The recession has started?

robots · 28 August 2008

hello,

interesting when i rolled the pushie into the local beauripares shop (5.05pm) to buy a new battery for the wagon,

the salesman "gleefully" commented how I was the only one to pay via eftpos selecting "savings",

all these flash cars there too, surely everything not on credit cards, they all must pay by the 15th of the month i reckon

not sure if it is job losses that is causing this extra-ordinary activity

thankyou
robots

Adam A · 28 August 2008

Us aussies have the largest credit card debt in the world!! apparently

I dont know if its because a lot of people put all their earnings into the home loan then pay of the balance of the credit card each month(in theory)

Or are they doing it for the points?

I do know that domayne in sydney now have 5 years interest free, unreal, is this some kind of record?

Beej · 28 August 2008

Adam A said:
Us aussies have the largest credit card debt in the world!! apparently

I dont know if its because a lot of people put all their earnings into the home loan then pay of the balance of the credit card each month(in theory)

Or are they doing it for the points?

I do know that domayne in sydney now have 5 years interest free, unreal, is this some kind of record?

Well I have a $10k credit card limit. I used to have to travel a lot for work (o/s every couple of months) so would rack up several thousands of $$$ each time that would get paid back in full by the due date by my employer.

Additionally, I have for nearly 10 years now always put as much personal expenditure as possible through my CC - in order to gain FF points, and also in order to save on interest utilising the interest free period (and have the money saving or earning interest somewhere else for that time). I probably put $1k-$3k every month through my CC this way, but it is ALWAYS paid in full every month (automatically even) on the due date.

So I do wonder how many other people run their finances in this way? I know many other people who do the same thing. Of course this all shows up as CC "debt" in the official statistics, but it isn't really from my perspective at all as I pay $0 in interest. So i always take some of those figures with a BIG grain of salt.

PS: The FF points are not worth as much now as they used to be, but I still managed I think 2 return trips to Europe and one to Canada (skiing in all cases) on the FF points earned from my CC. I won't add to that all the other "free" flights, upgrades etc I've got from the FF points earned through business travel A small consolation for all the time away from family and friends....

Cheers,

Beej

numbercruncher · 29 August 2008

Adam A said:
Us aussies have the largest credit card debt in the world!! apparently

I dont know if its because a lot of people put all their earnings into the home loan then pay of the balance of the credit card each month(in theory)

Or are they doing it for the points?

I do know that domayne in sydney now have 5 years interest free, unreal, is this some kind of record?

Debt to GDP in 06 was 145 percent ....

Now in 2008 its 165 percent ....

Just before the Great Depression began in 1929, the ratio was 80 per cent ....

Adam A · 29 August 2008

I guess thats what happens when people start using their houses as ATMs

In my circle of contacts friends and assoc many many people are living very close to the edge, one or two pay checks away from financial disaster,god help them if any of them lose their jobs or second income!

When people started lining up to save 3cents a litre of petrol that was warning bells for me.

Lets hope that this is wake up call for many folk

Beej · 29 August 2008

numbercruncher said:
Debt to GDP in 06 was 145 percent ....

Now in 2008 its 165 percent ....

Just before the Great Depression began in 1929, the ratio was 80 per cent ....

Yea, and just before the great depression most people had to go outside to go to the toilet.... so what??? Apples and oranges....

PS: I notice no-one has yet posted the positive surprise in the latest US GDP figures:

http://news.yahoo.com/nphotos/consu...conomy_dc_5;_ylt=AiwMboDVyQ7EqTB13OIg8GWb.HQA

So despite all the doom and gloom, the US economy still actually grew quite strongly in the last quarter. Again, I'm not saying that this quarter may not be bad, and there is certainly evidence that things have slowed over there since end of June. However, it certainly seems that all the pundits claiming the US has been in recession since the end of last year were/are wrong.....

I suspect the Oz numbers for the June quarter will not be too bad either. Especially given that the company earnings or outlook have been as bad as many expected.

Cheers,

Beej

numbercruncher · 29 August 2008

Beej said:
Yea, and just before the great depression most people had to go outside to go to the toilet.... so what??? Apples and oranges....

PS: I notice no-one has yet posted the positive surprise in the latest US GDP figures:

?? whatever you reckon matey ...

So US gets growth in GDP but mental inflation .... yes grrrrreat news im sure .... Just go ask the Average sepo whose wage has actually fallen since 2001 ...

Consumer prices were up more than 5 percent in July compared to a year before; that's the biggest jump in nearly 20 years. Wholesale prices are rising even faster

Beej · 29 August 2008

Beej said:
I suspect the Oz numbers for the June quarter will not be too bad either. Especially given that the company earnings or outlook have been as bad as many expected.

Sorry that sentence above should read:

I suspect the Oz numbers for the June quarter will not be too bad either. Especially given that the company earnings or outlook have NOT been as bad as many expected.

Beej

dhukka · 29 August 2008

Beej said:
Yea, and just before the great depression most people had to go outside to go to the toilet.... so what??? Apples and oranges....

PS: I notice no-one has yet posted the positive surprise in the latest US GDP figures:

http://news.yahoo.com/nphotos/consu...conomy_dc_5;_ylt=AiwMboDVyQ7EqTB13OIg8GWb.HQA

So despite all the doom and gloom, the US economy still actually grew quite strongly in the last quarter. Again, I'm not saying that this quarter may not be bad, and there is certainly evidence that things have slowed over there since end of June. However, it certainly seems that all the pundits claiming the US has been in recession since the end of last year were/are wrong.....

On the contrary, the GDP number was hardly strong. Nominal GDP grew at an annualised 4.5% (below trend) and this is with rebate checks. Then to get real GDP we have to adjust for inflation. Inflation in the US is currently running at 5%, (and that is if you believe the official figures). However, the BEA uses something called the PCE deflator. Theses geniuses would have us believe that inflation for 2Q08 was 1.2% at an annualised rate whilst oil hit record highs. So we subtract 1.2% from 4.5% and get real or inflation adjusted GDP of 3.3%. Magical stuff.

Despite the fantasy GDP number it does little to dent the case for a US recession. Fortunately the NBER, the organization that officially decides recessions understands the folly of relying on GDP and doesn't use GDP in it's estimates. In fact most of the metrics it uses don't even feed into GDP.

David Rosenberg of Merril Lynch sums it up well.

1) Employment
The NBER relies on four different variables. The first is employment. Now I've told you before; employment is down seven months in a row. Does employment go in the GDP? The answer is no. Is it correlated? Yes. Does it help grow the business cycle? Of course.

2) Industrial production
The next variable is industrial production. Does that go into GDP? The answer is no. Does it help grow the business cycle? The answer is yes. This is a number that comes from the Fed. The GDP comes from the Commerce Department. It's a very important variable.

3) Real personal income net government transfers
The next variable, the third one, is real personal income excluding government transfers. This metric is now down four months in a row. Does personal income go into GDP? The answer is no; of course, it doesn't. GDP is all about spending. Personal income goes into gross domestic income, which is another chart of the national accounts.

4) Real sales activity
The fourth variable and the only variable that actually feeds into GDP is real sales activity in manufacturing, retail and wholesale sectors.

Beej said:
I suspect the Oz numbers for the June quarter will not be too bad either. Especially given that the company earnings or outlook have been as bad as many expected.

I had expected corporate profits to be quite robust for FY08 however I heard Craig James of Comsec say yesterday that earnings were down -3%, much worse than I had expected and we haven't really even begun to slow down that much yet in Australia. What are profits going to look like next year in a slower economy and with the credit crunch still hanging around? As for aussie GDP, the economists will no doubt be revising their estimates up after yesterday's strong capex number.

gav · 29 August 2008

robots said:
hello,

interesting when i rolled the pushie into the local beauripares shop (5.05pm) to buy a new battery for the wagon,

the salesman "gleefully" commented how I was the only one to pay via eftpos selecting "savings",

all these flash cars there too, surely everything not on credit cards, they all must pay by the 15th of the month i reckon

not sure if it is job losses that is causing this extra-ordinary activity

thankyou
robots

What Beaurepaires was that Robots? My brother works at one, they are more busy now than ever. They need to put $4K through the till each day to make a profit, and have been averaging $6-8K per day as of late

robots · 29 August 2008

hello,

malvern rd, prahran

the stores are very nice and modern, chap behind counter was great,

taking back old battery in morning for disposal

thankyou
robots

dhukka · 29 August 2008

Although not in Australia, it's good to see some more jobs being created. Might even make up for some of the people who lose their bank jobs.

FDIC Adds Office Space in Dallas, Ready for More Bank Failures

The Federal Deposit Insurance Corp. is preparing to sign a five-year lease to add five floors of space at its Dallas regional office as the agency prepares to increase scrutiny of failing and troubled U.S. banks.

The federal agency, which insures deposits and disposes of failed banks and their assets, will add 125,000 square feet to the 185,000 square feet it rented last year at 1601 Bryan St., a 49- story tower in downtown Dallas. That agency will add about 300 staff at the building, including some of the 69 retirees it is bringing back to help handle the increased workload, said spokesman Andrew Gray.

At least a dozen U.S. lenders and credit unions have been closed by state and federal regulators since last year, and the FDIC said on Aug. 26 it had 117 banks on its ``problem list.'' On Aug. 22, Columbian Bank and Trust Co. of Topeka, Kansas became the ninth U.S. bank to collapse this year.

``Already you've seen nine failures of institutions this year,'' said Gray. ``While historically this isn't a large number, it does represent an increase over the past two years. We anticipate additional failures and thus we would anticipate additional workload.''

alwaysLearning · 2 September 2008

Dollar's big drop could save us from recession

What do you guys think of this article?
http://www.news.com.au/business/money/story/0,25479,24280440-5017313,00.html

moXJO · 2 September 2008

alwaysLearning said:
Dollar's big drop could save us from recession

So long as price of oil stays down as well, or the price at the pump will kill me.

