They're baaaccckk!

Granted it is not at the same fevered pitch as at the height of the credit bubble, but I am once again getting credit card solicitations in the mail. I have gotten several from one of my current cards recommending that I get a second card (separate account), and just the other day I finally received a "preapproved" solicitation for a no annual fee card from some bank I had never heard of. And just today I noticed that my preferred card just upped my credit limit by a very healthy amount. No, we are not yet back to happy days being here again, but the credit gloom seems to be a little less thick than even a month ago.

-- Jack Krupansky

Wall Street 2 movie was so-so

I was really looking forward to see the new Wall Street 2 movie ("Money Never Sleeps") and although it had quite a few good moments, overall it just wasn't as satisfying as I had hoped. Despite the severity of the recent financial crisis, the movie just didn't have the visceral punch that I though Oliver Stone would bring to this encore.

Michael Douglas was great, but he was great in the original, so no new ground was broken there. "Jake" as his nominal protégé was okay, but not great. His girlfriend, Gordon's daughter was... well... pathetic (or more charitably I could say that this was great acting to portray a pathetic character) but maybe that was intentional to forcefully illustrate how "toxic" the cretins of Wall Street really are.

The ending was quite lame, but maybe given the current cultural context Mr. Stone felt obligated not to leave people in a state of complete despair. That would be bad for ticket sales.

On the positive side, the acting of Frank Langella and Eli Wallach as aging investment bankers was absolutely fantastic.

As I noted, there were plenty of great individual scenes and lines such as you saw in the two trailers.

Maybe the bottom line is that Mr. Stone did in fact portray the culture of Wall Street and its denizens as being irredeemably "toxic", although his lame ending inscrutably seemed to let them off the hook and even excuse illegal activity.

There were a few scenes that reminded me of Wall Street activity that I hope the so-called Volcker Rule will eliminate or at least dramatically reduce, but only time will tell.

Maybe that is ultimately the fatal flaw with this movie: there is too much in it that is borderline documentary and cuts painfully too close to the bone. At the end of the credits it reminds us that it is a work of fiction and that similarities to real people and places is... "unintentional." Yeah, right. Sure, they changed the names of the investment banks, but we all know who they were talking about.

-- Jack Krupansky

ECRI Weekly Leading Index hangs in there but declines modestly even as growth rate rises

Talk about mixed signals on the economy. The recovery from the recession continues to poke along a bit too slowly for most people, but at least the trend is still positive. The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) continues to wobble a bit aimlessly, declining a little bit this week, to 122.2 from 122.6, while the WLI annualized growth rate actually rose moderately, to -8.7% from -9.2, remaining modestly above the psychologically important -10.0% level that some pundits (but not ECRI) view as the threshold for a recession for two consecutive weeks. The bottom line is that the WLI has remained roughly flat since the beginning of July. That is not great, but this is at least not a worsening of the outlook. The much-feared double-dip recession is being kept at bay.

As ECRI puts it, "After a brief plunge in the late spring, the WLI has been fairly stable throughout the summer and into September, suggesting that it is still premature to predict a new recession."

The WLI is well below its peak in April, and modestly lower than the level of a year ago (128.7) when the recovery was just getting underway in earnest.

We had a massive bulge of stimulus, which peaked and is now somewhat dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here for a couple of months, that would be a problem, but  we're not headed in that direction at the present time.

The WLI suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

-- Jack Krupansky

The New York Times article... in Portuguese

The New York Times article from Friday by Sewell Chan entitled "Small Gifts Sent to Ease U.S. Debt" that quotes me about making contributions to pay down the public debt and has my picture has been translated into Portuguese on this Brazilian web called Economia with the translation entitled "Para pagar dívida de R$ 23 trilhões, uma doação de R$ 554 - Crescem nos EUA as contribuições voluntárias para diminuir o rombo nas contas do governo, mas impacto sobre os débitos é mínimo". My original quote in The New York Times:

"I get mixed reactions," said John W. Krupansky, 56, a software developer in Midtown Manhattan who started reading about economics during the dot-com crash a decade ago, and has blogged about his tax deductible gifts, nine so far, of $25 each. "Some people are annoyed; they think the right thing to do is complain about the debt, not actually do something about it. Other people are amused that anyone would waste their time to do such a thing."

Translated into Portuguese:

"Ouço reações diversas", diz John W. Krupansky, de 56 anos, desenvolvedor de software no centro de Manhattan que começou a ler sobre a economia durante a crise das empresas pontocom, há uma década, e tem escrito em seu blog sobre suas doações - nove até agora, cada uma de US$ 25. "Algumas pessoas ficam irritadas. Elas pensam que a coisa certa a fazer é reclamar da dívida, e não fazer algo concreto sobre isso. Outras pessoas se divertem com a ideia de alguém perder seu tempo para fazer uma coisa dessas."

-- Jack Krupansky

Huh, I'm in the paper for trying to pay down the public debt... in the New York Times!

Huh, my meager efforts to take responsibility for paying down the public debt have gotten me a little attention... in The New York Times of all places! Today they are running an article by Sewell Chan entitled "Small Gifts Sent to Ease U.S. Debt" that actually quotes me:

"I get mixed reactions," said John W. Krupansky, 56, a software developer in Midtown Manhattan who started reading about economics during the dot-com crash a decade ago, and has blogged about his tax deductible gifts, nine so far, of $25 each. "Some people are annoyed; they think the right thing to do is complain about the debt, not actually do something about it. Other people are amused that anyone would waste their time to do such a thing."

And they even ran my picture.

-- Jack Krupansky

Definitions: recession, depression (revised rev 1)

Now that I have a definition for double-dip recession, I suppose I need to give my definition for recession. I did poke around and read what the National Bureau of Economic Research (NBER) Business Cycle Dating Committee (BCDC) has to say on the matter, and ultimately synthesized my own streamlined but reasonably accurate definition:

recession - an extended period, typically of at least six months and measured in months, during which economic activity is declining significantly and broadly in terms of GDP, income, production, and employment, measured from the peak of activity until the trough of activity when recovery begins, although employment tends to lag somewhat in the recovery and unemployment may remain elevated well into the recovery.

And my definition for depression:

depression - an extended period of depressed economic activity, typically a number of years, and consisting of at least one and maybe two or more recessions, during which one or more of GDP, output, income, or employment, especially the latter, fail to rise above their level at the beginning of the period, even if GDP or output do recover fully much earlier in the period. The Great Depression of the 1930's contained two distinct recessions with significant recoveries of GDP and output after each, but with an ongoing very high level of unemployment and loss of income.

-- Jack Krupansky

Definitions: recession, depression

Now that I have a definition for double-dip recession, I suppose I need to give my definition for recession. I did poke around and read what the National Bureau of Economic Research (NBER) Business Cycle Dating Committee (BCDC) has to say on the matter, and ultimately synthesized my own streamlined but reasonably accurate definition:

recession - an extended period, typically of at least six months and measured in months, during which economic activity is declining significantly and broadly in terms of GDP, income, production, and employment, measured from the peak of activity until the trough of activity when recovery begins.

And my definition for depression:

depression - an extended period of depressed economic activity, typically a number of years, and consisting of at least one and maybe two or more recessions, during which one or more of GDP, output, income, or employment, especially the latter, fail to rise above their level at the beginning of the period, even if GDP or output do recover fully much earlier in the period. The Great Depression of the 1930's contained two distinct recessions with significant recoveries of GDP and output after each, but with an ongoing very high level of unemployment and loss of income.

-- Jack Krupansky

Definitions: double-dip recession, recovery

What exactly is a double-dip recession? Everybody is talking about it and we all kind of know what it is, but what exactly is it? I poked around and found some so-so and confused definitions, but I synthesized them into my definition. So, here it is:

double-dip recession - a single recession in which a short or weak recovery dissipates quickly (less than a year) and turns into a significant and broad renewed decline in economic activity (more than a few months), and then followed by recovery.

I also need to offer my own definition for a related term:

recovery - the period of economic expansion following the trough of a recession until economic activity exceeds the peak at which the recession began, including GDP, income, production, and employment.

-- Jack Krupansky

Q3 GDP forecast for 1.4%

Macroeconomic  Advisers, the people who provide the data on monthly GDP for the National Bureau of Economic Research (NBER) Business Cycle Dating Committee (BCDC) are currently forecasting that annualized real GDP for Q3 will come in at +1.4%, down a little from an earlier forecast of +1.5%. Annualized real GDP for Q2 was +1.6%. These are rather sluggish growth rates, well below the 2.5% rate that most people would consider the minimum for a healthy economy. Nonetheless, the economy is still growing and recovering from the financial crisis and recession of 2008.

Those "hoping" for a double-dip recession will continue to be disappointed.

-- Jack Krupansky

The mini-depression continues even though The Great Recession is over

Is The Great Recession really over? The "recession" is officially over, as the National Bureau of Economic Research (NBER) Business Cycle Dating Committee (BCDC) tells us, as of June 2009, but "The Great Recession" was always a packaging of more than just the technical recession, including the raw level of unemployment, the slow pace of job creation, stagnant incomes, etc. I have been saying that we are in a mini-depression, not as dramatic as The Great Depression in the 1930's, but more dramatic than a mere recession. So, to be specific, the recession portion of the mini-depression is definitely over, but the rest of the mini-depression remains intact and likely to linger for years, maybe even five to ten years.

The Great Depression, lasting from 1929 to 1941, actually contained two separate recessions, the first from 1929 to 1933 and the second from 1937 to 1938. The rest of the time, although still in a depression, the years 1933 to 1937 and 1938 to 1941, the economy was in recovery. So, you can certainly have recovery in the midst of a depression.

Similarly, we have exited from recession, are in recovery, but remain in a mini-depression - in my view.

As far as "The Great Recession", a moniker that is very popular with a lot of pundits, people are in a bind since they can no longer technically say that we are in a recession, but they clearly want to refer to the lingering effects of the recent recession. It will be interesting to see how they resolve this discrepancy, either by coining a new term ("The Not-So-Great Recovery"?) or maybe remain in denial and stick with a technically inaccurate term. I am sticking with "mini-depression."

-- Jack Krupansky

The recession of 2008 is now officially over

It's official, the recession is over. The National Bureau of Economic Research (NBER) Business Cycle Dating Committee (BCDC), the quasi-official arbiter of the dating of recessions has issued their conclusion that the recession ended in June 2009. As the committee says:

The Business Cycle Dating Committee of the National Bureau of Economic Research met yesterday by conference call. At its meeting, the committee determined that a trough in business activity occurred in the U.S. economy in June 2009. The trough marks the end of the recession that began in December 2007 and the beginning of an expansion. The recession lasted 18 months, which makes it the longest of any recession since World War II. Previously the longest postwar recessions were those of 1973-75 and 1981-82, both of which lasted 16 months.

That is consistent with what I had been saying for quite some time, although I phrased it as "as of July 2009", meaning that July was the first full month of improvement. In the committee's terminology, to be strictly correct, we should say that the recovery began in June 2009 even though the economy was not recovering that whole month. And technically the recession began in December 2007, but I refer to it as the "recession of 2008" since that is when the bulk of the decline occurred.

As far as a double dip, the committee says only that:

The committee decided that any future downturn of the economy would be a new recession and not a continuation of the recession that began in December 2007. The basis for this decision was the length and strength of the recovery to date.

That is not to say that the economy won't decline in the near future, just that it would be categorized as a separate recession.

The committee also notes that the economy still has problems on the jobs and unemployment front:

The unemployment rate lags behind the NBER cycle dates as a general matter--it reaches a low point somewhat later than the peak in activity and usually remains at high levels after activity reaches its trough. For example, in the recovery beginning in March 1991, the unemployment rate continued to rise for 15 months after the trough. The lag was 19 months in 2001 to 2003. In the current recovery, the lag was only 4 months, from the trough in activity in June 2009 to the highest point of the unemployment rate in October 2009. But even in September 2010, the unemployment rate remained at high levels, even though these levels were below the maximum reached in October 2009.

It is also worth noting that the "end" of a recession is not to say that everything is back to normal, but simply that the economy has started to recover. As the committee puts it,

In determining that a trough occurred in June 2009, the committee did not conclude that economic conditions since that month have been favorable or that the economy has returned to operating at normal capacity. Rather, the committee determined only that the recession ended and a recovery began in that month. A recession is a period of falling economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales. The trough marks the end of the declining phase and the start of the rising phase of the business cycle. Economic activity is typically below normal in the early stages of an expansion, and it sometimes remains so well into the expansion.

As a final note, NBER is not a government agency. They are a private organization, essentially a cooperative of economists. They bill themselves as "a private, nonprofit, nonpartisan research organization dedicated to promoting a greater understanding of how the economy works." Everybody, including federal agencies, Congress, and the Federal Reserve, accepts and uses the NBER recession dates as gospel, so they are "official" in that sense, I refer to them as quasi-official since they are not from the federal government in the way that GDP, employment, income, and production numbers are.

-- Jack Krupansky

ECRI Weekly Leading Index hangs in there and even rises a little again

The recovery from the recession continues to poke along a bit too slowly for most people, but at least the trend is still positive. The Economic Cycle Research Institute (ECRI) Weekly Leading Index (WLI) continues to wobble a bit aimlessly, but did recover a little bit this week, to 122.6 from 122.0, and the WLI annualized growth rate did manage to eek out a moderate gain, to -9.2% from -10.1, bringing it a bit above the psychologically important -10.0% level that some pundits (but not ECRI) view as the threshold for a recession. The bottom line is that the WLI has remained roughly flat since the beginning of July. That is not great, but this is at least not a worsening of the outlook. The much-feared double-dip recession is being kept at bay.

The WLI is well below its peak in April, and modestly lower than the same level as a year ago when the recovery was just getting underway in earnest.

We had a massive bulge of stimulus, which peaked and is now somewhat dissipated. The big negative WLI growth rate is simply telling us that we are well down from that peak bulge. If the WLI were to deteriorate significantly further from here for a couple of months, that would be a problem, but  we're not headed in that direction at the present time.

The WLI suggests that the economy is likely to slow a bit further, but as of this week a double-dip recession is still not in the cards from the WLI perspective. Still, the outlook does remain, as Ben Bernanke has said, "unusually uncertain."

-- Jack Krupansky

Monthly GDP rose 1.2% (15.8% annualized) in July

Monthly real GDP, one of the five primary economic indicators that the NBER Business Cycle Dating Committee (NBER BCDC) uses to judge recession start and end dates, rose by a very sharp +1.2% in July or +15.8% annualized, after declining a cumulative -0.8% over the previous two months (May and June), and real Q3 GDP is forecast to rise by +1.5% annualized, according to Macroeconomic Advisers (MA). The government does not publish GDP data at a monthly level, but the NBER Business Cycle Dating Committee says that they refer to sources such as Macroeconomic Advisers (MA) and their MGDP data series. As Macroeconomic Advisers summarized GDP for July:

Monthly GDP rose 1.2% in July, more than reversing declines over the previous two months.  The large increase in monthly GDP in July was more than accounted for by large contributions from net exports and inventory investment.  Domestic final sales declined moderately in July.  The level of monthly GDP in July was 3.3% above the second-quarter average at an annual rate.  We view the level of nonfarm inventory investment in July to be unsustainably high, so we look for a large decline in August.  This is the primary reason we assume a 0.7% decline in monthly GDP in August.  This assumption underlies our latest tracking forecast of 1.5% growth of real GDP in the third quarter.

GDP is now back up to its level in October 2007, shortly before the recession began, but that is with the boost of extraordinary monetary and fiscal stimulus, so we are by no means out of the woods yet even if the recession is essentially over (as of July 2009, in my estimation.)

If the NBER BCDC is the definitive expert on marking of recessions, MA is the definitive expert on calculating real GDP at the monthly level with their MGDP data series.

-- Jack Krupansky

Made my ninth payment to pay down the public debt of the U.S. government

I just made my ninth monthly payment to pay down the public debt of the U.S. government. Not much, just another $25, but it is a matter of principle, albeit mostly symbolic. It may take me another 45 billion years to pay it all down all by myself at this rate, but, as I said, it is a matter of principle.

According to the U.S. Treasury web site, the total public debt outstanding was $13,441,762,397,157.23, as of September 10, 2010. It was $13,317,048,837,517.10, as of August 12, 2010, for an increase of about $125 billion over 29 days, about $4.3 billion a day or $1.57 trillion per year (annualized daily deficit.)

Here is what I wrote back in January 2010 when I made my first donation/gift/contribution/payment:

Everybody is whining and complaining about the ballooning debt of the U.S. government, but who is actually doing anything about it? Well, for starters, ME! Yes, that's right, I, Jack Krupansky, just did something to reduce the U.S. government debt. Really. No kidding. I actually paid down a small slice of this debt. Granted, it was a rather small slice, but a slice nonetheless. Okay, sure, it was only $20, but the point is that at least I am one of the very few people willing to stand up and DO something about the problem, rather than be one of the whiners and complainers who refuse to acknowledge that it is their debt and their problem, not just the fault of mindless politicians in Washington, D.C. After all, every politician ultimately answers to voters and most of the so-called wasteful spending of the U.S. government is simply politicians responding to the demands of their consistituents (voters.) Maybe my one small contribution to paying down the debt won't really make any difference to any of those whiners and complainers, but for me it is a matter of principle. I consciously choose action rather than the inaction and lack of responsibility of the whiners and complainers.

If you have any sense of principle, you too can pay down a slice of the U.S. government debt yourself at Pay.gov. You can pay via credit card or debit transfer from a bank account.

So do the right thing and show all those whiners and complainers (including so-called "tax protesters") how mindless and spineless they really are. PAY DOWN THE DEBT! And that has to start at the grass roots with us individuals before politicians will ever pick up the lead.

For the record, the only real way out of the deficit is not to merely cut expenditures or raise taxes or some combination of the two, but through economic growth, which includes a healthy amount of immigration in addition to unemployed workers going back to work and young people entering the work force. Sure, we need to manage the federal budget more carefully as well, but the big focus has to be on achieving sustainable economic growth.

-- Jack Krupansky