tag:blogger.com,1999:blog-42520164247567319772024-03-14T10:34:07.081-07:00Be Your Own Economist ®Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.comBlogger565125tag:blogger.com,1999:blog-4252016424756731977.post-21983037127506944452012-07-27T11:03:00.001-07:002012-07-27T11:03:52.775-07:00Change of Address<div dir="ltr" style="text-align: left;" trbidi="on">
The Lehmann Letter (SM)<br />
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Dear Reader,<br />
<br />
The Lehmann Letter has a new address:<br />
<br />
www.beyourowneconomist.com/blog.php<br />
<br />
Please go to <span style="background-color: white;">www.beyourowneconomist.com/blog.php to view the latest post as well as the following posts which you may have missed:</span><br />
<span style="background-color: white;"><br /></span><br />
<span style="background-color: white;">July 26: Business Investment Disappoints</span><br />
<span style="background-color: white;"><br /></span><br />
<span style="background-color: white;">July 25: Real-Estate Rebound?</span><br />
<span style="background-color: white;"><br /></span><br />
<span style="background-color: white;">July 24: Looking for a Silver Lining</span><br />
<span style="background-color: white;"><br /></span><br />
<span style="background-color: white;">Thank you for your patience during this transition and accept my apologies for any inconvenience. </span><br />
<span style="background-color: white;"><br /></span><br />
<span style="background-color: white;">Please contact me at lehmmanm@usfca.edu if you have any questions.</span><br />
<span style="background-color: white;"><br /></span><br />
<span style="background-color: white;">Yours truly,</span><br />
<span style="background-color: white;"><br /></span><br />
<span style="background-color: white;">Mike Lehmann</span></div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-34797875124059595292012-07-23T09:19:00.001-07:002012-07-23T09:19:13.973-07:00Greece’s Grinding Deflation: A Precedent for Spain and Italy?<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="background-color: white; font-family: Arial, sans-serif;">Stocks opened
lower today because of fears regarding Spain’s economy.</span></div>
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<span style="font-family: "Arial","sans-serif";">Will Spain go
the way of Greece?<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">A July 20
article in The Wall Street Journal discusses the circumstances that led to
Greece's grinding deflation. <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">This article
serves as an excellent case study of the cost-dilemma facing Europe's southern periphery:
Spain, Italy and Greece.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">“Greeks Brace for
More Pain on Wages” <o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";"><a href="http://online.wsj.com/article/SB10001424052702303740704577521210205236808.html?KEYWORDS=marcus+walker">http://online.wsj.com/article/SB10001424052702303740704577521210205236808.html?KEYWORDS=marcus+walker</a>
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<span style="font-family: "Arial","sans-serif";">Here are some
key excerpts, beginning with Greece's entry into the euro zone and the
inflationary process that boosted wages to uncompetitive levels.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">“Money was flooding into Greece's economy,
spurred by European Central Bank interest rates that were suited to a stagnant
Germany but were too low for fast-growing parts of the euro-zone periphery.
Banks and bond markets lent freely to the periphery, believing the risks were
equally low everywhere in the currency zone.<o:p></o:p></span></div>
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<a href="http://www.blogger.com/blogger.g?blogID=4252016424756731977" name="U7042880933289EG"></a><span lang="EN" style="font-family: Arial, sans-serif;">"In Spain, Portugal and
Ireland, the private sector went on a borrowing spree. In Greece, a public
sector rife with waste and patronage was the main conduit of the credit bubble.
The effect was similar: Inflated demand for goods and services sucked in
imports while pushing up domestic prices and business costs. The trade deficit
soared as the whole country spent more than it earned, requiring more foreign
credit to cover the gap.”<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">The remaining
excerpts describe Greece’s struggle to reduce its wages to regain
competitiveness with other European economies.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">“Greece, like other euro members that now
need financial help, struggled to compete in the European and global economies
as cheap credit and structural problems inflated prices and wages faster than
its palette of products could justify. Now, lacking a national currency that
can depreciate to make its goods cheaper in foreign markets, it must embark on
a grinding "internal devaluation," pushing down its wages and prices….<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">“Greece, Spain, Portugal and Italy all face
the same arduous route to recovery… They must push down wages and prices at the
same time as they labor to pay down heavy public or private debts….<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">“In February, Greece's main creditors, the
International Monetary Fund and the European Union, forced the government to
cut the national minimum wage by 22%—32% for young workers—and made
sector-specific pay deals between unions and private employers expire faster….<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">“Wages in much of Greece's economy have
already fallen some since the country's recession began in late 2008. But the
EU and the IMF say internal devaluation has a long way to go before Greece is
competitive enough internationally to begin an export-led recovery.<o:p></o:p></span></div>
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<a href="http://www.blogger.com/blogger.g?blogID=4252016424756731977" name="U704288093328OSB"></a><span lang="EN" style="font-family: Arial, sans-serif;">“Estimates vary on how
much prices need to fall in the euro-zone periphery, relative to the core
economies. Economists say Greece and Portugal face the biggest challenge, while
Spain and Italy need smaller but still painful adjustments.<o:p></o:p></span></div>
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<a href="http://www.blogger.com/blogger.g?blogID=4252016424756731977" name="U7042880933284VC"></a><span lang="EN" style="font-family: Arial, sans-serif;">“The EU-IMF bailout
program for Greece seeks to cut labor costs by 15% in the next three years. A
recent report by economists at Goldman Sachs says that, without major
structural reforms, Greece would need an internal devaluation of nearly 30% to
turn around its trade balance and end its dependence on foreign borrowing.”<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">Greece has a bitter pill to swallow. It may
be a foretaste of what awaits Spain and Italy.</span><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(Summer
season: The Lehmann Letter will be in summer-vacation mode during July and
August.)<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
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</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-22388391493549466842012-07-20T09:19:00.000-07:002012-07-20T09:19:37.368-07:00Business Sales Stall<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "Arial","sans-serif";">The Lehmann
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<span style="font-family: "Arial","sans-serif";">Manufacturing
and trade sales have stalled according to a recent Census Bureau report:<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";"><a href="http://www.census.gov/mtis/www/data/pdf/mtis_current.pdf">http://www.census.gov/mtis/www/data/pdf/mtis_current.pdf</a>
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<span style="font-family: "Arial","sans-serif";">They had been
recovering well from the recession, but then they declined in April and May
(the latest available data). Sometimes there’s a hiccup in the data, and that
could be the case here.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">But it’s not
the only evidence of manufacturing weakness. The Purchasing Manager’s Index
contracted in June after a couple of years of expansion and this week the
Federal Reserve’s measure of industrial capacity utilization remained flat:<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";"><a href="http://www.ism.ws/about/MediaRoom/newsreleasedetail.cfm?ItemNumber=22765">http://www.ism.ws/about/MediaRoom/newsreleasedetail.cfm?ItemNumber=22765</a>
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<span style="font-family: "Arial","sans-serif";"><a href="http://www.federalreserve.gov/releases/g17/current/">http://www.federalreserve.gov/releases/g17/current/</a>
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<span style="font-family: "Arial","sans-serif";">We have a
bifurcated economy. There has been recovery from recession, but new areas of
weakness may be emerging.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(Summer
season: The Lehmann Letter will be in summer-vacation mode during July and
August.)<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
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</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-43682383208149217742012-07-19T10:06:00.000-07:002012-07-19T10:06:04.176-07:00Existing Home Sales Remain Weak<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "Arial","sans-serif";">The National
Association of Realtors continues to speak optimistically of a housing recovery
because of improved affordability, shrinking inventories and firmer prices:<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";"><a href="http://www.realtor.org/news-releases/2012/07/june-existing-home-prices-rise-again-sales-down-with-constrained-supply">http://www.realtor.org/news-releases/2012/07/june-existing-home-prices-rise-again-sales-down-with-constrained-supply</a>
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<span style="font-family: "Arial","sans-serif";">But June existing
home sales fell to 4.37 million. Place that number on the chart and decide for
yourself.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">Existing Home
Sales<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)<o:p></o:p></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkawt7iq3IHqMMyKRIyclDHa9ZKZtHTz0Ml3d_xC79Irz_2ae7s4sxqF6isNDPciE4SmzC3puC6PtEjfwFTmD6haAZC1UfvhKg-WTCEbYTPSAP7CgtlMXjW_w6YWsCr0lA3tFsXl-nU3r2/s1600/5.8+Existing+Home+Sales+04-19-12.bmp" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjkawt7iq3IHqMMyKRIyclDHa9ZKZtHTz0Ml3d_xC79Irz_2ae7s4sxqF6isNDPciE4SmzC3puC6PtEjfwFTmD6haAZC1UfvhKg-WTCEbYTPSAP7CgtlMXjW_w6YWsCr0lA3tFsXl-nU3r2/s320/5.8+Existing+Home+Sales+04-19-12.bmp" width="320" /></a></div>
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<span style="font-family: "Arial","sans-serif";">(Recessions
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<span style="font-family: "Arial","sans-serif";">What do you
think?<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">A recovery
may be imminent. Some of the housing data is up. (Yesterday’s Letter reported a
jump in housing starts.) But consistent evidence of strength remains elusive.<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">© 2012 Michael B. Lehmann</span></div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-53169282580634742312012-07-18T10:19:00.000-07:002012-07-18T10:19:17.105-07:00Housing Starts: Big Jump<div dir="ltr" style="text-align: left;" trbidi="on">
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<span style="font-family: "Arial","sans-serif";">Housing
starts enjoyed a big jump in June to 760,000 the Census Bureau reported today:<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;"><a href="http://www.census.gov/construction/nrc/pdf/newresconst.pdf">http://www.census.gov/construction/nrc/pdf/newresconst.pdf</a>
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<span lang="EN" style="font-family: Arial, sans-serif;">Let’s hope that’s the sign of recovery that
many optimists have said we would soon see.<o:p></o:p></span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">Now take a look at the chart and update it
with that 760,000 figure (the chart’s scale is in thousands, so just use 760).
