helped ensure the rescue went ahead. But it turns out Jindal wasn't there at the key moment, and played no role in making the rescue happen.

There's a larger point here, though. The central anecdote of the GOP's prime-time response to President Obama's speech, intended to illustrate the threat of excessive government regulation, turns out to have been made up.

Maybe it's time to rethink the premise.

Sadly, the unemployed of Louisiana still have to deal with him keeping them from getting benefits, and he's taking the rest of the GOP down the road to near-permanent wilderness.

In Which Zandar Answers Your Burning Questions

Robert Reich asks:
There's no reason to suppose the 1st quarter of 2009 will be any better, and lots of reason to think it will be worse. Government is spender of last resort. We're at the last resort now. $787 billion over two years, and only two-thirds of it real spending, is way below what will be needed to get the economy moving back toward full capacity. Do Republicans know this? Is this why they're continuing to bet that the economy won't be recovering by November, 2010, and why they're going to continue to say no?
Why yes and yes, Bob.

The GOP is committed to the destruction of the American economy for political gain. From Bobby Jindal turning down federal stimulus dollars in order to earn conservative cred to John Boehner's laughable hypocrisy calling Obama's legislation a "job killer" to Mitch McConnell's equally laughable hypocrisy saying that Republicans "prefer personal freedom" to government control, the Republicans have bet their political future that America will all but collapse, and that the GOP will be able to rise from the ashes anew.

And they'll do everything they can to nudge America off the cliff.

The Real Tea Party

While the Wingnuts keep insisting there's an invisible massive populist anti-Obama protest just around the corner, the reality is the populist protest is coming at the expense of GOP governors who are turning down stimulus unemployment money. The result is that these 2012 Presidential hopefuls are drawing the anger of the people in their states who don't appreciate being the price paid for those ambitions.
For people like Henry Kight, 59, of Austin, Tex., the possibility that the money might be turned down is a deeply personal issue.

Mr. Kight, who worked for more than three decades as an engineering technician, discovered in September that because of complex state rules, he was not eligible for unemployment insurance after losing a job at a major electronics manufacturer he had landed at the beginning of the year.

Unable to draw jobless benefits, he and his wife have taken on thousands of dollars in credit-card debt to help make ends meet.

It is precisely these kind of regulations, involving such matters as the length of a person’s work history or reason for leaving a job, that the federal government is trying to get the states to change. Such a move could extend benefits to an estimated half-million more people, according to the National Employment Law Project, a liberal group in New York that supports the changes.

Mr. Kight and other unemployed workers said they were incensed to learn they were living in one of a handful of states — many of them among the poorest in the nation — that might not provide the expanded benefits.

“It just seems unreasonable,” Mr. Kight said, “that when people probably need the help the most, that because of partisan activity, or partisan feelings, against the current new administration, that Perry is willing to sacrifice the lives of so many Texans that have been out of work in the last year.”

He was referring to Gov. Rick Perry of Texas, who has said he may decline the extra money rather than change state policy.

“I remain opposed to using these funds to expand existing government programs, burdening the state with ongoing expenditures long after the funding has dried up,” Mr. Perry wrote in a letter to Mr. Obama last week.

The governors contend that once the federal money ran out, they would have to continue providing the new benefits, which they say would force them to raise taxes on businesses. The federal money will end in two or three years in some states, or much later in others, depending on the size of the state allocation.

Proponents say that nothing would prevent states from changing the laws back at that time.

The anger at the governors’ positions goes beyond just the unemployed workers who could directly benefit from the changes. Because eligibility rules for unemployment insurance are complicated and vary by state, many unemployed people do not even know whether they would be affected.

There is also confusion over what parts of the stimulus money are in danger. The governors have mostly said they do not object to the stimulus bill’s $25 per week increase in unemployment benefits, or a new federal extension of benefits.

As a result, many laid-off workers across the South have been fretting over precisely what they might lose out on, even as they express astonishment that they might not receive the help that jobless people in other states will get.

“I don’t understand the whole thing,” said Kelley Joyce, 43, of Myrtle Beach, S.C., about indications from Gov. Mark Sanford that he may reject some of the stimulus financing in that state. “Apparently because he has money and he doesn’t have to worry about everybody else who doesn’t have money.”

South Carolina, which has the nation’s third-highest unemployment rate at 9.5 percent, ruled Ms. Joyce was ineligible for benefits for the same reason as Mr. Kight after she lost her job as a marketing assistant in November.
Partisan stupidity has a price, and it's the nation's more unfortunate souls who are paying it. Remember that when the thought crosses your mind that GOP might not be so bad after all. You'd be right...they're much worse, and they have learned nothing.

Troop Transporting

Obama's getting a lot of flak on both sides for his Iraq withdrawal policy that he officially announced today at Camp Lejeune.
"Let me say this as plainly as I can: By August 31, 2010, our combat mission in Iraq will end," Obama said in a speech at Camp Lejeune, North Carolina.

Between 35,000 to 50,000 troops will remain in Iraq, he said. They would be withdrawn gradually until all U.S. forces are out of Iraq by December 31, 2011 -- the deadline set under an agreement the Bush administration signed with the Iraqi government last year.

The problem is he's getting pillaged on the left by the likes of Nancy and Rachel Maddow and on the right by the wingnuts for leaving those troops in country (and the August timing...just before the 2010 midterm elections.)

Frankly, I have to combine both criticisms. 35,000 troops in Iraq is 35,000 too many, and the timing does make Obama look like he's gearing up the Dems for a midterm declaration of "Mission Accomplished" redux.

It's an ugly compromise on something that shouldn't be compromised. The American people overwhelmingly want out of Iraq, and withdrawing 75% of our troops there just isn't going to cut it.

