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Ambrose Evans-Pritchard, distinguished International Business Editor of The Daily Telegraph, has just published an article pointing out that the global economy is a lot closer to recession than many may be willing to acknowledge, and highlights risks we now face in this age of ZIRP.

The Daily Telegraph
HSBC fears world recession with no lifeboats left
The world authorities have run out of ammunition as rates remain stuck at zero. They have no margin for error as economy falters.

The world economy is disturbingly close to stall speed. The United Nations has cut its global growth forecast for this year to 2.8pc, the latest of the multinational bodies to retreat.

We are not yet in the danger zone but this pace is only slightly above the 2.5pc rate that used to be regarded as a recession for the international system as a whole.

It leaves a thin safety buffer against any economic shock - most potently if China abandons its crawling dollar peg and resorts to 'beggar-thy-neighbour' policies, transmitting a further deflationary shock across the global economy...
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Possibly (hopefully) not the contagion risk of a few years ago, but should still be watched for its potential to end up making a bigger Graccident...

Greece will not make June IMF repayment: interior minister

Greece has again threatened to default on loan repayments due to the International Monetary Fund, saying it will be unable to meet pension and wage bills in June and also reimburse €1.6bn owed to the Fund without a bailout deal with creditors.

"The money won't be given . . . It isn't there to be given," Nikos Voutsis, the interior minister, told the Greek television station Mega...
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That Pesky, Weak First Quarter GDP Number

There is likely a negative bias that exists in the seasonally adjusted US GDP numbers of the first quarter of every year, and this has been going on for who knows how long. Hypothetically, this does get made up for in subsequent quarters (particularly the very next quarter - Q2 - (For example, take a look at Q2 GDP during 2008.. smack inside of the Great Recession.. and yet, decidedly positive!?)).

Well, leave it to the bean counters over at the BEA to fix it all. They are gearing up to release revised data going back to 2012. Never mind adjusting the entire series, which is arguably what they should do, if and when resetting how they account for this or that. Nope, they are merely going to tidy up those pesky, weak numbers going back to 2012, the extent of the current benchmark revision.

This is a real-life example why those in the know pay less and less attention to seasonally adjusted GDP reports, and more and more attention to things like The Big Four Recession Indicators (which, as has been shared here recently, are advertising that a dramatic economic slowdown is indeed underway, despite whatever these upcoming 'adjustments' may otherwise suggest). And when looking at GDP, many of the best econs are now placing far more weight on GDI (Gross Domestic Income). Also helpful is looking at NOT-seasonally-adjusted GDP comparisons, as well as Nominal GDP. Less data manipulation, less guesswork = often enough, more reliable inferences.

~Related Articles~

Govt sees GDP data problems, backs CNBC findings

The government agency charged with calculating the nation's growth rate is acknowledging problems with its numbers and pledging a series of fixes over the next several months.

In a statement to CNBC, the Bureau of Economic Analysis said it's "aware of issues" in it gross domestic product data and "is developing methods to address what it has found."

The BEA statement comes after CNBC, in a detailed report in April, showed that first-quarter GDP data have been weaker than the other three quarters for the past 30 years and substantially weaker in the past five...

Zero Hedge
The US Department Of Commerce Officially Jumps The Shark, Will "Double Seasonally Adjust" GDP Data

...In other words, as of July 30, the Q1 GDP which will have seen its final print at -1% or worse, will be revised to roughly +1.8%, just to give the Fed the "credibility" to proceed with a September rate hike...

Will abnormally "good" data be revised lower...? Don't hold your breath...
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Somewhat surprising given what is clearly a significant slowdown - if not outright 'Growth Recession' - in the states, the Economic Cycle Research Institute finds their proprietary Long Leading indexes are pointing towards a turn-around later this year on a global scale in both growth and pricing power.

If correct, it seems plausible that the US might skirt an outright recession this year, but it looks super close.