Then ask yourself how far we have to go before housing starts are anywhere near
normal.</span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">Housing Starts<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)<o:p></o:p></span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGPATTPK_JOJEgqgfUEVki46NG8xuCyVDzcFVx7p3e9jtQOi6ZPDFtolOhZ_nZNj96gBoM2NeemKetmIyj-jtopiP5x_4IHnclchsFfyqHhWCROBXPRFjZ1CcwJMtRLkoPqgZ-kEE_OFVx/s1600/5.7+Housing+Starts+04-17-12.bmp" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhGPATTPK_JOJEgqgfUEVki46NG8xuCyVDzcFVx7p3e9jtQOi6ZPDFtolOhZ_nZNj96gBoM2NeemKetmIyj-jtopiP5x_4IHnclchsFfyqHhWCROBXPRFjZ1CcwJMtRLkoPqgZ-kEE_OFVx/s320/5.7+Housing+Starts+04-17-12.bmp" width="320" /></a></div>
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<span lang="EN" style="font-family: Arial, sans-serif;">It will be a while, won’t it?<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(Summer
season: The Lehmann Letter will be in summer-vacation mode during July and
August.)<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/"><span style="color: windowtext; text-decoration: none; text-underline: none;">http://www.beyourowneconomist.com/</span></a>)
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<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">© 2012 Michael B. Lehmann</span></div>
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</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-24787603694524261172012-07-17T07:40:00.002-07:002012-07-17T07:40:47.140-07:00“We always get the majority we need."<div dir="ltr" style="text-align: left;" trbidi="on">
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<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: Arial, sans-serif;">“We always get the majority we need."<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: Arial, sans-serif;">That’s a quote from German Chancellor Angela
Merkel according to a July 15 Wall Street Journal article:</span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 12pt;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: Arial, sans-serif; font-size: 12pt;">“Merkel Says Future Bailout Liability Is Still
Undecided”</span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://online.wsj.com/article/SB10001424052702303612804577528863315549928.html?mod=WSJ__MIDDLENexttoWhatsNewsForth">http://online.wsj.com/article/SB10001424052702303612804577528863315549928.html?mod=WSJ__MIDDLENexttoWhatsNewsForth</a><o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Many have
criticized German Chancellor Angela Merkel for indecision in the face of the
euro crisis: Waffling to placate the shifting moods of her electorate. Others
have faulted her for doctrinaire fiscal and monetary austerity. Few in America
have lauded her for vision, statesmanship and leadership.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">But the Wall
Street Journal article portrays a leader confident in her role, deliberately
putting into place the building blocks of a new European monetary union.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Here are key
excerpts. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">First, the
issue at hand:<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><br /></span></div>
<div style="background: white;">
<span lang="EN" style="font-family: Arial, sans-serif;">“German Chancellor Angela Merkel on Sunday
said the question of liability for future bank bailouts in Europe hasn't yet
been decided, dismissing criticism that she caved on key positions at a recent
summit of European Union leaders.<o:p></o:p></span></div>
<div style="background: white;">
<span lang="EN" style="font-family: Arial, sans-serif;"><br /></span></div>
<div style="background: white;">
<span lang="EN" style="font-family: Arial, sans-serif;">“Ms. Merkel's comments come just days before
Germany's parliament is set to vote on whether to approve up to €100 billion
($122 billion) in loans to refinance weakened Spanish banks. The vote is widely
expected to pass, but criticism is growing at home that Ms. Merkel may be allowing
European leaders to water down conditions placed on such bailouts in the future…..”<o:p></o:p></span></div>
<div style="background: white;">
<span lang="EN" style="font-family: Arial, sans-serif;"><br /></span></div>
<div style="background: white;">
<span lang="EN" style="font-family: Arial, sans-serif;">Then the key point:<o:p></o:p></span></div>
<div style="background: white;">
<span lang="EN" style="font-family: Arial, sans-serif;"><br /></span></div>
<div style="background: white;">
<span lang="EN" style="font-family: Arial, sans-serif;">“"We always get the majority we
need," Ms. Merkel said…..<o:p></o:p></span></div>
<div style="background: white;">
<span lang="EN" style="font-family: Arial, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: Arial, sans-serif;">“Ms. Merkel is riding a wave of popularity
among German voters. A recent poll put her approval ratings at nearly 70%,
largely for her handling of the euro crisis. Ms. Merkel said that her European
policies would be the central plank in next year's general election, expected
to be held in September 2013.”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: Arial, sans-serif;">That looks like someone who is confident that
she can build a united Europe around a strong and stable German economy.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Summer
season: The Lehmann Letter will be in summer-vacation mode during July and
August.)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann<o:p></o:p></span></div>
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</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-68903474398337538622012-07-16T07:27:00.000-07:002012-07-16T07:27:28.778-07:00Housing Assistance: A Radical Plan<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Many
criticized the 2008 bailout of American banks for failing to also bail out
mortgage debtors. Now banks that received public assistance have foreclosed on mortgages
owed by those debtors. Large numbers of these homes remain vacant, exacerbating
the housing slump. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Other
borrowers are under water – owing more on their homes than they are worth –
because home values have fallen. They can’t obtain refinancing because the new mortgage
would exceed their home’s value. Some borrowers have walked away from their
homes and debts, assuming that their homes’ values will never exceed what they
owe on them.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">As a result
many neighborhoods are blighted with vacant homes that depress the value of the
housing stock. This contributes to the balance-sheet slump bedeviling American
households.<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Despite
suggestions that federal legislation enable banks and borrowers to write down
the value of distressed homes, no national program has emerged.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Now some
officials in Fontana, CA are exploring a radical way out.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Read all
about it in the July 15 New York Times:<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“California County Weighs Drastic Plan to Aid Homeowners”<o:p></o:p></span></div>
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<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/07/15/us/a-county-considers-rescue-of-underwater-homes.html?ref=todayspaper"><span style="color: windowtext; text-decoration: none; text-underline: none;">http://www.nytimes.com/2012/07/15/us/a-county-considers-rescue-of-underwater-homes.html?ref=todayspaper</span></a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Here are some
key excerpts from the article.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: "Arial","sans-serif";">“Desperate for a way out of a housing
collapse that has crippled the region, officials in San Bernardino County,
where Fontana is one of the largest cities, are exploring a drastic option —
using eminent domain to buy up mortgages for homes that are underwater. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: "Arial","sans-serif";">“Then, the idea goes, the county could
cut the mortgages to the current value of the homes and resell the mortgages to
a private investment firm, which would allow homeowners to lower their monthly
payments and hang onto their property…. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">“The idea to
use eminent domain to seize mortgages first came from a group of venture capitalists
in San Francisco, <a href="http://mortgageresolutionpartners.com/the-team" title="The group’s Web site."><span style="color: windowtext; text-decoration: none; text-underline: none;">Mortgage Resolution Partners</span></a>, who would
collect a fee for each of the restructured loans. The firm is also trying to
persuade officials in Nevada and Florida to try the idea….<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: "Arial","sans-serif";">““We have what we regard as a systemic
problem, but it’s felt most urgently at the local level,” said Steven M.
