"If everything goes well in the rest of the world, we can take a couple hits in the U.S. and still be okay." Bob Lutz, GM Vice Chairman of Global Product Development. [via TTAC]. "Those emerging markets can't carry GM. We've got to get the job done in all markets." Fritz Henderson, GM Chief Financial Officer [via Automotive News, sub]. Given GM Car Czar maximum Bob Lutz' reputation for "shooting from the hip" (a.k.a. making shit up as he goes along), I'm going with Fritz' analysis. Oh wait, "Henderson also said the U.S. economy in general is faring better than the financial markets. He said he doesn't think the nation is in a recession, thanks to strength in certain sectors of the economy, such as exports." Holy Cruising Down Denial Batman! If anyone is in a recession– you know, other than the housing market– it's the U.S. automobile industry. On the other hand, Fritz also told the assembled car hacks "In terms of what we have to do — profits, cash flow, market cap — we're not the world's largest automaker." So he's down with that. But– "That's what I'm spending 100 percent of my time trying to figure out." Hmmm. Maybe it has something to do with, I dunno, product, or, I'm guessing here, branding. Anyway, if it's not a recession, what is it? Downturn? Market correction? Help Fritz out here guys; what euphemism should he use?
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Recession, n. Two or more consecutive quarters of falling real gross national product. Henderson is correct. The U.S. economy is not in a recession. The growth has dropped from the prior 3-4% range to only 1-1.5% growth and that is being seen but the only “recession” is in the eyes of the media sector that want to further an agenda and so incorrectly suggest there’s a recession.
F***ed up s*** time? Vertical ascendancy challenged period? Customers-are-buying-better-made-asian-cars-built-in-North-America-and-we’re-too-
stupid-to-do-anything-about-it time?
US economy is doing prety well? 9 trillion external debt. 44 trillion social security obligations( 88 trillion long term obligations), dying manufacturing, subprime crisis, collapsing dollar, no gold standard, no gold reserves, no meaningful exports, subpar education, negative trade balance. Pretty good isn`t it? There is only one person brave enough to address these issues seriously. But you are afraid of him, so much afraid that media has to libel and hide him and exclude from statistics. he is the only hope to save your manufacturing and car business as well. you will experience the unbelievable horrors of economy starting from this year on. Then you will remember his name…………
The difference between recession and depression is in a recession your neighbor is unemployed in a depression you are unemployed.
“The Great Relaxation” maybe a comforting way to describe it, especially for the coddled crowd who find reality to be too harsh.
Maybe a better definition for it would be “Stagflation”.
What ever it’s called I’m feeling it with the spike in prices for just about everything and a relatively flat salary.
@ldbricker
That is the official definition, yes, but it can only be applied after 2 or more quarters of negative growth have been observed. The speculation is that we’re in recession right now, something we won’t know definitively for another 6 months. And yes, we probably are, given the information available to us right now.
Bad news sells more advertising than good news. Even here, we all love the “Death Watches”.
The press will scream recession everytime the trend is headed down.
@jurisb – huh?
Our sales were up, possibly due to the low, low prices of our exports, fueled by the crappy dollar.
—
Landcrusher, Jurisb is referring to Ron Paul, the ideal candidate for President in 1796.
“the ideal candidate for President in 1796.” Nope, at that time “The Wealth of Nations” had already been published, and Alexander Hamilton was available for public office. But Ron Paul’s ideas on the gold standard, etc., were popular with the colonial powers of 1696.