Construction in my area still going strong.Still seems to be a lot of money floating round as well.

kingbrown · 3 September 2008

'Links with Asia' might halt recession

Australia's strong relationship with Asia may save it from recession, Commonwealth Bank boss Ralph Norris says.

Figures out on Wednesday are likely to show the economy is slowing with economists predicting 0.4 per cent increase in gross domestic product (GDP) for the three months to the end of June, taking the annual growth rate to 2.9 per cent, the slowest rate since the last quarter of 2006.

"There is no doubt that the economy is slowing,"
Mr Norris told the Nine Network on Wednesday.

http://news.theage.com.au/business/links-with-asia-might-halt-recession-20080903-488i.html

kingbrown · 3 September 2008

STRUGGLING childcare group ABC Learning is planning to slash its part-time workforce by 1000 or more in an effort to save up to $26 million each year and stem losses that threaten the company's future.

Alongside its 16,000 permanent employees, Australia's biggest childcare company employs up to 1600 part-time staff through agencies, but is reworking the rosters and redeploying staff as part of the overhaul of its Australian and New Zealand operations by chief executive Eddy Groves.

Under the union agreement, ABC must have over 35 per cent of its staff on the full 38-hour week, but Mr Groves would not say how many more were on the full allocation.

Under the agreement, anyone employed for less than 38 hours can have their hours varied by 30 per cent.

People close to the company said ABC employed thousands of staff on 37.5 hours.
http://www.theaustralian.news.com.au/story/0,25197,24284533-20142,00.html

Temjin · 3 September 2008

dhukka said:
On the contrary, the GDP number was hardly strong. Nominal GDP grew at an annualised 4.5% (below trend) and this is with rebate checks. Then to get real GDP we have to adjust for inflation. Inflation in the US is currently running at 5%, (and that is if you believe the official figures). However, the BEA uses something called the PCE deflator. Theses geniuses would have us believe that inflation for 2Q08 was 1.2% at an annualised rate whilst oil hit record highs. So we subtract 1.2% from 4.5% and get real or inflation adjusted GDP of 3.3%. Magical stuff.

Despite the fantasy GDP number it does little to dent the case for a US recession. Fortunately the NBER, the organization that officially decides recessions understands the folly of relying on GDP and doesn't use GDP in it's estimates. In fact most of the metrics it uses don't even feed into GDP.

Exactly right here dhukka. Though some people tend to choose to believe in what the media say all the time.

It's a fact that if the "old" formula was used to calculate inflation for the US, it would have been like 10+%. This is a FACT, though not very well known because the government has managed to make the changes quietly.

The general public sentiment and the media would obviously go crazy if the old formula was used. There was no valid reasons why it was changed except to mask the actual inflation that was existed in the economy.

Regardless, the GDP value itself is being manipulated to make the public think that everything is "ok". Why would the US economy be booming by spending beyond their mean anyway? How would a "stimulus" check, which was funded through by printing money, would help their economy anyway?

Sometime people only believe in what they want to hear.

Beej · 6 September 2008

I love Ross Gittins - great and balanced economic analysis in terms we can all understand; Read his latest arlicle on his view if the current state if the economy here: http://business.smh.com.au/business/unseen-factors-keep-us-strong-20080905-4an3.html?page=2

Cheers,

Beej

Beej · 11 September 2008

So while everyone was busy posting here all the headline job losses through August, it seems that more broadly the economy was chugging away quite nicely and may have actually ADDED nearly 15,000 jobs - bringing the unemployment rate down to 4.1% - that doesn't sound like a recession yet to me!

http://business.smh.com.au/business/surprise-jump-in-jobs-20080911-4e9c.html

To be honest, this exceeded even my more optimistic (or is that less pessimistic?) views on what might have been happening with employment over the past couple of months.... I am wondering even if the figure may be adjusted down next month?

Cheers,

Beej

aleckara · 11 September 2008

Adam A said:
Us aussies have the largest credit card debt in the world!! apparently

I dont know if its because a lot of people put all their earnings into the home loan then pay of the balance of the credit card each month(in theory)

Or are they doing it for the points?

I do know that domayne in sydney now have 5 years interest free, unreal, is this some kind of record?

What is really interesting is the way credit card companies charge their transaction fees as opposed to EFTPOS. While they charge more the cost is bourne by the business. When you hit 'Savings' on the machine you normally have to pay a bank fee in addition to the amount. Businesses raise prices of goods in the store to accomodate users of credit in most places (expect Aldi, and so on where there is a cc surcharge). So what is the incentive of the normal person hitting 'Savings', when they still have to pay the high price of the good + the bank fee? Of course if everyone paid by Savings instead of cc this problem wouldnt be the case but the cc companies have made it one of those things that everyone has to do it, otherwise the person who isn't is getting screwed.

The RBA has mentioned this numerous times in their effors to reform the payments system over the years.

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