Surf's Up

In sharp contrast with the Wall Street consensus last July that global growth would accelerate, ECRI was warning of an impending global slowdown. Accordingly, growth in the Journal of Commerce (JoC)-ECRI Industrial Price Index (IPI)* peaked in July (Chart 1), before starting its sharp decline. By the fall Wall Street became wise to the downturn in energy prices in particular, focusing on supply concerns. However, the decline in IPI growth to a 70-month low early this year makes it clear that a broad industrial downturn was underway, hurting the prices of many other industrial commodities, including primary metals...

Today, the welcome news is that the long leading index has turned up, and the coincident index is starting to follow suit, with the revival being led by economies where exchange rate weakness is acting as a tailwind (Japan and the Eurozone), while being less evident in the U.S. where dollar strength is a headwind... Full article here. Credit: ECRI
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It's Starting to Look a Lot Like Recession, 2015

It's been almost six years since the end of the last recession and start of the current expansion. Did you feel it?

Humor aside, the last recession by all sorts of measures was truly the worst since the 1930s, and the expansion the weakest. While many people are back to work, part-time and/or lower paying jobs continue to strain many households - a trend that we have seen repeated after every downturn since the 1980s.

It is fair to say that historically speaking, we are much closer now to our next recession, than our last. In fact, it may already be coming into focus.

It's starting to look a lot like Recession, 2015

Read more...Collapse )

Risk of Financial Crisis Reduxdux

Read more...Collapse )
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This recession related topic is being discussed at The Recession.
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Demands on time in the MMT community include (i) providing “simple as possible” explanations of “basic MMT” for public consumption and (ii) exploring theoretical and policy ideas informed by an understanding of those basics together with insights from related approaches to economics. Although the latter task is perhaps more enticing for those who have by now (mostly) absorbed the basics, and is certainly an area worthy of pursuit, the former task remains politically pressing and so equally deserving of time. It doesn’t matter what progressive policies, institutional reforms or plans can be devised if the public believes they are “unaffordable because the nation is bankrupt” or “impossible because capitalists won’t stand for them”. This brainwashing has occurred over decades and clearly people are not freeing themselves of it easily.

Although confusion over “money” is immense, it seems fairly common on the left to view the topic as superficial compared with study of “real” stuff. I think downplaying the significance of money is a mistake. Downplaying its connection to the real is also a mistake. And imagining the analysis of money is any less threatening to the powers that be than analysis of the real is a bigger mistake. Probably the only topic as taboo as money in orthodox economics would be the identification of profit with surplus labor. The reason for money’s taboo status seems clear. Understanding existing monetary institutions and operations points to a way of undermining the profit system and exploitation of labor.

This is not, of course, to attribute such a focus or motivation to the Modern Monetary Theorists themselves, most of whom appear to favor managed capitalism (although see Bill Mitchell’s MMT is not conservative thought for a more left perspective from a leading proponent). It is rather to suggest that the Modern Monetary Theorists’ careful and, as far as possible, objective institutional description and analysis of monetary and fiscal operations in a sovereign currency system arguably brings to light a radical democratic potential inherent in sovereign money, waiting to be seized upon. It opens the way to managed capitalism or social democracy or socialism or beyond, however far (or not so far) we wish to take it. This democratic potential may have been what drove European elites to take currency issuance out of the hands of democratically elected national governments and empower, instead, the unaccountable European Central Bank.

In the present economic system, real resources are mobilized only on the say-so of the issuers or possessors of money, and only on their terms. No production, even for profit based on the exploitation of labor, takes place until finance is secured. It makes a great difference whether money is made available on our terms, by a democratically accountable currency-issuing government, or on the basis of private interests motivated narrowly by profit, facilitated by an unaccountable government. The issuers and possessors of money determine what production will and won’t take place, the nature of the production process, the nature of work itself, access to productive resources, distribution of income and leisure, and more. The channel through which money is created (public or private) and the terms on which it is issued (democratic or undemocratic, interest free or rentier friendly) strongly influence whether institutional reforms and regulatory measures contrary to the interests of capitalists, including measures capable of re-shaping the sphere of production, are viable or not viable.

