Housing, housing and more housing - that has been the dominant economic story for the last few weeks. The news has been universally bad: inventories are rising to 10-year high levels, buyers are already saddled with massive amounts of debt, homebuilders are cutting profit projections and overall investment is negative. And here is more from Nouriel Roubini: housing is already in free fall and will cause a recession by the summer of 2007.
Clément Gignac, chief economist and strategist, and Eric Dubé, an economist, noted that U.S. housing starts are already down 20.7 per cent from their January, 2006 peak "and some leading indicators are suggesting more declines are to be expected in the months to come," they warned in a recent economic comment. They also noted that the National Association of Home Builders reported this week that traffic of prospective buyers had tumbled to its lowest level since 1991, a recession year. Furthermore, U.S. building permits have plummeted 22 per cent from their peak last September.
There is a debate among economists regarding what will happen in housing - one side is arguing for a "soft landing" while the other is arguing for a harder landing. A soft landing implies the market retreats with little pain while a hard landing implies a larger number of bankruptcies, foreclosures etc.... I have no idea how many people are lining up on which side. However, housing related news continues to look, well, pretty bad.
Last week Toll Brothers Inc. warned that the upscale homebuilder's prospects were deteriorating more rapidly than first anticipated, with orders down nearly 50 percent from a year ago in the company's fiscal third quarter, which ended July 31.
In comments to investors, chairman and chief executive Robert Toll said this was the first housing slowdown in the 40 years he's been in the business "that was not precipitated by high interest rates, a weak economy, job losses or other macroeconomic factors."
These views have been echoed to varying degrees by other national homebuilders, including Fort Worth-based D.R. Horton Inc. and Dallas-based Centex Corp. You might even call the prognosis a consensus.
Republicans love to say tax cuts pay for themselves. It's an easy sell - it promises something for nothing. If we cut taxes people will start working harder to keep more of their money. This effort will grow the economy fast enough to increase the overall tax base, which in turn will actually increase taxes. The problem is this has never worked.
All of this information comes from the Bureau of Economic Analysis.
Tax revenues from individual taxpayers were $290 billion in 1981 and $451 billion in 1989 for an increase of 55%. Over the same period, the GDP price deflator increased from 59.128 to 78.569, or an increase of 32.87%. This makes the increase in tax revenues from individuals for Reagan's presidency 22.13%.
Tax revenues from individual taxpayers were $505 billion in 1993 and $994 billion in 2001 for an increase of 96%%. Over the same period, the GDP price deflator increased from 88.39 to 102.42 or an increase of 15%. This makes the increase in tax revenues from individuals for Clinton's presidency 81%.
Tax revenues from individual taxpayers were $994 billion in 2001 and $924 billion in 2005 for a decrease of 7%. Over the same period, the GDP price deflator increased from 102.42 to 112.744 or an increase of 10%. This makes the increase in tax revenues from individuals for Bush a decrease of 17%.
So, we get the following inflation adjusted increases in individual tax revenue for each of the last three presidents:
The Right Wing has never even considered the economic and/or financial cost of the Iraq War. They seem to think the US is made of money. What they fail to realize is the US - while having a strong and very efficient economy - is not made of money. There are limits to what we can pay for.
The financial side of the Iraq War is a joke. It has cost far too much money, will continue to cost far too much money and has been poorly managed financially - to say the least. In short, it's a financial disaster.
The talk of recession is increasing. The recent slowdown in GDP – which included a slowing consumer sector, a large slowdown in housing investment and an uncomfortable increase in inflation – increased these predictions. The slowdown in establishment hiring added to the concern. Below are excerpts from three economists – Paul Krugman, Brad DeLong and Nouriel Roubini – who are all concerned about the possibility of a recession.
It’s important to point out no one is making a 100% prediction for a recession. Economists are essentially odds players; they look at various facts and figures and attempt to draw conclusions from the data. However, all three economists point out the data is becoming increasingly bearish for the economy.
Raw Story is claiming it has obtained a copy of the GOP election playbook. All of the points made therein are crap -- as in pure crap. Assuming this is the true playbook, here are the basic rebuttals to the economic claims made therein. This information is free to all to use.
It's earnings season on Wall Street. Here are some of the results from Bloomberg:
Through yesterday, 71 percent of S&P 500 members that reported posted second-quarter earnings beat analysts' estimates, according to data compiled by Bloomberg. That's higher than the 68 percent figure for the first quarter and the 57 percent average since 1992.
Analysts estimate profit growth in the April-to-June period of 14.8 percent, which extends the S&P 500's stretch of 10 percent-plus quarterly increases to three years, according to Thomson Financial. Earnings will climb 14.7 percent this period and 14 percent in the final three months of 2006, based on Thomson data.
``This streak of above-average corporate earnings has been going on for a long time now,'' said Eric Thorne, who helps oversee $2.3 billion at Bryn Mawr Trust Co. in Bryn Mawr, Pennsylvania. ``The underlying strength is there from the economy and the earnings picture.''
I have been saying for a while that in 2006 Three Ugly Bears will scare the growth Goldilocks in the US and abroad. The Three Bears are: first, higher inflation -both core and headline - leading to higher interest rates in the US and the rest of the world; the era of cheap money feeding asset bubbles is over. Second, an oil and commodity price shock that is stagflationary for both the US and all other oil importing countries. Third, the fizzling out - to avoid saying bursting - of the housing bubble in the US and in many other economies where this bubble fermented for too long via the drug of easy liquidity.