Gluckstern, the chairman of Mortgage Resolution Partners. “We have all these
people who want to be able to stay in their homes and keep that, but it is
getting to be impossible. Until you fix this problem, you can’t fix any other
problems.” <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: "Arial","sans-serif";">“As for the group’s eminent domain
idea, “if it works, every mayor of every city is going to want to do this,” Mr.
Gluckstern said…. <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Under the
current proposal, only homeowners who are current on their payments would be
eligible for the program, a policy some have criticized because it does little
to help the neediest people.”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Drastic
problems elicit drastic solutions. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Summer
season: The Lehmann Letter will be in summer-vacation mode during July and
August.)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/"><span style="color: windowtext; text-decoration: none; text-underline: none;">http://www.beyourowneconomist.com/</span></a>)
<o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann<o:p></o:p></span></div>
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</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-66838682759750391692012-07-13T07:16:00.000-07:002012-07-13T07:16:12.070-07:00What the Fed Said<div dir="ltr" style="text-align: left;" trbidi="on">
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<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Yesterday’s
Letter featured The New York Times’s assessment of the Federal Reserve’s
economic outlook as expressed at the latest meeting of the Federal Open Market
Committee. (Minutes released with three-week delay.)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Here’s what the
Fed said:<o:p></o:p></span></div>
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<span style="font-family: "Arial","sans-serif";"><br /></span></div>
<div style="background: white;">
<span style="font-family: Arial, sans-serif;">“Minutes of the Federal Open Market Committee<strong><o:p></o:p></strong></span></div>
<div style="background: white;">
<span style="font-family: Arial, sans-serif;"><br /></span></div>
<div style="background: white;">
<strong><span style="font-family: Arial, sans-serif; font-weight: normal;">June 19-20, 2012”</span></strong><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></div>
<div style="background: white;">
<strong><span style="font-family: Arial, sans-serif; font-weight: normal;"><br /></span></strong></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.federalreserve.gov/monetarypolicy/fomcminutes20120620.htm">http://www.federalreserve.gov/monetarypolicy/fomcminutes20120620.htm</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<strong><span style="font-family: Arial, sans-serif; font-weight: normal;">“Staff Economic
Outlook</span></strong><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><br />
“In the economic projection prepared by the staff for the June FOMC meeting,
the forecast for real gross domestic product (GDP) growth in the near term was
revised down. The revision reflected data indicating a slower pace of
private-sector job gains, more-subdued retail sales, a lower trajectory for
personal income, greater restraint in government purchases, and weaker net
exports than the staff anticipated at the time of the previous projection.
Moreover, recent adverse developments in Europe and tighter domestic financial
conditions led the staff to revise down somewhat the medium-term forecast for
real GDP growth. With the drag from fiscal policy anticipated to increase next
year, the staff projected that the growth rate of real GDP would not materially
exceed that of potential output until 2014 when economic activity was expected
to accelerate gradually, supported by accommodative monetary policy, further
improvements in credit availability, and rising consumer and business
sentiment. Increases in economic activity were anticipated to narrow the wide
margin of slack in labor and product markets only slowly over the projection
period, and the unemployment rate was expected to still be elevated at the end
of 2014….”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Once
again: There’s little cause for optimism in the Fed’s forecast.</span><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></div>
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<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Summer
season: The Lehmann Letter will be in summer-vacation mode during July and
August.)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
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</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-9552403017602476122012-07-12T08:57:00.000-07:002012-07-12T08:57:08.098-07:00Sad Commentary<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Yesterday the
Fed released the minutes for its most recent Federal Open Market Committee
meeting:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.federalreserve.gov/newsevents/press/monetary/20120711b.htm">http://www.federalreserve.gov/newsevents/press/monetary/20120711b.htm</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">They elicited
a sad commentary in an article in this morning’s New York Times:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“Fed Is Torn on Tipping Point for Action”</span><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;"><a href="http://www.nytimes.com/2012/07/12/business/economy/federal-reserve-officials-show-disappointment-with-growth.html?_r=1&ref=todayspaper">http://www.nytimes.com/2012/07/12/business/economy/federal-reserve-officials-show-disappointment-with-growth.html?_r=1&ref=todayspaper</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">The article begins:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">“<a href="http://topics.nytimes.com/top/reference/timestopics/organizations/f/federal_reserve_system/index.html?inline=nyt-org" title="More articles about the Federal Reserve System."><span style="color: windowtext; text-decoration: none; text-underline: none;">Federal Reserve</span></a>
officials agreed at a meeting in June that unemployment would remain elevated
for another five to six years, but most did not regard that as reason enough to
expand the Fed’s efforts to stimulate growth, according to <a href="http://www.federalreserve.gov/monetarypolicy/fomcminutes20120620.htm" title="blocked::http://www.federalreserve.gov/monetarypolicy/fomcminutes20120620.htm"><span style="color: windowtext; text-decoration: none; text-underline: none;">an official
account</span></a> published on Wednesday.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">“The American
economy is stuck in a new kind of normal, somewhere between crisis and
prosperity, and economic policy makers are struggling to define their role. The
Fed, which has responded forcefully each time the economy tips back toward <a href="http://topics.nytimes.com/top/reference/timestopics/subjects/r/recession_and_depression/index.html?inline=nyt-classifier" title="More articles about the recession."><span style="color: windowtext; text-decoration: none; text-underline: none;">recession</span></a>, remains divided
over whether it should try with similar urgency to return the economy to
prosperity.”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">To repeat:
The new normal is five/six years of above-normal unemployment.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">That’s a sad
commentary.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Summer
season: The Lehmann Letter will be in summer-vacation form during July and
August.)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
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<br /></div>
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<br /></div>
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</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-68613216757000735432012-07-11T07:57:00.000-07:002012-07-11T07:57:38.756-07:00Consumer Credit’s Good Report<div dir="ltr" style="text-align: left;" trbidi="on">
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</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">On Monday the
Federal Reserve reported that consumer credit grew by a whopping $205.4 billion
in May:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.federalreserve.gov/releases/g19/current/default.htm">http://www.federalreserve.gov/releases/g19/current/default.htm</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Household
spending must grow strongly for a robust recovery, and households must borrow
to finance it. This shows they are.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Consumer
Credit<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><br /></span></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCPhAXdt2YWwx0v6KggxBQhfesZJlXFSBJCEJ0RlLWnJSZzFTSYiOoTfHqSk1cY-Rqn6Jfz8X_G0sfC7niX2D7r7WaDEe4n-HrwOz75dr4oWaMpqlUXyJxKWBApQE0JlldETT1U4riHnR_/s1600/5.6+Consumer+Credit+05-08-12.bmp" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjCPhAXdt2YWwx0v6KggxBQhfesZJlXFSBJCEJ0RlLWnJSZzFTSYiOoTfHqSk1cY-Rqn6Jfz8X_G0sfC7niX2D7r7WaDEe4n-HrwOz75dr4oWaMpqlUXyJxKWBApQE0JlldETT1U4riHnR_/s320/5.6+Consumer+Credit+05-08-12.bmp" width="320" /></a></div>
<br />
<div>
<br /></div>
<div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Recessions
shaded)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The chart as well
as the latest report, which provides data for the past three quarters, are all upbeat.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
</div>
<div>
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-86787572893381403662012-07-10T08:02:00.000-07:002012-07-10T08:02:15.516-07:00Europe: Doubters Take Note<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"> </span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">The
euro’s doubters should take note.</span><span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">Last weekend France and Germany commemorated the fiftieth anniversary of
their declaration of friendship, first announced at a 1962 meeting of President Charles
de Gaulle of France and Chancellor Konrad Adenauer of Germany.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">According to a July 8 article in The New York Times:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“Germany and France Celebrate Their Bond”<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;"><br /></span></div>
<span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/07/09/world/europe/germany-and-france-celebrate-their-bond.html?_r=1&ref=todayspaper">http://www.nytimes.com/2012/07/09/world/europe/germany-and-france-celebrate-their-bond.html?_r=1&ref=todayspaper</a><em><span style="color: #333333;"> </span></em><em><span style="color: #333333; font-style: normal;"><o:p></o:p></span></em></span><br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">Chancellor Angela Merkel of Germany, with French President Francois
Hollande by her side, said:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">““The
European economic and currency union, as founded 20 years ago, has proved
itself not strong enough yet,” she said. “Our generation has to draw the right
lessons from that.” It is important, she said, to put the “finishing touches on
a political level of the economic and monetary union — it’s a herculean task,
but Europe is up to it.””<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">It
