Physiognomy of Economic Depression - Eric Janszen

[TheServant]

That is a very interesting article, and probably not completely outlandish given the economic transformation that will presumably get underway in the coming few years.

Being the Motor City, the mass transmit system has never been developed to any extent. I mean, you don't want to take away the incentive to buy vehicles if that is what you sell. To be fair, if you want to be completely honest with the situation, this is probably a by-product of segregation as well.

Anyway, assuming energy and infrastructure will be the foundation of the economic paradigm in the coming decade, Detroit would be a logical poster child for making a transformation to a friendlier energy/environmental city.
Not only is there a lot of work to be done in these arenas, there will be an abundance of empty factories readily available for any new industries that would be required, as the auto industry settles into its new equilibrium.

...or maybe the area just fades into the night as the country comes to the realization of how difficult it will be be transform to energy sources that are far less efficient than "oil", aside from nuclear that is.

I had to add that to keep some perspective. After all, I'm not frequenting iTulip because I think everything is rainbows and puppy dogs. I come to try to put some perspective on the challenges that we face, and how best to deal with them, both from an investor's and policy maker's point of view.

[GRG55]

...This depression is transforming the world around us. If you don't think so, I encourage you to take a closer look. On the surface much appears to be the same as, say, two years ago, but under the surface much has changed and is changing--shifting relationships among friends, families, and colleagues. Changes in circumstances affect the range of choices people can make. They make different decisions than before. Different decisions produce different results. Those results impact someone else's decisions. Collections of decisions combine in unexpected ways. One of the most obvious is that consumers buy less as a sustained reduction income and wealth influences purchasing decisions. As they do, after a lag, they will find that they have less to buy because retailers, wholesalers, and manufacturers eventually respond by consolidating or going out of business.

The economy has changed, behavior follows...

From Gluskin Sheff's David Rosenberg [formerly @ Merrill]:

...Most pundits who crow about green shoots and about an inventory restocking in the third quarter giving way towards some sustainable economic expansion live in the old paradigm. They don’t realize, for whatever reason, that the deflationary aftershocks that follow a post-bubble credit collapse typically last for 5 to 10 years. Businesses understand better than the typical Wall Street or Bay Street economist and strategist that everything from order books, to output, to staffing have to now be restructured to adequately reflect a permanently lower level of leverage in the economy.

Indeed, by our estimates, there is up to another $5 trillion of household debt that has to be eliminated in coming years and that process is going to require that consumers go on a semi-permanent spending diet. Companies see this, which is why they are not just downsizing their payroll, but have also cut the workweek to a record low of 33.1 hours. Fewer people are working and those that are still working have seen their hours dramatically cut this cycle...

...The op-ed column by Bob Herbert in the Saturday New York Times really hit the nail on the head on this whole ‘green shoot’ issue — how can there be ‘green shoots’ when the labour market is deteriorating at such a rapid clip fully nine months after the Lehman collapse. The full brunt of the credit collapse may be behind us, but please, the other two shocks, namely deflating labour markets and deflating home prices, are very much still front and centre...

...As we said above, companies have permanently reduced the size of their operations with the knowledge of how much credit is going to be available to them in the future to survive because the financial sector is going to be operating under more supervision and regulation and leverage ratios, which means the funds available to support a given level of GDP is going to be measurably smaller than what we had become accustomed to during the secular credit expansion, which really began in the mid-1980s, only to turn parabolic during the ‘ownership society’ era of 2002 to 2007.

What makes this cycle “different” is that three-quarters of the workers that were fired over the last year were let go on a permanent, not a temporary basis. A record 53% of the unemployed today are workers who were displaced permanently — not just temporarily because of the vagaries of the traditional business cycle. This means that these jobs are not going to be coming back that quickly, if at all, when the economy does in fact begin to make the transition to the next expansion phase. In turn, this implies that any expansion phase is going to be extremely fragile and susceptible to periodic setbacks...

[babbittd]

Sure, we still hear "green shoots" sold hard, as if the load of debt that holds the economy back can be wished away, yet we also see more skepticism and less willingness to accept assertions by industry analysts and economists at face value. Reports on economic data still lack historical perspective, but at least most don’t read like press releases anymore, yet readers are still being set up for major disappointment.

What channels are you all watching? The tone of reporting has not changed by one iota, even since the Lehman crash.

[GRG55]

What channels are you all watching? The tone of reporting has not changed by one iota, even since the Lehman crash.

