Housing, Another Drag on US Growth

Several economists believe house prices have bottomed and will now begin a slow rise.
 I think they are nuts.

Here is a chart of their current forecast.

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The Mosque

Energy and US Economic Growth

I wanted to take a brief break from talking about debt as a drag on US economic growth.  

So... here are a few words and a few pictures about oil, an even more fundamental limitation than US debt, on world and US economic growth. 

Chart 1: Chart from an EIA Energy Conference in April 2009 from a presentation by Sweetnam
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NYT Reporting 2010Q2 GDP growth may be 1.2%

From NYT


August 11, 2010, 11:11 am

2nd Quarter G.D.P. May Be Revised Even Lower

Source: Bureau of Economic Analysis, via Haver Analytics 

US Borrowing, Debt and Growth Part 1

Below is a picture (Chart 1), for the last three decades, of the total amount of money Americans borrow each year.  The credit is provided, primarily by American banks for

1. American households, 
2. American businesses, 
3. American banks, 
4. Various branches of American government.

By far the majority of credit is provided to the "private" that is the "non government" sector, which are the first three sectors above.

Contrary to much of Main Stream Media and politician noise, private borrowing and private debt has been our primary borrowing and debt problem.  It has not been government borrowing and government debt.

It was only in the last couple of years (since Q4 2008) that the Bush administration, with the complete agreement of the incoming Obama administration, and the Federal Reserve, that the US federal government (USG) bailed out the private banking system, and thus took on the responsibility for redeeming private debt.

Thus did we middle class Americans have the excretions of bankers and conniving politicians dropped on our unwitting heads.

The USG got involved because the world credit "suddenly" froze and bank lending ceased.

In less than two years, Americans changed from borrowing about $4.5trillion per year to borrowing less than nothing -- whatever that means.  (More on that in later posts).

What does that signify?  Sound and Fury Signifying Nothing?  Just a Bump in the Road of  Perpetual Economic Growth?  A Harbinger of Economic Doom?

You will find my answer at the end of this piece.

This post is the first of a bunch of wonkish, but hopefully commonsense and easily understandable posts on the subjects of American borrowing, American debt and American economic growth (US GDP).

Chart 1.  Total US annual borrowing.  Data from the Fed Flow of Funds Table D2
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Job Cuts and Profits

Companies Wringing Huge Profits From Job Cuts - NYTimes.com

July 25, 2010
Industries Find Surging Profits in Deeper Cuts
By NELSON D. SCHWARTZ

By most measures, Harley-Davidson has been having a rough ride.

Motorcycle sales are falling in 2010, as they have for each of the last three years. The company does not expect a turnaround anytime soon.

Greenwald: What Collapsing Empire Looks Like

From Salon
Friday, Aug 6, 2010 12:07 ET

What collapsing empire looks like

By Glenn Greenwald

(updated below)

As we enter our ninth year of the War in Afghanistan with an escalated force, and continue to occupy Iraq indefinitely, and feed an endlessly growing Surveillance State, reports are emerging of the Deficit Commission hard at work planning how to cut Social Security, Medicare, and now even to freeze military pay.  But a new New York Times article today illustrates as vividly as anything else what a collapsing empire looks like, as it profiles just a few of the budget cuts which cities around the country are being forced to make.  This is a sampling of what one finds:

US Economic Growth -- Consensus and Limits

Image via Wikipedia

Chart1.  World and US GDP growth rate from US Dept of Agriculture Economic Research Service Source: "World Bank World Development Indicators, International Financial Statistics of the IMF, Global Insight, and Oxford Economic Forecasting, as well as estimated and projected values, developed by the Economic Research Service all converted to a 2005 base year" Data published November 2009.

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GDP Growth Rates, Debt and Tooth Fairies

Last Friday the Bureau of Economic Anaysis (a federal government bureau) issued their corrected GDP numbers for the last several years.  This post uses this updated data to begin the first of a few posts on Growth in a time of Debt.

Chart 1: BEA Quarterly Annualized Seasonally adjusted US GDP growth, 2005q1 thru 2010q2
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President Reagan's Budget Director Finds Religion

David Stockman is (was?) a staunch Republican.  He was director of the Office of Management and
Budget under President Reagan.  Below is his oped piece in the NYT.   It is a short and extremely accurate description of what four decades of living beyond our means and three decades of Reaganomics and subsequent Republican ethics and economics has wrought.  It is well worth reading.

Why the Bush Tax Cuts Should Expire

From the Washington Post -- Emphasis mine

Five Myths about the Bush Tax Cuts

By William G. Gale

Sunday, August 1, 2010

The cuts lowered tax rates across the board on income, dividends and
capital gains; eventually eliminated the estate tax; further lowered
burdens on married couples, parents and the working poor; and increased
tax credits for education and retirement savings. Obama's proposal would
extend most of these reductions, allowing only those for individuals
making more than $200,000 and families making more than $250,000 to
expire....

Drones and Deficit Spending..

Let's see now, what were we saying about increased increased US federal government expenditures and deficit spending under the Obama Administration?



From the BBC Urdu service

Since January 2009 nearly 2,500 people have been killed in Pakistan as a result of US drones and Islamic militant attacks. The graphics above show how Islamic militant strongholds in the border area close to Afghanistan have been targeted by US drone aircraft, while, at the same time, Islamic militants have carried out attacks across Pakistan.

Missile attacks by US drones in Pakistan's tribal areas have more than trebled under the Obama administration, research by the BBC Urdu service shows.