There will be no U.S. economic recovery in the second half of 2010

[jtuck004]

and the information below doesn't bode well for 2011-12 either.

There are 13 charts at the link below which are indicators as to the financial health of the economy. While they are symptoms, any patient with that many symptoms would have to be looked at for an underlying pathology.

Among them are the continuing problems with mortgages and housing, the redction of the U.S. labor force and the hours worked of those who are employed, and the increase in the numbers of long-term unemployed.

Worth reading through and drawing your own conclusions. None of this is irreversible, but it's past time for a plan.

More here...

[zipplewrath]

1. Short and long term bad

There's no easy way around a particular problem. Trillons of dollars have been "lost". When the housing market collapsed, built on a mountain of debt, much of that debt still existed in some form. The mortgage holders obviously lost some money, when forclosures didn't sell for what they had "spent" loaning the money out. Individuals lost equity, that they will never "get back". Even folks remaining in their homes "lost" the equity that otherwise should have been there. They aren't experiencing the "loss" right now, but some day they'll sell the house, and they won't get nearly as much for it. So retirement will be put off, or the next house will be smaller, and there will be less to spend. They've all "lost" money, even if it was "future" dollars. Practically the better part of a generation has lost a good 10 years of income, that they'll never see again.

It's gone, and in the short term "no one" has money to spend. Long term, people will have to start saving before they can start spending again, and it is a vicisous cycle. The reason loans are so important to growth is because it allows you to build now, so you can start earning sooner. If you have to earn it first, then expand the business, it can take 3 - 5 times as long to build and grown. Borrowing allows you to grow now, and use that growth to pay back the loan. "Gotta have money to make money".

So until money starts to get loanded again, we are severely limited in our ability to grow as an economy. In the mean time, the losses are still being "experienced". Every foreclosure is a new person suddenly facing the fact that the money is gone. Every lost job, or delayed retirement, is someone facing the fact that the money is gone. That 401K becomes "real money" about the time you're trying to figure out when you can retire. It's not going to get better real soon, unless someone figures out how to address the fact that trillions are gone, and not coming back.

[snot]

4. Ahem, the money didn't actually just vanish ---

the biggest losses arose from credit derivatives; and the big players who bought those got made WHOLE, even though their losses would have been relatively small if they hadn't.

I.e., those guys bought insurance on your house. When your house burned down, their policies paid them off in full, even though all they'd invested in the policies was the relatively small cost of the premium.

Meanwhile, your insurance on your house wasn't really very good, so you've only recovered about 75% of the value of the house.

That's what happened when the taxpayers bailed out AIG, which in turn paid on all its credit derivatives to Goldman Sachs et al. Even thought Goldman KNEW there was going to be a fire, and had no insurable interest in your house.

In sum, yeah, a whole lot of money got sucked OUT of your and my pockets; and a whole lot of it went INTO the big guys'.

[zipplewrath]

5. Absolutely

Of the many justifications for raising taxes on the richest, is that's where the money went.

[Statistical]

9. No money did vanish.

Between the stock market and housing market crashes roughly $50 trillion worth of wealth disappeared.
It would be identical to getting a million Americans to pile up $50 trillion in cash and then lighting it on fire.

While there is some transfer of wealth going one (rich's slice of pie getting bigger, everyone else's pie getting smaller) the other equally powerful event is THE WHOLE PIE GOT SMALLER (money or more accurately wealth vanished).

[Warpy]

2. The banks know if they lend out that TARP money,

not only will their balance sheets look worse in the short term, that money is likely to be uncollectable in the long term if the cycle becomes seriously deflationary, something their reluctance to lend is helping ensure. Add to that the reluctance of a lot of businesses and families to take on debt in such a desperate economic climate, and you've got the trap all set to spring.

I've read all the Doctor's charts and come to the same conclusion, but kudos to him for bringing it all together in such a readable way.

The government, still desperate to paste business as usual back together again, has not become desperate enough to change it back to what had worked so well for so long for everyone but the ultra rich, who were despondent at not getting richer as quickly as they thought they should have been.

I'm afraid the only way they ever take the correct action is when they hear the angry mob outside their gates. I am terribly afraid that will happen.

[Hawkowl]

3. I agree

Unfortunately, I think it is going to get a lot worse before people wake up and force the government back to a workable model (something resembling 1945 - 1975).

I am not terribly afraid, just terribly resigned. And yes it will be terrible. I think 2008 - 2010 is going to look like a picnic in the park before the policies are changed.

Obama may be good intentioned, but applying a band aid to a cancer victim is grounds for seeking a new doctor.

[sendero]

6. Exactly..

.... the talk of a "recovery" is just that, talk. I've been beating this drum here for 4 years and let me tell ya it gets tiresome trying to get people to see the way the way things really are.

There is absolutely NOTHING on the horizon that is likely to change the awful dynamic at play. Obama is CLEARLY CLUELESS, clearly completely out of his element and his hiring of the likes of Geithner and Summers don't speak well of his judgement or his intentions.

Folks, this is a many many year event. Our "recession" is not going away this year, or next year or probably the year after that. It has every potential to become a full on depression. Don't believe in green shoots, the "recovery summer" or any of the other marketing spin designed to get you to fail to make the right choices for the realities at play.

Prepare yourself, this is going to be a long flight.

[cowman]

7. I fully agree with you

and unfortunatly, the Dems are going to pay a terrible price in Nov, unfairly, because Bush and the repukes got us into this but the voters will punish the party in power and I got this horrible feeling that we are in for an ass kicking this Nov.

[sendero]

8. Yes they are...

... it is obvious that this calamity is 90% Republican-caused, and polls show that a majority of Americans get that. Most of us have not forgotten the relentless drumbeat for deregulation, the deregulation that ultimately made this fiasco possible.

But, now that it is here, what do you do? Obama can't even manage to take the simplest and almost UNIVERSALLY AGREED UPON step of reinstating Glass-Stegall or its equivalent.

Making a mess is bad, failing to do anything substantial to clean it up is not much better. The Dems deserve to be punished.

[OllieLotte]

10. I agree....totally. n/t

[Xenotime]

11. It appears the economy has started to whease. Could be the end.