I agree. EJ has clearly been hanging out with the converts [convicts?] on iTulip far too much lately [his comparatively prolific recent output serving as ample evidence]. He needs to watch more Bubblevision and get out into the real world more. Maybe we should pool together and buy him a plane ticket so he can visit Mega in Liverpool? :rolleyes:

[babbittd]

I agree. EJ has clearly been hanging out with the converts [convicts?] on iTulip far too much lately [his comparatively prolific recent output serving as ample evidence]. He needs to watch more Bubblevision and get out into the real world more. Maybe we should pool together and buy him a plane ticket so he can visit Mega in Liverpool? :rolleyes:

I didn't say that EJ should watch more bubblevision or that bubblevision = the real world, so I have to assume that you agree with him that the tone of the reports about economic data crafted for an American audience has changed.

Jobless claim press releases masquerading as reporting:

http://news.google.com/news/more?um=...SS8oPq7Ie6e0_M

On a different variation of the same theme, over on CNBC, they're running a series of ads based on the "We told you it (the crash) would happen" theme.

[metalman]

I didn't say that EJ should watch more bubblevision or that bubblevision = the real world, so I have to assume that you agree with him that the tone of the reports about economic data crafted for an American audience has changed.

Jobless claim press releases masquerading as reporting:

http://news.google.com/news/more?um=...SS8oPq7Ie6e0_M

On a different variation of the same theme, over on CNBC, they're running a series of ads based on the "We told you it (the crash) would happen" theme.

what'd you expect from liars but more lying? cnbs 'we told you so'. right... :rolleyes:

ej's said for ten years he'd change his 'doomer' tone after tshtf... who needs it after the fact? what's the point? too late to prepare... you're f&cked.

now it looks like he's still trying to keep us on the timescale... not crash on monday/soup lines on tues ala doomers or 'green shoots' ala cnbs.

[goadam1]

I think anectdotal stuff is important at this stage and I'm surprisde that so few have chimed in with reports of the real world.

I was working in Boston on newbery street last June. It was packed. The biggest worry I heard from retailers was that one store front wasto be converted into condos and maybe more would follow. I remember having lunch at one of the sidewalk cares with my clients and tried to explain what was coming they didn't believe me. They both lost their jobs and have not found full time work.

In new York, the first stores to close were related to housing(furniture and fixtures). Then came the restaurants and retail that I assume lost their line of credit. Then came the chains to close or cut outlets. But in the last couple of months some new places have opened and things stopped closing. Was it because credit started to flow? Mostly I see new restaurAnts. A new organic coffee places sells out of cookies everyday. Meanwhile, I keep my eye on the big empty space across from my office that used to hold barnes and noble. When it rents and what goes into the space will determine how I invest for the new cycle. So far it is empty. I heard landlords wanted $550 dollars a square foot around the area of the empty b an n. Now they want $150.

The town that I drive to in long island to catch the ferry to my beach house was wiped out in this depression. On the little mainstreet, a third of the stores closed. Not surprisingly, most were housing related ( realtors, furniture, etc.).

[metalman]

I think anectdotal stuff is important at this stage and I'm surprisde that so few have chimed in with reports of the real world.

I was working in Boston on newbery street last June. It was packed. The biggest worry I heard from retailers was that one store front wasto be converted into condos and maybe more would follow. I remember having lunch at one of the sidewalk cares with my clients and tried to explain what was coming they didn't believe me. They both lost their jobs and have not found full time work.

In new York, the first stores to close were related to housing(furniture and fixtures). Then came the restaurants and retail that I assume lost their line of credit. Then came the chains to close or cut outlets. But in the last couple of months some new places have opened and things stopped closing. Was it because credit started to flow?

nah... recession wiped out the morons who can't manage a 3 mo. dip in cash flow.

Mostly I see new restaurAnts. A new organic coffee places sells out of cookies everyday. Meanwhile, I keep my eye on the big empty space across from my office that used to hold barnes and noble. When it rents and what goes into the space will determine how I invest for the new cycle. So far it is empty. I heard landlords wanted $550 dollars a square foot around the area of the empty b an n. Now they want $150.

now the rent's low enough they can make money selling cookies. lower still, dance club. lower still strip club. lower still... etc. etc.

[ThePythonicCow]

lower still... etc. etc.

Thank-you, MM, for not decorating this post with your usual fine imagery ;).

[goadam1]

nah... recession wiped out the morons who can't manage a 3 mo. dip in cash flow.


now the rent's low enough they can make money selling cookies. lower still, dance club. lower still strip club. lower still... etc. etc.

