Was the U.S. Recession Worst Since Great Depression, Revised Data Show

Aug. 1 (Bloomberg) -- The first 12 months of the U.S. recession saw the economy shrink more than twice as much as previously estimated, reflecting even bigger declines in consumer spending and housing, revised figures showed.
The world’s largest economy contracted 1.9 percent from the fourth quarter of 2007 to the last three months of 2008, compared with the 0.8 percent drop previously on the books, the Commerce Department said yesterday in Washington. Gross domestic product has shrunk 3.9 percent in the past year, the report said, indicating the worst slump since the Great Depression.
Updated statistics also showed that Americans earned more over the last 10 years and socked away a larger share of that cash in savings. The report signals the process of repairing tattered balance sheets following the biggest drop in household wealth on record may be further along than anticipated.
“The current downturn beginning in 2008 is more pronounced,” Steven Landefeld, director of the Commerce Department’s Bureau of Economic Analysis, said in a press briefing this week. The revisions were in line with past experience in which initial figures tended to underestimate the severity of contractions during their early stages, he said.
Consumer spending, which accounts for 70 percent of the economy, decreased 1.8 percent in last year’s fourth quarter from the same period in 2007, exceeding the prior estimate of a 1.5 percent drop. Purchases also began sinking sooner than previously projected, registering their first decline at the start of 2008 rather than in the second half.
Treasuries, Stocks
Treasuries gained after the GDP report, while stocks closed little changed. Benchmark 10-year note yields dropped to 3.48 percent by the close in New York, from 3.61 percent late the day before. The Standard & Poor’s 500 Stock Index closed at 987.48.
Residential construction fell 21 percent during the period, almost 2 percentage points more than previously reported, aggravating what was already the worst slump since the Great Depression.
The Commerce Department also reported yesterday that the economy contracted at a 1 percent annual rate from April through June after shrinking at a 6.4 percent pace in the first quarter, the most since 1982. The decline in the first three months of the year was previously reported as 5.5 percent.
Recession’s Start
The National Bureau of Economic Research, the arbiter of U.S. business cycles, last year determined the recession started in December 2007. The private group is based in Cambridge, Massachusetts,
Yesterday’s updates are part of comprehensive revisions that take place about every five years and are more extensive than the changes announced at this time each year. Figures as far back as 1929 can be revised.
Over the most recent period, the third quarter of 2008 underwent one of the biggest changes, going from a 0.5 percent decrease in GDP to a 2.7 percent drop. The new reading better illustrates the effect the September collapse of Lehman Brothers Holdings Inc. had on the economy and credit markets.
The deeper deterioration last year underscores why Federal Reserve Chairman Ben S. Bernanke and his colleagues at the central bank cut the benchmark rate to a record low and extended credit to non-banks for the first time since the 1930s.
The new GDP data also help explain why the unemployment rate shot up 2.3 percentage points last year, the biggest annual jump since 1982.
2001 Recession Milder
The revisions showed that the 2001 recession was less severe than originally estimated, reflecting a smaller decline in business investment. The economy actually grew 0.1 percent from the fourth quarter of 2000 to the third quarter of 2001, erasing the 0.2 percent drop previously reported.
Personal income was revised up over the last decade, after the government boosted its adjustments for the underreporting and non-reporting of income using more recent data from the Internal Revenue Service. The increases in the most recent years reflect gains from rents, interest and proprietors’ income. The government changed the way it accounts for natural disasters, such as Hurricane Katrina, eliminating much of the prior volatility in income calculations.
Higher incomes and less spending translated into bigger savings. The savings rate for 2008 was revised up to 2.7 percent from 1.8 percent. The rate shot up to 5.2 percent in the second quarter, the highest level since 1998.
The government revised corporate profits down for 2006-2008 and up for 2004 and 2005.
Finally, Commerce shifted food services, which include meals purchased at restaurants or served in schools, out of the food category. As a result, the Fed’s preferred inflation gauge -- which tracks consumer spending and excludes food and fuel -- was pushed up by 0.2 percentage point for the three-year period from 2006 to 2008.
The costs of meals away from home are not as volatile as fresh food, the government said, and therefore services should be included in the measure commonly known as the core index.

When will the Recession be over ?? 2009,2010,2011,2012,2013 ?

