August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

[tacito]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

they can't replace trillions in gone credit

Funny think that so many people think that money gets destroyed when a credit is not payed. As I understand it, it's just the opposite:

Normal case (no default):
1) Bank gives credit to liar, creating new money.
2) Liar spends money buying an 80 inch plasma TV.
3) Money circulates: from mall to distributor, from distributor to manufacturer (in China), exchanged for yuan with chineses gov., from chinese gov. buying short term treasuries to american gov., from american gov. to GM, etc.
4) Liar earns back money plus interest from the economy.
5) Liar pays bank. Money gets destroyed. The bank should lend again, or the money supply will shrink.

New normal (default):
1) Bank gives credit to liar, creating new money.
2) Liar spends money buying an 80 inch plasma TV.
3) Money circulates: from mall to distributor, from distributor to manufacturer (in China), exchanged for yuan with chineses gov., from chinese gov. buying short term treasuries to american gov., from american gov. to GM, etc.
4) Liar fails to earn back money and defaults.
5) Bank loses money, that remains still in the economy. No deflation here.
6) Fed creates money to bailout bank. No inflation until the bank lends the money. It will try not to, but if it has enough defaults, it will have to...

[jiimbergin]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

i think you're a troll.

Thanks metalman. I think it is a great piece. But it would be better if someone would please help me understand about the 18%

jim

[metalman]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

mega trollish 1st post. i'll score it for ya... from 0 to 5...

I thought this was the weakest EJ piece I've ever read on this site. It actually contradicts his earlier pieces on Depression.

0... it is 100% consistent with previous analysis.

I fully appreciate his arguments for Depression, but runaway inflation in a Depression?

0... where does he say 'runaway inflation'??? he says stagflation...

iTulip Forecast: The U.S. will experience stagflation as the economy drifts in and out of periods of moderate to high inflation while unemployment remains high. The sources of inflation are: 1) high import costs, with energy costs exerting the greatest upward force on the prices of goods, 2) reduced quantity of goods and services, 3) industrial concentration. The challenge for investors and consumers alike will be managing through inflation volatility, high unemployment, and political uncertainly, a new problem for the U.S. that will weigh on the dollar even more than the Fed's and Federal Government's balance sheet. As the U.S. fiscal and external debt position grows increasingly precarious, the U.S. remains vulnerable to a sudden stop event.

I need to see more arguments for that. His citing of of a little blip upwards in CPI as a new trend towards runaway inflation is unconvincing.

0... never says runaway inflation... stagflation.

No matter how much Bernanke and Co. try, they can't replace trillions in gone credit, all over the world (remember the status of the dollar, not Argentina's currency).

0... ah, the meat of the deflationista troll... 'they can't hit the zero key enough...'

On one hand he critisizes people who compare current situation to Great Depression, saying this happened only once. But Depression and Inflation together NEVER happened in this country!

-5... bullshit. he backs it up with facts...



Japan since 1999: Wages up


wages up during a depression... b...b..b.but how?

Comparing other countries to US is much harder due to history and currency considerations, so citing 17 other countries with that experience is hardly an typical EJ good argument.

0... the dollar can't depreciate? really???? like the 40% it lost 2001 - 2008?

Is it possible EJ getting dogmatic about his Ka-Poom theory?

1... you get one point... posed as a question not an unsubstantiated assertion.

He could still be right, but I thought his arguments this time were weaker than his usual stuff.

What do you think?

i think you're a troll.

[talaicito]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

[url="http://finance.yahoo.com/tech-ticker/article/298981/Inflation-Not-a-Problem,-%22Deflationary-Depression%22-in-Our-Future,-Prechter-Says"]

elliot wave is a scam & prechter is a scam artist. give the man his due.... he's good at what he does... separating people from their money.

I heard he made 400% in 4 months trading, are you sure this is about money??
If I were him (and i'm all about money) i'd be just sitting and trading instead of wasting my time arguing with dumbasses on CNBC or anywhere else.

[talaicito]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

Excellent article, especially with added bonus that there was not one mention of a potential trade that may or may not pay off over the next ten minutes!

I thought this was the weakest EJ piece I've ever read on this site. It actually contradicts his earlier pieces on Depression. I fully appreciate his arguments for Depression, but runaway inflation in a Depression? I need to see more arguments for that. His citing of of a little blip upwards in CPI as a new trend towards runaway inflation is unconvincing. Very un-EJ. He usually criticizes others (rightfully) when they mistake a couple of data points for a trend.

No matter how much Bernanke and Co. try, they can't replace trillions in gone credit, all over the world (remember the status of the dollar, not Argentina's currency).

On one hand he critisizes people who compare current situation to Great Depression, saying this happened only once. But Depression and Inflation together NEVER happened in this country! Comparing other countries to US is much harder due to history and currency considerations, so citing 17 other countries with that experience is hardly an typical EJ good argument.

