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business newsIn the Midst of a Depression, Consumer Confidence Plunges
By
Mike Mish Shedlock
Jun 29, 2010 2:50 pm
Logically the disease and the cure can't be the same. Hopefully Congress and the Fed figure that out soon.
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Is that a 3-handle I see on the long bond and a 2-handle of the 10-Year Treasury? Why yes it is.
Treasury Yields -- Weekly Close
The week isn't over yet but this looks rather ominous. Treasury yields are back where they were in April of 2009 at the start of the so-called "recovery".
I'm not quite sure why the 3-month Treasury displays as a flatline at 0.5. The flatline is closer to 0.
Consumer Sentiment Plunges
Inquiring minds note that the Consumer Conference Board Confidence Index drops sharply.
An Economic Depression Is Here
Either the present conditions are about to move back up or the Expectations Index is about to plunge as well. I expect the latter. Expectations for improvement are way too optimistic, not that a reading of 71 is optimistic at all. It isn't.
Structural problems are immense and the sad fact of the matter is those problems can't be cured by more deficit spending. The New York Times' Paul Krugman is correct about a depression, just wrong about the cure. Logically the disease and the cure can't be the same.
By the way, a depression isn't coming, we're clearly in one, a deflationary one at that. Once again, those chanting hyperinflation all missed the boat by light-years.
Various safety nets like food stamps, unemployment insurance, and of course people no longer paying their mortgage and living in their houses for free all mask the depression.
Depression is the price we pay for budgetary murder and, contrary to Krugman's belief, further budgetary murder can't possibly cure anything.
Understanding the Problem
Before you can fix anything, you have to understand what the problem is and what caused it.
What causes depressions is an unsustainable run-up in credit and debt that precedes it, not a failure to go deeper in debt.
Anyone who understands 5th grade math should be able to figure that out. Unfortunately, Nobel Prize-winning economists can't.
Congress and the Fed Are to Blame
In this case, a spendthrift Congress coupled with loose monetary policy at the Fed effectively encouraged housing and other speculation. The depression we're in now is a result of massively failed policy. The same policy can't possibly be the cure.
Give Congress the boot and vote in those against bank bailouts, Fannie Mae (FNM) bailouts, excessive military spending the US simply can't afford, and other free-lunch policies.
Treasury Yields -- Weekly Close
The week isn't over yet but this looks rather ominous. Treasury yields are back where they were in April of 2009 at the start of the so-called "recovery".
I'm not quite sure why the 3-month Treasury displays as a flatline at 0.5. The flatline is closer to 0.
Consumer Sentiment Plunges
Inquiring minds note that the Consumer Conference Board Confidence Index drops sharply.
The Conference Board Consumer Confidence Index, which had been on the rise for three consecutive months, declined sharply in June. The Index now stands at 52.9 (1985 = 100), down from 62.7 in May. The Present Situation Index decreased to 25.5 from 29.8. The Expectations Index declined to 71.2 from 84.6 last month.
Those saying conditions are “good” decreased to 8.0% from 9.7%, while those saying business conditions are “bad” increased to 42.4% from 39.5%. Consumers’ assessment of the labor market was also less favorable. Those claiming jobs are “hard to get” increased to 44.8% from 43.9%, while those saying jobs are “plentiful” decreased to 4.3% from 4.6%.
Consumers’ short-term outlook, which had improved significantly last month, turned more pessimistic in June. Those anticipating an improvement in business conditions over the next six months decreased to 17.2% from 22.8%, while those expecting conditions will worsen rose to 14.9% from 11.9%.
An Economic Depression Is Here
Either the present conditions are about to move back up or the Expectations Index is about to plunge as well. I expect the latter. Expectations for improvement are way too optimistic, not that a reading of 71 is optimistic at all. It isn't.
Structural problems are immense and the sad fact of the matter is those problems can't be cured by more deficit spending. The New York Times' Paul Krugman is correct about a depression, just wrong about the cure. Logically the disease and the cure can't be the same.
By the way, a depression isn't coming, we're clearly in one, a deflationary one at that. Once again, those chanting hyperinflation all missed the boat by light-years.
Various safety nets like food stamps, unemployment insurance, and of course people no longer paying their mortgage and living in their houses for free all mask the depression.
Depression is the price we pay for budgetary murder and, contrary to Krugman's belief, further budgetary murder can't possibly cure anything.
Understanding the Problem
Before you can fix anything, you have to understand what the problem is and what caused it.
What causes depressions is an unsustainable run-up in credit and debt that precedes it, not a failure to go deeper in debt.
Anyone who understands 5th grade math should be able to figure that out. Unfortunately, Nobel Prize-winning economists can't.
Congress and the Fed Are to Blame
In this case, a spendthrift Congress coupled with loose monetary policy at the Fed effectively encouraged housing and other speculation. The depression we're in now is a result of massively failed policy. The same policy can't possibly be the cure.
Give Congress the boot and vote in those against bank bailouts, Fannie Mae (FNM) bailouts, excessive military spending the US simply can't afford, and other free-lunch policies.
No positions in stocks mentioned.
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