Stiglitz sees risks of ‘big bumps ahead for US economy’ & sustained UE in double digits, suggests a need for stimulus round deux
Our previous posts on Stiglitz here his answer is to spend more, OF COURSE IT IS! But Team TOTUS will hang on every word he says so it is good to know what he is saying.
Joe is talking about the UE rate again today see here.. The headline from that link is he sees ‘big bumps ahead for US economy..embed is disabled :(
Here he is last week:
Exclusive Interview with Columbia University Professor Joseph Stiglitz (Bloomberg News)
Update: US Credit Card Defaults hit record high; Stiglitz: No job growth for at least 2 years & Existing home sales and prices drop…
Update: More happy, happy, joy joy. As we said eons ago, okay in June, lol, we could not understand why the stress test results allowed CapitalOne to not raise reserves against credit card defaults. Well guess what? That ‘bottom’ they called in July, is broken, and we are at another new record and climbing on defaults:
The U.S. credit card charge-off rate rose to a record high in August, as more Americans lost their jobs, Moody’s Investors Service said on Wednesday, in another sign consumers remain under stress.The Moody’s credit card charge-off index — which measures credit card loans that banks do not expect to be repaid — rose to 11.49 percent in August from 10.52 percent in July.
The index resumed an upward trend after declining in July for the first time in almost a year, vanishing hopes of stabilization in the industry after record high credit losses…
In other happy happy talk, existing home sales dropped (which was a SHOCK to the talking heads but not to any average American, we know you cannot buy a home without a job, hello!!) and prices fell another 12%…
(…)Ivy Zelman, chief executive of Zelman & Associates, a research firm based in Cleveland, believes three million to four million foreclosed homes will be put up for sale in the next few years. The question is whether the flow of these homes onto the market will resemble “a fire hose or a garden hose or a drip,” she says.
Analysts who track the shadow market have focused primarily on the gap between the number of seriously delinquent loans and the number of foreclosed homes for sale by mortgage companies. A loan is considered seriously delinquent, which typically means it is headed to foreclosure, if it is 90 days or more past due.
As of July, mortgage companies hadn’t begun the foreclosure process on 1.2 million loans that were at least 90 days past due, according to estimates prepared for The Wall Street Journal by LPS Applied Analytics, which collects and analyzes mortgage data. An additional 1.5 million seriously delinquent loans were somewhere in the foreclosure process, though the lender hadn’t yet acquired the property. The figures don’t include home-equity loans and other second mortgages
Moreover, there were 217,000 loans in July where the borrower hadn’t made a payment in at least a year but the lender hadn’t begun the foreclosure process. In other words, 17% of home mortgages that are at least 12 months overdue aren’t in foreclosure, up from 8% a year earlier….
Finally the economists have caught on to the OBVIOUS fact -no job no house payment- and Mark Zandi of Moody’s (the Dems fave to bring to the Hill and talk up stimulus spending) has chimed in:
The housing recovery remains weak and could take a turn for the worse if more Americans lose their jobs, analysts say.
Well no shxt Sherlocks!! Hey I have been saying this for over a year, where’s my Nobel Prize, huh??
“The market’s incredibly fragile,” says Mark Zandi, chief economist at Moodys. “As long as job losses are rising, the housing market is at risk of continuing along a decline. Any recent stability would be in danger.”The unexpected drop in existing home sales for August was the latest sign of just how tentative the recent signs of recovery are.
More NO SHXT analysis:
What has helped housing in recent months, analysts say, has been the first time homebuyer tax credit of $8,000. But that is scheduled to end on November 30th and should be extended, says Walter Maloney, spokesman for the National Association of Realtors.”The tax credit has really been a catalyst,” Walter Maloney says. “We’ve seen a sustained gain in sales in recent months because of it. We need to extend it for all home buyers–and even to commercial real estate.”
Again, MiM has been saying this FOR AGES! That the home buyer tax credit that ends in November, and Clunkers would give 3Q GDP boost and then a drop off when consumers who still dont have work, continue to well NOT SPEND WHAT THEY DONT HAVE. Gee maybe that’s why the government doesn’t undertand it, becuase they DO SPEND WHAT THEY DONT HAVE!
Well gee now that they are on board with the REALITIES we have been talking about on Main St for months now, what do they plan to do to fix it? Give people more government money of course!
