``The cards are on the table and a recession is coming,'' Henry Herrmann, chief executive officer of Waddell & Reed Financial Inc. in Overland Park, Kansas, which manages $70 billion, told Bloomberg Television. ``Our focus is going to be on things like dividend yields, solid brand names, consumer staples, less cyclical exposure and those sorts of things. Broadly speaking, earnings estimates are coming down.''
The dreaded R word that Greenspan and all Bush Administration econotoadies bent numerous rules to avoid pronouncing, has not be put off for long, just made more severe.
And Herrmann better not bet his farm on the consumer staples either. It isn't just the deteriorating world of high financiers that is a statistic in support of declaring a recession: the republican party's favorite trickle down theories, the faith that their megarich corporate sponsors would drip dollars into blue collar pockets, work in practice far more swiftly and efficiently when it is absence rather than excess of money to be distributed:
Consumer spending held flat in August as high prices and lower earnings pinched U.S. households and put the economy in line for the first quarterly drop in consumer spending since the 1990-1991 recession.
The Commerce Department said August consumer spending held steady after dropping 0.5% in July. "Consumers are pulling back really across the board," said Bank of America economist Peter Kretzmer, who expects spending to decline at a 2.2% annual pace for the July through September period, following a 1.2% gain in the second quarter.
And consumer spending for the quarter as measured in the reported Commerce Department stats is an overstatement of the economic health: after correcting the dollars spent for the inflation that has taken place in that time period, we actually bought less stuff, not a steady level of stuff. Being 70% of the nation's economic activity, a decline in consumer spending pretty much makes a recession all by itself. When that last happened, in 1991, what did we do the the bush in the white house then? Eh? [The more damning question about us voters is why did we then plant another bush in the white house?]
Will I gloat over bad news like this when Obama is in office? It seems unlikely I will get the chance. We have let the Bush administration screw things up so thoroughly for so long that Obama, if he can merely arrest our downward spiral, would actually be a hero...there is nowhere to go but up.
That this low ebb of American economic power is the bottom is not entirely certain but I am a far more optimistic person by nature than evolution usually tolerates. So let me make my prediction that things will worsen in the economy only a little while longer, perhaps until next February...and then level off and begin a slow, hardworking but upward progress...if you and I, fellow citizen, are willing to do the work.
Why not make a prediction? I have been bitching about the neocon economy since at least 2006. I started bookmarking posts by economists around the time of the '06 election because I found my own opinions uninformed on economics. I was drafting but not publishing posts by Nov '07 because plenty of smart people had already been painting a picture of fiscal malaise seeping, despite officials in denial, into most quarters of commerce. I had no trouble foreseeing at the end of last year, in general terms, that Bush and Wall Street would trash our economy by the middle of this year...All I had to do was read the right columnists on the economy. And after all, voters have been worrying about the economy more and sooner than the politicians they elected. But let me hedge a bit: "upward progress" will never return us to the unsustainable excesses of consumption by which consumers helped wreck our economy...our wealth ultimately deriving from an over taxed nature, our life style will hence forth need to be a bit more modest.