Pimco bond guru — and occasional White House economic adviser – Bill Gross paints a really depressing economic future
Stick with me on this. The WSJ outlines three economic options for Germany, whose trade-based economy has fallen nearly 7 percent during the past four quarters: 1) do nothing and wait for the global economy to pick up; 2) increase domestic consumption via higher union wages; 3) innovate!
From the great David Goldman:
The negative multiplier occasioned by the retrenching of consumers (lower spending, more unemployment, lower incomes, lower spending in a vicious cycle) is stronger than the Keynesian multiplier from government spending (more government boondoggles for construction unions, more spending).
From Action Economics (bold is mine):
Today’s U.S. reports revealed a bigger May income boost than we assumed from recent stimulus legislation, but a lower service consumption trajectory nevertheless, to leave a remarkable surge in the savings rate and a slightly weaker trajectory for aggregate demand as we approach mid-year. We also saw a small upward bump in the Michigan sentiment index in June as the various confidence measures post gains from Q4-Q1 lows, though confidence remains remarkably lean. The soaring savings rate shows that households are still bracing for the worst despite improving market conditions, as they hoard distributed stimulus benefits and hence truncate some of the “stimulative” effects.
From IHS Global: “Reduced wealth, high debt, tight credit, and a weakening labor market are all weighing on consumers. Wages and salaries were down in May, and have fallen in four out of five months this year. And higher gasoline prices are biting into spending power.”
From RDQ Economics:
New and existing home sales, housing starts, building permits, and homebuilder sentiment all appear consistent with the picture of a bottoming out in housing activity, albeit at very low levels. It seems likely that the drag from housing on GDP growth in the second half of the year will be significantly smaller than the average subtraction of 1.0% point per quarter over the last three years.
Some doom and gloom from David Wyss of S&P via the NYPost:
David Wyss, S&P’s chief economist said banks should brace for a plastic meltdown as credit-card losses track the unemployment figures almost exactly. “Credit-card losses, on average, are equal to the unemployment rate plus about 5 percent,” he said, noting his estimates that the nationwide jobless rate could rise as high as 12.5 percent by 2011.