The economy has got to turn around soon. But how the heck will we know when the turn has come?
Here are five key signs that we at MSN Money will be watching for, plus some extras from experts and a couple from just plain folks eager to see some evidence of a recovery.
1) Indexes start rising
There was a flicker of good news in February, when the Economic Cycle Research Institute's Weekly Leading Index rose for the first time in six weeks.
Expert: Is a recovery coming?
The index, a composite of daily and weekly data on economic drivers of the business cycle, including corporate profits and housing activity, is still looking pretty weak, said Lakshman Achuthan, the managing director at ECRI, but it has stopped falling, and there has been some stabilization since mid-December.
"When these leading indexes begin to start rising, that will be a very clear and, as importantly, a very objective sign of a recovery," Achuthan said.
Detailed information about the institute's research is available only to subscribers, but the leading index is frequently mentioned in news reports and is worth following as a reliable indicator of key changes in the business cycle.
Talk back: How will you know the recession is over?
Another statistic worth following is consumer spending. That is already showing some signs of life. Consumer spending constitutes about 70% of the U.S. economy. When consumers spend, the economy grows. Consumer spending rose 0.6% in January, after a 1% decrease in December and a 0.8% drop in November.
2) Cardboard boxes are in demand
Cargo and cardboard are two heavy-duty industrial signals to watch.
The Baltic Dry Index is an assessment of the price of moving raw materials on cargo ships around the world. When the world economy is fading, shipping gets cheaper. When growth returns, shipping costs more. The index has shown some improvement this year, after sinking to a 22-year low in early December.
"In terms of a glimmer of hope, a tap has been turned," said Michael Gaylard, a derivatives broker at Freight Investor Services.
"The fundamentals -- the raw materials needed that are paramount to infrastructure rebuilding and investment around the globe -- they're starting to move," Gaylard said. "Once the flows that we've seen in the past few weeks start to have some continuity to them, then the market will rebuild. The turnaround has started, but it's going to be a long and slow process."Then-Federal Reserve Chairman Alan Greenspan used to watch the cardboard box business as an indicator of industrial production. About 75% of all nondurable goods are shipped in corrugated cardboard boxes; when demand for boxes is high, that's a sign that the economy is doing well.
3) Diamonds are forever . . . again
Jewelry sales are a leading indicator of recovery in the retail sector, according to Mike Niemira, the chief economist at the International Council of Shopping Centers. So what better store to watch than Tiffany (TIF, news, msgs)?
Sales of engagement rings have been down in recent months, said Mark Aaron, the company's vice president of investor relations.
"It's not that people don't fall in love during a recession," Aaron said, "It's whether they're making that commitment and buying a $10,000 engagement ring and making wedding plans.
"When people start to feel a little more secure about their jobs, when the stock market starts to stabilize, that might be enough to help restore confidence. If we see greater interest in the big-ticket items and a pickup in store traffic, that will be encouraging."
4) Restaurants are bubbly
There was no obvious sign of a recession at BLT Steak in New York City on a recent Thursday night. The tables were full, and the bar was packed.
But co-owner Keith Treyball said he has seen some pullback among his customers. He said he'll know the recession is ending when the most-affluent diners stop ordering the $150 bottles of wine they've been drinking lately and start ordering the $300 bottles they drank when the economy was stronger.
The wine indicator
Some restaurateurs have already seen signs of recovery.
Valentine's Day, traditionally a big one for restaurants, was even bigger for Wolfgang Puck's restaurants this year: Sales were up 25% across the board, said Tom Kaplan, the senior managing partner of Wolfgang Puck's Fine Dining Group.
Some in the restaurant business see sales of Champagne as a leading indicator. If you buy that, there's hope, as bubbly remains very popular at hip bars, nightclubs and hotels, said Stephen Brauer, the general manager of wines and champagnes at Pernod Ricard (PDRDY, news, msgs).
"You have the 25- to 35-year-olds who do not have mortgages and children in college who continue to spend money and enjoy themselves," Brauer said. "You do not have to go to the bank and get a loan to enjoy a great bottle (of Champagne)."
5) Little splurges are back in style
Here's another sign of life. Murray's Cheese Shop in Greenwich Village was packed on my last visit. I'd never seen it so crowded.Some glass-half-empty folks might say people were buying cheese for a night in, instead going out to dinner, but Murray's, which Forbes named the world's best cheese store, does not sell Kraft (KFT, news, msgs) singles. Cheese lovers end up spending $20 for a hunk of cheese. I did.
And people are still lining up for cupcakes at New York City's Magnolia Bakery. The bakery, which recently opened two more stores, has seen sales of its $2.50 cupcakes continually rise.
Strong sales of small indulgences demonstrate Americans still like to treat themselves and may soon be ready to move on to bigger treats.
Our own economic indicators
So what are other people watching?
Mike McLaughlin, an Asics sneaker salesman and an avid golfer from New Jersey, said he'll know things are improving when tee times become more expensive and harder to get.
Jen Sundstrom, a pharmaceutical sales representative in Philadelphia, will know when she finds herself back at Whole Foods Market (WFMI, news, msgs) for all of her grocery shopping.
Eric Goldberg, a regular at BLT Steak's bar, said his indicator is "the amount of time it takes to get a seat at the bar at BLT Steak." It's been easier to find a seat because fewer people have been out, he said.
Readers, take note: Goldberg stood the whole night.
Other people said they'd know a recovery was coming when they:
Upgraded to a bigger flat-screen television.
Saw lawyers working until 2 a.m. again.
Replaced generic dog food with organic brands.
Bought Starbucks (SBUX, news, msgs) lattes again.
Rejoined a gym and purchased sessions with a personal trainer.
Had more trouble catching a cab in New York City.
The taxicab indicator
David Zelman of housing research firm Zelman & Associates says he'll know the recession is over when he stops watching CNBC all day.
Where's the remote?
by msn.com

Recovery Signs from the recession, now here ?

3 of 5 recovery signs in place
D. Pett, Financial Post


With North American markets down more than 50% from their peaks, talk this week has turned again to the possibility that stocks are ready to rebound.
On Tuesday, Barack Obama, the U. S. President, declared that stock markets have bottomed and as indexes bounced on Wednesday, market analysts the world over jumped into the discussion, claiming a "bear market rally" was under way.
But based on yesterday's broad-based retreat that saw Canada's top exchange fall almost 200 points and the Dow Jones Industrial Average and S&P 500 both drop more than 4%, prognosticators may have spoken too soon.
In fact a report from Credit Suisse this week claims a recovery, even in the short term, appears unlikely until certain conditions are in place.
"All in all, three of the five preconditions for a bear market rally are in place," said U. K.-based analyst Andrew Garthwaite in a note to clients. "Ultimately, however, we believe all five preconditions are needed."
The first building block to a bear market rally that appears to be in place is the presence of high cash levels sitting on the sidelines. Mr. Garthwaite noted that U. S. money market mutual funds are worth roughly US$4-trillion currently and account for 40% of total market capitalization. And for the first time since 1993, they represent a greater value than U. S. equity mutual funds.
Second, the analyst is encouraged by a turnaround in the best U.S. lead indicators.
Third, credit spreads appear to be stabilizing and improving, with corporate bond issues picking up over the past few months.
Holding back the bear market rally, on the other hand, is the pending peak in U. S. housing inventories and the all-important point of investor capitulation.
Mr. Garthwaite says existing home inventories will likely peak in the second quarter.
As for investors reaching a capitulation point, Mr. Garthwaite says technical indicators remain mixed. NYSE stocks trading above their 10-week average seems to have capitulated, the analyst says, while the VIX index, a measure of market volatility, earnings breadth and market breadth all indicate a lower level of stress than three months ago.
Equity risk appetite, equity sentiment and insider buying, three other key indicators, have not capitulated, however.
Despite Mr. Garthwaite's belief that a bear-market rally is not imminent until all of the preconditions mentioned are satisfied, he remains confident that governments and corporations have the right policies in place to help turn markets before they get much worse.
"We are reluctant to be negative on equities when the market is more oversold than at any time in the last 70 years and has experienced the biggest peak-to-trough decline since the Depression (in real and nominal terms)," he said
"While the outlook for GDP growth is the worst it has been since the 1930s, this does not mean the equity market has to be as cheap as it was in the 1930s

Dow 4,000 ?

There are few steadfast investing principles. Dynamic markets constantly change and investors must be willing to adapt their strategies. However, one rule we should always follow is to trade with the primary trend. Trying to trade against the underlying current of the market will surely result in losses. Those doing so think of themselves as contrarians. In reality, they are foolish.
For months in my weekly newsletter EPIC Insights, I have repeatedly stated that the primary trend is bearish. When stock markets worldwide hit synchronized lows in November 2008, we were given notice. During the subsequent rally, markets began diverging and raised hopes that the primary trend was changing. This week that hope was crushed. As the chart shows, last week markets pushed to synchronized 2009 lows, on many occasions violated their 2008 lows, and have reinforced the primary trend as bearish:
Index Prior Low Date of Low Recent Low Date of Low New Low?
Dow Jones Industrial 7,552 11/20/2008 7,366 2/20/2009 Yes
Dow Jones Transport 2,989 11/20/2008 2,699 2/20/2009 Yes
NASDAQ 1,316 11/20/2008 1,440 1/20/2009 No
S&P 500 752 11/20/2008 770 2/20/2009 No
Wilshire 5000 7,451 11/20/2008 7,750 2/20/2009 No

FTSE 100 3,781 11/21/2008 3,889 2/20/2009 No
DAX Index 4,127 11/21/2008 4,015 2/20/2009 Yes
CAC 40 2,881 11/21/2008 2,751 2/20/2009 Yes
NIKKEI 225 7,163 10/27/2008 7,416 2/20/2009 No


With a primary bear market, we are unable to predict either the duration or severity of price declines. Instead, we turn to past experiences to guide us. Unfortunately, nothing in the past indicates promise for the immediate future.
For the economy, the current downtrend has already reached levels of prior deep recessions. However, as the storm clouds continue gathering we should expect this downturn to be more severe than any since the Great Depression. With indecisive policymakers who have used all traditional stimulative actions (i.e., interest rate reductions from the Federal Reserve and increased spending from the Federal government), we face an uncertain world with few concrete answers. Having used debt to finance our lifestyles for nearly 60 years, Americans are being forced to reduce debt and curtail spending. This combination should result in more economic malaise over the coming months.
Looking at stock market performance over prior bear markets, as shown in the following table, the picture this time around is equally bleak.
Bear Market Date of Market Date of Value
Market Peak Peak Bottom Bottom Lost Duration
1929 Crash 381 9/3/1929 41 7/8/1932 -89% 714 days
1968-1970 985 12/3/1968 631 5/26/1970 -36% 368 days
1973 -1974 1,052 1/11/1973 578 12/6/1974 -45% 482 days
2001-2002 11,338 5/21/2001 7,286 10/9/2002 -36% 347 days
NASDAQ 5,049 3/10/2000 1,114 10/9/2002 -78% 648 days
Current 14,165 10/9/2007 7,366 2/20/2009 -48% 344 days

While the current bear market has erased 48%, in line with the declines seen in most bear markets, the duration of 344 days is the shortest on record. If you follow the belief that this bear market is unwinding 60 years of excess spending, we should expect the Dow to lose at least 70% from peak to trough and the bear market to last in excess of 600 days. Combining these data points, the market may not bottom until the Dow approaches 4,000 sometime in the next 9 to 12 months.
Finally, most major bear markets do not end until prices have reached bargain levels. This often equaled a P/E multiple near 6-7 and a dividend yield in the same area. Currently the Dow sports an estimated P/E of 11 and a dividend yield of 4.3%. In order to achieve bargain levels, the Dow would need to trade near 4,000.
The picture painted here is very ugly. Most investors have a great deal of difficulty accepting the belief that the Dow could trade to such levels. I hope I am being overly cautious, but fear my analysis will prove correct. With such a drastic selloff predicted, earning meaningful returns will be difficult. Becoming excessively short stocks will provide the opportunity to be forced from your position by unexpected bear market rallies, while going long stocks that seem cheap will lead to losses and frustration as those cheap stocks become cheaper. Instead, I will stick to my core competencies as a value investor and search for cheap stocks that offer limited risk and outstanding return potential. However, I will not buy these shares blindly but will look to use index exposure to hedge all my risks.
Continuing a theme used in last week’s fundamental trade, I advise readers to become more short of the broad market. Last week, we shorted SPDR Trust (SPY) and iShares MSCI EAFE Index Fund (EFA) with excellent results. This week’s trade entails using options on SPY as a means to profit. Using a September 2009 expiration, I recommend shorting the SPY 77 calls (ROQ+IY) and using the proceeds to buy the SPY 77 puts (ROQ+UY) as this week’s fundamental trade. Cover 5% of your portfolio with this trade (six contracts for my portfolio).
By EpicAdv

Big Three failure may be catastrophe ?? or Worse ??

