August 25

data yesterday:
Canadian retail sales were weak, but driven by price effects, as volumes were fine; US existing home sales were atrocious, dropping 27% in July from a downward-revised level in June, to a new historical low of 3.83 million, increasing the months' supply to 12.5; the Richmond Fed Manuf index dropped, but not as much as expected

today's data:
mortgage purchase applications remained very low (back to 1996 levels); durable goods missed expectations, big-time, and were particularly weak ex-transportation, and capital goods orders non-defense ex-aircraft were down 8%; new home sales followed suit with existing home sales, falling to the lowest level its been in the history of the data series (1963), and months' supply up to 9.1 (despite the inventory of new homes being as low as its been since I was born);

claims tomorrow and U.S. GDP on Friday


with recent data, most notably claims and housing, you can see that, though papered over with stimulus for awhile, the underlying problems in the economy are re-emerging. And:

More negative news flow coming. Calculated Risk.

regarding my point yesterday that Hilsenrath's column in the WSJ did not bode well for the answer to Evans-Pritchard 's question of whether or not the Fed has the will to do QE2 yet, Goldman's Jan Hatzius says not til Nov. 3, via zerohedge.

Japan and the ancient art of shrugging. Norihiro Kato, NYT. (hat tip, Rosenberg)

a rather long but VERY worthwhile read, with plenty of links to other background articles: Contained Depression. Michael Shedlock.

China's looming real-estate bubble. Shikha Dalmia and Anthony Randazzowsj, WSJ.

there is mounting evidence that Beijing has misallocated vast amounts of capital, touching off a real-estate crisis that could yet drag the world's second-largest economy down to earth....So many middle-class Chinese are being priced out of the market that their travails became the subject of a popular TV series called "Dwelling Narrowness." Beijing banned the show, fearing it would cause unrest.

for more discussion/debate on whether or not China's economy is a bubble:
Stephen Roach, Morgan Stanley, Jim Rickards, Omnis Gourp, and John Rutledge, Chinese Academy of the Sciences on CNBC.

The limits of stimulus. Patrick Chovanec.

nice little take-down of Bill Gross, by Yves Smith, naked capitalism.

"Boy, when you think you’ve seen the worst in utterly shameless, self serving tripe, someone manages to outdo it."

I'm late to this, because I only just started reading his blog, but this is worth highlighting:
"Extend & pretend": Where are we after one (and a half) years of the suspension of the FASB rules? Gonzalo Lira.

ever since April 2, 2009, when the FASB rules were suspended, the American banking system has been floating on nothing by air. By suspending rule 157, none of the banks have had to admit that they’re insolvent. With the suspension of mark-to-market, accounting rules are now basically mark-to-make-believe....

Has it worked? Prima facie, it would seem so. The banks seem to be stable, and have been raking in the big bucks ever since the rule was suspended....

everything is wonderful! Nothing hurts! However, the basic problems in the banking system remain: The banks are still broke, because of the same reason—the toxic assets on their books. The banks have taken “extend and pretend” to heart—they have lobbied to extend the suspension of FASB, while they have pretended to repair their balance sheets, when in fact, they have not.

In fact, compared to the write-off mania of ’08, the banks have not written off any of these non-performing assets. They sit like dead weight on the balance sheets of the banks—we still do not have a clear grasp of even how much of this garbage is still lurking out there, like turds in the Venice canals, because of the obfuscation of the basic accounting rules—an obfuscation which the banks insist on perpetuating. The banks still have the holes in their balance sheets which caused the crisis in 2008.

BP link of the day:

Slow violence and the BP coverups. Anne McClintock, counterpunch.

“Let me tell you something. Today we saw three sharks washed up dead on the beach. The insides of their noses were black with oil. The membranes of their mouths were black with oil. Their eyes were black with oil.” Steve is a war veteran who has seen a great deal of horror, but he seems to find this memory inordinately upsetting. “I am telling you this for the sake of our grandchildren,” he said. “We have an apocalypse going on and no one is paying enough attention.”

and

BP could well stand, not for Beyond Petroleum, but for Beyond Principle. In a particularly nefarious act of cost-cutting and labor control, BP has hired prison inmates to do the clean-up, refusing to let them wear respirators, as this makes it visible that conditions are hazardous. Nor can they carry cell-phones lest they document the damage. Forced labor: slavery déjà vu. And there’s an extra perk for BP. Private companies like BP who use people on work-release get tax rebates of $2,400 for every worker they employ.

other fare:

on the multiple energy miracles that we need; talking energy with Bill Gates.

Can Exercise Make You Feel More Full? Scientific American.

Digital devices deprive brain of needed downtime. NYT.