G.O.O.D

Source: washingtonpost.com

With President-elect Barack Obama and congressional Democrats considering a massive spending package aimed at pulling the nation out of recession, the national debt is projected to jump by as much as $2 trillion this year, an unprecedented increase that could test the world’s appetite for financing U.S. government spending.

For now, investors are frantically stuffing money into the relative safety of the U.S. Treasury, which has come to serve as the world’s mattress in troubled times. Interest rates on Treasury bills have plummeted to historic lows, with some short-term investors literally giving the government money for free.

But about 40 percent of the debt held by private investors will mature in a year or less, according to Treasury officials. When those loans come due, the Treasury will have to borrow more money to repay them, even as it launches perhaps the most aggressive expansion of U.S. debt in modern history.

With the government planning to roll over its short-term loans into more stable, long-term securities, experts say investors are likely to demand a greater return on their money, saddling taxpayers with huge new interest payments for years to come. Some analysts also worry that foreign investors, the largest U.S. creditors, may prove unable to absorb the skyrocketing debt, undermining confidence in the United States as the bedrock of the global financial system.

While the current market for Treasurys is booming, it’s unclear whether demand for debt can be sustained, said Lou Crandall, chief economist at Wrightson ICAP, which analyzes Treasury financing trends.

“There’s a time bomb in there somewhere,” Crandall said, “but we don’t know exactly where on the calendar it’s planted.”

The government’s hunger for cash began growing exponentially as the nation slipped into recession in the wake of a housing foreclosure crisis a year ago. Washington has since approved $168 billion in spending to stimulate economic activity, $700 billion to prevent the collapse of the U.S. financial system, and multibillion-dollar bailouts for a variety of financial institutions, including insurance giant American International Group and mortgage financiers Fannie Mae and Freddie Mac.

Despite those actions, the economic outlook has continued to darken. Now, Obama and congressional Democrats are debating as much as $850 billion in new federal spending and tax cuts to create or preserve jobs and slow the grim, upward march of unemployment, which stood in November at 6.7 percent.

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Technorati Tags: debt, inflation, depression

Source: Bloomberg.com

The decline in U.S. manufacturing deepened in December as demand for such products as cars, appliances and furniture reached the lowest level since at least 1948, signaling further cutbacks in factory jobs and production this year.

The Institute for Supply Management’s factory index fell to 32.4, below economists’ forecasts and the lowest level since 1980, from 36.2 the prior month. Readings less than 50 signal contraction. The group’s new-orders measure reached the lowest level on record and prices slid the most since 1949.

“Every component suggests that the weakness is going to carry over into 2009,” Mark Vitner, a senior economist at Wachovia Corp. in Charlotte, North Carolina, said in a Bloomberg Television interview. “There’s just not a whole lot of new business coming in,” and companies will have a “painful adjustment” as consumers shun spending.

Today’s figures underscore that, with private demand collapsing, manufacturers’ best hope for new business this year may be President-elect Barack Obama’s plans for an unprecedented stimulus package. Obama has pledged an investment program in roads, schools and the U.S. energy network akin to the 1950s- era interstate highway construction boom.

Stocks advanced on the first day of trading in 2009, following the biggest annual drop for the Standard & Poor’s 500 Index in 71 years, on expectations government stimulus efforts will curtail the recession. The S&P index rose 1.4 percent to 916.16 at 11:08 a.m. in New York. Benchmark 10-year Treasury yields rose to 2.25 percent from 2.22 percent late Dec. 31.

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Technorati Tags: Manufacturing

Source: Bloomberg.com

Sales of single-family houses in the U.S. dropped in November by the most in two decades and resale prices collapsed at a pace reminiscent of the Great Depression, dashing speculation the market was close to a bottom.

Purchases of both new and existing houses dropped 7.6 percent from the prior month, the biggest decline since January 1989, to an annual rate of 4.43 million, government and industry figures showed today. A 13 percent drop in the median resale price from a year earlier was the most since records began in 1968 and was likely the largest since the 1930s, the National Association of Realtors said.

“Housing is still in a freefall,” said Nariman Behravesh, chief economist at IHS Global Insight in Lexington, Massachusetts.

The figures were worse than economists had forecast and signal that the battered housing market that led the economy into a recession may be taking another lurch down. Sliding property values mean more Americans will be under water on their mortgages, destroying household wealth and undermining consumers’ purchasing power.

President-elect Barack Obama plans an unprecedented economic stimulus to restore growth, and pledged on Dec. 13 to limit foreclosures. One tenth of U.S. families who own a home are in financial distress, Obama said.

“We need desperately to get this economy moving,” Vice President-elect Joseph Biden, who is leading the incoming administration’s initiative to bolster the middle class, told reporters before a meeting with Obama’s economic advisers today. Transition officials are “getting very close” to an agreement with lawmakers on the size of the stimulus, Biden said.

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Technorati Tags: Depression

Source: The Raw Story

Britain edged ever closer to a recession on Tuesday and the IMF’s top economist warned of a second Great Depression, as stock markets awaited fresh US growth data in the hope of some Christmas cheer.

Britain’s economy shrank by 0.6 percent in the three months to September compared with the previous quarter, against a previous estimate of 0.5-percent contraction given last month, the Office for National Statistics said.

Britain will officially be in recession if the economy contracts again in the fourth quarter after already screeching to a halt in the second quarter during which this key European Union economy recorded zero growth.

