Rosenberg comes in around the 6.30 mark.
Courtesy of CNBC: David Rosenberg, Gluskin Sheff & Associates chief economist, discusses his belief that we are in a depression despite the government’s best efforts.
…Rosenberg points out that the “overall economic malaise” has come despite aggressive efforts by the Federal Reserve to stimulate the economy through rate cuts. The central bank itself has scaled back its economic projections, has held steady on its balance sheet, and could be announcing another round of quantitative easing measures at its Jackson Hole summit this week.
“How’s that for a reality check,” Rosenberg said. “It’s not too late, by the way, to shift course if you have stayed long this market.”…
So is QE2, (the quantitative easing not the ship), on the way or is Ben blowing sunshine and/or smoke up our axxes again?
From Fed Chairman Ben Bernanke: Challenges for the Economy and State Governments
On the economy:
While the support to economic activity from stimulative fiscal policies and firms’ restocking of their inventories will diminish over time, rising demand from households and businesses should help sustain growth. In particular, in the household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions. In the business sector, investment in equipment and software has been increasing rapidly, in part as a result of the deferral of capital outlays during the downturn and the need of many businesses to replace aging equipment….
UHHH come again? Exsqueeze me? Increased consumer INCOME???? consumer spending?? Have you SEEN the savings rate and the PCE?
Memo to Ben: Wishin’ and hopin’ and thinkin’ and prayin’ is NOT an economic strategy! Give us Growth or tell the SOOPERGENIUSES in the WH to get the hell out of the way!
Ben continues~(…) To be sure, notable restraints on the recovery persist. The housing market has remained weak, with the overhang of vacant or foreclosed houses weighing on home prices and new construction. Similarly, poor economic fundamentals and tight credit are holding back investment in nonresidential structures, such as office buildings, hotels, and shopping malls.
Importantly, the slow recovery in the labor market and the attendant uncertainty about job prospects are weighing on household confidence and spending. After two years of job losses, private payrolls expanded at an average of about 100,000 per month during the first half of this year, an improvement but still a pace insufficient to reduce the unemployment rate materially. In all likelihood, significant time will be required to restore the nearly 8-1/2 million jobs that were lost over 2008 and 2009. Moreover, nearly half of the unemployed have been out of work for longer than six months….
Why yes!!!, that pesky LACK OF FRAKKIN JOBS is holding us back, just a WEE bit, mighty white of Ben to notice, pardon the pun, my days in the Bronx…
Let’s hope QE2 the MS way is coming (see excerpts and linky below), BTW guess who suggested this 1 pg refi for all??? JOHN MCCAIN IN 2008. yep.
The ONLY WAY IN HELL Ben’s forecast for ‘increased consumer spending and income!!!’ will materialize is if plans are in the works or about to be to launch the MS QE2 plan in which all Americans paying on time get an ‘instant 1 pg refi’ drop in their mortgages to market rates (which, following another buying binge by Fed would be 2.99% let’s say) in CONJUNCTION with cutting principle on the defaultees (this way the foreclosures will stop and the prices will stop dropping in housing) with the new rates for all! the larger group who pay on time wont be so pixxed since they get theirs too…
From the MS PDF-If it were possible to inject a significant amount of stimulus into the US household sector, and this stimulus had zero impact on the budget deficit, did not require an exit strategy, did not distort the markets, and took effect almost immediately, wouldn’t it seem like a slam dunk?
Such an option actually exists in the form of a change to
mortgage refinancing requirements. The Fed and
market forces have pushed mortgage rates to historic
lows, yet many homeowners are unable to take
advantage because they are blocked from refinancing.
This problem could be addressed if the Government
merely recognized its existing guarantee on the principal
value of a large part of the mortgage market – the
mortgages that are backed by Fannie, Freddie and
Ginnie – and acted to streamline the refi process.
There are 37 million mortgages outstanding whose
principal value is backed by the Federal government.
When these homeowners apply for a refinancing, the
application is subject to a standard underwriting process
that involves an LTV test (requiring a property appraisal),
an analysis of the borrower’s FICO score, and income
We estimate a potential average rate reduction of 125 bp on 50% of the outstanding volume of agency-backed mortgages. In the aggregate, the savings amounts to $46 billion per year. That’s more than the cost of the latest extension of unemployment benefits and more than taxpayers saved under the Make Work Pay tax
credits in the 2009 fiscal stimulus legislation.
The bottom line is that market conditions have created a
potential costless windfall that is not being used. There
is no need for a case-by-case analysis of a borrower’s
credit quality when the principal value of the mortgage is
already backed by the government.
…How Many Borrowers Could Be Impacted?
As seen in Exhibit 3, roughly half of all US households have a
mortgage. Of these 55 million households, 37 million have
mortgages whose principal value is already guaranteed by the
Federal government. Yet, when these homeowners apply for a
refinancing, the application is subject to a standard
underwriting process that involves an LTV test (requiring a
property appraisal), an analysis of the borrower’s FICO score,
and income verification. Obviously, the drop in home prices
during the past few years means that many borrowers will notmeet the LTV requirement – especially since there has been a significant tightening in the appraisal process according to press reports. Indeed, our housing analyst Oliver Chang estimates that more than one-third of all agency-backed mortgages outstanding now have an LTV above 80% (see Exhibit 2). Looking at the principal value of these mortgages, the proportion is even greater (a little above 40% of the total) because an outsized share are located in California, where property values are higher than the national average. There are probably an additional 10% or so of borrowers who don’t qualify for refinancing because of job loss or a low FICO score.
