2009: Recession vs. Recovery (Update 4)

Update 4:
This week we got a partial answer to the query posed by the title to this series: one of my two possible outcomes was a deflationary recession (an old fashioned "bust"), featuring (-1.5%) or greater deflation on an annual or shorter basis. This week we learned that in the August-October period CPI already declined (-1.5%). Since November and December have a seasonal bias towards slightly negative (-.1 and -.2 respectively) monthly CPI readings, this deflationary recession will almost certainly last into 2009.

It's officially "The Panic of 2008" (or, "I'm number 2!")

Way back on November 30 of last year, I wrote a blog entitled The Panic of 2008? in which I said:

This is NOT the Great Depression II. Nor is this the stagflationary 1970s. It is going to unfold as some other Beast. Only the broad outlines of this Beast appear discernable now: it will likely feature (1) increasing import prices; (2) wage stagnation (that does not keep up with price inflation); (3) real asset deflation; and (4) possibly a Japan-style "liquidity trap."

Friday Movie Night - Roger & Me

It's Friday Night! Party Time! Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

GM, along with Ford and Chrysler are now asking for $25 Billion dollars. We are hearing devastating reports of 3 million jobs lost, 4% decline in US GDP, in other words a tail spin cocktail for a bad economy, if GM or the US automakers were allowed to go into Chapter 11 bankruptcy.

With the Auto Bail Out theme, I thought it appropriate to show Michael Moore's famous documentary Roger & Me.

Google video has the entire documentary online to watch. (click the link). Note, you can watch this full screen.

If you have not seen this it's a treat and if you have, notice some of the same similarities. Pets or Meat!

UPDATE 8 : NEWSFLASH: Geithner nomination and the return of Lawrence Summers?

NBC is reporting that Federal Reserve Bank of New York President, Timothy Geithner has been nominated by President-elect Obama to be the new Treasury Secretary.

As new developments occur, I will update. Below is a brief from Wikipedia about the nominee.

After completing his studies, Geithner worked for Kissinger and Associates in Washington, DC, for three years and then joined the International Affairs division of the US Treasury Department in 1988.

In 1999 he was promoted to Under Secretary of the Treasury for International Affairs and served under Treasury Secretaries Robert Rubin and Lawrence Summers.

The significance of (-1.5%) deflation

Tim Iacono of "The Mess that Greenspan Made" has published the latest version of his very revealing graph series of the Case Schiller-CPI, which replaces "owners equivalent rent" with actual house prices:

I consider this graph the best proxy available for measuring the competing forces of inflation and deflation. As Tim points out, the graph is now "screaming" deflation. Tim, however, doesn't think measuring deflation is particularly productive. Here I respectfully disagree, for reasons I discuss below.

UPDATE7: Auto deal dead for now, certain politicians and market not happy

CNBC is just reporting that some sort of agreement has been reached in the Senate. Announcement to be made this afternoon.

The network is reporting that the funding will come from the $25 billion that was originally allocated for retooling. Now that money, if the deal goes through, will go to allow the automakers to meet their financial obligations. As everyone knows, the automakers have been struggling, their CEOs testifying before Congress this past week, are saying the situation hasn't been this dire in decades.

Jerome York, adviser to former GM board member, Kirk Kekorian, told Bloomberg today that the company actually has weeks left, not months. This contrasts to what CEO, Rick Wagoner has said to Congress and the Press.

What the 1974 recession teaches about our inflation cycle

Back in February I wrote:

With the release of today's January 2008 CPI showing a yearly reading of 4.1%, inflation hawks are certainly out in force in the blogosphere. .....

A regular pattern of cpi vs. ppi inflation unfolds over economic cycles.

The Decline and Fall of the Dollar Empire

The Japanese made an unusual suggestion the other day that was largely ignored in the American press.

Japanese economists, increasingly concerned that the United States might seek to pay its enormous and growing debt obligations in a weakened US dollar, are looking to the possibility of US Treasuries being issued in yen.
...
As the yen strengthens, the effective value of debt held in dollars will decline, a fate that yen-denominated Treasuries would escape.

This idea isn't new. President Carter issued bonds denominated in German Marks and Swiss Francs when the dollar's value was in doubt during the high inflation of the late 70's. Now there are new questions being raised about the dollar, but this time the concern isn't inflation - its default.

What comes around goes around?

This is a cross-post from Grist.org. I thought that the Economic Populist readers might be interested in the intersection between manufacturing and the environment -- please tell me what you think

How to save Detroit

Irony of ironies, the one set of products that could save G.M. is the one that G.M. destroyed -- the electric trolley systems of America. According to the well-known research of Bradford Snell, G.M. killed the electric trolley, because in 1922 they decided that the only way to increase car sales was to eliminate the competition, decent public transit. So they bought systems, pressured railroads and banks, bought public officials, did whatever they could to replace electric -- I'll repeat that, electric -- transportation with oil-based transportation.

Manufacturing Monday: Week of 11.17.08

Greetings ladies and gentlemen and welcome to a new installment of Manufacturing Monday. Now I would like to do something a tad different this week. You see today we get two important economic indicators released. So, instead of waiting a whole week for me to reprise them here, I would go ahead and write about then today! I will still go over last week's indicators, but figured you deserve to get something more up to date as well. The numbers get released around 9:30 Eastern, so they will be covered first, then last week's stuff.

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