Doesn't feel like the recession is over - The Daily Reckoning
The Daily Reckoning by Bill Bonner
On This Day - 23 September 2010
PRINTER FRIENDLY | ARCHIVES
Doesn't feel like the recession is over A  A  A

Delray Beach, Florida

Yesterday, the Fed's FOMC group announced that it was standing pat. Yes, it might have to do something in the future. But for now, it is neither exiting its stimulus monetary position...nor is it adding to it.

------------------------------ Don't Miss ------------------------------
We are delighted to offer you our latest publication - The Definitive Guide To Derivatives.
This guide will empower you with all the necessary knowledge you need to take your first steps to investing profitably in derivatives.
The best part, dear reader, is that this guide is Absolutely Free Of Any Charge. try our free-for-life daily newsletter - The 5 Minute WrapUp - for a week! Click here Right away!

---------------------------------------------------------------------------

The stock market didn't know whether that was good or bad...so it didn't do much of anything. The Dow went down 24 points. But gold soared to a new record - up $17.

Officially, the recession is behind us. That's the good news. Officially, it ended in June of '09.

The bad news is - so what? Recession or no recession, people are having a hard time finding jobs and making ends meet. The US economy continues rumbling and trundling along. It is a Great Correction....

According to the latest figures, there are more people without jobs today than there were when the recession ended. On Tuesday, the Labor Department announced that total joblessness fell in 3 out of 4 states during August. Overall, the US economy lost 54,000 jobs, net, driving the unemployment rate up to 9.6%.

Those who lack work are unlikely to enjoy their leisure; they have too much of it. The jobless today are likely to stay unemployed much longer than any in US history. In the 70s downturns, the typical unemployed person remained without a job for 10-15 weeks. In the 80s, it was more like 20 weeks. Now, idleness has stretched to 35 weeks. The young are traumatized by it for life, says a new study cited by the Telegraph. For the old, it is like baldness or arthritis; they may be stuck with it for the rest of their lives, says the New York Times.

Even since the recession officially ended, more people have gone into the poorhouse than come out of it. Not only do they lack jobs, their major asset - the value of their homes --- is falling. And it will probably fall much more, as inventories of foreclosed houses are dumped onto the market. Here's the latest report from Bloomberg:


U.S. home prices dropped 3.3 percent in July from a year earlier, the eighth consecutive decline, as foreclosed properties flooded the market.

Prices fell 0.5 percent from June, the Federal Housing Finance Agency in Washington said in a report today. Economists had projected prices to fall 0.2 percent from the previous month, based on the average of 15 estimates in a Bloomberg survey. The agency revised the previously reported May-to-June decline to 1.2 percent from 0.3 percent.

Foreclosures are boosting the supply of available properties and reducing prices, even as mortgage rates tumble to record lows. The time it would take to clear the market of homes for sale was 12.5 months in July, the highest in more than a decade of data, according to the National Association of Realtors. Banks seized a record 95,364 properties from delinquent borrowers in August, according to RealtyTrac Inc., an Irvine, California-based seller of housing data.

Nationally, sales of existing homes in July plunged 27 percent to a 3.83 million annual pace, the lowest level on record, NAR said Aug. 24. July sales of new homes dropped to an annual pace of 276,000, the fewest since data began in 1963, the Commerce Department reported Aug. 25.


"I had a house a couple of blocks from here," said a friend in Delray Beach. "I sold it in 2006 for $295,000. It wasn't much of a house. On the edge of a bad neighborhood. But I fixed it up.

"Well, the guy who bought it couldn't pay his mortgage. So another friend is buying it back. Guess how much he's paying for it? Seventy-five thousand. I'm glad I sold that when I did."

*** Dear readers may wonder at a definition of growth so slippery that it permits people to grow poorer, even as the numbers are positive. Is it a paradox, an oxymoron or a damned lie? How come the economy is 'growing' while the key measures of a household's financial situation have not improved or are getting worse? Joblessness is the same or worse than it was a year ago, depending on how you measure it. Housing prices are clearly going lower. People are not earning more money. And their major asset - their homes - are declining in value. So, what does it mean to say the economy is improving?

It is merely an outward sign of an inner rot. Last week, just to remind regular readers, we touched upon the institutional imperative. Nothing wants to die. Not a hound dog. Not a bank or a business. Nor even a whole profession. Given an opportunity, it survives by cunning...and it uses a crisis to expand its influence power, and wealth.

The SEC, for example, is clearly incapable of preventing major fraud - as in the Madoff case - even when you run its nose in it. The regulators are also incapable of noticing the biggest bubble in human history.

Of course, that could be said of the Fed too, which not only failed to spot the bubble, it - along with Fannie Mae and Freddie Mac - had a hand in creating it.

Well, now the SEC has new enforcement powers, says a headline. And the Fed does too. They've 'adapted' to the new challenges, say the news reports. Progress has been made. Yes, progress on the road to Hell!

If the NBER is to be believed, the longest correction since the Great Depression caused a total backsliding of only about 4% of GDP - maximum. Piddly... So the authorities have to get credit for that too. As Charlie Munger puts it, the "bailouts were absolutely necessary to save our civilization."And they worked.

And Munger's partner Warren Buffett is ready to give them credit for another great success. There will be no double dip, he says. Another big success for the home team.

To these wonders you can add further improvement. The world's central bankers and Treasury secretaries agreed on new banking standards at what is known as 'Basel Ill.'

In light of these achievements, who can help but be optimistic for the future of the human race?

Readers are encouraged to see the process in a new light.

Bill Bonner is the President & Founder of Agora Inc, an international publisher of financial and special interest books and newsletters.

Disclaimer:
The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

Get The Daily Reckoning directly
in your mail box.
Just enter your e-mail address » 

Read our Privacy Policy and Terms Of Use.

Equitymaster requests your view! Post a comment on "Doesn't feel like the recession is over". Click here!

2 Responses to "Doesn't feel like the recession is over"

thejas

Sep 25, 2010

This is the case in India as well. The rich is becoming more rich and the poor become more poor. The gap is widening.

Like 

Srinivas

Sep 23, 2010

"How come the economy is 'growing' while the key measures of a household's financial situation have not improved or are getting worse?"

It's a frame of reference, perspective...What is your definition of Economy? Perhaps, for them, economy means wealth of the rich & powerful, financial status of big businesses... and it's growing. Rest of the people are consumers (read 'outsiders'... resources outside the economy). And, for you, economy means that which includes all the people in a nation. That is Crony capitalism.

"The regulators are also incapable of noticing the biggest bubble in human history."

They are not incapable, they are capable. But they don't want/have to notice it, because they created it.


Like 
  
Equitymaster requests your view! Post a comment on "Doesn't feel like the recession is over". Click here!

Recent Articles:
Trump Takes a Beating
August 18, 2017
Donald J Trump, a wrasslin' fan, took a 'Holy Sh*t!' blow on Tuesday.
Which Gods Will Bring Down the US Empire?
August 17, 2017
Mr Trump is in the White House and the gods are in their heavens; what's not to like?
Will They Haul Off Trump's Statue, Too?
August 16, 2017
All across the country, the old gods become devils. New, gluten-free gods take their places...
Farm Loan Waivers: Why Bad Economics Makes for Good Politics
August 14, 2017
It is because the negative effects of the waivers aren't clearly visible.