Friday, March 27, 2015

Things are up and that has Conservatives saying that they're down

A lot of contradictory statements are appearing in the business news about the debt crisis in Greece. The usual suspects blame the Greek people for being lazy tax evading leeches living off the welfare state. In fact per capita economic output is higher in Greece than in several US Red States, at least it was before austerity. Greece does have a problem with tax evasion, basically the rich feel entitled to not pay them, just like in the US. The new so called 'far left' government vows to do something about tax collection and since they aren't in the pockets of the rich they probably will. In the US the rich don't so much evade taxes illegally, they just have tax evasion decriminalized so that they accomplish the same goal.

The Greek government has made it clear that they have no intention of paying their creditors without a deal that reduces their debt payment burden to a manageable level. To some this seems outrageous but Greece didn't have a debt problem until they were set upon by Wall Street banks that drove up the interest rates that they had to pay. The subsequent austerity demands from German banks wrecked their economy making debt management impossible. The so called bailout requires that the entire country of Greece be privatized from ports, railroads, and other infrasture to all public lands including Greek antiquities. During the Bush administration there was a concerted effort to do that in the US and that scam has never really gone away, it's just concentrated in the Red States.

With Germany's outrageous trade surplus the euro is really the deutschmark. The Germans are stuck between two factions. Those that want to make an example of Greece and throw them out of the euro and those who see the rest of Europe following the Greeks out the door making the euro worthless. So far the Germans have been giving ground despite claims in the Conservative media suggesting that Greece is on the ropes.

In more news that contradicts the Conservative media: 'strategists' (what ever that means) that work for the Bank of America Merrill Lynch are saying that this October the International Monetary Fund will add the Chinese yuan to the basket of currencies that make up the "Special Drawing Rights" fund that the IMF uses for its transactions.

Currently there are only four currencies used for this purpose, the USD, euro, British pound and the Japanese yen. This would make the yuan officially one of the world's major currencies. In fact the yuan is already held as a reserve currency by many foreign countries. A reserve currency is used to settle international trade transactions. Most countries used to exchange yuans for USD on each side of the trade, but not so much anymore. The US doesn't have much to sell anymore, so it simply makes sense to do the trade in the currency of the world's dominate economic power.

The ascendency of renminbi (the People's currency) to world domination contradicts the constant drone from the right that China is on the verge of collapse any day now, they've been saying that for 35 years. The other name for China's currency is actually slang, yuan translates as 'round' like coins. The Right likes to say China has moved from Communism to capitalism. The Right used to say that would make China democratic, they don't say that anymore because they don't even pretend to want democracy here, just capitalism.

At least the USD is currently pretty strong and since the typical American consumes a lot of imports that's a good thing. A strong dollar is bad for exports, but we don't make anything anymore, so it's not really a problem. So when a Conservative tells you that Obama is debasing the currency you could point this out. It's not going to make a dent in the Conservatives though, they think the dollar has been debased because an ounce of gold won't buy as many dollars as it did at the height of the Bush Crash. This is of course the opposite of the USD being debased, but Obama is still Black and that's what they really care about.

Twitter @BruceEnberg - where up is still up, and down is still down, no matter what Conservatives say.

Tuesday, March 10, 2015

50 years since Selma

To be Conservative is to oppose change. That definition is too kind, to be Conservative is to embrace evil.

Friday, March 6, 2015

Things Sweet and Sour but otherwise mundane

Another month and Obama sets another record of continuous months of job growth, now at 59 months, and this was a good one. According to employers they hired 295,000 new workers in February and the household survey of workers dropped the unemployment rate to 5.5%. This is half the rate that Obama inherited, but the Republicans insist this simply doesn't count because of the 'low' Workforce Participation Rate. The official Conservative Talking Points don't mention Participation so much anymore since the rate actually started to edge up five months ago even though Baby Boomers continue to retire.

Oil has been trending up in price lately as well as gasoline, but the people who keep track of the big storage tanks in the US are saying that most of them are full, and by mid-April there will be no place to put oil. This suggests that we're likely to see a market crash taking the price back to pre-Operation Iraqi Liberation (OIL) levels. The main reason that there is an oversupply is that there are two basic types of oil 'light sweet crude' and 'heavy sour crude'. The difference between sweet and sour is the sulfur content of the oil, and because in the old days refinery men would actually taste the oil in order to tell what was in a railroad tank car.

Most oil imported into the US is sour but much of the domestic production is sweet and most refineries only handle one or the other. This gives you competing supply sources that both wish to keep refining instead of shutting down. Venezuela produces sour crude and they own their own US refineries which they've been unable to sell recently so they need to keep those running.

Gasoline prices aren't directly connected to oil prices but could plunge if domestic oil production remains high as light sweet crude contains more gasoline. The veto of Keystone XL by President Obama maintains the supply of oil as the pipeline was to be a loophole in 1970s law prohibiting the export of US oil. The Koch Brothers would have done this by terminating pipeline in a Free Trade Zone in Texas created under NAFTA to process Mexican produced oil. Tar Sands oil is too thick to pump through a pipeline by itself and they are allowed to thin it with domestic oil.

From the 'kinder, gentler machine gun hand' file: the Pentagon has announced that the US and coalition forces engaged in Iraq and Syria will not be using Depleted Uranium ammunition. This applies mostly to 30mm anti-armor munitions fired by aircraft like the A-10 Warthog that is being used heavily in the conflict. The Bush Administration was a big fan of the Uranium ammunition and used it for everything from vehicle mounted weapons to helicopters and aircraft of all types. Technically DU isn't radioactive, but since it vaporizes on impact in order to burn through armor it produces a persistent heavy metal dust that is a gene scrambling poison. In such a dry climate DU's effect of creating Iraqi birth defects will probably never end completely.  