US economy is doing pretty well? 9 trillion external debt. 44 trillion social security obligations( 88 trillion long term obligations), dying manufacturing, subprime crisis, collapsing dollar, no gold standard, no gold reserves, no meaningful exports, subpar education, negative trade balance. Pretty good isn`t it? There is only one person brave enough to address these issues seriously. But you are afraid of him, so much afraid that media has to libel and hide him and exclude from statistics. he is the only hope to save your manufacturing and car business as well. you will experience the unbelievable horrors of economy starting from this year on. Then you will remember his name…………
Well, “doing well” is relative, isn’t it? $9,000,000,000,000 external debt against a current annual GDP economy of over $13,000,000,000,000 and growing is manageable. $88,000,000,000,000 in long-term obligations, of which about half relates to the Boomer demands on social security is a serious problem but one every advanced country is facing. But the US has one big advantage: growth. Other major currently industrialized countries are on a de-population demographic curve. We’re not. We’ll deal with it.
Dying Manufacturing? It’s just changing. Critics said manufacturing was dead in the US in the 1980s and then its share of the economy rose during the 1990s. What we make shifts. Software, media, financial services, etc. aren’t included in manufacturing data, yet they result in products shipped.
Subprime mortgage crisis? Sure. We had a Savings & Loan crisis 20 years ago, which doomsdayers pointed to as the beginning of the end for us, and we dispatched that. This will pass too. Collapsing dollar? Every time we fight a war without taxing for it, the dollar erodes. We saw same during the latter Vietnam years and the immediate postwar period that followed. The flip side of the dollar’s dive is that the Euro was at 80 cents in 2000. The dollar will recover. For now, it’s aiding exports.
No meaningful exports? Rubbish. Aircraft, software, chips, foodstuffs, education, expertise, machinery, media, communications infrastructure, servers, mainframes….the list is long.
Subpar education? This is the Great Perennial Worry of the intelligentsia. Yup, our public education systems need reform and a cultural reversion to the unified intergenerational support schools had in the post-WWII consensus in America. Yet, there’s something about our schools that continues to produce a disproportionate share of the world’s innovation. There’s more to schooling than book-learning, and more ways to master disciplines than the classroom. The crisis in the schools has not to date produced the dire consequences predicted for their neglect.
No gold standard? Right. Dumped that in 1971. No gold reserves? Not true, but there’s no point in having enough gold to cover all dollars. Negative trade balance? The world seems to like it that way. The US has deliberately used its open markets as a financial and economic engine to help lift the world since 1946. Maybe we should stop. See how that works out for the EU and Asia.
Yes, it is pretty good as modern economies go. The EU could not follow our Fed on interest rate reduction in part because the EU’s higher inflation rate constrains their latitude. One wonders how the EU’s economy would perform if it were carrying its fair share of global security. That goes for Japan too. Who’s the guarantor of freedom of the seas? The US. Who does the EU turn to when they want some heavy lifting done in military policing in the Balkans or Africa? The US. Who has the lowest dependency on foreign energy sources of the major industrial countries? The US. Who has resources in-territory for energy self-reliance when we get serious about extracting it? The US. Given the load America carries, we do extraordinarily well.
Of course we can do better. We can live a little more frugally. We can trim our ambitions. We can consciously support our own industries, up our game in weaker sectors that an advancing economy is leaving behind. We can reduce our subsidies to the rest of the world.
It was interesting to watch the global equity markets dive a week and a half ago, on fears that the US will tip into recession and the Fed is impotent to stop it. After several years of talk that the world economy is finally decoupled from the health of the USA, well…..so much for that.
We don’t have stagflation today, Redbarchetta. That’s coincident high inflation and lack of economic growth. That was the 1970s disease. It could re-emerge, but at the present, inflation is still low, particularly outside a few volatile sectors, and energy has less leverage on prices than it did 30 years ago, as we drive a unit of economic growth on less than half the energy required to do so in 1973.
What we have is a pause to assimilate the artificiality of a value bubble just passed, awaiting the conditions of legislation, markets, innovation and mass psychology to ignite the next escalation. A few public policy errors and a media-driven tip-over of consumer confidence could make The Pause a retraction. We don’t know yet. 2001 looked bad. But the recession was only 8 months long. America is not Europe. We don’t like inhibitors so we work around them.
Phil
One thing should be added to Phil’s note… It’s unfortunately but rampant piracy adds to our trade imbalance.
phil – have you been to the supermarket recently? if not drop by with $20 and see how you walk out with. Low inflation, huh.
Mind you the defense industry looks healthy.
stagflation = economic growth is stagnant combined with high inflation, something Keynesian economists said would never happen.
Phil Ressler-US composite of GDP being 13 trillion is an illusion, it rather represents credits allotted all the services and manufacturing combined. Imagine if you buy a house for 100k and then sell for 150K, 250 K is added to GDP. but no real item of value is created. Us purchasing power is decreasing and that is what matters. how come Bernanke didn`t have your `smart` arguments when Ron Paul slapped him in a financial report? By the way percentage of manufacturing in GDP is shrinking very fast, and a nationwide cancer of low paid service jobs march is accelerating.
If you are so happy about demography, take into account that negative balance is avoided only because of growth of non-caucasian immigrants. You want to live in a multiracial culture, don`t you? What a joyful parade of colours!?( when will you understand that you should bombard Africa with fishing rods, not fish). Only take into account that an average white -caucasian family has 2 children, while blacks, asians, and mexicans have an average of 4-5, meaning they multiply much faster than white population and soon will represent a huge slice of gene-pie. except of Asians, I haven`t observed any expertize of the other ones that could be brought to US as an added value whether to science ,art ,education or manufacturing.Am I racist? Well, as long as Ermitage is in St.Petersburg,Shakespeare in England, Silicon valley in California and Ferrari in Modena, I have my arguments.If Muslim countries are so bored by materialistic values, who could have prohibited them to create masterpieces of painting ,architecture or writing? Music and Opera, etc..?
manufacturing is just changing? do you call `changing` those shuttered factories and fired workers who later find cheap jobs in tattoo salons or gas filling stations? And by the way financial services and software are included in GDP.financial services and software are no part of manufacturing , and are pretty hard to be defined as value.Us business shifts to easier businesses because they haven`t shown ability to manufacture in long term competetively. That`s why you have services everywhere, including dotcoms. Common, do you call all this internet vapour a serious business? Even Tanzania does software, so US makes less and less things that world couldn`t live without or couldn`t find a cheaper substitute manufacturer.
exports. If US had serious exports, they could easily overcome negative trade balance. because cheaper dollar means more competetive export prices. Yet trade balance doesn`t stop it`s downfall. Soon it will reach 1 trillion annually, meaning external debt will increase by a trillion as minimum each year .The problem is that no matter how cheap commodities you export, there is no diversity nor complexity of them to call them serious contenders. We buy like crazy Samsungs or Mitsus, not junk harleys with vapour -legend or Zillion-razored mega-mach -turbo Gillette shaving super system. yes, you have a lot of innovations, big share based on immigrant-visas. You try to scoop cream of foreign engineering, yet it is not enough.While succeeding in patents, somehow you stumble when it comes to assembly line.Us students scores in natural sciences( basis for complex manufacturing)have reached all time low. Ditto PhD in sciences.
Gold. Gold or other valuable commodity can be used as counterweight guarant to national currency, while US has quited the standard by assuming that trade of oil in dollars will be enough powerful. Yet oil extracting countries rapidly start to divert from dollar to other currencies. China is also dumping US dollar and obligation holdings, while accumulating gold reserves. As there is no commodity to cover dollar`s white ass, it just tumbles down the rabbit hole.negative trade balance is created by exporting less than importing. How do you think they cover the difference? simple! they borrow money from china and also print additional dollars. How can a country become richer by printing money?
when you noticed on previous weeks a nosedive in Stock markets and sudden upsurges, it means only one- Us has entered the last phase before total downfall. It is the pre-agony fluctuation of stocks at the highest point. Pretty damn similar to 1929.
