Don’t let the GDP growth of 5.7 percent in the last quarter of 2009 fool you even though the statistic means that the recession is officially over. (A recession is two consecutive quarters of negative economic growth.) Besides, government statistics may be misleading — or even wrong — as Karl Denninger cites in a review of recent CPI data.
As the above chart shows, the worst may be yet to come. More adjustable-rate mortgages are going to reset in the middle of this year and continue through the middle of 2012, meaning that more people will default, housing prices will continue a downward trajectory in general, bad debt will not disappear, and the entire economy will remain threatened. The downward trend in interest-rate resets right now is merely the eye of the fiscal storm.
The U.S. economy will likely get worse before it gets better for other reasons as well:
Just as they are contending with massive gaps in their operating budgets, states and localities must also deal with a $1 trillion deficit in public employees’ retirement benefits’ funds, a new report found.
The shortfall amounts to more than $8,800 for every household in the nation, according to the Pew Center on the States, which published its findings Thursday.
Just to drive the economic point home:
Here is a report from the National Governor’s Association:
In a survey conducted last week of 45 of the 50 states, the group found that states have $18.8 billion of budget gaps yet to be closed in fiscal 2010. This comes after they have already imposed measures to eliminate budget imbalances totaling $87 billion in the fiscal year, which for most started last summer.
In the budgets they are drafting for fiscal 2011, states foresee shortfalls of $53.6 billion and for fiscal 2012 $61.6 billion.
And, most scarily, the first hint of a possible run on banks is here. Citigroup told its Texas customers the following:
“Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change.”
I would love to see any data on the number of people who withdrew money from Citigroup branches in Texas in the days after the notice was sent. I would have withdrawn my money the next day.
What does it all mean? A New York Times headline says it all: Millions of Unemployed Face Years Without Jobs.
