New way to say "new normal" from Robert Reich

Robert Reich turned a nice phrase when he said we are not in a double dip recession but a "one and a half dip" recession. You may not know it from the stock market and equity profitability, but the economy is not had a pop as expected from the Zarnowitz rule which states that a fast fall will be matched by a fast recovery.

Housing is an old story but it still convert to a sluggish economy. We know that liquefying housing wealth through home equity loans boosted the economy during the 2000's period. We are not getting a housing boost now. Wealth has been stabilized but not increased. The headwinds are significant, so we have the half dip.

Copper and the Chinese business cycle

Copper, as a base metal follows the long-term trend in the business cycles around the world. If you do not believe it, look at the Deutsche Bank chart from their commodity group. There was a not a strong correlation in the early 2000 period because the Chinese economy was smaller and their as build-up phase, but the recent leading indicators for China when overlaid with copper prices shows that as China slows so will copper.

GM is buying Americredit? what about paying back US Treasury ?

GM which was taken over by the government and is 61% owned by the US Treasury and has yet to payback the Treasury is buying Americredit. Americredit is a sub-prime lender. Does this make any sense? Should auto companies be in the finance business or should it focus on cars? To have a good car company you need a good finance arm to extend credit but one of the excesses in credit over the last 20 years has been in the auto area. Credit has been extended at looser terms and for longer periods which may be the exact thing the government would like to reduce.

While i do not like to comment on politics, this one made me stand-up and notice.

"Unusually uncertain" - Bernanke's call

A great turn of a phrase to describe the current economy by Ben Bernanke. "unusually uncertain". Hard to say what that means, but the markets reacted immediately, risk-off. This certainly was not a confidence builder. The Chairman also said that he is prepared to act, but we do not know what action he will take. A news account mentioned that most of testimony was focused on exit and not on new stimulus. We also know that some Fed presidents want to raise rates. There is no clear consensus on what action can or should be taken. Rates could go to zero and QE can begin again, but the problem is that if the market environment is "unusually uncertain" there is little willingness to lend or borrow. Cash balances will accumulate and the economy will maintain a slow growth posture.

Sen Bunning asked the important question whether the Fed is out of bullet. Using this analogy, I would say the Fed is low on ammo and shooting blanks.