Yet I was surprised that all of you would only put Ron Paul a president in pre-cembrian era. Since when honesty, integrity ,cleverness and true uncompromised love for the country has become an useless-old-school? How cheap -driven you are believing obamas and clintons shouting their watered promises of better future. What facts do they state? Did anyone of them tell you where are they going to get the money from? Do you beleive that MS Clinton having gulped 60 millions in her private net wort, as a president she will stop caring about herself and start giving damn about the nation? Seen many sharks turned into vegetarians?Don`t you understand that Obama is going to waste last US financial reserves to support blacks and their rights, instead of injecting adrenaline in manufacturing?
I don`t stand for republicans, I don`t stand for democrats. I stand for myself. I stand for my own values of true love, sense of achievement, honesty and hard working people. I stand for the boy who closes his eyes and hugs a puppy, I stand for a mother that gives her life away for a baby. for a father that teaches his son how to use tools. For an artist that dreams a masterpiece on canvas. for a chef that runs pizzeria and the janitor that cleans his bathroom. I stand for people whose eyes say more than their words. Whose blisters say more than their gestures.I stand for no muslims, presbiterians or catholics, yet I stand for the universal kindness of God that you carry in your hearts, those little churches of giving, love and forgiveness. See, true hearts stand no for parties, they stand for values, And value is in a man himself, not his kind, race, colour,varsity or fraternity. God bless America, and the true men that stand yet for true values. I am honoured to know one of them.
Juris B, Latvia
Sorry Fritz, but this mess actually started in 1913 at Jekyll Island, but nobody wants to hear about that…
phil – have you been to the supermarket recently? if not drop by with $20 and see how you walk out with. Low inflation, huh.
Yes, as a matter of fact, this weekend. Food is one area with price volatility. I also see in the grocery store that there is tremendous choice for how your benchmark $20 gets spent and lots of people are filling carts with choices that aren’t the cheapest. Americans overall pay a low percentage of purchasing power for food. It is not a major statistical driver for inflation across the economy. Bad policy, like corn ethanol subsidies , could change that. The successful tamping down of inflation between 1983 and 2005 and the long ’90s boom, made some people sensitive to price variation again. That’s basically good, but we don’t have a high-inflation economy nevertheless, unless you live on an in-service jet.
stagflation = economic growth is stagnant combined with high inflation, something Keynesian economists said would never happen.
They don’t say it anymore. That denial was undermined by 1974 – 1982. But that stagflation was also exacerbated by poor and untimely data, and got a nice boost by Nixon’s knuckleheaded experiment with wage & price controls in 1971. It was further fueled by the unprecedented scale of introduction of low-productivity new labor in the form of the massive Boomer infusion looking for jobs, and the absorption of large numbers of women in short order into the work force, consequence of feminism in the West. The US absorbed this much better than Europe, sustaining roughly half their rates of unemployment and inflation or less.
Can it happen again? Sure, if people have learned nothing. The patterns are there: a war we aren’t taxed for, Echo Boomers headed for the workforce in the coming decade, etc. But the econometric data is much better than it was then, and the monetary and financial instruments to respond are more numerous and precise. Still humans are at the switch and we could get it wrong. Food and energy may get more expensive. That’s OK if productivity growth allows us to pay out of higher income. These are comments applied to a macro view. Some individuals will be adversely affected.
Jurisb,
PLEASE find your carriage return key and use a little more punctuation! Or write in an editor and cut/paste into TTAC.
US composite of GDP being 13 trillion is an illusion, it rather represents credits allotted all the services and manufacturing combined. Imagine if you buy a house for 100k and then sell for 150K, 250 K is added to GDP.
GDP is measured the same way for everybody. GDP is the amount of goods and services measured at market prices, produced within a country’s borders during a specific period, usually an annual measure.
You don’t like the value assigned to services and investment. But the EU, Japan and even India and China are mixed economies that have service and hard production components. Software might be shipped via a 60 cents CD or downloaded at nil cost via the internet. Same with music, movies and money. But that doesn’t mean their market value isn’t much higher. We’re all measured by the same rules. If our wealth is an illusion, so is everyone else’s.
