Friday, July 16, 2010

Things are about to get a whole lot worse

Fed's volte face sends the dollar tumbling

The US workforce has shrunk by a 1m over the past two months as discouraged jobless give up the hunt. Retail sales have fallen for the past two months. New homes sales crashed to 300,000 in May after tax credits ran out, the lowest since records began in 1963. Mortgage applications have fallen by 42pc to 13-year low since April. Paul Dales at Capital Economics said the "shadow inventory" of unsold properties has risen to 7.8m. "The double dip in housing has begun," he said. ----------------------------------------- The signs of a deep and sudden slowdown in the US are becoming ever clearer as the "sugar rush" from the Obama fiscal stimulus wears off and the inventory boost fades. California, Illinois and other states are cutting spending, tightening US fiscal policy by 0.8pc of GDP.

Posted by mark @ 10:45 AM (1409 views)
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5 thoughts on “Things are about to get a whole lot worse

  • general congreve says:

    Time to fire up the printing press me thinks. Do it for me Fed, if nothing else, I want my gold rush fortune now, not in a decade.

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  • Over to you MG!!!

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  • Regarding the last paragraph of this article. Why does Evans-Pritchard think the UK is immune to debt deflation, if the USA and Japan are not? Does he think Cameron et al would engineer a reflation in that scenario? And what does our greater economic sovereignty amount to if that would trigger a sterling crisis? Anyone?

    Recaptha: annexing debt

    Nick

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  • Both in the UK and US, illusory economic growth borne of unsustainable debt expansion was for several years masking a slowdown in the growth of the core economy. Worse was the response of the governments by not only banking that growth, but running a budget deficit as well.

    The upshot is that something like 20% of the pre-bust economy was living on air, and so far the contraction, coupled to a little core growth, has accounted for less than half of the necessary adjustment.

    The key to getting out of the mess is not more QE, but a huge effort to get people who are out of work working constructively, and to drastically pare back the parasitic non-jobs, both in government and the private sector.

    The litigation culture needs to be effectively brought to a halt, and every bureaucratic process needs to be tested with the question ‘is this work absolutely essential?’

    For the UK, there is a clear direction – abandon most of the planning red tape, and get people building houses..

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  • uncle tom,

    Correct: “For the UK, there is a clear direction – abandon most of the planning red tape, and get people building houses…”
    Building houses is what could bring the economic growth for this country but it will not happen because politicians want to keep people in arrest cultivating the idea of a housing shortage for generations to come so the young generations would feel like an achievement when they will step on the property ladder. Probably the opposite what the Americans are feeling now more like they have been fooled taking on too much debt and not an achievement stepping on the property ladder.

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