is significant that the leaders of Europe’s most powerful states publicized
their bonding of fifty years ago to declare their vision of where Europe will
be fifty years hence: United in both economy and polity.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">The
euro’s doubters should take note.</span><span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, sans-serif;">(To be fully
informed visit </span><a href="http://www.beyourowneconomist.com/" style="background-color: white; font-family: Arial, sans-serif;">http://www.beyourowneconomist.com/</a><span style="background-color: white; font-family: Arial, sans-serif;">)</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-70717286837482582692012-07-09T09:21:00.000-07:002012-07-09T09:21:11.596-07:00Autos: Revising Our Expectations Downward?<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="background-color: white; font-family: Arial, sans-serif;">Is it time to
revise our expectations downward?</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">There was an
upbeat reaction at the beginning of the month to motor-vehicle manufacturers’ June
sales. <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">And on July 5
the Commerce Department released its estimate of 14.0 million new-vehicle sales
at a seasonally-adjusted annual rate:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.bea.gov/national/index.htm#gdp">http://www.bea.gov/national/index.htm#gdp</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The chart
tells you that this is a big improvement over the recession lows of less than
10 million. There’s been a big pop up.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">But now – it
seems – we’ve stalled.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">New-Vehicle
Sales<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)<o:p></o:p></span></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6IW1v9kqG2d-bo_FCgc39gPkK0KPcFoXr-mWkaWquS5JvMGfsdkG_Sbz21-hdiheREsh2myynbl7HqBXnBct_BuKyw87fn7r4ebfO1kh3ywA7Mu6x6-H7uvGlM06ijJaVX8b_QvJaBB23/s1600/5.5+New-Vehicle+Sales+04-04-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEi6IW1v9kqG2d-bo_FCgc39gPkK0KPcFoXr-mWkaWquS5JvMGfsdkG_Sbz21-hdiheREsh2myynbl7HqBXnBct_BuKyw87fn7r4ebfO1kh3ywA7Mu6x6-H7uvGlM06ijJaVX8b_QvJaBB23/s320/5.5+New-Vehicle+Sales+04-04-12.png" width="320" /></a></div>
<br />
<div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Recessions
shaded)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">New-vehicle
sales have averaged around 14million for the first-half of the year. The growth
trend is over.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Is it time to
revise our expectations downward?<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
</div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-40882285675931190192012-07-06T10:04:00.002-07:002012-07-06T10:04:48.279-07:00Employment: What Can You Say?<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">What can you
say when you’ve already said so much?<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">We need
250,000 more jobs a month – month after month, year after year – to drive down
the unemployment rate. It’s just not happening.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">And today’s employment
report from the Bureau of Labor Statistics did nothing to change that
assessment.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://stats.bls.gov/news.release/empsit.nr0.htm">http://stats.bls.gov/news.release/empsit.nr0.htm</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The report
begins:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="background: white; tab-stops: 45.8pt 91.6pt 137.4pt 183.2pt 229.0pt 274.8pt 320.6pt 366.4pt 412.2pt 458.0pt 503.8pt 549.6pt 595.4pt 641.2pt 687.0pt 732.8pt;">
<span lang="EN" style="font-family: "Arial","sans-serif"; mso-ansi-language: EN;">“Nonfarm payroll employment continued to edge up in June
(+80,000), and the </span><span style="background-color: white; font-family: Arial, sans-serif;">unemployment rate was unchanged at 8.2 percent, the U.S.
Bureau of Labor </span><span style="background-color: white; font-family: Arial, sans-serif;">Statistics reported today….”</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The second
number can’t head south until the first number goes north.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"> (To be fully informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-90155282739238044392012-07-05T08:04:00.000-07:002012-07-05T08:04:39.085-07:00Europe: Not Yet Toast<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The casual
observer of European events is tempted to throw up his or her hands in despair
and conclude: THEY’RE TOAST!<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Not so fast.
Don’t be dragged into the details. Keep the big picture in focus. Every crisis has
brought new progress. New challenges have brought new solutions.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">You needn’t
be thoroughly familiar with current events in order to see history, as well as
progress, unfolding. A stronger Europe is being forged before our eyes.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">See, for
instance, this article that appeared in July 3’s New York Times.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“Europe’s Banking Chief Wields New Power in Crisis”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/07/03/world/europe/european-central-bank-head-draghi-has-new-powers.html?_r=1&ref=nicholaskulish">http://www.nytimes.com/2012/07/03/world/europe/european-central-bank-head-draghi-has-new-powers.html?_r=1&ref=nicholaskulish</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The article’s
opening paragraphs said:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“The
spotlight in the </span><span style="font-family: "Arial","sans-serif";"><a href="http://topics.nytimes.com/top/reference/timestopics/subjects/e/european_sovereign_debt_crisis/index.html?inline=nyt-classifier" title="More articles about the European sovereign debt crisis."><span style="color: windowtext; text-decoration: none; text-underline: none;">European debt
crisis</span></a> has now shifted decisively toward
the influential leader of the <a href="http://topics.nytimes.com/top/reference/timestopics/organizations/e/european_central_bank/index.html?inline=nyt-org" title="More articles about European Central Bank"><span style="color: windowtext; text-decoration: none; text-underline: none;">European Central Bank</span></a>, <a href="http://topics.nytimes.com/top/reference/timestopics/people/d/mario_draghi/index.html?inline=nyt-per" title="More articles about Mario Draghi."><span style="color: windowtext; text-decoration: none; text-underline: none;">Mario Draghi</span></a>, who emerged from <a href="http://www.nytimes.com/2012/06/30/world/europe/european-leaders-move-toward-deals-for-spain-and-italy.html" title="Times article"><span style="color: windowtext; text-decoration: none; text-underline: none;">the recent summit meeting in Brussels</span></a> with new powers and stronger backing to address the
Continent’s financial woes.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">“Political leaders took
significant strides toward making the central bank more like the United States
Federal Reserve, giving it authority to oversee the euro zone’s largest banks
and, once that new regulator is in place as soon as the end of this year, a
likely role in rescuing Spanish banks with capital directly from the European
rescue funds. <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">“Many of the longer-run
plans under discussion, like European deposit insurance, would mean shifting
further responsibilities toward the bank, arguably giving Mr. Draghi the most
influential executive powers in Europe.”<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">These are just pieces of
the final puzzle. But they are falling into place.</span><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-17070676247823300792012-07-03T08:11:00.001-07:002012-07-03T08:11:49.459-07:00Manufacturing Slowdown?<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"> </span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Yesterday’s
report from the Institute of Supply Management that its June Purchasing
Managers’ Index (PMI) dipped below 50% is cause for concern:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942">http://www.ism.ws/ISMReport/MfgROB.cfm?navItemNumber=12942</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Any reading
below 50% is a sign of manufacturing contraction, and June’s 49.7% interrupts
an expansionary trend. Let’s hope it was a fluke.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Purchasing
Managers’ Index<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)<o:p></o:p></span></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6aytcG0blgsxPnAWnIbiSwKolEB_JJEOC7q8KWV8iSuVV3tHXMMRqaelKdy54Jjh9R8l3CTWH5mn7UJASRUqd-mzbOkG6wV3qCbbWpLp6s-tj6_DYOmRgkOZsxDG2zYtji1Fnr6NWGrKK/s1600/3.4+PMI+04-02-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEj6aytcG0blgsxPnAWnIbiSwKolEB_JJEOC7q8KWV8iSuVV3tHXMMRqaelKdy54Jjh9R8l3CTWH5mn7UJASRUqd-mzbOkG6wV3qCbbWpLp6s-tj6_DYOmRgkOZsxDG2zYtji1Fnr6NWGrKK/s320/3.4+PMI+04-02-12.png" width="320" /></a></div>
<br />
<div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Recessions
shaded)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">But there
have been too many signs of softness to remain complacent.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">We’ll see.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
</div>
<div>
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-75226797348526959882012-07-02T08:09:00.000-07:002012-07-02T08:09:24.088-07:00July Publication Schedule<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<b><span style="font-family: "Arial","sans-serif";">ECONOMIC INDICATOR PUBLICATION
SCHEDULE<o:p></o:p></span></b></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<b><span style="font-family: "Arial","sans-serif";">July 2012<o:p></o:p></span></b></div>
<div style="border-bottom: solid windowtext 1.5pt; border: none; mso-element: para-border-div; padding: 0in 0in 9.0pt 0in;">
<div class="MsoNormal" style="border: none; mso-border-bottom-alt: solid windowtext 1.5pt; mso-layout-grid-align: none; mso-padding-alt: 0in 0in 9.0pt 0in; mso-pagination: none; padding: 0in; text-autospace: none;">
<br /></div>
<div class="MsoNormal" style="border: none; mso-border-bottom-alt: solid windowtext 1.5pt; mso-layout-grid-align: none; mso-padding-alt: 0in 0in 9.0pt 0in; mso-pagination: none; padding: 0in; text-autospace: none;">
<b><span style="font-family: "Arial","sans-serif";">Source (* below)……Series Description……Day & Date <o:p></o:p></span></b></div>
</div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial","sans-serif";">Quarterly
Data<o:p></o:p></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">BEA……..….GDP
..……..…Fri, 27th<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<b><span style="font-family: "Arial","sans-serif";">Monthly
Data</span></b><sup><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></sup></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">ISM..Purchasing
managers’ index…Mon, 2nd <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">BEA.New-vehicle
sales.(Approximate).Thu, 5<sup>th</sup><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">BLS………….Employment…….… Fri, 6th<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">Fed.