By the way percentage of manufacturing in GDP is shrinking very fast, and a nationwide cancer of low paid service jobs march is accelerating.
Manufacturing shrank as in relative terms for decades and then grew again in the 1990s. I’d like to retain more manufacturing jobs, as I’ve made clear here in prior writing. But manufacturing as a relative presence in our economy will inevitably decline, but in a growing economy its absolute size can still be quite robust. The acceleration of low-wage service jobs is accompanied by an acceleration of high wage creative and service jobs, especially if you ignore the short term flutters. Some people are in low wage service jobs because they lack the initiative or training to change their circumstances, some are in them voluntarily because they value their immediate community and won’t move to a city with better jobs, and some are just in unfortunate circumstances that require very high initiative to escape. As I’ve said before, manufacturing jobs are one of the key underpinnings of the middle class, but retaining those jobs requires Americans to take an interest in other Americans. That’s one reason I buy competitive American cars.
If you are so happy about demography, take into account that negative balance is avoided only because of growth of non-caucasian immigrants. You want to live in a multiracial culture, don`t you? What a joyful parade of colours!?
I grew up in an area that was 99.9% Caucasian. You were a “minority” in my high school if you were Catholic or Jewish. Now I live in Los Angeles, where Caucasians are a plurality, no longer a majority. I’m completely comfortable with my multi-cultural city. Moreover, I live in California, a state where no ethnicity is majority. There is a Caucasian plurality. In 2006, California was the 8th largest economy in the world when compared with countries. This mixed-race immigrant economy of 36 million people was in 2006 almost equal to Italy’s and less than 25% smaller than the economies of the UK and France — countries with nearly twice as many people.
America is an idea, not merely a politically-bounded territory. It was created on the principle that freedom and opportunity will attract talent, and talent will create wealth. Cultures that haven’t been culturally productive nevertheless include individuals who are creative, expressive, innovative and aggressive about pursuing their imperatives. We have Muslim painters, musicians, architects, technicians, software developers, entrepreneurs. Same for just about every culture around the world. Your dystopian view of ethnicity doesn’t play here.
when will you understand that you should bombard Africa with fishing rods, not fish
We do both: food grants to ward off immediate crisis; technical and financial aid for skill transfer. The agricultural “Green Revolution” that averted famine in the 1960s was birthed in the US and disseminated around the world, for example. India became a food exporter.
Even Tanzania does software, so US makes less and less things that world couldn`t live without or couldn`t find a cheaper substitute manufacturer.
That’s by design. Since 1945, the United States has executed a sustained policy to spread the instruments of wealth, foster trade and improve chances of economic success the world over. After WWII and the debacle of the post WWI reparations, we said, “enough.” Poverty breeds political desperation, which resorts to military aggrandizement. Japan lunged for resource control using her army, navy and air forces. They unsuccessfully attempted to neutralize their only effective blocker at Pearl Harbor. Germany overran Europe for similar and additional ideological reasons. We wanted a trading world with multiple successful economies. We humped it to life and subsidized the reality we have today. It worked. Now we have to compete. It’s the world we wanted, and it’s a better one than we had in 1939.
However, even at that, we export food, prodigiously. Our software and communications innovations are essential to the world’s continuing development. Our financial, distributional, aeronautical, medical and even automotive innovations are vital. And there’s always what’s next.
Gold. Gold or other valuable commodity can be used as counterweight guarantee to national currency, while US has quit the standard by assuming that trade of oil in dollars will be enough powerful. Yet oil extracting countries rapidly start to divert from dollar to other currencies. China is also dumping US dollar and obligation holdings, while accumulating gold reserves. As there is no commodity to cover dollar`s white ass, it just tumbles down the rabbit hole.negative trade balance is created by exporting less than importing. How do you think they cover the difference? simple! they borrow money from china and also print additional dollars. How can a country become richer by printing money?
