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Workers build a Jeep Compass at the Chrysler assembly plant in Belvidere, Ill. U.S. growth continues to contract despite a good performance by the auto industry.
There were plenty of reasons to be optimistic about the U.S. economy at the tail end of last year. On balance, the year had been pretty miserable, growth-wise, up to that point: gross domestic product grew less than two percent. But the fourth quarter came in at double that, a surprising 4 percent. The stage was set for some real if not spectacular economic recovery in 2012.
The first quarter initially looked good, as we started to add 200,000-plus jobs. But when the GDP numbers started to roll in, we could see a repeat of an old pattern: the year begins with promise, only to hit headwinds by spring. In 2011, in was the Japanese earthquake and tsunami, a spike in oil costs, and the debt-ceiling battle and ensuing U.S. credit downgrade by S&P that smothered progress. This year, it's been ongoing troubles in Europe, plus a hot summer and drought that damaged agriculture, which had been one of the unsung stars of the recovery.
Take a look at how their economies would stack up if California and L.A. County were countries.
The Commerce Department released its figures for second-quarter U.S. GDP growth this morning. Growth was weak, and that's something to worry about. But it's also an opportunity to compare U.S. growth with California's, and to compare California's to the rest of the world.
Conveniently, the LAEDC recently compiled this data into a nice, neat chart (above). It actually isn't technically possible to compare the GDP of a U.S. state with the GDP of a country, but for the sake of argument you can pretend that California is a country, just to get a sense of how we're doing. Besides, California's economy is so large — nearly $2 trillion in the context of a $15-trillion-plus U.S. economy — that it's routinely talked about as if it were a country.
Indeed, if it were a stand-alone economy, California would be the world's ninth largest, coming in just above Russia and just below Italy. But let's compare California to the rest of the world in terms of growth. First off, the Golden State saw growth last year that was actually better than the U.S. — 2 percent for Cali, versus 1.8 percent for the U.S.
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The JP Morgan Chase building in New York City. This is one of the big banks that's filing a "living will" with federal regulators — and dealing with a potentially $9-billion trading loss.
The biggest U.S. banks are delivering their so-called "living wills" to the Federal Reserve and the FDIC today. This is all part of the implementation of the Dodd-Frank financial reform legislation, and it follows the stress tests that the big banks were all subjected to several months back — and that they all passed, some more auspiciously than others.
Today's plans are part one of the living-will process: banks will explain how they intend to enter bankruptcy, if they get in trouble. Obviously, a big bank could enter restructuring and emerge as a new bank, with reduced debts. Part two is more menacing: big banks are being asked to detail how they would work with the FDIC to be taken down, their assets merged with more stable institutions. That's the nightmare scenario.
It's critical that the big banks deal with both possibilities because even though we had a bunch of too-big-to-fail banks before the financial crisis, we have what I call too-bigger-to-fail banks now. The crisis forced the consolidation of failing banks into stronger ones. Additionally, big banks have been buying up weaker smaller banks. So we have a less diverse financial ecosystem now than we did before the Great Recession. This is why a big trading loss at JP Morgan, initially reported at around $2 billion but now climbing to $9 billion according to some reports, is cause for alarm.
U.S. Department of the Treasury
The financial industry is less vulnerable to shocks than before the crisis.
Another downturn or recession might hit us in the next few years, as a natural consequence of the business cycle, but we're unlikely to have another Great Recession or major crisis. At least in the U.S. And here's why.
The Treasury Department released a whole bunch of very nice charts last week that summarize in glorious visual detail the government's response to the crisis. My personal favorite is above.
What put the "crisis" in financial crisis was actually the "financial" part: the nation's "too big to fail" banks all had to be bolstered with taxpayer bailouts (some reportedly against their will). A couple of investment banks went down. A couple more had to seek emergency deals and call in favors through the backdoor — and stop being true investment banks, but rather "bank holding companies" so that they could get more money from the Federal Reserve.
Freelancing: as a work choice, it's full of ups and downs.
•Pro: 50 percent of freelancers "saw their incomes increase in the past year"
•Con: The average freelancer was stiffed for $6,000 total, while 8 in 10 freelancers had a employer refuse to pay up
The data sounds accurate to me — in my anecdotal experience, anyway. In the past decade of so, I never got stiffed or had an employer fail to pay. But in the 1990s...well, it happened on several occasions. We were so much younger then...