News of weakening growth sent the British pound sliding under 1.06 euros, nearing a record low of 1.0463 reached last week, as dealers bet on more interest rate cuts from the Bank of England and forecast parity with the euro.

The dollar also dipped against the euro and the yen in morning trading.

“Contraction of 0.6 percent in the third quarter was even sharper than previously anticipated, highlighting the serious downturn in the economy,” said Howard Archer, an economist at the IHS Global Insight consultancy in London.

The IMF’s top economist, Olivier Blanchard, meanwhile said governments around the world should boost domestic demand in order to avoid a Great Depression similar to the downturn that shook the world in the 1930s.

“Consumer and business confidence indexes have never fallen so far since they began. The coming months will be very bad,” Blanchard said in an interview with the French newspaper Le Monde.

“It is imperative to stifle this loss of confidence, to restart household consumption, if we want to prevent this recession developing into a Great Depression,” he added.

New data out in France offered some respite from the gloom, however, showing that household consumption of manufactured goods — a key growth indicator — rallied 0.3 percent last month after slumping in October.

“It is a first small Christmas present for the French economy,” said Alexander Law, an economist at the Xerfi research centre in Paris.

But in Italy, retail sales figures went down 0.3 percent in October.

Denmark’s economy contracted 0.4 percent in the third quarter and the Dutch economy showed zero growth, official data showed. Finland’s unemployment rate rose to 6.0 percent in November from 5.8 percent a month earlier.

The European Central Bank issued some heartening pre-Christmas data showing that the eurozone’s current account deficit narrowed to 6.4 billion euros (9.0 billion dollars) in October from 8.8 billion euros in September.

European stocks were slightly up in midday trading ahead of the release of US third-quarter growth data, with the FTSE index in London up 0.46 percent, the Frankfurt Dax up 0.37 percent but the CAC 40 in Paris dipping 0.04 percent.

“UK and US GDP readings will be closely watched and with expectations low for both, any positive surprises could help provide some festive cheer,” said Jimmy Yates, a dealer at CMC Markets in London.

Asian stocks closed mostly down, with the Hong Kong stock market shedding 2.8 percent and Shanghai sinking 4.55 percent as a smaller-than-expected Chinese interest rate cut failed to boost market moods.

Oil prices also fell further to below 40 dollars a barrel in Asian trade, with New York’s main futures contract, light sweet crude for delivery in February, shedding 60 cents to 39.31 dollars a barrel.

The contract had fallen to 39.91 dollars in New York on Monday.

Energy analysts were also keeping a close eye on a meeting of key world gas exporters in Moscow amid fears of a “gas OPEC” similar to the Vienna-based oil cartel that could raise natural gas prices.

In a keynote speech, Russian Prime Minister Vladimir Putin told the conference that the “era of cheap gas” for consumers was coming to an end because of the expense of developing new fields.

Technorati Tags: Recession, Depression

It’s more than just a recession…it’s a depression.

Source: CNBC.com

Shockwaves from the global financial crisis are now being felt in almost every corner of working America as companies press the eject button on increasing numbers of their employees.

While the ax has been falling for months in the financial, homebuilding and auto industries—where the current economic downturn started—makers of everything from soft drinks to water filtration systems have unveiled rounds of job cuts in recent weeks as they brace for what could become a long and deep recession.

This week alone, companies including PepsiCo [PEP 53.88 0.80 (+1.51%) ] and Danaher said they would lay off thousands of workers, while the state of Massachusetts disclosed plans to cut its payroll by 1,000 as it faces a tax shortfall.

The situation is poised to worsen as the holidays approach as many businesses scrutinize budgets for the coming year. Christmas layoffs are common in tough times.

“It’s a fairly grim outlook,” said Michael Goodman, director of economic and public policy research at the Donahue Institute of the University of Massachusetts. “I don’t know of any sector of the economy that will be spared.”

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layoffs, depression

If “Economists generally don’t believe that a depression is likely” then you can almost be guaranteed that it’s just around the corner.  If you are not prepared now it may very well be too late…

Source: CNN.com

Economists generally don’t believe that a depression is likely, but Ross isn’t alone in her despair. A CNN/Opinion Research Corp. poll released Monday found that among 1,000 Americans surveyed over the weekend, nearly 60 percent said a depression is at least somewhat likely.

To define economic depression, the poll cited measures of the Great Depression of the 1930s: a 25 percent unemployment rate; widespread bank failures; and millions of Americans homeless and unable to feed their families.

Jim Whipp, a 55-year-old Coloradan visiting Atlanta on Monday, didn’t mention depression when asked about the economy, but said he was worried about retirement.

Whipp, who does DSL installation and maintenance for Qwest Communications, said he had put more than 25 percent of his pay into his 401k from mid-2006 to the end of November 2007, when his wife was laid off from her job.

Falls in the stock market erased all of that, he said.

“Everything I put in the last two years are gone,” said Whipp.

He had planned to retire in two to three years. But now, even though his wife has been rehired, retirement probably is seven or eight years away, he said.

Greg Olsen, a partner with New York financial services firm Lenox Advisors, said his advice to investors in the face of the distressing economic news depends on how much time and money they have.

“It’s the person who has the lesser amount of money to invest that we worry about because they can’t afford to have these types of losses,” he said.

But he said now “is not the time to make any rash decisions” for anyone whose retirement is more than 10 years away.

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