The floating dollar is underpinned by both the value of what’s produced and the dependency producing countries have on exporting to our economy. Every government is guilty of printing money. The key is having discipline on the intervals and retaining ability to grow your way out of the devaluation and reflate the exchange. We’ve done that multiple times. We will again.
Do you believe that MS Clinton having gulped 60 millions in her private net wort, as a president she will stop caring about herself and start giving damn about the nation?
I’m a registered Democrat, but Mrs. Clinton will not get my vote, neither in the California primary nor in the general election if she wins the nomination.
The entire world has an array of thorny problems to solve. The US remains resilient and resourceful so that our problems are addressable. We’re not the source of the world’s emergencies.
Phil
I like a lot of what Dr. Paul stands for, but I don’t agree with all of it. Libertarians all too often forget that they should not talk about things that are not going to change anyway. There are several topics that Libertarians should avoid as if they were the abortion topic, but they know they are right so they open their big mouths.
The other problem they have are their supporters who should REALLY keep their mouths shut if they can’t really understand and articulate the policies and/or believe we should all be worried about black helicopters (or other conspiracy).
The result is that the other parties, who know they are wrong, simply dismiss the Libertarians as nut jobs. They get away with it because the Libertarians seem happy to help them make the case.
Let’s start by telling Japan and Europe that they have 10 years to pick up their own defense obligations and that in the meantime we will be removing 10% of our forces and equipment from their countries per year to get it done.
Why on earth did we close so many military bases in the US while adding them around the world? Now we are positioned to defend South Korea from invasion but have no defensive forces in the San Francisco or Monterey Bays. In fact, most of the western coastline is undefended. The many WWII bases along it have mostly been shut down while new bases have been built in Kuwait, Bosnia, Afghanistan, Iraq, etc.
Base the troops here in the US and spend the money it takes to support them here instead of all over the world.
Does anyone know what saved Toyota’s financial bacon in the 1950s? Yep, US purchases of Land Cruisers for the Korean war.
“When the Korean War broke out in 1950, Japan’s economy was still weak. Once the War began, United States flooded Japan with orders for equipment and material ranging from gunny sacks for rice (for sandbags) to Toyota vehicles, to chemical products. In addition to purchases, Americans brought American technology and capital to Japan and introduced American management techniques notably those of quality control expert, W. Edwards Deming”
http://chnm.gmu.edu/courses/schrag/wiki/index.php?title=The_Korean_War_in_World_History
Ron Paul has a good point about the direct and indirect consequences of the US playing policeman to the world.
J,
Isolationism. Seriously? How about we apply that strategy to your house. Let’s let the criminals take over the entire city, until they come to get your house. Then, you start shooting from behind your walls. Good luck with that.
If you want to win people over to libertarianism, try sticking to lower taxes, less regulation, less government intrusion in to our lives. If you get drawn into a talk on foreign policy, then you argue that we should be more concerned with domestic issues, and meddle less in the concerns of other countries that don’t affect us. But don’t go straight to isolationism. There are no votes there.
I believe, until recently, that most people in this country were economically conservative and socially liberal. The liberals seem to be winning back a lot of people on the economics side because the social conservatives have run them out of the camp. Once again, instead of recruiting those folks though, the Libertarians want to stand up shouting some of the regular idiocies.
Good Grief! Toyota’s in 1950? Just because it’s a fact, doesn’t mean anyone cares. Even if we did save the Japanese economy by buying a bunch of jeeps from them, so what? Good for us. Good for them. Are you saying that we should have let their economy fail? That would have been a great idea. Then who would have ended up in charge over there?
I suppose we would be better off with Kim running the whole Korean peninsula? Maybe let him take Sakhalin too? Brilliant. I can see a millions of Americans going for that pitch.
I am done on this one, you may have the last word if you wish. Somehow, I don’t think it will help you.