The Fog of Economic Crisis - Part I: Will the real Real Economy please stand up - Eric Janszen

[doom&gloom]

wow, I get first comment?

Great job as usual!

[cjppjc]

Lot's of good information. I enjoyed reading this very much. I wonder if this piece just shows how the cancer is too strong to kill.

[slippery]

Great analysis of PCE components. Thanks.

[porter]

So does this mean the FIRE economy is here to stay?

[Me]

So does this mean the FIRE economy is here to stay?

From what I can figure out the answer is yes. My question is rather. Does this put us in a deflationary outcome?

[we_are_toast]

Excellent piece, one of the best.

Exposing PCE is a very nice piece of economic investigative journalism. That's the good news. The bad news is it was one of the indicators iTulip recommended to watch. We are running out of reliable measuring sticks to use to measure what's happening in the economy.

I sure don't like the term "Great Recession". This still feels like we are in the beginning of a long process that is going to get much worse and will only make us wish for the recessions of the past.

[oddlots]

Outstanding. This is the kind of analysis that got me hooked here years back.

There's a ton of analysis that looks at arguments from a kind of a priori stance. Most of the arguments that tend to get me exercised fall into this category: ideological musings. (I would argue they have their place, and also that I don't know what that place is.)

There's a ton of analysis that looks at economic data but never get much below the surface. Much of the guff in the MSM falls into this category (what will the U3 numbers be, the revisions, etc.... blah, blah blah.)

Pulling apart the PCE figures is a brilliant idea and a demonstration of the maturity and depth of thinking that underpins the itulip project. Ditto the look at energy usage and rail traffic as a proxy for overall, "real" activity.

Thanks. Very helpful antidote to my own self-distracting political obsessions and the vacuous chatter of cheerleaders.

You'll make an adult of me yet.

[jk]

real insight, thank you, but unfortunately a depressing one: the only thing that continues to grow is the fire sector. the parasite/cancer lives on, while its host continues to weaken.

[c1ue]

real insight, thank you, but unfortunately a depressing one: the only thing that continues to grow is the fire sector. the parasite/cancer lives on, while its host continues to weaken.

http://www.itulip.com/forums/showpos...0&postcount=10

Remember this post? And what Dr. Michael Hudson said?

[jpatter666]

Remember this post? And what Dr. Michael Hudson said?

Hey c1ue, link doesn't seem to work?

[jk]

http://www.itulip.com/forums/showpos...0&postcount=10

Remember this post? And what Dr. Michael Hudson said?

i remember that nightmarish post quite well. i wasn't consciously referring to it, but obviously the image of the parasite and host was out there before i used it.

[newnewthing]

Just an awesome piece. This provides detail that explains a lot I've noticed but hadn't quantified. This is the sort of thing one hopes to see discussed in the broader body politic but that may be asking too much. Way too much. Once can only hope some influential folk are paying attention.

[metalman]

Just an awesome piece. This provides detail that explains a lot I've noticed but hadn't quantified. This is the sort of thing one hopes to see discussed in the broader body politic but that may be asking too much. Way too much. Once can only hope some influential folk are paying attention.

thanks for this one... well done.

[porter]

Our earlier report of the death of the FIRE Economy was wildly exaggerated. PCE increased even during The Great Recession because the so-called Services component—that makes up 67% of the measure—grew due to interest and fees on existing debt.

How does this jive with the massive decline in revolving credit? How can you justify this conclusion without comparing the magnitude of the increase in fees and interest versus the decline in revolving credit? Where would we even get this data?

As someone who works at a commercial bank I can speak to what we are seeing. We don't do any consumer loans (no autos, credit cards, etc.), but only business lines of credit, equipment loans, construction loans, mini-perms, acquisition & development, etc. So, this may be different that what consumers are experiencing. However, we are generally freezing lines of credit for Borrowers who don't have sufficient cash flow or collateral value. Additionally we have implemented rate floors on virtually everything at 6%, with the exception of problem loans (in which case we actually are lowering rates to help with debt service). Even with these rate floors, we are pretty much holding steady on rates (no dramatic change over the past few years), but we are reducing our commitments and doing very few new loans. Given this experience, it doesn't seem to jive with the above analysis.

