Solarbird (solarbird) wrote,

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Good morning.

As a very rough tally, yesterday's layoff notices ran around 39,000. On a Wednesday. If you took M-W notices and spread that across a month, it'd be around 1 million - and for the most part, only public companies and governments announce like this. Make the real number 1.5 million, hence the subject. Fortunately that's not actually likely, but still, it's a scary number, and these are notices, not immediate layoffs, so all these people aren't hitting the streets at the same time. Today's rough count so far is around 44,000; there's usually a round after closing, so we're staying more or less on track. Unsurprisingly, new jobless claims rose. The headline number of 558,000 is the seasonally-adjusted number; the raw number is 617,289.

Locally, Boeing is big news, at -10,000, of which 4,500 are here.

Sadly, the durable-goods number for December was quite bad, and November's number was revised dramatically lower, the posted decline more than doubling in revision. (As a local note, Starbucks missed its already-low number targets to the downside. So did Ford, and Kodak.)

The unemployment picture will trigger another major round of problems at banks, as when layoffs spike, so do revolving-credit (Visa/Mastercard/other charge card/etc) failures spike. There's a decent graph at the URL, where the WSJ notes that "bank balance sheets don't appear in a position to deal with unemployment moving sharply higher from its current 7.2% rate... Building up bad-loan reserves to deal with a 9% to 10% rate could produce enormous losses and pulverize capital when banks are trying to preserve the thin cushions they have. And fear of rising unemployment could deter lending when the government wants banks to expand credit." Mish, ever credit-market aware, has commentary, as you'd expect, and thinks "low-end" credit will become as tight as "high-end" credit was loose. Apparently, everyone knows a wave of bank failures and nationalisation is coming in the US, tho' everyone is trying to pretend it's not going to happen. (Dr. Roubini talks about a major implosion leading to "near" Depression, here. He's also saying now that most of the banking sector has to be nationalised to prevent this.) The Congressional Budget Office says banks will need "hundreds of billions" of dollars more than what has already gone out the door in order to survive.

One good thing could be that if this is managed as a "bad bank" collection, by the FDIC, with the specific intent of cramming down the bad debt, that you could get the necessary purging that is part of the system. (There is, at long last, some talk of purging the old management, as well.) But all this is reliant upon the return of transparency, which so far we aren't seeing.

(Oh, and that first link in the previous paragraph, relinked here, also points to a technical markets analysis you might find interesting. Minyanville has another one, here. And here's an article about a credit-union wholesaler bailout, but it's on a dramatically smaller scale than the usual banking data.)

Sales of new homes in December fell to the lowest number ever recorded since record-keeping started in 1963, tho' I can't imagine why people were expecting better. Mish expects the new "home ownership preservation" policies to fail, and then be expanded so they can fail further, as per almost every action taken so far. I'm particularly worried about the near-inevitability at this point of the Federal Reserve buying Treasury bills, at which point you're just printing money. The idea will be that the Fed will try to keep long-term T-bill rates low if they start to spike up. The problem is to do that, they have to override the market. To override the market, they have to dominate that market - they have to be the market, which really just is monetisation.

I can think of two examples where this worked, in the sense of achieving the goals intended. The first is Weimar Germany, where they monetised away their war debt. They did in fact achieve their goal and in the late 20s the economy rebounded quite well, totalitarianism shrank, and things were looking quite up. Sadly, the next downturn, they had no credibility as a government and Germany went quite feral. The second is the early Soviet Union, where the CPUSSR had a specific policy of destroying the idea of the currency as a thing of intrinsic value, and printed without limit in order to achieve that goal. This was successful. However, I should remind you that this case is different than either of those, of course.

There is starting to be some recovery in shipping other than Cape Index. It's a small but meaningful amount; I suspect, but do not know, that shipping lines of credit are relaxing a little, at least for the moment. I also know (but can't link, sorry) that China is specifically stockpiling a variety of raw materials at the current market-collapse prices; this may also be a factor. Irritatingly, the company from which I get these quotes is in trouble - it's in breech of loan covenants - so hopefully I won't have to be looking for a new source for these numbers.

Minyanville has good links to some of the politics of protectionism and isolation going on, including national protest actions in France. Kevin Depew's five things includes some ugly stories of worsening social mood. And the biggest story is probably China's rather cranky comments warning against protectionism at World Economic Forum in Davros Davos.

Tax refunds in California are now on official 30-day hold. What is the greatest joy, Governor?

In perp-walk news, the FBI was aware of systematic mortgage fraud as early as 2002, but took no action to stop it. Can we please see some action now, under a new administration? I hope so.

Terrifyingly, there's more, but I'm way out of typing time - and have gone over a bit - so this is it for today. Good luck.
Tags: economics
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