Is it possible EJ getting dogmatic about his Ka-Poom theory?

He could still be right, but I thought his arguments this time were weaker than his usual stuff.

What do you think?

[bart]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

What matters is that we be consistent on terminology. If u3 at 9.5% means 16% in your terms than it doesn't really matter what means what. But you can't switch between terms. You need to use the same definition of unemployment to have a legitimate conversation.

In a thread I started in January, I asked if 20% was u3 or u6 or some other definition of unemployment. I did not receive a straight answer.

So now we get a kind of, "see I'm right, it's 16% unemployment."

I am in no way, shape or form saying that 9.5% U3 is the same as 16%+ U6, but rather expressed an opinion about U1-U6 being "crap". I only watch U6 & my own U7, but also note U3 since Wall St spins & spews about it and it affects markets - whether I like it or agree with it or not.

What we have here is a rock and a hard place, as Fred sort of noted. U6 is not well known at all and U3 is full of holes... and both shadowstats.com and my U7 reconstruction don't exactly have huge following either.

And then we have the whole issue of EJ or iTulip or whomever getting zapped or raked over the coals when they're not 100% perfect and correct, and what a crock that is. I'm a successful trader, and only get 60%+ right.
I don't mean this to be a personal attack on you at all, but think about what it takes to put your butt on the line and make forecasts going out many months or years, and knowing that sometimes you'll be wrong. The real key to me is how honest someone in the forecast business is, and much more - do they learn from those inadvertent goofs. And do their overall calls and views stand the test of time... and iTulip does *way* better than most.

The whole area of economics and finance has been injected with so much outright wrong data and vested interest based spin & crud etc. that its so far beyond ridiculous that I can't even put it into words. And I don't want my blood pressure even higher than it is already.

Whether its intentional or inadvertent or some combination of the two isn't even all that important - the main point is that its well beyond a minefield, and trying to punch through all the crud and bad data that the average person has is extremely difficult.
As just one small example - I started posting about Fed OMOs and POMOs almost 4 years ago, and damn near no one believed what I was saying - and with raw facts directly from the Fed! Its part of the reason I use a tinfoil fat avatar - the real truth about what's really going on is literally alien to most people.


Then in my opinion we have the issue of if iTulip only talked about U6 for example, some/many folk would have hissy fits about why they're avoiding U3. I was confused myself at whether their 20% forecast was U3 or U6, but it was clarified many times as being U3 and a search will confirm that.

I even wrote a post a week or so ago with a best guess that we'll have a "double dip" or worse and that 20% is still not out of line for U3... but its so hugely political that redefinition will cause it to never happen. After all, on a best guess basis per my research, today's shadowstats.com numbers or my U7 reconstruction actually are roughly equivalent to U3 prior to 1970 or so. And that research, as well as the reconstruction, took many dozens of hours to plow through all the BLS BS... and I'm still a bit uncertain on my conclusions.




edit/add:
As far as nominal vs. "real Dow", its another damned if you do and damned if you don't. Some want one and some want the other, and so they do both - much as I do on many of my charts.

People are different and want/need different views, and given that roughly 80% of the Dow or Dow+dividends gain since 1900 are inflation only (per shadowstats.com adjustments with some changes by me), things like "real Dow" go a long way towards exposing that awful truth.

I also don't expect iTulip to use either my or shadowstats numbers on anything either. They're their own folk with their own opinions. I'm happy that they have used some of my charts, since that's one of the main reasons I spend so much time on them - so that raw facts can get wider exposure - but mostly they go their own way. I'm here precisely because I don't always agree and also because they do frequently come up with some quite good and unique work which is head & shoulders above most, while being far from perfect.

[seanm123]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

Seems there is some very credible evidence popping up to suggest that the guy carrying an AR-15 was a plant as he was supposedly seen chanting pro-obama slogans and was with the SEIU crowd of counterdemonstrators.

It may well have been a plant exercise by Law Enforcement than an actual protest, look for more of this including aid provided by informants planted in protest groups.

[we_are_toast]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

What do you recommend?

Chasing the BLS around could turn into a full time job. See: BLS plans to pump up PCE with food and energy prices.

Thanks again for another fine job by iTulip and EJ.

I too have been confused in the past as to what measurement you were using for unemployment. I think the 27 week unemployed as a % of total civilian population is a good measure. But how does 6 million unemployed (for more than 27 weeks) in a 150 + million labor force translate to 18% unemployment? :confused:

[goadam1]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

What do you recommend?

Chasing the BLS around could turn into a full time job. See: BLS plans to pump up PCE with food and energy prices.

You can use the shadowstat definition or Bart's. When I see a number, I need to know it is has the same meaning and the same relationship. Switching around terms and declaring victory is bogus science.