Big Three failure may be catastrophe
Blow to economy could be costlier than bailout, automaker CEOs say
By S. CARTY and B HAGENBAUGH USA Today

When the heads of General Motors, Chrysler and Ford went to Capitol Hill last week, they tried to persuade lawmakers that if they go under, an already fragile U.S. economy will be dealt a blow far costlier than the $25 billion in aid the companies are seeking.


As lawmakers wrestled, then decided to head home and not quickly approve a bailout, foremost in their thinking was a question the Big Three CEOs apparently failed to answer: If we let these guys fail, how bad will it really be for the economy?

Critics say Detroit created its own problems with poor planning and inferior products, and cite a healthier foreign auto industry operating mostly in southern states that isn't seeking a taxpayer bailout. But even Toyota said over the weekend it fears the impact on the parts suppliers it uses if the U.S. auto industry collapses.

Moody's Economy.com chief economist Mark Zandi estimates that 2.6 million jobs -- about 1.9 percent of the U.S. work force -- would be lost if GM, Chrysler and Ford were to go under.

That includes more than 255,000 people directly tied to the three companies and another 2.3 million whose jobs are indirectly dependent -- everything from people who work in the steel, glass, fabric, tire and electronic industries to the barista who makes $4 cappuccinos for the ad executive who'll be out of work when his auto industry business ceases to exist.

Zandi argues the economy is too weak to absorb that fallout.

"This could be the thing to push us over," he says. "The ripple effect is like throwing a big boulder into the economic pond."

The auto industry is woven into the grass roots of the U.S. economy, through its dealer networks, the advertising it buys in newspapers and local TV and radio stations, the health care it buys for its workers and their families and the retirees it supports.

The domestic auto industry supports nearly 800,000 retirees and spouses with pensions and, until recently, health care for everyone. Now that's being cut back for white-collar retirees, but if the automakers file for bankruptcy, they could shed their pension costs and force the government to pick up the tab.

Advocates of a bailout argue that if one of the Big Three fails, it could take down the entire supply chain that cuts a wide swath from Wisconsin to Ontario, Canada, and south from Florida to Texas. As Toyota officials pointed out, the effect would be on all companies making vehicles in the USA.

The impact of the industry woes already is being felt beyond Detroit. Saturday, a Chrysler-Dodge dealer in North Brattleboro, Vt., closed after 20 years, citing slumping sales. It became one of the projected 700 dealers nationwide expected to have closed by the end of this year.

Advertising agencies and media from New York to local TV stations in New Mexico are seeing revenue dry up because the automakers and their dealers are spending less money hawking cars. Suppliers in North Carolina, host to roughly one-quarter of the parts-manufacturing base for the auto industry, are declaring bankruptcy at an alarming rate.

'Very difficult judgments'
The ripple effect of an industry collapse could further trim consumer confidence and unemployment, said Lyle Gramley, a former Federal Reserve Board governor who is senior economic adviser at the Stanford Group.

"As a general principle, I don't think that bailing out individual companies is a good idea," said Gramley. However, "You have to contemplate the possibility of 1 million employees losing their jobs and the entire industry at risk" if an automaker were to fail.

Comerica Bank chief economist Dana Johnson said there are some "very difficult judgments" for lawmakers to make about the potential impact an auto industry failure would have on the economy. If one or more of the companies were to go under, the U.S. government would be on the hook for unemployment benefits, retraining and pension obligations while receiving less in taxes, he said.

"There are roughly two parts producers for every employee at the car companies, and there are a lot of vendors -- steel producers, paint producers, glass producers, business services, accounting, advertising," he said. "There's no question that it is an important industry, that there are linkages to employment elsewhere."

Zandi and other economists argue there is a better way to aid the auto sector than to provide bailout loans.

