Recovery: Here Today, Gone Tomorrow

[marmar]

from the Working Life blog:



Recovery: Here Today, Gone Tomorrow
by Jonathan Tasini

Wednesday 06 of January, 2010


This is how fragile--and foolish--the talk of recovery is. Yesterday, you may recall that I pointed out the record level of personal bankruptcies recorded in 2009--at the same time that some "analysts" were heralding a recovery based on some uptick in manufacturing (one would venture to guess that those same "analysts" were among those who predicted the Dow 30,000 or that housing prices had nowhere to go but up, up up). Well, never mind, cancel the recovery today:

The number of houses placed under contract fell sharply in November in the first drop in nearly a year, figures released Tuesday show. It was the clearest sign yet that predictions of another downturn in real estate may become a reality.

The National Association of Realtors said that its index of pending home sales plunged to 96 from a revised level of 114.3 in October. Analysts had predicted a drop, but nothing like that.

“We thought it would drop 2 percent,” said Jennifer Lee of BMO Capital Markets. “When you see 16 percent, the first thing you say is, what the heck happened here?”

The only thing surprising thing about Lee's surprise is...her surprise. People are hurting. They have exhausted their credit. They are out of work. Where do we think the money will come from to underwrite housing purchases?

Add to that the two following very worrying trends. First, states are on the precipice:

On Wednesday, governors in California, Kentucky and New York kick off the season of addresses to state lawmakers as at least 36 states struggle to close budget shortfalls and also begin confronting the next fiscal year’s woes.

For many of the states, the new year spells the end to accounting maneuvers, one-off solutions, tax increases and service cuts that were as deep as lawmakers thought they could bear. And governors confront this situation in an election year in which dozens of their jobs are in play, and as many state legislators face their own election challenges.

And, yesterday, there was a piece in the Financial Times, which should send shivers throughout communities everywhere:

The US public pension system faces a higher-than-expected shortfall of more than $2,000bn that will increase pressure on many states' strained finances and crimp economic growth, according to the chairman of New Jersey's pension fund.

So, let's see if we can encapsulate this. States are on the verge of financial collapse, in the short term, because people have no jobs and, therefore, tax receipts have declined--and because the top one percent of the population decline to pay their fair share in the dues needed to have a decent society. The short-term crisis seems rosy compared to the long-term outlook for retirees who, if history is a guide, will take a huge hit when the pension crisis mushrooms. Consider this: a 2 TRILLION shortfall at the public pension level, coupled with the recent evaporation of trillions of dollars from peoples' 401(k)'s when the real estate and stock market bubbles popped.

We are not having a serious debate.


http://www.workinglife.org/blogs/view_post.php?content_id=14661

[SpiralHawk]

1. The putrid fruit of republiconomics

The dems are complicit, of course, but mainly for embracing republiconthink and republiconomics.

Ptooey on Borrow & Spend Republiconomics, which has tossed America into the economic crapper for years to come.

[dixiegrrrrl]

2. Same pension issues happened in the 30's, too.

I just read a short archived news article of how Confederate Soldiers and WW! veterans had their pensions held up, then when payments resumed, it was at 50% rate of what was promised.
There is so much history being repeated, so many games out of the 1930's playbook.
And no apparent learning curve.

[Goldstein1984]

3. With 70% of the economy dependent on consumption

Consumer confidence is critical to the recovery.

Even if TPTB have to lie to consumers to create the confidence.

What if we aren't experiencing a recession? What if it's an adjustment? I ask this question because, if the bust we just experienced was the collapse of a bubble built on a housing bubble and credit-fueled consumption, then only another bubble is capable of returning us to a pre-collapse condition. Do we really want another bubble? Does the working class have enough disposable income and credit to fuel another bubble?

[leftstreet]

4. Insurance/Pharma Bubble?

Makes ya wonder

[Ready4Change]

5. Here today for some. Not in sight for many.

If you're in the top 5%, yah, there is a recovery.

If you're not in that upper strata, then I don't think the media economy pundits consider you relevant.

[quiller4]

6. We are retirees and our income is only slightly higher than the median

for our community. We are better off than we were a year ago. This time last year my CREF was still tanking and I got notice that my monthly retirement check would drop by $80. Now my CREF has rebounded and my income is going up.

My nephew, a PhD candidate, was worried about the job market he would enter when he leaves grad school in the fall. He already has offers from 3 universities and 6 foundations. His younger sister landed her "dream job" in November and quit her "pay the school loans" temporary job at USPS.

After 4 years of double digit increases in health insurance premiums, our 2010 increase was under 5%. Our water and power rates dropped in November and we actually had a bit more to spend on holiday gifts that we'd planned.

Existing and new home sales in my community are way up over 2008 (though still below 2006 highs), foreclosures are way down, major employers are hiring and department stores announced bewtween 3 and 5% increases in existing store sales over Dec 2008.

Although our community unemployment rate has dropped 2% since October, it is still too high. It isn't time for cheering but it looks very much like the worst is over and that recovery is well underway.

[Better Today]

7. I know that many people here and elsewhere are trying real hard

to see positively. But, alas, I feel more akin to this OP than those.