Share on Google Plus Share on Twitter Share on Facebook Share on LinkedIn Share on PInterest Share on Fark! Share on Reddit Share on StumbleUpon Tell A Friend 4 (4 Shares)  
Printer Friendly Page Save As Favorite View Favorites View Article Stats   5 comments

OpEdNews Op Eds

Where IS the Bottom of the Economy?

By (about the author)     Permalink       (Page 1 of 2 pages)
Related Topic(s): ; ; ; , Add Tags Add to My Group(s)

View Ratings | Rate It

opednews.com Headlined to H3 3/5/09

Become a Fan
  (2 fans)
There are lots of ideas being thrown around about when we will hit the "bottom" of the current recession - end of 2009, sometime in 2010, maybe beyond that. While the speculation is largely on when the we hit the bottom, that does not necessarily indicate the beginning of the recovery. In fact, it is entirely possible that we could muddle around in the muck for some time - even years. Depending on where the bottom is also impacts how long it takes to get back to some sort of stability and growth.

First, we are still falling by all accounts, and so is the rest of the world. According to Klaus Schmidt-Hebbel (chief economist for the OECD), the global economic projections are worse than formerly thought:

"The shape of it will be a significantly deeper recession than what was forecast by the IMF in January, at all levels," said Schmidt-Hebbel. "(It will be) significantly deeper and more protracted -- meaning longer than what is embodied in the IMF forecasts of late January."


Another indicator that we are not even close to the bottom is the scheduled resets on an array of Adjustable Rate Mortgages (ARMs). An excellent discussion of this issue was published at Scoop on February 4, 2009, and the following chart is from that article.



Mortgage Resets Correct


As you can see, there is another set of mortgages resetting in the middle of 2010 and an even larger peak in the middle of 2011. While not all of these are "sub-prime," many may be equally weak (Alt-A is incomplete documentation, Agency is government backed loans - Fannie and Freddie primarily, Option is flexible terms including interest only). Given that 20% of homeowners are currently upside down on their mortgages, and the housing values are still dropping, getting in front of this is a major problem.


Add to this growing unemployment, and the credit card hit that has been discussed by others (such as Huffington Post, Time, ABC News), the suggestion that "Hedge Funds Pulling Most of Their Money Out of Market at the End of Each Day," and the indicators point to a fast decline, followed by a another decline, and then perhaps another before we "hit bottom." What is left at the end of this is anyone's guess.

Looking at the various news and articles coming out, I scratch my head when I hear "Things will pick up towards the end of the year." Invariably, these people (including from the Federal Reserve) do not say what they are basing such statements on.

The hope, of course, is that the various stimulus, bailout, and mortgage interventions will have significant positive impacts. Further, that other nations are also successful at slowing and reversing their economies as well. We are not in a world where any nation is likely to recover without others also recovering.

Then there is option 2. As most are probably already aware, a significant part of the U.S. and global economy is actually massive amounts of crime and drug cartel money (see Petras for example). Therefore, I was not completely surprised by Mark Heinrich's Reuters article "Mafia millions buoying banks: UN," or that California is considering legalizing and taxing marijuana. When the economy fails, then the shadow economy comes into the sunlight. I have to wonder if the exigencies of a global economic crisis will result in a new look at the "war on drugs" for example.

______

Background information
What follows is an addendum to my article. It provides additional information that may be of interest.

In trying to make sense of the economic mess, I feel like I am engaging in a self tutoring in economics, the stock market, and the arcane world of finance. I will try to share my "lay person's" understanding of the concepts and terms and how they fit into the bigger picture.

As nations throw money at the banks, the financiers, and finally at "stimulus," it has not seemed to have much effect. Sometimes pictures are worth a thousand words. Here is the M1 Money Multiplier as an ALFRED Graph from 2/11/2000 to 2/11/2009 (the last date for which the graph is currently calculated and also available at this link).


Mortgage Resets


If you want to wade through the actual formula for the M1 Money Multiplier, it is elaborated here. As I understand the M1, it is the amount of money available for each dollar in reserves (or the monetary base). In other words, if the M1 is 1, then for each dollar put into the system one dollar comes out. If the M1 is 2, then for each dollar into reserves two comes out. The ALFRED was started in 1984 and is produced by the St. Louis Federal Reserve. Here is a more extended graph (also available here).

Next Page  1  |  2

 

Rowan Wolf is an activist and sociologist living in Oregon. She is the founder and principle author of Uncommon Thought Journal, and a Senior Editor for Cyrano's Journal Online with her own page being CJO's Avenger.

Share on Google Plus Submit to Twitter Add this Page to Facebook! Share on LinkedIn Pin It! Add this Page to Fark! Submit to Reddit Submit to Stumble Upon

The views expressed in this article are the sole responsibility of the author and do not necessarily reflect those of this website or its editors.

Follow Me on Twitter

Contact Author Contact Editor View Authors' Articles

Most Popular Articles by this Author:     (View All Most Popular Articles by this Author)

Acinetobacter Baumannii: We Need to Know

Occupy Wall Street: The Roots of a Social Movement

Keeping an Eye on Turkey

Gas Shortage Across Southeastern U.S.

High Crime - and Profit - in Jailing Kids: Monopoly Capitalism at Work

Economic Globalization and Speculation Coming Home to Roost

Comments

The time limit for entering new comments on this article has expired.

This limit can be removed. Our paid membership program is designed to give you many benefits, such as removing this time limit. To learn more, please click here.

Comments: Expand   Shrink   Hide  
4 people are discussing this page, with 5 comments
To view all comments:
Expand Comments
(Or you can set your preferences to show all comments, always)

I am not economic or financial expert, but some of... by Rowan Wolf on Thursday, Mar 5, 2009 at 8:55:46 AM
Here is an article I posted recently to the Op Ed ... by Scott Baker on Thursday, Mar 5, 2009 at 9:11:31 AM
Voiding out and shutting down the derivatives scam... by Rowan Wolf on Thursday, Mar 5, 2009 at 9:19:31 AM
Since I can not imagine that the elites want any k... by richard on Friday, Mar 6, 2009 at 5:07:24 AM
In misguided attempts to defend the need for hydro... by Mark Goldes on Friday, Mar 6, 2009 at 2:49:42 PM