There is growing support for allowing the companies go into bankruptcy, using government funds to guarantee financing from banks. That would allow the automakers to restructure, including tearing up old labor contracts and reducing their sizes. Government support could give consumers confidence that the car companies would exist after bankruptcy, soothing worries about car warranties and availability of replacement parts.

"Like the airlines, I think they should go into Chapter 11 bankruptcy and start with a clean slate," said Michael Cusumano, a professor at MIT's Sloan School of Management who has written two books on the auto industry. He said reorganization should include replacing management.

But then, there are two auto industries in the U.S. The first, based in and around Detroit, is GM, Ford and Chrysler. The second is sprinkled around the Southeast and includes foreign automakers Toyota, Honda, Subaru, Nissan, BMW and Mercedes-Benz.

Parts suppliers are spread out between them "like pearls on a necklace" along the highways connecting the South and the Midwest, said Thomas Klier, senior economist with the Federal Reserve Bank of Chicago.

Suppliers in the past tended to focus on one customer, but now almost all have overlapping customer bases. That's why Toyota is worried about the Big Three. About 75 percent of Toyota's suppliers here are North American companies who also make parts for the Detroit companies.

"We are concerned with the industry in general, but we're mostly concerned about our suppliers," Toyota spokesman Mike Goss said. "If the worst happens in Detroit and these companies suffer, we're worried about their longevity as well."

Russian Credit Collapse getting worse ??

Putin Promises Russians to Prevent Another Financial Collapse

By H Meyer L Pronina

(Bloomberg) -- Russian Prime Minister Vladimir Putin vowed tax cuts, defense of the ruble and ``everything'' needed to prevent the kind of financial crises that shook the country after the collapse of the Soviet Union.

Among the measures unveiled by Putin today to counter the effects of the global economic crunch are corporate tax cuts, higher welfare payments and increased government spending.

``We'll do everything we can to prevent a repeat in our country of the problems of past years, the collapse of past years,'' Putin told the annual congress in Moscow of the ruling United Russia party which he heads, broadcast live on state television. ``We have amassed sizable financial reserves which will give us the freedom to maneuver, allow us to maintain macroeconomic stability.''

Putin, 56, is bolstering his public role in response to a global slowdown that has punctured Russia's 10-year oil-fueled boom, sparking growing speculation that he may seek to return to the Kremlin as president next year.

Putin remains at the center of power after handing the presidency in May to his chosen successor, 43-year-old Dmitry Medvedev. He may persuade Medvedev to step down, triggering snap elections that would enable Putin to reclaim the No. 1 post for up to 12 years under a new six-year presidential term, analysts say.

``Medvedev can announce that he isn't coping and it's better if an experienced political leader takes the reins again,'' said Leonid Sedov, a political analyst at the Levada Center research group in Moscow.

Oil, Gas Exports

As the U.S., Europe and Japan slip into recession, the price of oil has fallen to almost $50 a barrel in New York from a July high of almost $150, hurting Russia, the world's largest energy exporter which relies on oil and gas for two-thirds of its export earnings.

Russia's economic growth will slow to 3 percent next year after average expansion of 7 percent a year since 1999, the year after the 1998 financial default, the World Bank estimates. The economy grew 8.1 percent in 2007.

Russia in August 1998 defaulted on $40 billion of debt and devalued the ruble, wiping out the life savings of millions of people overnight and pushing the government to the edge of bankruptcy.

Russia ``won't allow a spike in inflation or sharp changes in the ruble's exchange rate,'' Putin said. Bank deposits are safe in Russia since 98.5 percent of all retail deposits are fully covered by a state guarantee, he said.

Tax Cuts

Putin announced that the government will cut the corporate profit tax rate by 4 percentage points in January, reduce taxes for small businesses and speed refunds of value-added tax. Unemployment benefits will rise next year to 4,900 rubles ($177.79) a month as ``structural'' labor market changes loom, he said.

Plans to inject funds into the health and education sectors and social spending under a long-term strategy until 2020 will not be abandoned, Putin promised.

With Urals crude already $20 below the $70 average required to balance Russia's budget next year, the government is depleting its reserves, the world's third-largest.

Already Russia has spent 24 percent or $144.6 billion of its central bank stockpile since early August, mostly on a failed attempt to defend the ruble, which has lost more than 17 percent of its value against the dollar during that period.

