Robert Oak — Attack of the Central Banks Points to Impending Recession

The Central Banks went on the move. Within 45 minutes of each other, the ECB lowered interest rates, the Chinese central bank did too and the U.K. just enacted more glorified quantitative easing. BoE increased their asset purchases by £50 billion to a grand total of £350 billion.

While it appears we have a global, coordinated plan of attack by Central banks, one might also notice we have a global coordinated plan to counter an economic slowdown. In other words, by all acting in concert, this gives more confirmation that we have a global economic mini-implosion going on.

We already know a U.S. recession is projected for 2013....

Read it at The Economic Populist
Attack of the Central Banks Points to Impending Recession
by Robert Oak

Tim Duy on a double-dip

A major credit event in Europe looks inevitable. Would a European meltdown endanger the US recovery? We are looking at two channels, trade and financial. I tend to discount the trade channel. As a general rule, I think the propagation of such shocks is too weak to alter the fundamental cyclical forces underlying the US economy. The potential for financial shocks, however, keeps me up at night - this is the key to the US recession story. There is a nontrivial chance that credit event in Europe triggers a credit event in the US.

Read the whole post, On That Double-Dip at Tim Duy's Fed Watch

This has been my thinking for some time. Real economy is recovering — very slowly, but the financial system is still badly impaired. Any significant shock can tip things over the cliff, and the deteriorating situation in Euroland looks like another Credit Anstalt moment just waiting to happen. My money is on another shock, followed by the second leg down in Great Depression II. The crisis in Euroland could provoke it, but there are a number of other things hanging by a thread ready to break, too.

Tim Duy is getting pessimistic

"It is beginning to look like the economy is circling the drain."

Read Tim's full analysis of monetary policy at Fed Watch: Circling the Drain

Dr. Housing Bubble on the Housing News Cycle

The official double dip in home prices is not significant in the sense that it is a surprising revelation but will carry more traction because of the way the news cycle works. The press reports on what happened especially when it comes to economics and feeds the beast especially with bubbles. Virtually every large news outlet missed the most obvious and biggest housing bubble ever witnessed by humankind. During the meteoric rise in housing prices the press fed into the feeding frenzy by drawing more and more buyers into the housing game either through cable shows erotically showing granite countertops or ordinary people making a mint by simply slapping on a coat of magenta paint to the living room wall. This is typically how manias work until they reach a tipping point. After the bubble burst the press reported on the “shocking” crash and fed into this part of the cycle. But for well over a year it has been stories about housing rebounding. The fact that we have now officially double dipped will create another news cycle reflecting the continued decline in home values. What you as a thoughtful reader and follower of the housing market should ask is why isn’t the press actually examining the connection between home values and actual household incomes? This is the absolutely most important item never examined. This is the most obvious item to explore from a big news story since mortgages are paid by W2 wages, not by some alchemy of finances or HD cameras.

I follow a variety of sources in regards to news and as the above picture highlights, the press is running full steam ahead with the double dip. We’ve been tracking the massive amount of shadow inventoryand large pipeline of troubled homes so the question of a double dip was never in doubt. The question was rather one of timing. It is now clear that the new bottom in housing prices, both in nominal and real levels is occurring fluidly today. This is now an active cycle low. The only question in doubt at this point is how much further will home prices fall before reaching an absolute bottom? I don’t think we can answer that question until we figure out how low household wages will go (or move up if the economy turns around). This is really the wild card in how deep this double dip goes.

Read the whole post at Financial and psychological double dip for real estate – How new economic news will feed into lower home prices as incomes remain stagnant. Only 11 percent of recent loan volume in the first quarter dealt with purchases.

Edward Harrison Sees Depression In the Cards

Edward Harrison of Credit Writedowns is an Austrian schooler who has adopted the MMT monetary description. In A few brief comments on America's fiscal choices he reiterates his October, 2009 position that The recession is over but the depression has just begun, set forth in eight bullet points and commentary.

"I don't see the need to change any of these bullet points because the logic of that post is still operative. We are now at bullet points number 4-7 in this time series. Look at the budgetary debate in Washington as proof of point 4. Look at QE and the liquidity provided by the ECB and the BoJ and the increase in commodity prices as proof of point 5. Look at the imminent increase in rates in Europe as proof of point 6. Look at the unrest in the Middle East as proof of point 7."