Where is the US economy headed?

What's next?

stick around to find out !
hbg

Economists worry about Credit Card debt

"But don't worry, George Bush has a plan for winning in Iraq."

He just proposed corporate tax cuts..

parados, It's not only the credit card debt that will hurt the US economy, it's those sub-prime loans to people who shouldn't have been approved for those loans in the first place. The market dropped 387 points today; expect the DOW to hit below 13,000.


ECONOMIC REPORT
U.S. consumer credit rises by 6.5% in June

By Robert Schroeder, MarketWatch
Last Update: 3:09 PM ET Aug 7, 2007


WASHINGTON (MarketWatch) -- An increase in credit-card debt pushed outstanding U.S. consumer debt up at a 6.5% annual rate, or $13.2 billion, to $2.46 trillion in June, the Federal Reserve said Tuesday.
It was the second consecutive month that a rise in credit-card debt was mostly behind the overall increase in consumer debt. In June, credit-card and other forms of revolving debt rose at an 8.4% annual rate, or by $6.3 billion. May's gain was revised upward, to 12.2%.
Meanwhile, auto, student, personal and other non-revolving debts rose at an annual rate of 5.3% in June after climbing by 5.4% in May.
Total consumer credit increased by a revised 7.9% annualized in May, or by $16 billion.
The Fed data do not include mortgages or other loans backed by real estate.
The consumer credit report follows the Federal Open Market Committee's decision earlier Tuesday to leave short-term interest rates unchanged at 5.25%.
The Fed said that it still expects moderate growth in coming months, despite volatile financial markets, tighter credit conditions and the ongoing correction in the housing market. See full story.
Shares of U.S. financial stock indexes slipped Tuesday afternoon after the Fed's announcement. See Financial Stocks.
Robert Schroeder is a reporter for MarketWatch in Washington.

The US GDP is around 13.13 trillion. The consumer credit card debt is 2.46 trillion. On top of that, the consumer debt on mortgage and sub-prime loans adds a huge chunk to the debt in a economy that cannot continue to sustain itself on borrowed money.

It's nice that taxpayers are willing to spend 2.7 billion dollars every week in Iraq to add to the inflation.

The quarter point adjustments to the short-term rates by the feds is a real joke. They're worried about inflation? It's already here! Jeesh.

Hang onto your hats; the windy season is yet to come. Many of the developed nations are releasing billions of dollars into the market to ease money liquidity. They're playing with fire, because the market is artificially being supported with money that only adds fuel to the inflation scenario. They're reacting on fear of the world economy going into recession; we're already at that point.

I'm pissed that the Fed only allowed those who are holding on to sub-prime endangered hedge funds to buy up the 19 billion they released today.

This essentially amounts to a bail-out for folks who invested in risky things. Ridiculous.

Cycloptichorn

I don't know how the mechanics of this works. But as I understand it, the Fed, with its 38 billion dollar infusion, is not bailing out lenders who made poor loans. Rather it is like a can of oil to a car that is in danger of seizing up. The lenders will have to bear the consequences for poor decisions on lending, but what we saw today from the Fed was simply keeping the markets liquid.

rjb is correct; it's to keep the markets liquid. Without the ability to lend money, the economy will freeze up and die.

The Market is, to a large extent, a mindless beast.

It doesn't react to events in a studious and considered way, it reacts like a wildebeest.

A herd of wildebeests cover a thousand acres of African savannah. Their migration has led them to a land of plenty and they are happily munching away at fodder and every now and then having sex and getting pregnant.

Where there are massive herds of wildebeests there are lions.

The lions stalk the outer fringes of the herd in search of the lame and weak.

All the while the herd is collectively complacent. "I can't smell the lions and therefore they're not there."

The lions attack and reaction cascades from the fringe throughout the herd. Suddenly thousands of wildebeests are running and very very few of them need to escape peril.

Right now no one can say with any certainty what will be the long term impact of the sub-prime credit fiasco. Some individuals within the herd will perish, but the lions are hardly capable of bringing down the entire mass of wildebeests.

Some time in the not so distant future the herd will forget about the lions and enjoy the bounty of Nature. It doesn't mean the lions have disappeared, but it does mean that their threat is put in proper perspective.

Fundamentally, we have the strongest economy in the world. We weathered 9/11, we can certainly weather a decline in housing prices and an increased default rate on sub-prime mortgages.

This is the Market at it's most wild and beautiful nature.

Individuals cannot control it, any more than individuals can control the natural ecology. Masses can influence it from time to time, but over the long run it is self-correcting.

If your personal wealth is invested in stocks and you are at the latter stage of your life, you probably should consider getting out of the Market once things stabilize. If you have years to go, just hang on. This too shall pass and the economic engine that is the US will inevitably lead to increased wealth.

The Federal Reserve is the *CAUSE* of inflation.. Its amazing how people think they are there to prevent it.. it is such a joke its not even funny.

dys, Better make that the first floor window now!