The same goes for "real Dow." If one prediction is nominal, but 6 months later we are talking about the inflation adjusted level, then I don't understand what is being discussed. We had "beware of relief rallies" but then we start talking about "real dow." Both terms matter for different discussions. As Finster has made the point, if dollars shrink but the dow goes up, then not being out of dollars makes me lose. I understand that I didn't make "real dow" gains. But there is no "leave" in the system. Besides, inflation has always been part of stock "gains."

And real dow should be compared to something consistent. I'm not good at math, but I think a 50 or 200 day moving average of the dow to gold or oil would tell us something about real gains.

Great work. Thanks.

[Retired Commish]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

No question: One of the finest articles I read this year. EJ, you have that knack of a great teacher to make something understandable and interesting enough for one to continue learning. Until you are better paid, Thanks. This article will go to my select friends!

[FRED]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

What matters is that we be consistent on terminology. If u3 at 9.5% means 16% in your terms than it doesn't really matter what means what. But you can't switch between terms. You need to use the same definition of unemployment to have a legitimate conversation.

In a thread I started in January, I asked if 20% was u3 or u6 or some other definition of unemployment. I did not receive a straight answer.

So now we get a kind of, "see I'm right, it's 16% unemployment."

What do you recommend?

Chasing the BLS around could turn into a full time job. See: BLS plans to pump up PCE with food and energy prices.

[goadam1]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

I actually don't think they're crap, one just needs to both put them in proper perspective (as in mostly ignore U1-5 except for inevitable U3 spin effects from Wall St., back adjust for the doofus birth death model, etc.) and also pay attention to stats like John Williams estimates and my own U7 reconstruction - as well as folk like EJ who have been talking about "jobless recovery" and similar for years.


They tell close to the same macro story - things are not in good shape to say the very least. The difference between ~16% U6 and ~20% shadowstats.com numbers and my own ~20% reconstructed U7, while very important for that 4% difference who are unemployed, is not terribly consequential in the grand scheme - they both suck hugely.




Agreed... and unfortunately I don't track working age population. It would certainly present a better & more complete picture, but those charts beat nuttin'.

What matters is that we be consistent on terminology. If u3 at 9.5% means 16% in your terms than it doesn't really matter what means what. But you can't switch between terms. You need to use the same definition of unemployment to have a legitimate conversation.

In a thread I started in January, I asked if 20% was u3 or u6 or some other definition of unemployment. I did not receive a straight answer.

So now we get a kind of, "see I'm right, it's 16% unemployment."

[jiimbergin]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

Have I missed something? No one has given an answer to the 18% (percent of total civilian population or as in the footnote total civilian labor force) that is unemployed for more than 27 weeks. Does anyone understand this? Since the question was asked almost right after the post was made I thought we would have an answer by now.

jim

[jk]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

from zerohedge. prices paid- up a lot. prices received- not so much.

Empire Manufaturing Index Rises As Margin Pressure Increases

Submitted by Tyler Durden on 08/17/2009 07:59 -0500




The Empire Manufacturing Index screamed higher to 12.1, much higher than the estimate of 3, yet the simple reason for this was margin pressure increased. As the chart below demonstrates The Prices Paid - Prices Received delta increased yet again, this time hitting 26.60, indicating manufacturers are losing on margin, which will impact the bottom line. And the future does not look much better: Prices Paid is expected to increase to +31.91 and Received to pick up to +5.32, meaning the margin pressure is here to stay.

[ironlady]

Re: August 2009 FIRE Economy Depression update – Part I: Snowball in Summer - Eric Janszen

The inside of our local Target store in Burlington, Massachusetts looks like this. Shelf space has been cut by more about 40%. The isles are wide enough to drive through. The selection of goods is a fraction of what it was six months ago. The same is true of the Super 88 where we shop for Asian groceries. The space is half empty, and the items on the shelves no longer include expensive Japanese imports, only Chinese.



It is refreshing to see a man walking through the isles with his wife...that is why I read your posts and agree so wholeheartedly with what you write. When you raise children on your own , you learn all about the grocery games. Right now in Canada, our packaging has shrunk, but prices are where they have always been. Pricing has also changed, ie, they used to sell cabbage at $0.69 a head and it is now by the pound. Ever wheighed a cabbage? What used to cost $0.69 is now $2.25. The shelves are now lowered in the "newly redesigned Loblaws" Canada's top chain, and the isles are wider and the shelves are half empty. Staff say, "we are just adjusting to our new look". Hogwash! Potatoes that used to feed an out of work hungry family used to be $0.29 lb and are now $0.99 or more per pound. And we grow them here !!!
As always EJ, you are right and you will be right in the future. Just keep holding your wifes hand down those isles!;)