by bobswern, Thu Apr 16, 2009 at 12:31:08 AM EDT
From Wikipedia: Lurching downward
The Great Depression was not a sudden total collapse. The stock market turned upward in early 1930, returning to early 1929 levels by April, though still almost 30 percent below of peak in September 1929. Together government and business actually spent more in the first half of 1930 than in the corresponding period of the previous year. But consumers, many of whom had suffered severe losses in the stock market the prior year, cut back their expenditures by ten percent...
...In the spring of 1930, credit was ample and available at low rates, but people were reluctant to add new debt by borrowing. By May 1930, auto sales had declined to below the levels of 1928. Prices in general began to decline, but wages held steady in 1930, then began to drop in 1931. Conditions were worst in farming areas where commodity prices plunged, and in mining and logging areas where unemployment was high and there were few other jobs. The decline in the American economy was the motor that pulled down most other countries at first, then internal weaknesses or strengths in each country made conditions worse or better. By late in 1930, a steady decline set in which reached bottom by March 1933.
While we were distracted by clueless, bloviating teabaggers, here were some of the more-ignored stories around the Progressive blogosphere over the past 24 hours...
Economy still worsening across U.S.: Beige Book
By Rex Nutting, MarketWatch
April 15, 2009
WASHINGTON (MarketWatch) - The economy continued to worsen across the United States in March and early April, amid scattered signs that the pace of the decline was lessening in some regions, the Federal Reserve reported Wednesday in its Beige Book account of the economy.
The report, written by the economics staff at the Dallas Fed, generally agrees with comments by top policymakers that there are some signs that the economy may be getting worse at a slower pace.
The economy declined at a 6.3% annual pace in the fourth quarter, and economists are forecasting a decline of 5% in the first quarter and about 2% in the current quarter.
Almost all sectors were contracting or slowing in almost all regions, the Beige Books said. Manufacturing weakened, retail spending was "sluggish," the housing markets were "weak" and banks reported rising delinquencies and deteriorating loan quality.
Biggest recessionary output drop since World War II
U.S. production falls 1.5% in March, despite bounce in autos and utilities
By Rex Nutting, MarketWatch
WASHINGTON (MarketWatch) -- As businesses struggle to work down their inventories of unsold goods, the output of the nation's factories, mines and utilities fell 1.5% in March, retreating in spite of higher production of motor vehicles and a boost from utilities, the Federal Reserve reported Wednesday.
Industrial production is down 13.3% since the recession began in December 2007, the largest percentage decline since the end of World War II, when production of military equipment ground to a halt and production fell 35%.
In the past year, industrial production has fallen 12.8%. Output fell at a 20% annualized rate during the first quarter, and it's now at the same level as December 1998, the Fed's latest data showed.
Some other facts presented in this story:
--Factory production dropped 1.7% in March. Factory output has fallen 15.7% during the recession, also the largest decline since 1945-1946.
--Factory output has dropped 15% in the past 12 months and has fallen for five consecutive quarters.
--In March, per the Federal Reserve, capacity utilization fell by a full percentage point, to 69.3%, the lowest since the data series began in 1967. In manufacturing, capacity utilization fell to 65.8%, which means a third of the nation's manufacturing capacity is idle, cutting into profits and reducing companies' pricing power.
"These results are additional signs of growing slack throughout the economy that are very deflationary," wrote Lori Helwing and David Rosenberg, economists for Bank of America's Merrill Lynch.
More facts from this story:
--Consumer prices fell 0.1% in March after seasonal adjustments. Prices have dropped 0.4% in the past year, the first time since 1955 that prices have decreased on a year-over-year basis. The core CPI rose 0.2% in March.
--In March, mining output fell 3.2%. Utility output increased 1.8%.
--In the factory sector, output of business equipment fell 2.8% and is down 14% in the past year. Output of consumer goods fell 0.3% in March and is down 8% in the past year.
--Factory output fell 2.8% excluding vehicles. (Highlight: Vehicle production was actually up a bit.)
--Production of high-technology equipment fell 3.1% for the second month in a row, putting the cumulative drop at 22.6% in the past year. Excluding high-tech, industrial production for March fell 1.4%.
Depression Lurks Unless There's More Stimulus
Commentary by Robert Shiller
April 15 (Bloomberg) -- In the Great Depression of the 1930s the U.S. government had a great deal of trouble maintaining its commitment to economic stimulus. "Pump- priming" was talked about and tried, but not consistently. The Depression could have been mostly prevented, but wasn't. Ultimately, the reason for this policy failure was inadequate understanding of the relevant economic theory.
In the face of a similar Depression-era psychology today, we are in need of massive pump-priming again. We appear to be in a much better situation due to the stronger efforts to date. Still, there is a danger that, because of a combination of faulty economic theory and inadequate appreciation of human psychology, as well as deep public anger, we will not continue with such stimulus on a high enough level.
It is time to face up to what needs to be done. The sticker shock involved will be large, but the costs in terms of lost output of not meeting either the credit target or the aggregate demand target will be yet larger.
It would be a shame if we are so overwhelmed by anger at the unfairness of it all that we do not take the positive measures needed to restore us to full employment. That would not just be unfair to the U.S. taxpayer. That would be unfair to those who are living in Hoovervilles in Sacramento and Fresno, California, and elsewhere; it would be unfair to those who are being evicted from their homes, and can't find new ones because they can't find jobs. That would be unfair to those who have to drop out of school because they, or their parents, can't find jobs.
Tuesday, April 14, 2009
We Need More Stimulus, Not More Bailout
With only $110 billion remaining in the TARP bailout fund, all signs are that Tim Geithner is preparing to return to Congress seeking more bailout money. He'll bring along the results of his bank "stress tests," which will probably show many that big banks are still technically insolvent, along with bankruptcy scenarios for General Motors and Chrysler, and a couple of CEO scalps - he's already got GM's. Congress won't be happy but in the end it will cough up another 300 to 500 billion...
...That's the big issue - the continued lack of enough demand in the economy. The current stimulus package is proving way too small relative to the shortfall between what consumers and businesses are buying and what the economy could produce at full capacity. (According to today's report from the Commerce Department, retail sales fell in March, as did prices paid to U.S. producers.)
Worse yet, the states are pulling in the opposite direction. States cannot run deficits, which means that as their revenues drop in this downturn they're cutting vital services and raising taxes to the tune of $350 billion over this year and next. This fiscal drag is wiping out about half of the current federal stimulus...
And, yet other stories about Treasury Secretary Tim Geithner returning to Congress and asking for anywhere from $300- to $500-billion in additional Wall Street (not Main Street) bailout funds circulated today, as well.
Taken together, it all kind of speaks for itself, doesn't it?
(Sorry, didn't mean to interrupt all those teabagging stories. Or, did I?)
Tags: auto sales, Chrysler, consumer prices, credit, factory production, Federal Reserve, General Motors, great depression, Hoovervilles, Housing market, industrial production, Mining, Recession, stress tests, TARP, Tim Geithner, U.S. Beige Book (all tags)