Consumer credit..(Approximate).Mon, 9<sup>th<o:p></o:p></sup></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">BLS………...Producer
prices……. Fri, 13<sup>th</sup> <o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">Census…….......Inventories….....
Mon, 16<sup>th<o:p></o:p></sup></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">BLS……….Consumer
prices.….... Tue, 17<sup>th</sup> <sup><o:p></o:p></sup></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">Fed……….Capacity
utilization……Tue, 17<sup>th<o:p></o:p></sup></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">Census……...Housing
starts…….Wed, 18<sup>th<o:p></o:p></sup></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">NAR………Existing-home
sales….Thu, 19th <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Conf
Bd…….Leading indicators….Thu, 19th <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">Census……..New-home
sales…... Wed, 25th <o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Census……….Capital
goods…….. Thu, 26<sup>th<o:p></o:p></sup></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Conf Bd….Consumer
confidence.. Tue, 31st <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">*BEA =
Bureau of Economic Analysis of the U.S. Department of Commerce<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">*BLS =
Bureau of Labor Statistics of the U.S. Department of Labor<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">*Census
= U.S. Bureau of the Census<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">*Conf
Bd = Conference Board<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">*Fed =
Federal Reserve System<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">*ISM =
Institute for Supply Management<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<span style="font-family: "Arial","sans-serif";">*NAR =
National Association of Realtors<o:p></o:p></span></div>
<div class="MsoNormal" style="line-height: 150%; mso-layout-grid-align: none; mso-pagination: none; text-autospace: none;">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-81237400319960699482012-06-29T06:12:00.000-07:002012-06-29T06:12:36.667-07:00Germany Budges<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"> </span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Once again
the European nations have decided to hang together rather than hang separately.
Their efforts to save the Euro appear to bring them more rapidly together
rather than drive them apart.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Chancellor
Angela Merkel said it wouldn’t happen, but…….<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Yesterday
Germany made major concessions to support the Euro.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">As The New
York Times reported in today’s edition:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“European Leaders Agree to Use Bailout Fund to Aid Banks”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/06/29/world/europe/european-union-meeting-opens-without-french-german-accord.html?_r=1&ref=todayspaper">http://www.nytimes.com/2012/06/29/world/europe/european-union-meeting-opens-without-french-german-accord.html?_r=1&ref=todayspaper</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“Mr.
Van Rompuy (president of the European Council) called the agreement a
“breakthrough that banks can be recapitalized directly,” which represents a
concession by northern European countries, including </span><span style="font-family: "Arial","sans-serif";"><a href="http://topics.nytimes.com/top/news/international/countriesandterritories/germany/index.html?inline=nyt-geo" title="More news and information about Germany."><span style="color: windowtext; text-decoration: none; text-underline: none;">Germany</span></a>. The leaders agreed that the euro zone’s permanent bailout
fund, the 500 billion euro European Stability Mechanism, due to come into being
next month, could recapitalize banks directly once a banking supervisory body
overseen by the European Central Bank has been set up. That should happen by
the end of the year, he said. The joint banking supervisory body is also a
breakthrough, an effort to ensure the future health of the area’s banks, but
details about that component of the agreement were scarce….<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“Italy
and Spain were supported in their efforts by the new French president, </span><span style="font-family: "Arial","sans-serif";"><a href="http://topics.nytimes.com/top/reference/timestopics/people/h/francois_hollande/index.html?inline=nyt-per" title="More articles about Fran ois Hollande."><span style="color: windowtext; text-decoration: none; text-underline: none;">François Hollande</span></a>, who arrived here on Thursday demanding “rapid solutions” to
the euro’s problems. But Chancellor <a href="http://topics.nytimes.com/top/reference/timestopics/people/m/angela_merkel/index.html?inline=nyt-per" title="More articles about Angela Merkel."><span style="color: windowtext; text-decoration: none; text-underline: none;">Angela Merkel</span></a> of Germany gave little sign of budging on any quick fixes,
arguing that existing mechanisms could be used, illustrating some of the deep
divisions as European leaders try to restore faith in the single currency….”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Then
the article goes on to say that Germany did budge<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“…Mr.
Monti told the other leaders that Italy would not agree to any other issue here
until there was serious discussion of how the union could help bring down
interest rates on Italian bonds, and Mr. Rajoy, under even more pressure from
the markets, joined him….<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“In
a speech on Wednesday to German lawmakers, Ms. Merkel argued that short-term
solutions like pooled debt would be counterproductive without the construction,
first, of a political and economic union among the member states in the euro
zone. Without mutual responsibility and control over national budgets, she
argued, there could not be mutual liabilities that can turn into blank checks….”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Although
Germany’s insistence on long-term integration has born fruit.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">“The European Union
gathering has goals for both the short and longer term — to ease the pressure
on Spain and Italy, but also to lay the ground for increased integration of the
euro zone.…<o:p></o:p></span></div>
<div class="MsoNormal" itemprop="articleBody" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">“The
leaders will also discuss proposals for the future of the euro drafted by the
heads of the major European institutions and </span><span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/06/27/world/europe/european-union-prods-germany-with-fiscal-plan.html" title="Times article."><span style="color: windowtext; text-decoration: none; text-underline: none;">released Tuesday</span></a>,
plans that could lead to the creation of a euro zone finance ministry and —
eventually — greater sharing of debt burdens.”<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">An article
that appeared several days ago in the Times anticipated these developments:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“Why Germany Will Pay Up to Save the Euro” <o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/06/27/business/economy/why-germany-will-pay-up-to-save-the-euro.html?ref=eduardoporter">http://www.nytimes.com/2012/06/27/business/economy/why-germany-will-pay-up-to-save-the-euro.html?ref=eduardoporter</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“Yet
it would be wrong to kiss the euro goodbye just yet. For all of Berlin’s neins,
shooting down every serious proposal to address its woes, the German government
knows it must ultimately cave and open its wallet to save the single currency…..<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“But
Ms. Merkel knows that Germany must ultimately underwrite the euro’s rescue,
pretty much regardless of whether its conditions are satisfied. There are three
good reasons. First, the euro has been very good to Germany. Second, the
bailout costs are likely to be much lower than most Germans believe. Third, and
perhaps most important, the cost to Germany of euro dismemberment would be
incalculably high — far more than that of keeping the currency together…..<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“Let’s
take the reasons in turn…..<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“Since
the advent of the single currency, Germany’s labor costs have fallen more than
15 percent against the average labor costs of all the countries using the euro,
and about 25 percent against those of the troubled nations on the periphery. If
it dumped the euro for a new deutsche mark, its exchange rate would surge to
make up for the difference, potentially crippling its exports, which have fed
most of its economic growth over the last decade….”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">The
article points out why the financial burden on Germany will not be large, and
then goes on to say:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“Rather
than spending so much effort discussing the cost of bailing out Europe, Germany
might do better by opening a public debate about the costs of letting the euro
start to fall apart. Those are likely to be much less manageable….<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“But
given the stakes, it is hard not to conclude that Germany will ultimately pay
whatever it takes. It’s not that difficult a call. On one hand, there are
manageable costs and clear benefits. On the other, there is a decent chance of
unmitigated disaster.”</span><b><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></b></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Once again
the European nations have decided to hang together rather than hang separately.
Their efforts to save the Euro appear to bring them more rapidly together
rather than drive them apart.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-50552933942768525342012-06-28T08:27:00.001-07:002012-06-28T08:27:57.826-07:00GDP and the Bifurcated Economy<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"> </span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Today’s GDP
report reconfirms our bifurcated economy. Throughout the recovery some data has
been strong while other data has been weak.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1">http://www.bea.gov/iTable/iTable.cfm?ReqID=9&step=1</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Sad news
first: GDP grew by 1.9% in the first quarter.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The really sad
news: GDP growth would have been higher had it not been for government’s
continued contraction.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Government
spending has fallen since the beginning of 2010. That's too bad because
government spending is within our direct control and could have grown had we
desired that. We can't do much about housing or business investment, but we can
and could have seen to it that government expanded. Government could have been
the balloon that lifted us higher. Instead it has been the anchor that has held
us back.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The good
news: This report reconfirms the significant increase in corporate profits to
$1,644.9 billion. Take a look at the chart and you will see that this is a big
jump. It appeared that earnings had stalled at $1,500 billion or less. Now they
are off the chart.<o:p></o:p></span></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Profits<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)<o:p></o:p></span></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUNDyDVNMJn7rvJLoWoPpqyv096fnP3iI2wqwGt2tLe0co8YP2h6MO0BBUMCc5bZit-hOChzAfz8F_FFIOsko5DWw3ysnK94w3EwUfHF7fXd1UdVuJlKq9Sc5DpkuurKkG-69X0WIwapvC/s1600/2.1+Corporate+Profits+05-26-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUNDyDVNMJn7rvJLoWoPpqyv096fnP3iI2wqwGt2tLe0co8YP2h6MO0BBUMCc5bZit-hOChzAfz8F_FFIOsko5DWw3ysnK94w3EwUfHF7fXd1UdVuJlKq9Sc5DpkuurKkG-69X0WIwapvC/s320/2.1+Corporate+Profits+05-26-12.png" width="320" /></a></div>
<br />
<div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Recessions
shaded)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Once again we
have a bifurcated economy: Some reports have been strong, others weak. That's
not good enough, but it certainly could have been worse.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
</div>
<div>
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-71154843914048039172012-06-27T07:04:00.000-07:002012-06-27T07:04:00.838-07:00Business Investment: Gloom Sets In<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"> </span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Lately there
have been too many signs of sluggish or nonexistent growth: Home building,
new-vehicle sales, consumer confidence. We need exuberance to herald robust
recovery. It’s not there.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Are we locked
in a range? Eventually we will no longer be able to say, “It’s too soon to
tell.”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Business
investment in new equipment had been a rosy exception to households’ reluctance
to purchase tangible assets.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">This morning
the Census Bureau reported approximately $70 billion in new orders for
nondefense capital goods for May.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf">http://www.census.gov/manufacturing/m3/adv/pdf/durgd.pdf</a></span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">New orders
have been stuck at around $70 billion for several months. The chart tells you
we should be breaking through $80 billion, on our way to $100 billion. Instead –
as is true for so many household reports – we’re resting on a plateau.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">New Orders
for Nondefense Capital Goods<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">(Click on chart to enlarge)</span><br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKAWXKR2j4AI5O8zOxIhgurH4m9tJ88NXmpp7c1XUPynwrhnS8FkD9kh8Eh1pidFDyNJ4BJFVYHYDAW42VDdeSnwcUwkoPmwxnMQaRlPZkTBVAVRIn5ap8wHXWd0vqspaiP70d7vdZY9Ux/s1600/4.1+Nondefense+Capital+Goods+05-24-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhKAWXKR2j4AI5O8zOxIhgurH4m9tJ88NXmpp7c1XUPynwrhnS8FkD9kh8Eh1pidFDyNJ4BJFVYHYDAW42VDdeSnwcUwkoPmwxnMQaRlPZkTBVAVRIn5ap8wHXWd0vqspaiP70d7vdZY9Ux/s320/4.1+Nondefense+Capital+Goods+05-24-12.png" width="320" /></a></div>
<span style="background-color: white; font-family: Arial, sans-serif;">(Recessions
shaded)</span><br />
<span style="background-color: white; font-family: Arial, sans-serif;"><br /></span><br />
<span style="background-color: white; font-family: Arial, sans-serif;">This is a bad
omen. Where is the growth we’ve come to expect and rely upon? Are we locked in a
range? Eventually we will no longer be able to say, “It’s too soon to tell.”</span><br />
<br />
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-53831033189244087342012-06-26T07:41:00.001-07:002012-06-26T07:41:48.701-07:00Consumer Confidence: From Sizzle to Fizzle<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">When you look
at the chart you can see that consumer confidence popped back nicely from
recession’s deep trough. That sizzle is now fizzle. Economic expansion can’t
proceed with exuberance while consumer confidence is mired in the doldrums.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Consumer
confidence has stalled. The long climb out of recession’s trough has reached a
plateau, and that’s bad for consumer demand.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">This morning
the Conference board reported “…the fourth consecutive moderate decline…” June’s
index-value was 62.0<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="https://www.conference-board.org/press/pressdetail.cfm?pressid=4526">https://www.conference-board.org/press/pressdetail.cfm?pressid=4526</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The problem
is not so much decline. The index is essentially flat. But there’s no need to
quibble. The index has to rise through 100 to prove we have a robust recovery.
Just rising through 80 would be welcome.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Consumer
Confidence<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)<o:p></o:p></span></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNEHN5m7j6U5tSNU0mtUfNYGrGdI9_lcAeciQDNoGxmhS0IICCwjyC2VFEK_to32wTe9pw3vHl02ZUi_DwYxA-BbLOyUiyKjc_X2CQp37yGW5JX8HPn65xA8NrlSNoaRa_VbE8yMzgCrqS/s1600/5.4+Consumer+Confidence+04-24-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjNEHN5m7j6U5tSNU0mtUfNYGrGdI9_lcAeciQDNoGxmhS0IICCwjyC2VFEK_to32wTe9pw3vHl02ZUi_DwYxA-BbLOyUiyKjc_X2CQp37yGW5JX8HPn65xA8NrlSNoaRa_VbE8yMzgCrqS/s320/5.4+Consumer+Confidence+04-24-12.png" width="320" /></a></div>
<br />
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Recessions
shaded)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">What’s wrong?