The tax cuts announced today amount to 550 billion rubles, including 400 billion rubles in profit tax relief, Finance Minister Alexei Kudrin said. Putin also pledged 50 billion rubles for the defense industry and 83 billion rubles for new housing.

Boosting Liquidity

The government has already pledged more than $200 billion in loans, tax cuts, delayed tax payments and other measures to boost liquidity in the financial system during the credit crunch.

Putin accused certain politicians of complacency inherited from the years of high prices, which he criticized as ``absolutely unacceptable'' in today's crisis. He didn't name any of the politicians he attacked.

``This will inevitably lead to mistakes that will cost us the trust of the Russian people,'' he said in his speech. ``In difficult circumstances, the real capabilities of public institutions become clear.''

Putin next month will once again take center stage by holding a live call-in show on national television.

Putin Call-in Show

Putin has held a nationwide call-in show every year since 2001, broadcast live and lasting several hours, with questions on a wide range of issues submitted by TV link-up, phone and Internet. The event dominated TV news coverage on the days it aired.

Russia's lower house of parliament on Nov. 14 and Nov. 19 approved in two of the three required readings a constitutional amendment that would extend the president's term to six years from four.

The measure is expected to secure final legislative approval by mid-December. It would allow Putin, who stepped down as president in May after serving two consecutive terms, the constitutional limit, to serve at least another 12 years should he again become president.

Are we in a Recession???

The American economy expanded more slowly than expected from April to June, the government reported Thursday, while numbers for the last three months of 2007 were revised downward to show a contraction — the first official slide backward since the last recession in 2001.