That was my point. What goes in the old spa es say a lot about the post crash economy. If they just stay closed, then either credit isn't working or landlords are holding out if a new balance is acheived, then what does that balance look like. I think a slowing of closing business says her is enough cash flow to maintain business.

[metalman]

That was my point. What goes in the old spa es say a lot about the post crash economy. If they just stay closed, then either credit isn't working or landlords are holding out if a new balance is acheived, then what does that balance look like. I think a slowing of closing business says her is enough cash flow to maintain business.

my guess is it comes in waves... 1st the retailers with not enough cash to weather a few weak months... 2nd the better run retailers who run out of cash after 6 - 9 months. 3rd come the retailers who throw in the towel 'not worth the trouble' after a year of off business.

[goadam1]

my guess is it comes in waves... 1st the retailers with not enough cash to weather a few weak months... 2nd the better run retailers who run out of cash after 6 - 9 months. 3rd come the retailers who throw in the towel 'not worth the trouble' after a year of off business.

Fair enough. But there will be survivors even if the profit is lower. Smart and effecient businesses that supply what people need will exist. What they are and what they do:tbd. In my business, advertising, the pie is smaller but clever new businesses will grow.

The overarching issue of if here is enough productive economy to create escape debt velocity, I say no. So we see waves of inflation versus deflation. At some point it will all reset. Lois like ej called it spot on on the next downwave

[metalman]

Fair enough. But there will be survivors even if the profit is lower. Smart and effecient businesses that supply what people need will exist. What they are and what they do:tbd. In my business, advertising, the pie is smaller but clever new businesses will grow.

The overarching issue of if here is enough productive economy to create escape debt velocity, I say no. So we see waves of inflation versus deflation. At some point it will all reset.

cash flow net of debt repayment...

Lois like ej called it spot on on the next downwave

first bounce, mar 27, 2009...

bounce over, jun 17, 2009...



we shall see...

[mcgurme]

my guess is it comes in waves... 1st the retailers with not enough cash to weather a few weak months... 2nd the better run retailers who run out of cash after 6 - 9 months. 3rd come the retailers who throw in the towel 'not worth the trouble' after a year of off business.

I know someone who recently threw in the towel for exactly that reason: "not worth the trouble."

They hadn't earned a dime in a few years of business, and just decided life would be simpler without the business. So they returned to being a single income family.

[snakela]

now the rent's low enough they can make money selling cookies. lower still, dance club. lower still strip club. lower still... etc. etc.

This sounds like green shoots to me

In all seriousness, maybe i missed it but does any of the unemployment data actually count # of people working vs. # of people in the population?

Everything is adjusted some way or another. eligble to work, looking for work etc etc. I'd like to see something that doesnt adjust for people who are truely disabled or permanently on the dole.

[bart]

This sounds like green shoots to me

In all seriousness, maybe i missed it but does any of the unemployment data actually count # of people working vs. # of people in the population?

Everything is adjusted some way or another. eligble to work, looking for work etc etc. I'd like to see something that doesnt adjust for people who are truely disabled or permanently on the dole.

Percentage of full population working is as close as one can get without a custom chart.






You may be able to fiddle with it here and get closer
http://research.stlouisfed.org/fred2/series/CIVPART

[Jay]

Percentage of full population working is as close as one can get without a custom chart.






You may be able to fiddle with it here and get closer
http://research.stlouisfed.org/fred2/series/CIVPART

Interesting that there is no uptick after 2001. More fuel for the possibility of the real crash starting then?

[bart]

Interesting that there is no uptick after 2001. More fuel for the possibility of the real crash starting then?

As an ex Valley girl I used to date said a few times - "Fer shure". ;)

The year 2000 about was when my hard vs. paper asset cycle turned... and its not much like the crash starting in 1929 either. I look at it very generally as a hybrid between the '30s and the '70s, and with a few overtones of other periods like the 1870s.

[metalman]

As an ex Valley girl I used to date said a few times - "Fer shure". ;)

The year 2000 about was when my hard vs. paper asset cycle turned... and its not much like the crash starting in 1929 either. I look at it very generally as a hybrid between the '30s and the '70s, and with a few overtones of other periods like the 1870s.

you might call it... argentina currency crisis and inflation with usa characteristics... plus a real great depression ;)

[jtabeb]

you might call it... argentina currency crisis and inflation with usa characteristics... plus a real great depression ;)

Oh, is that all. Damn, I was worried there for a second.

@#$@#% Bankers! &*^*&^ Economists! *&%^*&%^ MSM Media! (*&(*# Politicians! (*&(*& umm, Bankers!:mad::mad::mad: