Economy Sends Off Warning Flares

[Purveyor]

Source: Associated Press

(09-25) 15:10 PDT New York (AP) --

Crumbling consumer confidence and slumping home sales could prove to be a bad combination for retailers, and for the broader economy going into the holiday shopping season, if the labor market contracts further and chokes off spending, economic data showed Tuesday.

But markets took some heart from the warning signs, hoping that they would goad the Federal Reserve to lower interest rates more.

Worries about jobs and the economy flared in September, driving a key barometer of consumer sentiment to its lowest level in nearly two years, a private research group said.

The bad news was compounded by a report from the National Association of Realtors that sales of existing homes declined for a sixth straight month in August, pushing activity to the lowest point in five years. The Realtors showed a rise in median home prices, but a separate report done by S&P/Case-Shiller said home prices fell 3.9 percent in July in its 20-city index. Economists said that decline was probably a better reflection of where the market stands now.

The New York-based Conference Board said its Consumer Confidence Index fell to 99.8, an almost 6-point drop from the revised 105.6 in August. The reading was below the 104.5 that analysts had expected.



Read more: http://sfgate.com/cgi-bin/article.cgi?f=/n/a/2007/09/25/financial/f115423D94.DTL

[Warpy]

1. The party's over and we all know there's a hell of a hangover coming

as the years of strip mining the consumers finally has its effect, leaving them sitting around with massive debts, housing that isn't worth the outstanding mortgage, and declining wages.

We're about to find out why regulations existed and why so many things were in public, not private hands.

Let's hope when conservatives are finally disgraced we'll get some real reforms, reforms that won't be quite as vulnerable to greed and short sightedness.

It's going to be a hell of a recovery, though. We can't even afford any aspirin.

[truedelphi]

10. Well some of us are offering aspirin for half price over at Ebay

When everything is outsourced, we now all get to work from home!

[truedelphi]

11. Well some of us are offering aspirin for half price over at Ebay

When everything is outsourced, we now all get to work from home!

[Auggie]

2. If the economy tanks does it helps Democratic candidates next year?

I'd think it would

[truthisfreedom]

3. It sure does.

All of these years of lawless 'thug control over our country are coming back to haunt them.

[Demeter]

4. Nah. Snatch Defeat From the Jaws of Victory, That's Us!

Hate to be such a pessimist, but I've been beaten down enough.

[sendero]

6. The economy....

... and not the war, is what is going to drive a wooden stake through the heart of the Republican party.

Because most Americans are blissfully unaffected by the war, but MOST Americans are going to feel the coming economic troubles in a big way.

[Le Taz Hot]

16. I don't think so.

People are hurting now and it's only going to get worse. They're going to want someone to blame. When times get tough ALL politicians are going to be seen as the cause of people's misery. And, IMO, rightly so. Besides, people's misery should not be seen as a political "advantage" for one side or the other.

[TexasLawyer]

5. lower interest rates would ultimately HURT-- not help

Another reduction of the fed funds rate would be inflationary, would further drive down the value of the dollar and would raise the cost of imports like oil.

Lower interest rates would also drive up long bond yields (they would have to rise in order to attract investors to the ever-riskier inflation-damaged dollar). 30-year fixed-rate loans generally mirror rates on 10-year Treasury notes.

So lowering the fed funds rate can actually increase the going rate for mortgages.

[RC]

8. I have some savings and not much debt.

I want the prime interest rate to go up to 6-8%. Encourage people to save. That is one way out of this mess.

[girl gone mad]

9. That would hurt our economy since..

it's completely dependent on American consumer spending.

[RC]

14. Sorry, no.

We got in this mess partly because people do not save. They have nothing to fall back on. Hence the sub-prime loads and bankruptcy. How can spending help out the economy when we outsourced our manufacturing and import most everything from China? Consumer spending keeps the CEO's and their board members in golden parachutes.

[1932]

17. The people who need to save won't change their behavior because savings rates go up.

But they might save if the cost of debt goes up.

People don't save because we a consumption driven debt-loaded middle and working class. People load up their credit cards with the purchase of fast-depreciating consumer goods they don't really need, they lease cars, and they have more house than they can afford.

A lot of people would do that no matter what the savings rate is. And if the cost of borrowing went up, it would most likely mean that they'd reduce consumption a little, but pay the difference to their lender rather than put it in a savings account.

[pattmarty]

7. If it happens, I hope it does it on Bush's watch.

[cliss]

12. It's over baby.

The patient is in the ICU ward. Breathing's laboured. The EKG monitor just showed flat-lining.

Meanwhile, the doctors are so proud and excited. The patient's FINE!!! He'll recover nicely, not even sick a little bit.

[sutz12]

13. I think it's been tanking for a while now.

They've just been propping it up with every trick they can come up with.

[fasttense]

15. It is going to really hit hard in October.

That is when a huge amount of sub-prime loans are scheduled to reset. This will be followed by more hits in December, January 08 and April 08. I wonder what the dollar will be worth then?

The pundits and spin meisters before the Great Depression:

"We will not have any more crashes in our time."
- John Maynard Keynes in 1927

"I cannot help but raise a dissenting voice to statements that we are living in a fool's paradise, and that prosperity in this country must necessarily diminish and recede in the near future."
- E. H. H. Simmons, President, New York Stock Exchange, January 12, 1928

"There will be no interruption of our permanent prosperity."
- Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928


"No Congress of the United States ever assembled, on surveying the state of the Union, has met with a more pleasing prospect than that which appears at the present time. In the domestic field there is tranquility and contentment...and the highest record of years of prosperity."
- Calvin Coolidge December 4, 1928

"There may be a recession in stock prices, but not anything in the nature of a crash."
- Irving Fisher, leading U.S. economist , New York Times, Sept. 5, 1929

http://greatdepression2006.blogspot.com/2007/08/famous-quotes-from-past-revisited.html

[Le Taz Hot]

18. I just went to a HUGE one-day-only-sale

at Kohl's last weekend where everything was 40-70% off. The sale was from 7:00 to 1:00 and we didn't get there until about 10:00. I was dreading the crowd and going through already-picked-through items but was amazed to see the store was virtually empty. THAT spoke volumes.