Thus, we believe that perhaps 50% of the outstanding principal value of agency mortgages may not be refi-able at present. As seen in Exhibit 4, this estimate is broadly consistent with actual versus predicted prepay9(ment speeds that currently prevail in the mortgage market. (go read the entire paper and how they propose this be addressed, seems a win/win to me)
but if they do not plan to do this then he is either totally disconnected or full of shxt and lying to us, neither is good…
Update: Several well respected prognosticators are positively giddy at the notion of a 20/20 cap on cap gains/dividend rates. They take this from the Geithner interview below.
Again the DENIAL is astounding! The 20/20 is the FLOOR not the ceiling! Let’s say Tim is forthright with his statement that 20/20 is what Obama will propose on cap gains/dividends (which is s 5% hike from where we are now). Recall the Deficit Commission report is due December. I fully expect it to propose SS Medicare taxes on investment income. So start with 20/20, then add what 10? 15% for SS Medicare, then add the Obamacare taxes on investment income.
Get a Grip! No moderation in economic policy is forthcoming. This is Obama and Pelosi. Taxes are going up across the board, Obama will not stop. VOTE.
Larry Kudlow has THE interview with Geithner. After this there is absolutely no excuse for delusions that Obama will suddenly find his inner capitalist and embrace pro growth economic policies. All of our taxes are going up across the board.
It is my opinion that Obama believes the US is too big and uses too many global resources. He is actively and deliberately seeking out and implementing policies that reduce the American standard of living, that is a feature not a bug. I believe he sees it as his duty to ‘correct’ what he thinks America has ‘done’ to the world and to restore balance as he sees it.
He does not believe in GROWING the pie a la Big Dawg. He is going to take pieces from us and give them to the rest of the world and those select groups who he either envisions as oppressed by our success, or who assist him. Period.
Take the blinders off folks. Smart money is IMO moving its income to 2010 and taking the tax hit now then focusing on CAPITAL PRESERVATION as Obama continues to roll out wealth destroying business killing middle class crushing policies. He will not stop.
Fisher makes it quite clear the Fed has done all they can do (and I would argue more than they should have) and that the reason private investment is not picking up the ball is UNCERTAINTY CREATED BY THE POLITICAL PROCESS, ie CONGRESS and OBAMA. If they would just STOP we could all move forward. I think people are STILL deluding themselves into thinking Obama will stop the coming end of the Bush tax cuts. He won’t. They will expire and we will double dip in ’11.
Update: Calculated Risk expands on the GDP number and the PCE:
…Here are some Q1 numbers (all annualized):
Personal consumption expenditures (PCE) increased $130.7 billion Personal saving declined $88.5 billion. Government social benefits to persons increased $61.1 billion. So the boost in PCE came from the decline in saving and the increase in benefits. That is not sustainable….
which finally showed some inflation- (hiring costs rising)..
…you know what that means…it’s been a while….
PS it has leaked that the Feds have a criminal probe into Government Slacks…poor bastards really bet on the wrong horse didn’t they? GS down another 7% to 148, several firms putting hold or sell ratings on now…
1Q GDP came in at 3.2%, slightly below expectations
Consumer Sentiment fell in April
Ben Bernanke: ‘Joblessness, foreclosures pose hurdles to economic recovery’ in other Earth shattering news, water is wet!
But he still denies that overly loose Fed policy has anything to do with the housing bubble V1…
…meanwhile Greenspan told the ‘Crisis Cmte’, lol, that it was Congress’ that pushed the Fed to allow all those loose lending standards and predatory products, and no regulator could have caught it, yeah whatevs Alan, you abandoned your Randian views and tanked the economy with not one but 2 bubbles, the dot com bust thanks to your loose rates and later the housing bubble…
James Grant, editor of Grant’s Interest Rate Observer, absolutely annihilated Greenspan on Bloomberg today during the hearing coverage-go to bloomberg for entire interview it is must see TV…
The lights actually went out in the Crisis Panel hearing with Greenspan, they continued in the dark for a bit, a metaphor from God surely, heh…
…Federal Reserve Chairman Ben S. Bernanke said joblessness, home foreclosures and weak lending to small businesses pose challenges to the economy as it recovers from the worst recession since the 1930s.
“We are far from being out of the woods,” Bernanke said today in a speech in Dallas. While the financial crisis has abated and economic growth will probably reduce unemployment (MiM here, italics mine) over the next year, the U.S. faces hurdles including the lack of a sustained rebound in housing, a “troubled” commercial real estate market and “very weak” hiring, he said.
The remarks reflect concerns by Fed officials at their meeting last month that the job market and tight credit would restrain consumer spending. At the session, Bernanke and his colleagues reiterated interest rates will stay very low for an “extended period.” He didn’t repeat that in today’s speech, while saying the Fed’s “stimulative” rates will aid growth.
“The economy has stabilized and is growing again, although we can hardly be satisfied when one out of every 10 U.S. workers is unemployed and family finances remain under great stress,” Bernanke said in prepared remarks to the Dallas Regional Chamber…
Bill Gross, PIMCO, reiterates the new normal, the recovery, the end of stimulus, the consumer continuing to deleverage and the impact on the American economy
…Speaking just after the government said January saw the loss of another 20,000 jobs even as the unemployment rate fell to 9.7 percent, the Pimco co-CIO said the jobs weakness will make for a difficult transition to prosperity.
“We think that it’s substantially different this time, based upon the fact that instead of levering we’re delevering and instead of deregulating we’re regulating,” Gross said. “Both of those conditions in combination produce a very weak economy, very slow growth and ultimately have effects on asset markets that depend on asset appreciation.”
…”Four percent growth in the first quarter is probably a reasonable expectation,” he said. “But the unemployment is a long-term structural problem.”…