A few snippets from the last few days' economic news:
Credit card debt up...Folks with adjustable rate mortgages (ARMs) finding that they have too bad credit to renegotiate...Countrywide, the largest originator of mortgage loans is rumored to be on the brink of bankruptcy...sales at Wal-Mart and Home Depot fail to meet expectations.

And the looming storm that I don't think has hit the screen yet is the consumer price index (CPI). You can see it at the grocery store. Stuff is costing more. I am in retail and it seems like every other day one of our suppliers is announcing a price increase effective in the fall or the first of the year.

I mentioned before that my chain of stores is in a sample of some 180 retail and service sector businesses in the region covered by the Fed Reserve Bank of Richmond's quick survey of conditions. They admit that the survey is somewhat simplistic and it may not be statistically valid. But I have played since Febuary and it is, I think, useful in that it guages the sentiments of businesses like mine as to how things looked last month and where we might be in the next six months. The trend is downward in employment and up in prices.

and the price for crude is not making any attempt to come down - as a matter of fact it climbed today !
some rather creditable analysts are now in agreement that $100 a barrel may become reality before too long !
hbg



full report :
$100 FOR A BARREL OF CRUDE ?

The storm hasn't even hit us yet, so hang onto your hats!

I hope this doesn't stretch the page too much...

2-day



a few months



Note the SPYs are way under the 200-day SMA. This is a pretty good sign that things are headed further south. Also note the volume after about 12:30 today, which is roughly about when the rumors the Countrywide mortgage is in serious trouble started floating around.

Another 7 billion of taxpayer mon-- I mean, liquidity -- couldn't stop the fall today.

Cycloptichorn

c.i. wrote :



you got a hat ? LUCKY YOU ! you may be able to get a second mortgage on it .
hbg

Cyclo, I didn't know about the SPY graph, but my gut told me from all the information floating around that "we ain't seen nothing yet!" It doesn't take long to determine a ball park figure on how much the sub-prime market defaults are going to be lost. I gave it till the end of this month.
The problem with the stock market is that most of the movements are based on computer programs and the delayed sentiments of the investors who try to play the market for profit. They are short-term players in a long term economic world. Big changes do not happen in one or two weeks. Our economy has been showing strains since Bush took over the white house, but people didn't learn why our economy continued to grow at three (3) percent while salaries and wages remained stagnant (not keeping up with the inflation rate), consumer debt grew, and banks were giving loans to people who could not meet the simplest standards of fiscal stability. All the tell-tale signs were there; an increase in the uninsured for health care (a major necessity for most families), the cost of energy increasing at a time when food costs have also increased. People taking out second mortgages on the equity in their homes to maintain their standard of living - hoping that the value of their homes will continue to increase.

The dam just burst, and we're not sure how many will drown. It depends on how many survive this flood.

It's also my guess that the stock market will be at about 13,000 on the DOW by year's end.

"Where is the economy headed?"

UP and DOWN and UP and DOWN and UP and DOWN and... good times then bad times then good times then bad times then... Overall the economy grows, but the "line" of growth is an asymptote overall, with less than followed by greater than followed by less than followed by...

It's cyclical, though not a predictable cycle. The stock market has risen overall despite some ups and downs. People own more in general over time despite ups and downs.

Our employment rate is surprisingly high... a 40 year record I believe (?). Home ownership overall is up, despite some losing homes they really couldn't afford in the first place. Credit card debt has ALWAYS been more than folks should have, because it's wayyy too tempting to "get it NOW" and worry about paying later... human nature is impatient.

After the tax decrease business had more to invest in expansion and production and could hire more workers. Thus the new workers paid taxes and the businesses had more profit so paid MORE in taxes... and our deficit DEcreased faster than expected, surprising only those folks who don't understand how tax RATES are different from tax REVENUE. In general, HIGH tax rates slow the economy thus lowering the amount of revenue the govt takes in, while LOW tax rates give a boost to the economy, helping people find jobs and increase the amount of tax revenue the govt takes in. Remember, the more those "greedy" businesses make the more taxes they pay!

That's how it works, regardless of what myths and hopes "tax and spenders" want to cling to. The cycle often speeds up too fast one way or another, and corrections need to occur. But a natural market correction beats govt interference in the long run. The more govt interferes in the market, with the good intentions of trying to help people, the worse things get. When the govt lets the market work, prices naturally come down and everyone is better off. In general... please don't list a bunch of exceptions to the rule, which don't affect the overall pattern.

Excellent assessment, pstewart.

To add my comment, for people looking for and wanting bad economic news for political purposes, there are always indicators and news that will accomplish their purposes. I have always noticed that those same people often change their tune and start singing the praises of other indicators and news when the people in office are more to their liking.

And if things are so bad, how come around 94% in a new poll are satisfied with their lives, and a majority think their lives have gotten better over the last 5 years? Hmmm.....I think George Bush has been in office for the last 5 years. Happy days are here again, unless you are imposter or cyclops, etc.

http://www.politicalgateway.com/news/read/96340