Wisconsin School of Business professors produced a recommendation based on their recent study to the Obama administration regarding the grave condition of foreclosures across America…
Continues after the break:
Hey let’s put on some Ritz MiM style, the grand chief poohbah high muckety mucks of the ivy league intelligentsia Feldstein, Stiglitz, Krugman, Gross you know their names…and they all loved them some Obama…Well now Stiglitz is the latest to go on record echoing MiM’s position which we took here on the blog lo these many moons ago…the flat L leading to the double dip….
Nobel laureate economist Joseph Stiglitz on Thursday gave a gloomy assessment of a rebound in the U.S. economy, saying he does not see a resurgence in the strong consumer spending that has been a key driver of growth.
…But Stiglitz said the U.S. economy faces the possibility of low economic growth over a long-term period or the possibility of a “double-dip” recession whereby a recovery is not sustained.
“It is not possible to predict whether we have a malaise or a W (shaped growth pattern). But there is a significant chance of a W,” he said. “It is not as if the second dip is going to be as bad as the first dip,” he said. Instead, it could mean the economy rotates through a process of low growth followed by contraction.
“We are not seeing a recovery of sustained consumption,” in the United States, said Stiglitz, who said he has been consulted on an informal basis by the Obama Administration to talk about the major economic issues….
Gee I wonder why, ‘we are not seeing a recovery of SUSTAINED CONSUMPTION’?? Could it be because THE FRAKKIN IDIOTS IN DC ARE SCARING THE EVER LOVIN CRXP OUT OF WE CONSUMERS WITH THEIR HARE BRAINED SPENDING AND TAX PLANS??!! HMMMMNNN? Could be rabbit, could be!!! Is TOTUS doing bugs? Would I add this gigantic spending plan if the economy was about to collapse in a second leg down? You might TOTUS you might!
Have said it before, will say it again- What a bunch of maroons. For a group of the ‘Smartest People Evah’ they are awfully dense about how their ‘visionary changes’ impact real world consumers. Their pie in the sky ideas of de-industrializing the US and slowing population growth and greening everything and the greater good, cap and trade, change housing codes nationwide, pay cash for clunkers, take over car companies, then health care, they are really SHOCKED that 21 Century Americans do not want to go all ‘neo socialist Luddite’ with them…
They can claim anything they want, but they pixxed away 800 billion in ways that do not help the consumer feel safe and spend, have jobs and spend, pay off some debt and spend. There is no THERE there in that spendulus. All it did was ADD to consumers low expectations and high deficit concerns. The S & P financials are headed for a second crash IMO, commercial RE is about to hit the FDIC in a wave of bank failures and the end of 2010-11 will see a tripling of the current residential foreclosure wave as we have discussed here before.
They are SOL in the 2010 elections, they simply don’t have the money to fix what they have done with the spent bullets of the spendulus and TARP bazooka, they are out of ammo, the FED is making noises that they are split on continued quantitative easing and MBS purchases. Bill Gross at PIMCO says they will have to stay loose and keep buying to keep rates low or send housing off the second cliff. This is precisely why Krugman was suddenly pro giant deficit and Gross is making noises about the end of stimulus being a problem.
News flash geniuses Americans will not support ANY MORE GIANT SPENDULUS bills. That ship sailed baby, and sunk. It was overloaded with ‘interest group’ payoffs…I heard an analyst on Caterpillar CAT today talking about how the spendulus was less than 3% infrastructure and CAT will not have a bump in 2010. Remember TOTUS in Elkhart and talking with CAT workers? How awful. And now Pete Stark D-outoftouch is talking about laying a tax on all Wall St stock transactions to pay for billions in what? You guessed it INFRASTRUCTURE. Fuggedaboudit.
Treasury is out talking up additional mortgage help for homeowners as they see all this coming, and yet in the face of all this Team TOTUS is STILL going to attempt a 1 trillion dollar health care bill? The Administration needs to find religion and go moderate or 2/3 of Congress can go home in 2010…
Young Frankenstein courtesy of cristiancd
Bugs Bunny courtesy of chrispdx
Video Update: Market Mover Friday: Larry ‘the Ego’ Summers Speaks …is Stiglitz the reason we still have no ‘illiquid assets’ plan?
Larry does the BEGATS from The Bible…
The Ego takes to the lecturn at the Brooking Institute today...(Safe for Larry to speak without overwhelming Geithner, since Tiimmeh is in Europe trying to get the G20 to drink the kool aid, for their part the Europeans have already indicated they are behind the idea of expanding the IMF balance sheet, but they absolutely will not sign on to global stimulus spending)
At 10:30 a.m. EDT, White House economics adviser Larry Summers will deliver a briefing at the Brookings Institute in Washington DC.
lOne Question, WHERE THE HELL IS THE FINANCIAL SYSTEM PLAN TO DEAL WITH THE BAD PAPER?!?!
WOTS is the bad paper plan is not coming together because most of Team Obama was nurtured by Stiglitz’ and is following his lead, while Summers wants to go another way…
I would chime in, but as Summers’ has said I am a woman and cannot do math..(what a jackaxx he is)
A plan Obama was considering to buy illiquid assets on banks’ balance sheets amounted to swapping taxpayers’ “cash for trash,” Stiglitz, 66, said in January interviews at the World Economic Forum in Davos, Switzerland. “I’m hopefully shaping some of the debate and some of the policies and framing the discussion.”
But why is everyone listening to Stiglitz and not Summers’?
Like fellow Nobel laureate Paul Krugman, who writes a column for the New York Times, Stiglitz has his own forum, contributing regularly to Vanity Fair magazine. His articles, with titles including “Capitalist Fools,” are spread through the Internet via sites such as DemocraticUnderground.com and DailyKos.com.
Stiglitz’s work is cited in economic papers by more people than that of any of his peers, according to a February ranking by Research Papers in Economics, an international database. Obama adviser Lawrence Summers is 11th on the list and Federal Reserve Chairman Ben S. Bernanke 34th.
While Stiglitz’s long-held views on the drawbacks of unfettered markets are proving prophetic in the global recession, his outspokenness excludes him from government, said David Ellerman, who worked with the economist at the World Bank in the 1990s.
So what does Summers have that Stiglitz doesn’t?
“If you’re going to function well in a big bureaucracy, you’ve got to have a sort of self-control that Joe doesn’t have,” said Ellerman, a visiting scholar at the University of California, Riverside
OMG are you KIDDING ME?? Summers has self control and Stiglitz doesn’t? My gawd imagine what a piece of work Stiglitz is if he makes Summers look controlled..Jeebus!
Stiglitz also mentored several members of Obama’s economic team, including budget director Peter Orszag, 40, and Jason Furman, 38, deputy director of the National Economic Council. Still, Stiglitz is critical of how the president plans to rescue the economy and questions his appointment of Summers as his top economic adviser.
It’s “a real concern” that people such as Summers, “who have been openly on the side of deregulation,” are back in positions of power, said Stiglitz. The presidential adviser helped secure passage of the 1999 Gramm-Leach-Bliley Act, which repealed longstanding banking regulations.
A real smack down is coming..
When Stiglitz last worked in Washington, as chief economist at the World Bank, he clashed with Summers at Treasury and with the lender’s president, James Wolfensohn, by criticizing International Monetary Fund policies. Stiglitz said the IMF was hurting poor countries by demanding they cut budgets, raise interest rates and open capital markets.
When Stiglitz resigned from the bank in early 2000, his staff drew up a mock list of reasons for his departure. At the top: “Had Just Seen One Too Many Hot Summers in Washington.” Another entry: “To Find a Vaccine for Foot-in-Mouth Disease.” “Remaining silent when people are pursuing wrong ideas would have been a form of complicity,” the New York Times quoted Stiglitz as saying of his departure. “Rather than muzzle myself, or be muzzled, I decided to leave,” he said, according to the Times.
Oh that’s classy..
At the World Bank, Stiglitz repeatedly criticized IMF handling of the financial crisis that swept Asia in the late 1990s. He claimed austerity measures the fund demanded from nations looking for help risked pushing them into severe recessions. Stiglitz also questioned the IMF’s motives. “I worry a little bit about organizations whose function is to deal with crises,” he said in September 1999. “What are their incentives?”
Soon after leaving the bank, Stiglitz wrote in The New Republic magazine that fund staffers were “third-rank students from first-rate universities.” “There was probably nothing worse he could have said about them,” said Dean Baker, co-director of the Center for Economic Policy Research in Washington. Stiglitz’s bestselling 2002 book “Globalization and Its Discontents,” (W.W. Norton & Company, 304 pages, $16.95) denounced World Bank and IMF policies, along with the way trade liberalization was being pursued by Washington officials.
His writings and criticism of the IMF prompted an open letter from Kenneth Rogoff, then research director at the fund. “Joe, as an academic, you are a towering genius,” Rogoff wrote. “As a policymaker, however, you were just a bit less impressive.”
Guess Stiglitz won’t be helping Timmeh get the IMF in line BWAAAHAAAA, wonder what he thinks of our plan to expand IMF power and balance sheet to save Eastern Europe? Wow the fireworks should be grand, If only Team Obama weren’t listening to someone not even in the Administration over their own pick..good grief…