Household balance sheets (as this letter believes)? Unemployment, the euro, the
stock market, etc. (as others believe)? Why argue? We can probably all agree
that we have a problem.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<br />
<br /></div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-7344602166792622702012-06-25T07:46:00.000-07:002012-06-25T07:46:29.631-07:00New-Home Sales Uptick: Another Mirage?<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">We’ve been
crawling for so long in the housing-rebound desert that any sign of an oasis
raises suspicions of another mirage.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">For instance……….<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">This morning
the Census Bureau announced 369,000 new-home sales in May.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.census.gov/construction/nrs/pdf/newressales.pdf">http://www.census.gov/construction/nrs/pdf/newressales.pdf</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Take a look
at the chart and the latest report seems unremarkable. New-home sales have
stagnated under 400,000 since the depths of the recession. We will have cause
to cheer when sales break through 400,000 and then 600,000 and maybe even
800,000. But sales under 400,000 hardly seem cause for celebration.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">New Home
Sales<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqx6od-qkwjP3yWRQXbfZsmQ-xo-alQqqkRyZ1lxVVHePBsATTZkQ02FeXbnL3I0y4JDs_6SMHHxK7B1uJg7-8Eja2TSXQsax5E-SZ12MJhX3Bbo9wPTu9G_WgX7efpFWevZepX_SycY0Q/s1600/5.9+New+Home+Sales+04-24-12.bmp" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjqx6od-qkwjP3yWRQXbfZsmQ-xo-alQqqkRyZ1lxVVHePBsATTZkQ02FeXbnL3I0y4JDs_6SMHHxK7B1uJg7-8Eja2TSXQsax5E-SZ12MJhX3Bbo9wPTu9G_WgX7efpFWevZepX_SycY0Q/s320/5.9+New+Home+Sales+04-24-12.bmp" width="320" /></a></div>
<br />
<div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Recessions
shaded)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">But there
were other (optimistic) data in the report. The supply of new homes for sale fell
from 6.6 months to 4.7 months over the past year, while the number of new homes
for sale fell from 169,000 145,000. Let's hope the glut of homes on the market has
shrunk to a level that will spur new building.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">We're weary of mirages.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<span style="font-family: "Arial","sans-serif"; font-size: 12.0pt; mso-ansi-language: EN-US; mso-bidi-language: AR-SA; mso-fareast-font-family: "Times New Roman"; mso-fareast-language: EN-US;">© 2012 Michael B. Lehmann</span></div>
<div>
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-78924314457766516032012-06-22T07:40:00.000-07:002012-06-22T12:35:02.386-07:00Balance-Sheet Crisis<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"> </span><span style="background-color: white; font-family: Arial, sans-serif;"> </span></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">You can't simultaneously
cut back and spend more. Cutting back will ease the balance-sheet crisis and
spending more will speed recovery. But you can't cut back and spend more at the
same time.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Much of the
United States and Europe – households, banks and governments - faces a balance
sheet crisis: Shaky assets, depleted liquidity, too much debt and too little
net worth. The evidence is all around us: Homes underwater, credit-rating
downgrades and insolvent governments.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">We all know
the solution: Pay your debts, tighten your belt, spend less, be frugal, curtail
borrowing, blah blah blah. OK, suppose we do that. Then what?<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Private
Borrowing<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif; font-size: 16px;">(Click on chart to enlarge)</span></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPTHNnnwpwO090y1LzuMtxuBC0ZaXlq68ZL1QlDIyHrWNw3_-Wg-cDq2PweEt1dB1WWgDd021RQpOatmpKutFMh6b_uu9uuYC-l2WMPvhkoquFl-S1o1ng5bf9xfehk9NafrZMQPgtmwSa/s1600/6.3+Private+Borrowing+06-21-12.png" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiPTHNnnwpwO090y1LzuMtxuBC0ZaXlq68ZL1QlDIyHrWNw3_-Wg-cDq2PweEt1dB1WWgDd021RQpOatmpKutFMh6b_uu9uuYC-l2WMPvhkoquFl-S1o1ng5bf9xfehk9NafrZMQPgtmwSa/s320/6.3+Private+Borrowing+06-21-12.png" width="320" /></a></div>
<br />
<br />
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">(Recessions
shaded)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Let's begin
with the United States. As you can see from the chart, the private sector - households
and businesses - cut back sharply as recession unfolded. Borrowing plunged
until the private sector began repaying its debts rather than borrowing more.
That was the first time this has occurred since World War II.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Looks good - and
it is - until you begin contemplating the consequences. In a report released
this month, the Federal Reserve reported that private sector borrowing (households
and business) had fallen from $574.4 billion in 2011's fourth-quarter to $564.6
billion in 2012's first quarter.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“D.2 Credit Market Borrowing by Sector”</span><span style="font-family: Arial, sans-serif;"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;"><a href="http://www.federalreserve.gov/releases/z1/current/accessible/d2.htm">http://www.federalreserve.gov/releases/z1/current/accessible/d2.htm</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">Now that
private-sector borrowing is only one fourth of what it was before recession hit
(see chart), ask yourself: "How are households going to buy all the homes
and cars required to hasten economic expansion?" They can't do it without
borrowing and they can't repair their balance sheets if they do borrow. We're
in a jam.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">There is no
easy exit from this predicament. Cutting back will ease the balance-sheet crisis
and spending more will speed recovery. But you can't cut back and spend more at
the same time.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<span style="font-family: Arial, sans-serif; font-size: 12pt;">© 2012 Michael B. Lehmann</span></div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-49120771728283807882012-06-21T08:41:00.000-07:002012-06-21T08:41:11.907-07:00Home Sales Remain Weak<div dir="ltr" style="text-align: left;" trbidi="on">
<div class="separator" style="clear: both; text-align: left;">
</div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Today's
announcement from the National Association of Realtors blames supply
constraints for last month's weak sales.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.realtor.org/news-releases/2012/06/existing-home-sales-constrained-by-tight-supply-in-may-prices-continue-to-gain">http://www.realtor.org/news-releases/2012/06/existing-home-sales-constrained-by-tight-supply-in-may-prices-continue-to-gain</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Supply
constraints may limit recent sales in some markets, but it is difficult to
reconcile the chart with a chronic supply-side problem. If a true, overall
supply-side problem really does exist, then new construction should recover
quickly.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Let's hope
so. If the economic recovery is like a ship trying to get underway, then
housing is the anchor that prevents it from doing so.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Take a look at
the chart. Home sales over the past five years look like an “L” not a “V.” Past
recoveries were V-shaped because homeowners and potential homeowners had the
wherewithal to get in the market as soon as interest rates fell. Now homeowners
and potential homeowners can't get in the market because their balance sheets
are compromised. Lenders want strong balance sheets and strong evidence of
credit worthiness.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Existing Home
Sales<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><br /></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Click on
chart to enlarge)</span></div>
<br />
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUaAdi0XLCHg19HO6ARzaEi0DIr0EVx7hbQl5MSwXn7rTAOo-ioKuDV8t26BLyL4JNM_zKdGQvJmWDnxnqhhX-Wv87siu8eAl7Jd9DBYJxc3cbiMq6vXx3aDMjwgjeakFfgN38GwJDP6CB/s1600/5.8+Existing+Home+Sales+04-19-12.bmp" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" height="186" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgUaAdi0XLCHg19HO6ARzaEi0DIr0EVx7hbQl5MSwXn7rTAOo-ioKuDV8t26BLyL4JNM_zKdGQvJmWDnxnqhhX-Wv87siu8eAl7Jd9DBYJxc3cbiMq6vXx3aDMjwgjeakFfgN38GwJDP6CB/s320/5.8+Existing+Home+Sales+04-19-12.bmp" width="320" /></a></div>
<br />
<div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(Recessions
shaded)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Today's
announcement from the National Association of Realtors (NAR) provides little
solace: Existing home sales fell from 4.6 million in April to 4.5 million in May.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The NAR’s
accompanying announcement said, in part:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span lang="EN" style="font-family: "Arial","sans-serif"; mso-ansi-language: EN;">“<a href="http://www.realtor.org/bios/lawrence-yun"><span style="color: windowtext; text-decoration: none; text-underline: none;">Lawrence Yun</span></a>,
NAR chief economist, said inventory shortages in certain areas have been
building all year. ‘The slight pullback in monthly home sales is more likely
due to supply constraints rather than softening demand. The normal seasonal
upturn in inventory did not occur this spring,’ he said. ‘Even with the monthly
decline, home sales have moved markedly higher with 11 consecutive months of
gains over the same month a year earlier.’”</span><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">"Supply
constraints" may limit recent sales in some markets, but it is difficult
to reconcile the chart with a chronic supply-side problem. If a true, overall
supply-side problem really does exist, then new construction should recover
quickly.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">We'll see.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
</div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-87622606265048535492012-06-20T08:17:00.002-07:002012-06-20T08:17:36.673-07:00Why the Fed Can't Help<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Federal
Reserve's Federal Open Market Committee reports today. Hopes and expectations
are high that the Fed will reduce long-term interest rates to further stimulate
the economy.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Problem is: Temporary
additional borrowing and spending by the federal government would probably be
more effective at boosting the economy than whatever rate reductions the
Federal Reserve announces today.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">We are in a
liquidity trap and lower rates won't help much. In 1936 John Maynard Keynes
publicized the liquidity trap in "The General Theory of Employment
Interest and Money." According to Lord Keynes, reducing interest rates is
not effective once they have fallen below a certain low level. In a climate of
generally weak aggregate demand, in which interest rates are already depressed,
further rate reductions do not stimulate additional borrowing and spending.