But, like I said, we don't really do consumer loans, so I realize this might be a different experience. However, from personal experience my credit card rates are still low and I haven't been charged any new fees. Also, residential mortgages still have very low rates and most folks I talk to are actually negotiating lower rates on their home loans (some have even told me they are short-selling their homes to their wives and locking in lower rates at the same time). In general people are spending less, borrowing less, paying off existing debt and negotiating better rates/deals on existing loans.

Again, I realize this is anectodal, so I will restate my questions above: How does this jive with the massive decline in revolving credit? How can you justify this conclusion without comparing the magnitude of the increase in fees and interest versus the decline in revolving credit? Where would we even get this data?

[we_are_toast]

Again, I realize this is anectodal, so I will restate my questions above: How does this jive with the massive decline in revolving credit? How can you justify this conclusion without comparing the magnitude of the increase in fees and interest versus the decline in revolving credit? Where would we even get this data?

Consumer credit falls in November for record 11th month, as Americans pay down credit cards

...By contrast, November's revised $21.8 billion drop in total credit was the biggest amount in dollars terms since records began in 1943.

The Fed's credit report excludes home loans and home equity mortgages, only covering borrowing that is not secured by real estate.

The drop in overall credit for 11 straight months was a record in terms of consecutive declines, surpassing the old mark of seven straight declines set in 1943 and again in 1991.

Borrowing in the category that includes credit cards has fallen for 15 straight months, also a record.

With the string of declines, overall consumer borrowing by the Fed measure has fallen to $2.46 trillion.

With all the defaults on Mortgages, the total interest and fees on mortgages has to have fallen greatly.

Something is not adding up with attributing the increase in PCE to interest and fees from the FIRE economy.:confused:

[c1ue]

With all the defaults on Mortgages, the total interest and fees on mortgages has to have fallen greatly.

Something is not adding up with attributing the increase in PCE to interest and fees from the FIRE economy.:confused:

Not necessarily.

With Mark to Fantasy, all of the defaults can still be officially earning income for the banks - mortgage, credit card, or otherwise.

Perhaps being accelerated by the addition of late fees and penalties.

[flintlock]

Not necessarily.

With Mark to Fantasy, all of the defaults can still be officially earning income for the banks - mortgage, credit card, or otherwise.

Perhaps being accelerated by the addition of late fees and penalties.

You beat me to it. I was going to say, its not on a cash basis that they count it.

[tsetsefly]

anyone have a link of the NPR interview he was talking about?

[jneal3]

Just to clarify, retail sales data does not include imputed interest from purchases made by credit, correct? It seems to me then that retails sales showing a 'sharp recovery' wouldn't fit well with the thesis that there really isn't a recovery going on and that any good news is just FIRE-related, no? Granted that the rail traffic and energy production/consumption numbers are consistent with sluggishness, to me the retail sales chart looks simply like a phase-lagged version of the PCE (total dollars) chart. What am I missing?

[pianodoctor]

EJ, Fred, or Others: I am a bit thick regarding economics. Can someone explain that when we are reading about this sharp upturn in "imputed interest" (Interest and fees paid to credit card accounts), is it to be understood that the increase is solely tied to such imputed interest paid on new purchases (as registered at the appropriate point on the timeline axis of the chart), or is it the total amount of interest and fees the companies are receiving including consumers paying off old debt?

IOW, it seems there is a current trend to pay off old debt and become more frugal. (See TV shows like Dave Ramsey, Suze Orman, Till Debt Do Us Part, etc) Is the upturn in the interest & fees component of the PCE reflective of consumers paying down their credit accounts- or is it only computed as it relates to more recent purchases?