Except to the extent that production is freed from the profit imperative — is allowed to proceed without reference to it and without a need to answer to it — attempts to base enterprise on a different social basis and re-shape the sphere of production, including the nature of work, seem likely sooner rather than later to revert to the same methods of operation and priorities as capitalist corporations. But freedom from the profit imperative, when desired, is always near at hand in a modern money system. A prerogative of a currency-issuing government is to ignore the profit criterion and to proceed on a different basis. The absence of a revenue constraint means that real-resource availability (in relation both to the inflation barrier and environmental sustainability) is the only hard constraint. There is no need to generate a profit. There is no need to provide a flow of interest income to rentiers. If the production is something that the majority would consider socially beneficial, and is within resource limits, the main obstacle to its going ahead is the electorate’s own failure to understand the options available to it.

An understanding of modern money makes clear that a democratically accountable government with the backing of the greater part of the electorate would already, under present institutional arrangements, be in a position to begin an extensive transformation of social and economic institutions. But it would require going against the interests of the rich and powerful. To do that successfully, government needs the overwhelming backing of the electorate. And, for that to happen, the electorate needs to be liberated from its confusion over “money” and comprehend the viability of following such a course.

That, perhaps, is why close scrutiny of monetary operations is taboo among orthodox academic economists just as acknowledging the origin of profit is taboo.
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...from "The Hipcrime Vocab": In which 'escapefromwisconsin' not merely refutes the various claims of The Austerity Mafia, but completely eviscerates them and then outlines - in detail - a whole raft of positive solutions to the present 'crisis'...

I - Where the Workers Are Going.

One of my blog posts that got a bit of attention was this one-What if a Collapse Happened and Nobody Noticed? In that post, I pointed out that waiting for a collapse was a rather foolish proposition because it is already happening. The problem is, people tend not to see it because it does not conform to certain preconceived notions of what a collapse "should" look like-notions fostered by Hollywood rather than by history, including shelves empty of food, dry gas pumps, ATMs unable to dispense cash, and chaos and rioting in the streets.

Also, the unevenness makes it hard to detect. Gasoline was indeed rationed - but only in the aftermath of hurricane Sandy. There are still plenty of suburbs, but total miles driven is slightly down for the first time ever, the average age of cars on the road is at an all-time high, and many of those homes lie empty and deserted. The pumps still dispense gas, but you're paying more for it without a corresponding raise in salary. Some areas are gentrifying and gaining population, whereas others are virtual ghost towns. There is indeed mayhem and civil war in the streets - but it is in Syria. There are indeed deactivated ATMs, but they are in Cyprus. An unknown wag coined the term Detroitification, and I think I will co-opt it. Like a spreading mold, it's coming to a town near you.

We humans are designed by evolution to respond to immediate threats, but slow-motion catastrophes simply do not register or generate any source of alarm. Another of the underlying themes of this blog is to remind people that it is indeed happening, but is subject to what I'll dub the Gibson Principle - the future is already here; it's just not evenly distributed. If you look closely, though, you'll see the subtle signs everywhere. See for example - California water managers despair over snowpack, and FAA to close 149 air traffic towers as budget cuts bite. If every single one of these towers ever reopens, I'll run through the streets naked.

Just as I attempted to gain notoriety by being the first to actually predict collapse, I will now predict the date of the arrival of the post-work society. It is right here, right now. [con't below]

Part I: http://hipcrime.blogspot.com/2013/04/the-post-work-society-is-not-future.html

Part II - The Other Wards of the State: http://hipcrime.blogspot.com/2013/04/the-post-work-society-is-not-future_7.html

Part III - Corporate Welfare: http://hipcrime.blogspot.com/2013/04/part-iii-corporate-welfare-of-course.html

Part IV - A Modest Proposal: http://hipcrime.blogspot.com/2013/04/the-post-work-society-is-not-future_8.html

Part V - But, But, But...: http://hipcrime.blogspot.com/2013/04/the-post-work-society-is-not-future_10.html

Part VI - The Alternative: http://hipcrime.blogspot.com/2013/04/the-post-work-society-is-not-future_997.html

Part VII - Conclusion: http://hipcrime.blogspot.com/2013/04/the-post-work-society-is-not-future_11.html

Part VIII - Charts: http://hipcrime.blogspot.com/2013/04/the-post-work-society-is-not-future_6596.html

Some Additional Notes: http://hipcrime.blogspot.com/2013/04/some-additional-notes.html
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Welcome visitors, members one and all! I hope you find this community as informative, useful and entertaining as we do!

If you haven't done so already, please take a moment to review the couple of guidelines we have in place by clicking on the community profile. From the main profile page you can also familiarize yourself with the many websites and resources members have recommended since this community started. Some of our personal favorites include Calculated Risk, Economic Cycle Research Institute & Jeffrey Frankel's Blog.

You may also want to participate in our LiveJournal Global Economic Poll - "The Economy Around The World: A Real Live Journal Global Poll" .

As the economies around the world teeter once again, with many already having slipped into "Growth Recession" if not outright technical recession, and with many more looking at the real possibility of outright recession in 2012 and 2013, "the recession" in 2011 was seeming mild by way of comparison to what could be lurking just around the corner.

Will "Recession 2012" look as bad as "The Great Recession" of 2007-2009? Could we skirt by this time without a full-on economic death spiral? Will the economy get better by election day? Or will Obama lose the election for economic reasons? (Presidential elections are usually won or lost for base economic reasons in this country, after all).

Stay tuned. I think it's fair to say that it is going to continue to be a pretty wild ride for the world economy for some time to come. Recession 2013? Recession 2014? Did the Great Recession ever really end in the first place? Many think not!

ECRI Weekly Leading Index
Has a moderate lead over cyclical turns in U.S. economic activity. Data begins in 1967.

Recent Data

Date Level Growth

Jun 29 '12 121.9 -2.9
Jun 22 '12 121.7 -3.2
Jun 15 '12 121.5 -3.2
Jun 08 '12 122.1 -2.8

ECRI Calendar

March 22, 2012
Frankfurt Conference

ECRI will participate in the Bloomberg Sovereign Debt Conference in Frankfurt on March 22, 2012.

Crude Oil 1Yr Chart


State Coincident Index
3-Month Change

Is your state essentially in expansion or recession?
Lt Green-Dark Green: Growing-Faster.
Gray: No growth.
Pink-Dark Red: Contracting-Faster.

What is the
definition of recession?

According to the laypress, and even many economists, a recession is defined as two consecutive quarters of negative GDP (Gross Domestic Product). While this very simple definition is usually the case during recessions, it is not always so.

Most experts now acknowledge that GDP alone is an insufficient determinant of recession.

For one, GDP is often revised several quarters - even years - later, as more complete information becomes available that changes the components of the earlier, initial GDP estimates in what can be very substantial ways.

For another, not all serious downturns exact as serious a toll on GDP. Often, the decline is much more pronounced in GDI (Gross Domestic Income) and/or employment. If the income or employment of a nation is undergoing a pronounced, pervasive and prolonged decline even if for whatever various reasons its GDP may be holding up, is it not foolish to deny that a recession is underway?

For these reasons and others, the NBER (National Bureau of Economic Research), the official arbiter of recessions and expansions in the United States, determines whether or not the US has fallen into recession using a much more holistic approach.

As the NBER explains it:
Q: The financial press often states the definition of a recession as two consecutive quarters of decline in real GDP. How does that relate to the NBER's recession dating procedure?

Most of the recessions identified by our procedures do consist of two or more quarters of declining real GDP, but not all of them. In 2001, for example, the recession did not include two consecutive quarters of decline in real GDP. In the recession beginning in December 2007 and ending in June 2009, real GDP declined in the first, third, and fourth quarters of 2008 and in the first quarter of 2009. The committee places real Gross Domestic Income on an equal footing with real GDP; real GDI declined for six consecutive quarters in the recent recession.

Q: Why doesn't the committee accept the two-quarter definition?

The committee's procedure for identifying turning points differs from the two-quarter rule in a number of ways. First, we do not identify economic activity solely with real GDP and real GDI, but use a range of other indicators as well. Second, we place considerable emphasis on monthly indicators in arriving at a monthly chronology. Third, we consider the depth of the decline in economic activity. Recall that our definition includes the phrase, "a significant decline in activity." Fourth, in examining the behavior of domestic production, we consider not only the conventional product-side GDP estimates, but also the conceptually equivalent income-side GDI estimates. The differences between these two sets of estimates were particularly evident in the recessions of 2001 and 2007-2009.

Q: How does the committee weight employment in determining the dates of peaks and troughs?

In the 2007-2009 recession, the central indicators–real GDP and real GDI–gave mixed signals about the peak date and a clear signal about the trough date. The peak date at the end of 2007 coincided with the peak in employment. We designated June 2009 as the trough, six months before the trough in employment, which is consistent with earlier trough dates in the NBER business-cycle chronology. In the 2001 recession, we found a clear signal in employment and a mixed one in the various measures of output. Consequently, we picked the peak month based on the clear signal in employment, as well as our consideration of output and other measures. In that cycle, as well, the dating of the trough relied primarily on output measures.

Q: Isn't a recession a period of diminished economic activity?

It's more accurate to say that a recession–the way we use the word–is a period of diminishing activity rather than diminished activity. We identify a month when the economy reached a peak of activity and a later month when the economy reached a trough. The time in between is a recession, a period when economic activity is contracting. The following period is an expansion. As of September 2010, when we decided that a trough had occurred in June 2009, the economy was still weak, with lingering high unemployment, but had expanded considerably from its trough 15 months earlier.

What is a
"Double Dip Recession"?

In the most general sense a Double Dip Recession occurs when an economy falls back into contraction for at least a couple of months (usually at least six) after a relatively brief expansion.

By this definition, the recession of 1981-82 which followed a year-long expansion after the very short, two quarter's long 1980 recession, seems to qualify. Also by this broad definition, the 1937 recession that occurred four years after the end of the 1929-1933 recession also qualifies. While each of those were technically "new" recessions, they happened so soon after their predecessors that many people tend to think of the separate 1980 & 1981-82 recessions as one nasty, long recession. Similarly, most people think of the 1929-1933 & 1937 recessions as encompassing "The Great Depression."

Another definition of a "Double Dip Recession" would be that of a recession which technically has not ended, and was only punctuated by a quarter or twos worth of head-fake rise in GDP. Many recessions throughout history have had such false hopes, only to swoon back down into contraction, until they finally came to an end.

List of Recessions:
Post-1900 US Recessions

Mo/Yr Started Duration
Sep 1902 - 23 Months
May 1907 - 13 Months
Jan 1910 - 24 Months
Jan 1913 - 23 Months
Aug 1918 - 7 Months
Jan 1920 - 18 Months
May 1923 - 14 Months
Oct 1926 - 13 Months
Aug 1929 - 43 Months
May 1937 - 13 Months
Feb 1945 - 8 Months
Nov 1948 - 11 Months
Jul 1953 - 10 Months
Aug 1957 - 8 Months
Apr 1960 - 10 Months
Dec 1969 - 11 Months
Nov 1973 - 16 Months
Jan 1980 - 6 Months
Jul 1981 - 16 Months
Jul 1990 - 8 Months
Mar 2001 - 8 Months
Dec 2007 - 18 Months

What is
Gross National Happiness (GNH)?

An alternate measure of a nation's wealth was conceptualized several decades ago as a means of cutting through the overemphasis on materialism of traditional wealth measures, and seeing the bigger picture.

According to GNHUSA.Org

  Gross National Happiness (GNH) is an indicator developed in Bhutan in the Himalayas, based on the concept elaborated in 1972 by the then King Jigme Singye Wangchuck. Since then, the kingdom of Bhutan, with the support of UNDP (UN Development Program), began to put this concept into practice, and has attracted the attention of the rest of the world with its new formula to measure the progress of a community or nation.

GNH is based on the premise that the calculation of "wealth" should consider other aspects besides economic development: the preservation of the environment and the quality of life of the people. The goal of a society should be the integration of material development with psychological, cultural, and spiritual aspects - all in harmony with the Earth.

The Four Pillars of GNH

  • the promotion of equitable and sustainable socio-economic development
  • the preservation and promotion of cultural values
  • the conservation of the natural environment, and
  • the establishment of good governance.


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