Saturday, December 5, 2009

Dollar Survey

Today, a Sudden Debt "special" survey.

Where do you think the dollar foreign exchange rate will go over the next 6-12 months? Please heed the obvious proviso: this is NOT a scientific survey, its results are NOT predictive and thus NOT to be considered investment/speculation advice.


I have re-done the poll, using a different provider that does not limit the size of the answers.

49 comments:

Debra said...

Ha. I love doing stuff like this FOR FUN !!!
I said... will stay the same. We'll see, right ?
Maybe the.. dollar and the euro will BOTH dive together, right ? Globalisation oblige ? as we say over here...

Thai said...

On a different note (and he will probably kill me for saying this), it is Okie's B-day so I thought you all might want to wish him a happy B-day.

Happy B-day Okie!

OkieLawyer said...

The poll was closed before I could vote, but if I had to put money on it, I suspect it will go back up. The U.S. Dollar is kind of like democracy -- it's the worst one ... except for all the others.

@Thai:

You're right. I am going to kill you for that.... ;^)

Hellasious said...

Happy Birthday Okie!

Debra said...

Happy birthday, Okie !
Why kill Thai ? He DIDN'T say how old you are, and besides, it's usually WOMEN who get all upset about that anyway..

Joe said...

The USD will lose world reserve currency status in 2010 and begin its terminal phase.

It will go the route that every other pure fiat currency, in history, has gone.

Joe M.

Anonymous said...

The dollar should have a decent bounce to the 80-82 area by spring 2010 before the bear resumes. I expect the buck tp test and probably violate its all time low of 72 towards the end of next year.

marcus said...

Happy birthday Okie, your input is always appreciated.

Tell me if my thinking is accurate Hell: The dollar has to stay the same or rise in value in order to keep interest rates low. The nightmare for the U.S. now is a ramp-up in interest rates, putting the brakes on recovery. The Fed will step in and purchase enough securities to keep interest rates low.

Yophat said...

Agree to disagree with Joe.

Most of the dollar depression is due to subterfuge (naked shorts - see Matt Taibbi article Rolling Stone) and carry trade games. I think we'll see a serious bounceback as the carry trade unwinds and the flight to safety occurs (currency games like North Korea, defaults like Dubai, coming implosions of Japan & UK from debt, etc etc etc).

yoski said...

I think the Dollar will continue to lose value as will most other major currencies, especially the Euro, Yen and the Pound. So I would think the exchange rate to the Euro will stay about the same. Commodities, stocks and maybe even real estate will be higher in dollar terms as people try to preserve their savings by pulling it out of cash and buying anything that is perceived to be a hedge against inflation. Of course this might lead to bubbles in other areas. Staying in any fiat currency long term will lead to serious loss of purchasing power as various schemes to reinflate the economy take hold world wide.

Thee Earl of Obvious said...

I saw a Matt Taibbi article Rolling Stone bashing the head coach of the Cleveland Browns. Seemed odd to me. Can't be that he is a big Cleveland fan as he never seemed to write about them before. Then I remember spygate and the flak Coach Mangini got for uncovering it.

Why did that make Taibbi mad? Perhaps he is connected to the man behind the curtain?

Makes me wonder about his motives as a financial writer as well.

Thee Earl of Obvious said...

The strength of a currency is a reflection of the relative strength of the country associated with that currency. That being said many times the currency is played with and manipulated in the SHORT TERM hope of boosting exports. In the end though it reflects overall prosperity of the associated country.

For this reason the Euro will continue to gain strength against the Dollar. Europe is in a much better position to weather a recession/depression as its citizens are able to cope with a smaller lifestyle.

Anonymous said...

More importantly, I think the pertinent question should be where will gold be in the next 6 to 12 months.....?

We're shaking out the sissies, once that's done, I believe that we could see some real hyper space activity in that asset class.

However to answer your question, basis the euro, I suspect that we should probably trade in the 146ish to 152ish range over the next year. Yenwise, I believe that there is a strong possibility of a sharp dollar rally, hard to determine where to. That, could extend the down side of the euro well past the 146 mentioned above, however, that would only be temporary.

Please don't confuse me with the facts, I'm extremely bearish long term, it's in everyone's best interest that the demise of the dollar take place in an orderly fashion. Remember, the US holds the largest nuclear inventory and has also been the only country to use nuclear force in conflict.

Best regards,

Econolicious

Thai said...

"The reports of my death are greatly exaggerated"

- Mark Twain

Yophat said...

Well it will be an interesting battle between "de" or "in" no matter which "flation" camp you are in....as for me and my house though...deflation all the way! We have crossed the tipping point in our collective ability to assume more debt....currency games only add suspense to the implosions!

Edwardo said...

I have voted over two hundred times in random fashion just to screw up the poll. Goldman Sachs made me do it.

Debra said...

LOL, Edwardo, you are showing veleities of doing what I LOVE TO DO !!
Whenever some sleazy telephone poll person calls me saying "this will just take a minute, please tell me what you think about Aristotelian metaphysics" (yeah well, I'm exaggerating as usual, but you know what I mean...) I take a kind of perverse glee in skewing my answers.
I feel NO GUILT whatsoever, especially since polling has wrested away power from the urns, you know...
(And... Edwardo catch that cute word in the first sentence... did you pull out your dico for it ? I had to... since I wasn't sure I wasn't wholesale exporting it into English from the French idiom...) MY ANTISPAM WORD : CURSE... Oh my God, God exists...

Hellasious said...

Dear Edwardo and Debra,

Goldie is doing God's work, don't you know? Or is it Dog's work, I often get confused.

Anyway, I don't think you can skew the poll in this way. As far as I know the system only allows one vote from each IP address..

He, He, Hellasious

Alex said...

The USD will be the safety trade going forward as sovereign debt defaults become the new normal. And fears of the potential break up of the European Union will weigh heavily on the Euro as Club Med countries and Ireland fall deeper into their respective debt black holes.

Camabron said...

First deflation, then inflation. But it will be a looong process lasting a generation or so probably.

Laxmi said...

I wonder what the effect it will be on these people...
http://www.youtube.com/watch?v=vJtS9CuyuaU&feature=player_embedded

Edwardo said...

I had to look that one up, Deb. Super secret, double decoder spy polls show that the word in question will not show up often in sentences on this forum. Management regrets that, at this time, it can not precisely define the parameters of "often."

Hell, I was just jokin' about de poll. As for you know who doin' Gawd's work, well, no one ask de man, who his God be. I say it be lord of de flies.

Arnould said...

I really do not know how to vote.

What I DO (hello Debra) know, however, is that the american dollar is well defended against speculators in the best interest of the United States.

Camabron said...
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Camabron said...
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Thai said...

Hell, as the following article illustrated, economic forces are non-linear. In this particular example, the tragic loss of income necessary to afford good health care was more than ofset by the benefit on health that the great depression forced on people's behavior.

TOnight I came across thisand it had me wondering if a similar non-linear force was in effect. But again, as it is non-linear, it is very difficult to see.

For if this is productivity improvement is true and holds- e.g. the strongest productivity gains in almost 50 years- then this would have a strong implication for our economy?

How much would a greatly improved productivity rate change your deflation forecast?

Just Curious

Yophat said...

Productivity growth...positive...are you kidding?

Fast productivity growth is normally a sign of economic strength, but in this case because it is the result of a combination of GDP growth and destruction in employment, this has raised further concerns about the possibility of a jobless recovery (see Brad DeLong, among others).

How unusual is to see productivity growing that fast during a recovery phase? No doubt that 9.5% is a very large number but we have seen similar patterns before. For example, the 1981Q3 recession showed a very similar pattern of productivity growth as seen in the picture below.

Six or seven quarters after the recession had started, productivity was growing at rates which are very similar to what we are seeing now. Interestingly, the 1981 recession was also a long recession, it lasted 16 months. It is possible that the current recession ended in the summer of 2009 which would make it very similar in length to the 1981 recession.

There is, however, a big difference between the two: in the 1981Q3 recession, we saw GDP growth rates close to 10% (quarter to quarter) seven quarters after the recession started - i.e. the last observation in the above chart. This time GDP is only growing at 3.5% and it is only because of the large decrease in employment that productivity growth is so high. This is not good news (unless we believe that this trend is about to reverse).

http://fatasmihov.blogspot.com/2009/11/95-productivity-growth-how-unusual.html

Nonfarm business productivity was revised to 8.1% growth in Q3. The revision was slightly worse than expected as the consensus projected a growth rate of 8.5%.

As expected, the drop in the productivity rate was mostly due to output being revised lower. As recorded in the GDP report, output for Q3 dropped from 3.4% to 2.7%. This translated to a nonfarm business output revision of 2.9% quarter-over-quarter growth instead of the originally reported 4.0%.

http://news.briefing.com/GeneralContent/Investor/Active/ArticlePopup/ArticlePopup.aspx?ArticleId=NS20091203091454HeadlineHits

Your also talking about pre-holiday buildup with businesses scared silly to hire anyone....and employees scared silly that they are going to lose their jobs.

Wait till 2010 Q1 layoffs roll out...

Thai said...

Yophat, I have an idea that might clear up some of these viewpoint/frame of reference issues that endlessly distort economic discussions on the internet and make talking about this stuff with others the equivalent of a three ring circus clusterF{^&

I will call it absolute individual-collective frame of reference or AICFOR for short ;-)

Just like Einstein created absolute spacetime to solve the problem Newton created with his erroneous assertions of absolute space and absolute time, perhaps we can do the same for economics so that there is not so much confusion on the "from what viewpoint" are you looking at this issue from.

Hell does such a thing exist already? Have the quants developed an equivalent concept? e.g. kicking the reference frame from which an observer observes events to a yet higher manifold?

Thai said...
This comment has been removed by the author.
Thai said...

Sorry, too many typos so I reposted:

Because re: "Wait till 2010 Q1 layoffs roll out... "

From whose viewpoint are you referring to?

1. From the person who lost his (her) job?
Answer: It is terrible
2. From the owner of the company that is more profitable (albeit on a lower earnings)
Answer: Hard to say, it may be good or it may be bad. Depends on how the two balance out.
3. From the perspective of someone who has an idea that will improve productivity and needs funding for that idea?
Answer: It is awesome as everyone and their grandmother comes knocking on his door looking to save money.
4. From the perspective of the collective as a whole?
Answer: zero-sum (no difference) as some people in the collective win and some people in it loose... Though I guess it depends on how you define collective as no two observers will have the same definition of collective either.

Debra said...

WORDS WORDS WORDS, Thai.
Productivity is a big word in the economic temple.
Just like in psychoanalytic circles, it is a word that people throw around just to show that they are part of the crowd of elite believers (who don't necessarily grasp the "technical" definition of the word, or know anything about the historical/philosophical/ideological implications of the word).
Laying off flesh and blood people so that you can trimphantly strut and crow to your abstract stock market pals that you are more productive is a lousy example of conservation of energy, Thai.
What happens to your topo when you adjust for abstraction ?
Saying that you're more productive, crowing it, while you're squeezing your employees dry like little lemons, is that REALLY increased productivity or is that.. ABSTRACT productivity ON PAPER ??
In my book, they're not the same thing at all.

Earl said...

I agree Deb, even though all I have really ever studied in college was productivity and efficiency. Seems to me that we never have answered the questions asked by "Old Mr. Fezziwig" in A Christmas Carol. Technology at what cost.

If you bring this question up in almost MBA class you will be laughed right out of the room.

Another topic that is not taught with any real degree of popularity (note I say popularity instead of success) are courses on "ethics in business". Always and I mean always the argument based on "the greater good" is beyond reproach.

I thought it funny that some students from Thailand vehemently defended labor practices in their country by saying it was better than no jobs. We on the other hand prefer unemployment lines I guess.

Yophat said...

Thai - From the perspective of bystander charting the downward spiral - i.e. crossing the tipping point in the accumulation of more debt (money)....and the consequent constriction on the economy as interest costs slowly squeeze the life out.

Three lunchtime reads:

1) The one thing you need to know about the markets
http://blogs.wsj.com/deals/2009/12/09/mean-street-the-one-thing-you-need-to-know-about-the-stock-market/

2) Housing: On equity 'cushions' and negative equity
http://seekingalpha.com/article/177435-on-equity-cushions-and-negative-equity

3) Twelve reasons the job market is worse than you think
http://blogs.reuters.com/james-pethokoukis/2009/12/09/12-reasons-the-job-market-is-worse-than-you-think/

Yophat said...

Here is a better composed summary of what I just said...

The credit collapse and the accompanying deflation and overcapacity are going to drive the economy and financial markets in 2010. We have said repeatedly that this recession is really a depression because the recessions of the post-WWII experience were merely small backward steps in an inventory cycle but in the context of expanding credit. Whereas now, we are in a prolonged period of credit contraction, especially as it relates to households and small businesses.
http://blogs.reuters.com/felix-salmon/2009/12/10/is-this-just-the-beginning-of-a-depression/

...of course not all have bought into reality yet...

In a bold but risky year-end strategy, Democrats are preparing to raise the federal debt ceiling by as much as $1.8 trillion before New Year’s rather than have to face the issue again prior to the 2010 elections.

“We’ve incurred this debt. We have to pay our bills,” House Majority Leader Steny Hoyer told POLITICO Wednesday. And the Maryland Democrat confirmed that the anticipated increase could be as high as $1.8 trillion — nearly twice what had been assumed in last spring’s budget resolution for the 2010 fiscal year.

The leadership is betting that it’s better for the party to take its lumps now rather than risk further votes over the coming year. But the enormity of the number could create its own dynamic, much as another debt ceiling fight in 1985 gave rise to the Gramm-Rudman deficit reduction act mandating across-the-board spending cuts nearly 25 years ago.
http://sayanythingblog.com/entry/democrats_to_lift_national_debt_ceilinganother_1.8_trillion_this_year/

...meanwhile...

Every month the number on food stamps increases. Food stamp usage is now up to a record 36 million.
http://globaleconomicanalysis.blogspot.com/2009/12/one-in-four-children-on-food-stamps-one.html

Thai said...

Earl, huh?

I don't disagree with you at all- and Deb knows this.

This blog focuses on $ so I try to stay in that manifold as I was told that I tend to go into too many other areas- Hell now says he is retracting that request. There are all kind of manifolds and times when I would say "to hell with the money"- in fact I am in one of those luxurious positions in my career where I often get to do just that and then fight with a utilization reviewer for 10 minutes after I do (it is kind of fun).

I am not defending (but to be fair not criticizing either) ANY labor practices of any kind.

I am trying to do the same for understanding from whose viewpoint? one is talking about as (say) the gold bugs do when they go on about gold/currencies/faith, etc...

I am trying to create an absolute viewpoint to have that conversation. Otherwise it always ends up in such a clusterfuck and we get back to the war of the world as all these different viewpoints collide.

Why would I call it absolute INDIVIDUAL-collective frame of reference if I was only interested in the collective's viewpoint?

To hell with the individual if I were not. Just call it absolute collective's viewpoint then.

How many times have I said on this blog that from my perspective, I think the bigger issues are where the boundaries conditions between the individual and the collective resides??????

Please don't pull a Marcus, and go all fractal wrongness on me.

Why do you think I get so upset on the health care debate? It is easy to save money, but someone will ALWAYS lose when you are talking about national decisions- it is zero sum. There may be times when the pay off is lots of $ for only a small loss in health, etc... (indeed at times it may improve it!), but there is ALWAYS a cost.

zero-sum

ALL global decision made by a collective are zero-sum. ALL. What do you think a conservation of energy means?????

What do you think evolution is?

Have you never thought about this?

Why do you think the mammography/self examination screening debate has gotten so ugly so fast already.

zero-sum

Some win/some lose.

If you are anti-utilitarian, and there are lots of physicians I highly respect who become enraged at the very discussion of utilitarianism as they know what it means- I respect this... to a point.

It is definitely true I have utilitarian tendencies, and that I therefore tend to by into the system/see its point of view- I freely admit that. But don't think my utilitarianism is something I blindly accept by ANY stretch of the imagination.

Why would I write stuff like this if I were just interested in utilitarian views and the group over the individual ?

What are you talking about?

Thai said...

And Deb re: What happens to your to people when you adjust for abstraction ?"

I guess we already know.

;-)

Thai said...

Sorry, Earl

Are you referring literally to the country Thailand?

Thai said...

Yophat, I got through your links.

Thoughts on from whose viewpoint to look at this from... and do not misunderstand me as I am not saying any are good or bad, I am "just saying"

Take the link which talks about how 25% of mortgage holders now have a negative equity situation.

From what I can find, 75 million Americans own a home.

I admit I may do some double counting in the following back of the envelope calculation, but here I go:

50% of homes have no debt at all (this may have some error in it). Of the remaining 38 million Americans, 25% or 9.5 million are underwater.

There are 300 million Americans. this means 9.5/300 million are in trouble. This is roughly 3.3% of Americans.

Now I admit this is a little misleading as 300 million includes children and a lot of kids are affected by parents decisions (we are all connected). So remove 1/3 of these 300 million and it changes the number to roughly 5% of all adults being in trouble.

Then assume this disproportionately effects working adults as the elderly are more likely to have paid off their homes (not always true), anyway, it is probably reasonable to assume that 10 % of working adults are in a negative equity situation... I again admit this back of the envelope calculation may be off.

So you have to look at this from different views.

But of course as these people spend less, others are affected.

And as we go into deflation, those with no debt benefit. etc...

Whose viewpoint?

Yophat said...

I see your viewpoint - LOL

Last stats I saw said roughly a third owned their homes, a third had positive equity, and a third had negative equity. I believe it was MISH or Calc Risk with the stats.

Well to put this in perspective, in terms of viewpoint it comes down to macro perspectives, tipping points, and long-term outlook.

While in this period of deflation a person that is debt free might benefit...they could also lose. For example, being wealthy one moment but robbed at gunpoint the next. Therefore, the survival and outlook on the system as a whole becomes the priority. Let the individuals fall or rise as they may.

Back to the numbers - unemployment numbers that is...
Fifteen states have collectively borrowed more than $15 billion and another nine states are in the red over unemployment benefits. Please consider Jobless claims put state in debt.

Let's do the math. The state budget is $19 billion. Potentially $4 billion will be borrowed to pay unemployment benefits. In other words the state is borrowing an amount equal to 21% of its total budget just to pay unemployment benefits. Wow.

http://www.minyanville.com/articles/index/a/25713

Nov 3 with pretty map -
http://www.propublica.org/special/is-your-states-unemployment-system-in-danger-603

Current -
http://ows.doleta.gov/unemploy/budget.asp#tfloans

As of Dec 8 - Total $23,105,185,267.47
On Dec 2nd (last time I checked and did analysis) - $22,376,706,063.69
Difference of - $728,479,203.78 or increase of $121,413,200.63 per day
Average Nov 3 to Dec 2 and the average increase jumps to $69 million per day from $59 million per day for Nov 3 to Nov 30. average in from Nov 3 to Dec 8 we now average nearly $79 million per day...

Now back to perspectives - in the short term sure you could be in the unemployment camp saying keep it going...or in the employment camp saying - you extended benefits to 99 months? Are you kidding? Why do I have to foot the bill?
But in the long term perspective...if the trend continues...both suffer!
Stuff like 10 charts -
http://www.doctorhousingbubble.com/finance-budget-economy-2010-10-charts-showing-why-there-will-be-no-economic-or-housing-recovery-for-california-in-2010-unemployment-at-12/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+DrHousingBubble-HowILearnedToLoveSocal+%28Dr.+Housing+Bubble+-+How+I+learned+to+Love+SoCal
OK let's dive into a little analysis....here is California's latest budget summary -
http://www.sco.ca.gov/Press-Releases/2009/11-09summary.pdf
On page 3 you can see actual tax revenue collections for the fiscal year through the end of October. Retail Sales and Use Tax collections total $7.439 billion which works out to an average daily collection of $60.075 million. Sales tax is 30.4% of California's revenue. Now look at the debt currently being incurred for funding current unemployment claims as noted above. From Nov 3rd to Dec 2nd California borrowed almost $363 million. That works out to an average of $12.962 million per day....or about 21.3% of California's daily sales tax revenue. ****Remember this is debt incurred over and above the unemployment insurance revenue currently being collected from businesses in California.
Let's be realistic - the economy isn't going to bounce back in 2010...best case scenario is we flat line. The state will be $7.4 billion in the hole just in unemployment insurance borrowing at the beginning of the year. In the best case scenario 2010 will add at least an additional $5 billion in unemployment debt. Now add in another billion or two for interest costs (currently being accrued) and you are looking at $14-$15 billion cash out JUST FOR PAST UNEMPLOYMENT PAYMENTS in 2011.

Yophat said...

The fancy description is -
forward financing as economic stabilizer.

Works until it doesn't. No money ever created for interest thus the game is over when the tipping point in debt is reached.

Forgot to mention that on the housing comment previously. Not all homes have to be underwater...just enough to cross the tipping point. Just like banks who may plan to write off 15% of loans. When you hit 17% it stinks but livable. 20% some red flags. 24% game over.

Thai said...

re: "For example, being wealthy one moment but robbed at gunpoint the next. Therefore, the survival and outlook on the system as a whole becomes the priority. Let the individuals fall or rise as they may."

But the economy as a whole is stabilizing, though it could dip again as it matters what we do.

If Marcus gets his way, and you pay me more money to get universality, I would be very worried.

If other get their way, and we achieve BASIC universality at no added cost by saving money elsewhere (lots of ways to do this), I would be a lot more optimistic.

It always mattered how we spend our money.


And re: crime and the economy.

This is the most fascinating thing about pessimism vs. reality.

Look up the crime data yourself. Crime is dropping

... I think Edwardo has a link on crime and deflation which I have forgotten to save or I would link.

Be well

Yophat said...

Well there we go with perspective again. I think the economy is far from stabilizing...in fact quite the opposite.

Just more and more lies we keep telling ourselves as the models/budgets keep getting adjusted for downward revisions. Revenue just keeps shrinking faster than we can keep up.

Black hole of debt! Any bounce to the cat and the media screams we are rebounding.

Here's a piece for you...

Zero Hedge recently highlighted the developing risk in the government's outstanding Treasury portfolio, where nearly 40% of all issues mature within the year. As such the roll risk for the US government is massive, and even the smallest unexpected macro blip would make the rolling/refinancing of roughly $5 trillion in debt very problematic. Yet the US government is not alone in this quandary of how to keep T-Bill interest rates at record lows: an earlier report by Moody's demonstrates that the banking system is in far, far worse shape: "we note that average maturities of new debt issuances rated by Moody’s – which we use as an indicator of general trends -- fell from 7.2 years to 4.7 years globally over the last five years. This is the shortest average maturity for new debt at any given point during the 30 years of bank funding history covered by our analysis. As a related matter, we estimate that banks that we rate will face maturing debt of about $10 trillion between now and the end of 2015, $7 trillion of which will occur by the end of 2012."

Let's do the math: the US Gov't needs to roll about $6 trillion (and increasing) every year, Commercial Real Estate has a $3 trillion refi cliff around 2014 and the banking system has a $7 trillion roll maturity by 2012. In other words at or about 2012, or at the time Barack Obama is sure to be enjoying record approval ratings (high or low, your choice) courtesy of 30% unemployment, the American economy will be straddled with not just the ongoing burden of issuing about $2 trillion in debt each year to finance what can only be characterized as a budget concocted by the most hard-core, raving lunatics in the Federal Insane Asylum Reserve, but will have to deal with roughly $15 trillion of rolling maturities.

* One hears such sounds, and what can one say but... "Salieri"
* One fathoms such idiocy, and what can one say but..."Bernanke"

Full Moody's report for those who would rather see that the US economy is going to 10th circle of hell promptly, instead of buying Amazon stock at 1E10^18243 P/E, attached below.
http://www.zerohedge.com/article/us-lunatic-asylum-ie-economy-facing-approximately-15-trillion-roll-risk-2012

Yophat said...

http://www.youtube.com/watch?v=Ulu3SCAmeBA

Yophat said...

What percentage of the economy is the consumer?

http://globaleconomicanalysis.blogspot.com/2009/12/gallup-spending-down-across-incomes-wsj.html

http://www.minyanville.com/articles/index/a/25852

http://www.calculatedriskblog.com/2009/12/retail-sales-looks-like-middle-of.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+CalculatedRisk+(Calculated+Risk)

http://paper-money.blogspot.com/2009/12/effervescent-equity-federal-reserves.html

http://www.federalreserve.gov/releases/g19/Current/

Revolving debt, which is made up almost entirely of credit card debt, has been falling steadily as people pay down their credit card debt and limit their use of plastic. Outstanding debt has fallen for 13 straight months to a seasonally adjusted $888.1 billion, according to Federal Reserve figures released Monday, after hitting a peak of $975.2 billion in September 2008.

The reduction in debt is probably an outgrowth of rising unemployment, which limits spending, and a reduced availabilty of credit.

Some 6 percent of consumers, or 13.5 million people, are still carrying debt from last year’s holiday season, according to Consumer Reports.
http://www.msnbc.msn.com/id/34347297/ns/business-consumer_news/

Yophat said...

Lest you think headway is really being made on the debt...


JP Morgan Chase (JPM) CEO Jamie Dimon remarked at a financial services conference this afternoon that of the total $13.5 trillion worth of consumer debt outstanding in the U.S., about 1 trillion of it will go away in the next year sheerly through writedowns by creditors — banks, stores, etc. (Note: Dimon is including in this figure roughly $11 trillion of mortgage debt, on top of the usual $2.5 trillion or so of what is mostly credit card debt.)

That still leaves a lot of debt left, I suppose.

http://blogs.barrons.com/stockstowatchtoday/2009/12/08/dimon-1-trillion-consumer-debt-to-be-written-off/

Debra said...

Two observations starting from everyday "little" reality, the way I like to do things.
I used to wrangle with a dear friend over the debt problem.
And I noticed that... her attitude about government debt basically reflected her enormous... PREJUDICE (and misconception in my book...) that the government was just like lil ole you and me (with respect to debt...), the INDIVIDUALS.
I think that that is a hell of a misconception... But a very telling one, as she is not alone in that idea which seems to be shared by all Wall Street, and the PEOPLE, everywhere.
Next observation : I have begun cutting up my deserts in... UNEQUAL slices because... WHO SAYS everybody WANTS to have the same size piece of the pie ?
And WHY DO WE BELIEVE IT ?
As it turns out, when you go around the table, not everybody wants to have the same size.
And... I keep harping on about the incredible PREJUDICE of imagining that the whole schmilblik, as we say here, IS A PIE THAT HAS TO BE DIVIDED between us.
Maybe there are other ways of seeing it ???
And Thai, there's only so long that you can keep arguing about, or trying to see every possible viewpoint on something. There is a certain element of... HUBRIS in that idea.
But I understand why you do it . I think... ;-)

Earl said...

Sorry Thai,

Yes I was, we had several in our class back when the Nike debate regarding low wage labor in Thailand was going on. I thought their perspective was interesting in the face of righteous admonishment from the Professor.

Sorry for the confusion.

Thai said...

Again, sorry Earl. My bad.


Yophat, think about the issue of viewpoint a little more before you drink too much of Zero Hedge's doom and gloom cool-aid.

I am not saying you should go all Mark Perry and start singing "everything's coming up roses"... Although I admire his optimism, it must be a nice way to go through life. But I wouldn't let Zero-Hedge manipulate you too much with their fear mongering either- kind of reminds me of the bankers from whose ranks he descended.

As we both know, often the real action on the field is what is not being noticed.

"Not everything that can be counted counts, and not everything that counts can be counted"

- Albert Einstein


... In fact, Hell has been making this exact point for as long as his blog has been around.

From a global perspective, a lot of these issues are zero-sum.

Yophat said...

Which viewpoint would you prefer - that of the taker or that of the taken?

I wouldn't sweat Zero Hedge as I just started following the posts there a month or two ago. Plenty of others like Mish, Calc Risk, Seeking Alpha, Karl Denninger, Russ Winter, Aaron Krowne, Paul Kasriel, and myriad others that I've followed for years. Not to mention my research and analysis - which lately has been focused on the rapid increase in state borrowing to fund current unemployment claims.

All that aside, and a distraction, the fundamentals indicate a rapidly approaching day of reckoning with debt. We have borrowed from tomorrow's consumption until there is nothing left to consume.

Society is a pyramid of which the middle class provide the foundation. The middle class is being wiped out. Take away the foundation and say adieus to the pyramid!

Of course the future is all guesses - but here is mine...

I see a build up in troops at home during the next 6 months. Get the troops in place before things break loose to squash outbreaks like LA riots with an iron fist. I think all the cogs are currently in place - NORTHCOM, Homeland Security, and UN security forces(Obama is the head of the UN Security Council).

I don't expect things to really get bad till next fall/winter.

After this dismal Christmas shopping season - Q1 layoffs will take off (heard rumors at the last oil conference in Houston that Shell intends to lay off 8,000 of the 14,000 employees in Houston).

Unemployment payments, food stamps, and other social safety net expenses will increase while tax revenues continue to decrease thus bankrupting the states and placing them in position to be absorbed under complete Federal control.

As the real unemployment rate crosses 30% in Q2 and the CRE meltdown rolls in full swing (sat next to a workout specialist from M&I bank on a recent flight who covered DC to LA - banks getting at most 30 cents on the dollar) see the FDIC take over 20 to 30 banks a week. Roll up of little banks into big banks.

As July rolls in new fiscal budgets for state and local will experience drastic cutbacks in all areas. If anything kicks off riots this ought to.....as teachers vs cops vs firefighters vs bureaucrats. This is really the area for a good spark (which would ignite the boiling cauldron of middle class anger). When folks that have been living off of the government tit (nearly all of us at one point or another) suddenly find themselves cut off....then there exists some impetus for riot.

As my friends who participated in the LA riots said - it had nothing to do with Rodney King and everything to do with economics - but Rodney provided the spark (excuse) to bust into the TV shop across the street and pickup a new tv/stereo.

Example - http://kstp.com/news/stories/s1302620.shtml?cat=1

Also debt costs are going to soar as risk goes off the charts thus the roll over issues mentioned at your favorite site -
http://www.zerohedge.com/article/us-lunatic-asylum-ie-economy-facing-approximately-15-trillion-roll-risk-2012

California is the canary in the economic coal mine to keep your eye on -
http://www.zerohedge.com/article/bankrupt-state-california-starts-selling-office-buildings-cb-richard-ellis-markets-largest-o

Summer is always better economically so I expect the big blowups to hit fall/winter of next year. 2011 will be pure ugliness. I can't imagine what 2012 will look like.

Of course if the dollar heads north and blows up the carry trade as discussed here -
http://www.safehaven.com/article-15241.htm


"A reporter interviewing A.J. Muste, who during the Vietnam War stood in front of the White House night after night with a candle, one rainy night asked, Mr. Muste, do you really think you are going to change the policies of this country by standing out here alone at night with a candle? Muste replied, Oh, I don't do it to change the country, I do it so the country won't change me." ~ Andrea Ayvazian