Those who won't - or can't - borrow and spend confront obstacles other than
borrowing costs.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">For instance:
Households' current balance-sheet difficulties prevent them from borrowing and
spending to purchase new housing. Their limited liquidity, high debt and reduced
net worth - not high interest rates - impede the recovery in residential real
estate. And that sits like a boulder in the road, forestalling robust economic
expansion.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Meanwhile we abandoned
prematurely the direct stimulus that could have prevented additional job loss.
If the federal government had borrowed more and provided additional funding to
local governments, that could have prevented mass layoffs of local-government
workers. While many of us believe that government employment has recently grown,
an article in today's New York Times says that it has fallen by over half a
million jobs.<span style="display: none; mso-hide: all;">,</span><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“Public Workers Face Continued Layoffs, Hurting the Recovery”</span><span style="font-family: "Arial","sans-serif";"><o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/06/20/business/public-workers-face-continued-layoffs-and-recovery-is-hurt.html?_r=1&ref=todayspaper">http://www.nytimes.com/2012/06/20/business/public-workers-face-continued-layoffs-and-recovery-is-hurt.html?_r=1&ref=todayspaper</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Here are some
excerpts from the article:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“Government
payrolls grew in the early part of the recovery, largely because of federal
stimulus measures. But since its postrecession peak in April 2009 (not counting
temporary Census hiring), the public sector has shrunk by 657,000 jobs. The
losses appeared to be tapering off earlier this year, but have accelerated for
the last three months, creating the single biggest drag on the recovery in many
areas…….<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“So
while the federal government has grown a little since the </span><span style="font-family: "Arial","sans-serif";"><a href="http://topics.nytimes.com/top/reference/timestopics/subjects/r/recession_and_depression/index.html?inline=nyt-classifier" title="More articles about the recession."><span style="color: windowtext; text-decoration: none; text-underline: none;">recession</span></a>, and many states have recently begun to add a few jobs,
local governments are making new cuts that outweigh those gains……..<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“If
governments still employed the same percentage of the work force as they did in
2009, the unemployment rate would be a percentage point lower, according to an
analysis by Moody’s Analytics. At the pace so far this year, layoffs will
siphon off $15 billion in spending power. Yale economists have said that if
state and local governments had followed the pattern of previous recessions,
they would have </span><span style="font-family: "Arial","sans-serif";"><a href="http://economix.blogs.nytimes.com/2012/06/11/americas-hidden-austerity-program/" title="Economix blog post by the economists."><span style="color: windowtext; text-decoration: none; text-underline: none;">added at least 1.4 million jobs</span></a>.”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">It is
probably true that, for political and ideological reasons, the federal economic
stimulus went as far as it could go. But that does not mean that it would not
have been effective. It probably would have been far more effective at boosting
the economy than whatever rate reductions the Federal Reserve announces today.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0tag:blogger.com,1999:blog-4252016424756731977.post-46397684168538650482012-06-19T08:24:00.003-07:002012-06-19T08:24:56.627-07:00Balance Sheet Crisis Grips America and Europe<div dir="ltr" style="text-align: left;" trbidi="on">
<br />
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">The Lehmann
Letter (SM)<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">America and
Europe find themselves in a balance-sheet crisis.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Here at home
households have too little cash, too much debt and too little net worth. They
can't do the borrowing and spending required to adequately stimulate national
economic recovery.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Today's Census
Bureau report on May residential construction provides evidence:<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.census.gov/construction/nrc/pdf/newresconst.pdf">http://www.census.gov/construction/nrc/pdf/newresconst.pdf</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">New building
permits were up but starts were down. Either way recovery has been sluggish: Insufficient
to provide oomph for the rest of the economy.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Some of
Europe's households also find themselves with too little cash, too much debt
and too little net worth. They, too, can't do the borrowing and spending
required to adequately stimulate recovery.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">But it’s southern
Europe's nations and banks, in addition to its households, that grab the
headlines. They can't do the borrowing and spending required to adequately
stimulate recovery because they also have too little cash, too much debt and
too little net worth.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">Southern
Europe requires a balance-sheet infusion, but northern Europe remains reluctant.
Southern Europe needs cash, but Northern Europe wants strings attached.
Southern Europe says, "Trust us." Northern Europe says, "Not any
more."<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">See, for
instance, this article in today's New York Times.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“Greek Voting Past, Europe Returns to Fiscal Rescue”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/06/19/world/europe/greek-vote-past-europe-returns-to-fiscal-rescue.html?_r=1&ref=todayspaper">http://www.nytimes.com/2012/06/19/world/europe/greek-vote-past-europe-returns-to-fiscal-rescue.html?_r=1&ref=todayspaper</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“German
hard-liners were emboldened by the victory, viewing it as an endorsement of the
drive for structural adjustment in Greece and elsewhere in Southern Europe
through further austerity. As a result, the vote may delay concerted pro-growth
steps by central banks and governments around the world, as well as the hard
choices within Europe over deeper integration that are likely to prove
necessary in the long run….<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">“Ms.
Merkel has called for deeper fiscal and political integration to improve the
functioning of the currency union. While leaders in Paris, Rome and elsewhere
would like to tap Germany’s top credit rating through jointly issued debt, they
are not as ready to give up more powers to central authorities in Brussels.”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: Arial, sans-serif;">These
difficulties - as well as the underlying balance-sheet issue - are examined in
another article in today's Times.<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif"; mso-bidi-font-weight: bold;">“Investors in Search of Bigger Fix to Euro Crisis”<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";"><a href="http://www.nytimes.com/2012/06/19/business/daily-stock-market-activity.html?ref=todayspaper">http://www.nytimes.com/2012/06/19/business/daily-stock-market-activity.html?ref=todayspaper</a>
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">“The most pressing problem
is the bad loans that are sitting on the books of European banks, particularly
in Spain, where rising real estate losses have called into question the
viability of the country’s largest banks. Two weeks ago the European Union
provided Spain with up to 100 billion euros to prop up its banks, but investors
have so far judged that to be yet another partial solution, because they fear
banks in other countries may eventually need help as well. <o:p></o:p></span></div>
<div class="MsoNormal" itemprop="articleBody" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">“More
recently, several European financial leaders have said that when they meet next
week they will unveil a road map for a so-called banking union. This is
expected to include a form of deposit insurance for European banks to ensure
that banks maintain responsible lending standards. <o:p></o:p></span></div>
<div class="MsoNormal" itemprop="articleBody" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">“But
support for Europe’s banks is viewed by many investors as insufficient, given
the rising borrowing costs facing a growing number of European governments. If
any of the Continent’s larger economies find themselves unable to borrow money
through the bond markets, they will have trouble paying their bills and could
be forced to leave the euro. <o:p></o:p></span></div>
<div class="MsoNormal" itemprop="articleBody" style="line-height: 17.6pt; margin-bottom: 12.0pt;">
<span style="font-family: Arial, sans-serif;">“Douglas
Elliott, a fellow at the Brookings Institution, said that at some point
Europe’s stronger economies, most of all Germany, would need to provide some
form of shared guarantee for the bonds issued by its weaker neighbors. One
approach would involve issuing so-called euro bonds that are backed by the
entire Continent. Germany’s opposition to this has generated discussion of
shorter-dated euro bills that would involve less long-term commitment. Even
that would be unlikely to win support from Germany unless other European
nations agree to give up some of their sovereignty.”<o:p></o:p></span></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">In Europe
question is: Will the North rescue the South? Here the question is: Who will
restore households' balance sheet?<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">(To be fully
informed visit <a href="http://www.beyourowneconomist.com/">http://www.beyourowneconomist.com/</a>)
<o:p></o:p></span></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
<span style="font-family: "Arial","sans-serif";">© 2012
Michael B. Lehmann</span></div>
<div class="MsoNormal" style="mso-layout-grid-align: none; mso-pagination: none; text-align: justify; text-autospace: none;">
<br /></div>
</div>Be Your Own Economist (R)http://www.blogger.com/profile/10871255755167172509noreply@blogger.com0