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EPI: If Big 3 Fail 18% Unemployment in Michigan

The Economic Policy Institute has a new report out today about the economic impact of an auto industry collapse. A previous report by the Center for Automotive Research (CAR)estimated that a total collapse of the big 3 would result in the loss of almost 3 million jobs, and $554.6 billion(4% of US GDP) in economic losses. What was missing was a state by state breakout.

How could they have let this happen?

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The financial markets have collapsed. The real estate market has collapsed. The auto industry is collapsing. We are already in the longest and deepest recession in nearly 30 years, and there is no end in sight. The entire world is suffering financial turmoil at least as bad as America, if not worse.

Something this big didn't fall from the sky unexpectedly. There were plenty of people who predicted it.
Hell, even I predicted it three years ago and I have little formal training in economics.

There is plenty of evidence to suggest that the political and financial leaders knew that something like this was coming, and yet no one did anything to prevent it. It's concrete proof of a complete failure of leadership across the globe, but especially in America.
It's also evidence of a more systemic problem in our society.

Knights of Columbus Microeconomic Data Tigard, OR

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A bit of micro economic data I'm just reporting on from my (Catholic) Knights of Columbus Men's Club meeting last night. I find it pretty telling that the recession is beginning to hit main street.

Our St. Vincent De Paul food bank served 256 families in July, 358 families in August, 425 families in September, 468 families in October, and 458 families in November. In the first 3 days of December, we served 100 families already.

Give Them The Money

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Give Them the Money!

Who am I talking about?  Why the United States Auto Manufacturers of course.

America, you've got it all backwards. The outrage should be directed at the financial bail out, not at the automobile manufacturers.

A poll says 61% of Americans oppose the bail out of the auto industry and Senate Majority Leader Harry Reid says the Auto Bail Out bill is dead, they don't have the votes.

More interesting in the poll, people do not believe the collapse of the auto industry will affect them. Well, I have news for you, it will affect you, probably more than you can imagine.

A full fledged Deflationary Bust

This morning the NAPM reported a record low reading on their services index. This is the vast majority of the economy. Yesterday we learned that auto sales also declined by a record amount in November.
What both auto sales and services have in common is a continuing worsening of monthly measures compared with 2007. For example, in August car sales were down about 19% YoY. In September the loss was 21%. In October it was 23%. November's number, released yesterday,was more than 30% off from 2007.

Some time ago, I summarized Prof. Leamer's research on typical business cycle contractions: first housing, then durables (mainly cars and furniture), then non-durables, and finally services. When services go, you are in the full force of the recession. That's where we are now.

In the services report was another bomb: the prices index has also declined dramatically, also to a new all-time low -- from an all-time high only four months ago.

Manufacturing Tuesday: Week of 12.02.08


(editor's note: I was planning on publishing this morning, but some major personal business involving a sick wiener dog to one of those emergency vets had to take precedence. )
Ladies and Gentlemen, welcome to another edition of Manufacturing Monday...er Tuesday! Originally I wanted to post this on Monday morning, but I wanted to include the latest development from the Boeing SPEEA talks. Outside of this we got news from the steel industry, unfortunately not the good kind. Sticking with steel for a moment, there's an op-ed piece I wish to highlight that I thought you should look at. We have news or alarm bells I should say about pensions. Of course we also have some Green news, some ominous, but some good.

But before we get to those, let's take a look at the Numbers!

The Numbers

The U.S. can't survive on services alone

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This post is taken from my post at Grist.org that I put up a few months ago.

Rebuilding the manufacturing sector would not only provide millions of direct jobs, it would transform the entire economy, because manufacturing is the foundation of an economy.

No large nation, not even the U.S., can survive by only producing services. The vast majority of services consist of the economic activity that surrounds manufactured goods. In order to see why this is so, we need to take a stroll through the main sectors of the service economy; consider this an exercise in economic natural history.

Did the 2005 Bankruptcy “Reform” cause the world financial collapse?

Did the 2005 Bankruptcy “Reform” cause the world financial collapse?

Federal Reserve Bank of New York Staff Report No. 358 - Seismic Effects of the Bankruptcy Reform.

Remember the Bankruptcy Abuse [sic] Reform act of 2005? Yeah, the one that the credit card companies and banks got passed by buying the very best Congress money can buy. Turns out, according to the New York Fed's research, that since people going bankrupt after the BAR found it more difficult to stop paying their unsecured debts - i.e. credit cards - they were forced to stop paying their mortgages instead. Over 120,000 of them a year, according to the NY Fed researchers.

Is a 2009 recovery still possible?

This is a follow up on my previous posts in which I discussed whether we were heading for a deflationary recession or a recovery in 2009. As we found out within the last couple of weeks, the deflationary recession is already here. But are there still grounds to believe a recovery in 2009 is possible? Money supply indicators (m1 [red, green] and monetary base[orange]) continue to indicate so as of this week's update:

It is now virtually certain that the Kasriel indicator will predict a recovery in the first half of 2009.

Econ-Fin News Dec 1 2008 - Bernanke's Laissez Faire Dissected

Economics and Finance News - Dec 1, 2008

Bernanke and Paulson talk about the financial collapse
John Cassidy has a lengthy article in The New Yorker today which includes some excellent insights into U.S. Federal Reserve chairman Ben Bernanke and his miserable handling of the financial collapse, including, so far as I know, the first public discussion of an August 2007 meeting in Jackson Hole, Wyoming in which the Fed’s initial approach was discussed and decided by Bernanke and a small group of top advisers.

First, Cassidy provides some interesting details on how Bernanke became Fed chairman,

“I always thought that Ben would stay in academia,” Mark Gertler, an economist at New York University who has known Bernanke well since 1979, told me. “But two things happened.”

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