Right now this plan leaves Obama rightly open to being Bush on this issue on both sides.

Nobody Could Have Predicted...

And that, as Josh Marshall points out, is the problem.
What continues to surprise me, however, is that even after we've gotten to an apparent consensus that we are in for a recession that is much more severe than anything we've endured in the post-war era, and even after six months in which each successive month looked worse than the last, that with each new number we're still surprised that it's even worse than we'd realized -- still worse than the consensus assumptions.
That's because the consensus assumptions are and continue to be made by the people who got us into this mess, failed to predict the mess, and in fact did everything in their power to cover up the mess. They need to be given the heave-ho, cleaned out, fired, dismissed, reduced in headcount, whatever.

But we stubbornly refuse to do so. In fact, we turn around and keep them in charge of the "recovery efforts"...guys like Timmy Geithner.

If these guys are so motherf'ckin smart, how come they lost trillions of friggin dollars? Over at Obsidian Wings, Hilzoy takes a look at a Financial Times article that explains just how badly these idiots screwed up.
If I'm reading this right, within four years of being issued, two thirds of these CDOs are in default, and their recovery rates are very, very low. That's just staggering. It's actually hard to understand how the banks managed to do this badly: you'd think they could have done better hiring people off the street and paying them to put all those nice little loan documents into piles at random, or tossing mortgages down the stairs and bundling them based on how they landed. They certainly didn't need to hire people with advanced math degrees and pay them seven- or eight-figure salaries to get these kinds of results.

And how about those ratings agencies? They would have done a better job using a Magic 8-Ball to rate the CDOs. ("Signs point to junk!")

I have been hearing for years and years about how the financial services sector pays such exorbitant wages because the people who work there are so immensely talented that they are cheap at $50 million a year. I never particularly bought that line before. But I never imagined that all those Masters of the Universe would do quite this badly. If we had paid them $50 million a year to go far, far away and leave our financial system alone, it would have been a bargain.
And yet for the most part these guys are still in charge of the economy because we're told time and time again that mere mortals like ourselves just aren't intelligent enough to understand the complex intricacies of these mortgage products or the economy that runs on them.

Well, I'm no theoretical economathical projectionist or anything, but even I understand these three things:
  1. If people don't know how much to value what you're selling, and
  2. What you're selling is the universe's most glorified IOU, and
  3. The value of your whole company is based on craploads of those IOUs,
Then you're screwed. Period. Now if your entire financial system is based on the above three principles, then your entire financial system is screwed.

Where's my $50 million? I'm worth that much by comparison, right?

And CEOs are still there, Treasury and the SEC still have most of the same faces, the financial happy-face talking heads are still there, and nobody's taken any responsibility for any of this mess.

And these same people continue to be surprised at how badly the economy is doing? We don't just need new pundits, new voices, new direction. We need to replace the system. A system that allows this much wealth to be lost, that in fact threatens the stability of the globe, is a system that needs to go.

And the first step is to jettison the people who created it and rode it into the ground. You guys lost. Make way for the new. They need to be gone.

I leave you with The Kroog:

Why is this important? A recurring theme of those who believe that the financial system can be rescued with fancy financial engineering — a group that, sad to say, apparently now includes the Obama administration — is that the losses on toxic assets aren’t really as bad as people say; that lack of liquidity and “irrational despondence” have led to an undervaluation of these assets, and that if we can just calm things down and get cash flowing again all will be well.

Not so much, it seems.
Not gonna happen. It's to the point now where ripping out the plumbing is cheaper than repairing it.

Your Number's Up Again

Back on January 30th, the government popped out a 4Q GDP decline of 3.8% and said "Hey, it wasn't so bad!"

Then, today, they revised it. Down 6.2%.
The U.S. economy contracted more sharply than initially estimated in the fourth quarter, government data showed on Friday, as exports plunged and consumers cut spending by the most in over 28 years amid a severe recession.

The Commerce Department said gross domestic product, which measures the total output of goods and services within U.S. borders, fell at an annual rate of 6.2 percent in the October-December quarter, the deepest slide since the first quarter of 1982. The government last month estimated the drop in fourth-quarter GDP at 3.8 percent.

The weaker GDP estimate reflected downward revisions to inventories and exports by the department.

The decline was worse than analysts' expectations for a 5.4 percent contraction in fourth-quarter GDP. The economy expanded 1.1 percent in 2008, the slowest pace since 2001, the department said.

Back in January I called the decline at 6% even, and I thought I was highballing the number at the time. That 6.2% is bad. Flying Spaghetti Monster help me, but I think it's going to get worse this quarter.

We'll see in May, I guess.

Fannie Mae Fumble

Fannie Mae announced a $25.2 billion quarterly loss for 4Q '08, bringing 2008 losses for the mortgage giant to nearly a staggering $60 billion.
The company, a crucial source of funding for mortgage lenders, said it would draw down $15.2 billion of its $200 billion federal line of credit. In return, the government will receive preferred shares.

And it gave a dour view of the housing market -- saying it expects peak-to-trough price declines to be in the 33% to 46% range, up from the 27% to 32% range it gave in the previous quarter. For 2009, it predicts home values will drop 12 to 18%.
And that's bad, bad news. If housing prices end up where Fannie Mae predicts, off 40% from 2005-2006 highs (and another 15% drop this year alone) then there will be no recovery at all in late 2009...and there may not be any real recovery in 2010 either.

In other words, the "lost decade" scenario is growing ever closer. We're maybe a bit more than halfway through the housing collapse now, with another 18 months to go or more possibly before the housing market stabilizes. That would delay recovery until 2010 or even 2011, and even then recovery would be excruciatingly slow.

It's going to be a long, ugly period in world history here, folks.


Related Posts with Thumbnails