The New York Times


Economists construed the tepid growth in the second quarter, combined with a surge in claims for unemployment benefits, as a clear indication that the economy remains mired in the weeds of a downturn. Many said the data increased the likelihood that a recession began late last year.
The next major piece of data comes Friday, when the government is to release its monthly snapshot of the job market. Analysts expect the report to show a loss of 75,000 jobs, signifying the seventh straight month of declines.
“We already knew the economy was weak, and now you have both a negative growth number coupled with job losses,” said Dean Baker, a director of the liberal Center for Economic and Policy Research. “There’s a lot of real bad times to come.”
President Bush zeroed in on the positive growth in the second quarter — a 1.9 percent annual rate of expansion, compared with an anticipated 2.3 percent rate. That follows growth of 0.9 percent in the first quarter. He claimed success for the $100 billion in tax rebates sent out by the government this year in a bid to spur spending, along with $52 billion in tax cuts for businesses.
“We got some positive news today,” the president said in West Virginia, addressing a coal industry trade association. “It’s not as good as we’d like it to be but I want to remind you a few months ago, there were predictions, and — that the economy would shrink this quarter, not grow.”
But the snapshot of disappointing economic growth released by the Bureau of Economic Analysis on Thursday morning provided no comfort to Wall Street, where a broad sell-off commenced. By the end of business, the Dow Jones industrial average was down 206 points to close at 11,378, a drop of nearly 2 percent.
The rout may have been explained in part by significant changes the government made to historical data on the profitability of American businesses. According to the revised numbers, corporate profits earned in the United States by American companies rose much more swiftly than previously recorded from 2005 through 2007, making the recent decline appear much steeper.
That the economy grew at all this spring is a testament to two bright spots — increased consumer spending fueled by the tax rebates, and the continuing expansion of American exports.
Consumer spending, which amounts to 70 percent of the economy, grew at a 1.5 percent annual rate between April and June, after growing at a meager 0.9 percent clip in the previous quarter.
“Clearly the tax rebates did give some oomph to the economy,” said Robert Barbera, chief economist at the research and trading firm ITG.
Exports expanded at a 9.2 percent annual pace in the second quarter, up from 5.1 percent in the first three months of the year. Foreign sales have been lubricated by the weak dollar, which makes American-made goods cheaper on world markets.
Adding to the improving trade picture, imports dropped by 6.6 percent, as Americans tightened their spending. Imports are subtracted from economic growth, so the effect was positive.
Over all, trade added 2.42 percentage points to the growth rate from April to June. Without that contribution, the economy would have contracted.
But many economists are dubious that consumer spending and exports can keep growing robustly in the face of substantial challenges that are now entrenched in the United States and are gathering force in many other major economies. Japan and much of Europe appear headed into downturns, damping demand for American-made products.
“The trade improvement doesn’t look sustainable,” said Jan Hatzius, an economist at Goldman Sachs in New York. “In an environment where the global economy is clearly slowing, you’re not being able to get that export growth in future quarters.”
Economists said the sharp drop in imports was largely a function of retailers delaying wholesale purchases in the midst of acute fears about declining American spending power — a dynamic that will eventually give way to new spending.
“This reflects sheer panic by retailers about what the next Christmas buying season is going to look like,” said Mark Zandi, chief economist at Moody’s Economy.com.
The tax rebates have mostly been distributed. While the checks appear to have bolstered spending, they have failed to generate activity that is likely to carry on even after the cash has cycled through the economy, say economists.
“They slowed the downturn, but it’s clear they didn’t really provide any spark,” Mr. Baker said.
Employers have not hired much, even as shopping has picked up, cognizant that the rebate checks are a one-time event. Businesses have not shelled out for new machinery. Indeed, investment for equipment fell 3.4 percent in the spring months, dropping for the second consecutive quarter.
Rather than stockpile more goods, businesses generally tried to sell what they already had on hand. Business inventories declined in the second quarter by $62 billion, a factor that shaved nearly 2 percent off the overall rate of economic growth.
As the impact of the rebate checks continues to wear off in the coming weeks, households will be left confronting the same set of troubles that have been dragging on the economy for many months: a deteriorating job market, rising prices for food and gas and plummeting housing values.
Tens of millions of Americans have in recent years borrowed aggressively against the value of their homes to finance trips to the mall, dinners out, vacations and new cars. As housing values continue to fall, that artery of finance is rapidly constricting.
Since last summer, when the mortgage crisis provoked panic on Wall Street and many Americans saw access to credit diminish, consumer spending on so-called durable goods like appliances, cars and furniture has been sliding. This spending barely grew in the last three months of 2007, fell at a 4.3 percent clip in the first three months of this year and dropped at a 3 percent pace in the second quarter.
Meanwhile, joblessness is growing, with new unemployment claims filed in the week that ended July 26 swelling to 448,000 — up 44,000 from the previous week. And the purchasing power of wages is being eroded by higher prices for food and energy. Prices paid for goods by Americans surged at a 4.2 percent annual rate in the second quarter, after climbing at a 3.5 percent annual clip over the first three months of the year, according to the report on Thursday.
Higher prices, fewer paychecks and less household wealth: It is not a recipe for free-spending abandon.
“Now, consumers have to sing for their supper,” said Alan D. Levenson, chief economist at T. Rowe Price Associates in Baltimore. “Spending growth is slowing and income growth is slowing.”
Democrats in Congress have begun devising a second package of measures to stimulate the economy, centered on aid to struggling states. But the Bush administration has resisted such proposals, and the political stakes of a presidential election year make compromise especially tricky.
The Federal Reserve has lowered interest rates in recent months to encourage businesses to invest and households to spend. But with concern growing about high prices — a trend fueled by lower interest rates — the Fed may not be able to deliver another round, even if growth slows further.
“Looking forward, I don’t think there’s anything to change the lousy trend for the domestic economy,” said Joshua Shapiro, chief domestic economist at MFR, a research firm.
With the last three months of 2007 now officially revised down — from an initial 0.6 percent annual rate of growth to a 0.2 percent decline — many economists expect that these tough times will officially be declared a recession. That label is affixed by a panel of economists at a private research institution, the National Bureau of Economic Research, though typically well after the fact.
President Bush derided such characterizations, along with the academic discipline known as the dismal science.
“You can listen to these economists,” Mr. Bush said in West Virginia. “On the one hand, they’ll say, and then on the other hand. If they had three hands, it would be on the one hand, the second hand and the third hand.”
But for many, the old debate about whether this is a recession has become purely academic, and eclipsed by the troubles at hand.
“All my cousins already know it’s a recession,” said Mr. Barbera, the ITG economist. “They have the luxury of not having Ph.D.’s. The auto companies are in dire straits, the airlines have been shutting down flights and firing pilots. The truckers are in near hysteria because of the price of diesel. If you round up the usual suspects, this is a bad circumstance. And the word we usually use for a bad circumstance is a recession.”