In other news, it's possible that a historical miscarriage of justice could be corrected. The National Transportation Safety Board announced in late February that they will formally consider re-opening the investigation into the plane crash that killed Buddy Holly. This determination came shortly after the 56th anniversary of his death in an Iowa plane crash. Popularly known as the Day the Music Died, Buddy Holly, the Big Bopper Richardson and Ritchie Valens were killed along with their pilot when their plane plowed into a snowy corn field at full speed some six miles from take off.

The crash of the new Beechcraft Bonanza Vee-Tail aircraft was officially blamed on pilot Roger Peterson's lack of experience. Persistent rumors circulated that a gun known to be carried by the Big Bopper and found two months later had discharged causing the crash. An autopsy was done in 2007 to lay to rest rumors that Richardson had initially survived the crash.

The likely conconclusion of a new investigation will lay blame on the aircraft as a number of similar crashes occurred with the same model until a retrofit was done by the manufacturer. It appears that control cables to the plane's tail surfaces would bind causing altitude loss or a stall. The company never accepted responsibility for any of the 'unsolved' accidents.

Twitter @BruceEnberg - It can be the most mundane things that profoundly alter history.  

Thursday, February 26, 2015

Liberal content streaming directly to you on the ObamaNet

If you are streaming this online you are receiving it without paying extra nor are you trying to get around an outright block of its liberal content. That's because you are using the ObamaNet. A bit of history: the Right Wing crazies made fun of Al Gore for 'inventing the Internet', a claim he never made by the way. Gore did push through the language that made the government funded construction of the  internet entirely available to anyone without prejudice, or as it's commonly known, Net Neutrality, and the right wing corporations hated him for it.

Bush appointees to the FCC found a loophole in the law and simply declared that that Net Neutrality ended when it reached your ISP or Internet Service Provider. That could be a phone company or increasingly a monopoly cable company that provides the last mile of wire between you and the World Wide Web (www). So if you want to stream a movie you don't just pay for high-speed internet, you pay extra to the original source because they will be artificially restricted from providing you with content at a usable speed without paying extra, even though you are already paying for high speed access.

Robbing you at the toll booth is the Conservative Economic Model, any number of tollways, toll bridges, utilities... Enron, all models for taking your money for no reason other than they can. The difference here is that they can simply refuse to stream content that they don't approve of. It's like turning back cars at the toll booth because they don't like the liberal bumper stickers on your car. Actually Bush did eject people from his Town Meetings on that basis alone.

Once Harry Reid nuked the Right Wing hold on Presidential Nominees, Obama appointees confirmed by the Senate to the FCC have reversed this regulation. It had originally led to a Supreme Court ruling in favor of corporate censorship. Simply put Obama appointees have decided that the last mile of internet cable serves the "Public Good" and is not just a corporate profit center nor an excuse for censorship of content.

The Right Wing response is that Obama's FCC ruling allows the Federal Government to micromanage the internet. They are good at that kind of lie aren't they? It's just the opposite of that of course, any corporation or individual can continue stream content to Al Gore's World Wide Web regardless of content, political leaning or what ever standard you care to apply.

Twitter @BruceEnberg - The Founders would have seen the Internet not as magic as you might assume but as the result of the science and learning that they almost all endorsed. They would be pleased that the First Amendment was applied as they wrote it to cover this Free Expression of Ideas.

Friday, February 6, 2015

Did you buy that suit off the rack?

There were 257,000 new jobs in January, and that's pretty good. But the more significant news is that November's number has been revised upward again to 423,000 new jobs. December was revised upward to 329,000. This is 147,000 previously unreported new jobs. You can expect January to be similarly revised when complete data becomes available from employers. That's a cool million new jobs in three months.

The Household Survey showed a 0.1% increase in the unemployment rate because another million people have rejoined the workforce. The news speak expression is "people have more confidence in the economy" or in English, 'people are hearing from those working that the boss is looking for new hires'. The Workforce Participation Rate that Conservatives always cite to 'prove' that Obama isn't creating any actual new jobs ticked down slightly even though Baby Boomers are continuing to retire.

Greece has proposed a perfectly reasonable compromise to lower their debt obligations to foreign bondholders. Germany continues to make not so vague threats that Greece had better not default. The European Central Bank that prints the euros has cut individual Greek Banks off from loans, but not Greece's Central Bank. This is more a message to Germany than Greece. The Greeks know that they'll need to start printing their own money if cut off from euro borrowing. It's up to Germany if they want to risk a flight from the euro by the nations owing Germany's trade surplus as debt.

Remember Collateralized Debt Obligations (CDO) that collapsed the entire banking system, halved real estate prices, crashed the stock market and caused uncertainty about the day to day continuation of civilization? They're backkkk, but are now called 'bespoke tranche opportunities'. In case you're not up on obsolete english words, 'bespoke' is having your suits custom made instead of buying off the rack. Of course there's nothing custom about the new CDOs, dealers just have a rack of them with pretentious names on the labels.

Goldman Sachs is again cranking out these moth eaten rag suits big time. They don't expect to sell all the tranches (a slice of debt rated at a certain risk level) from any particular bundle of debt, the big money is in hedging against them. In other words they're selling bets and bets on bets and on and on. Last time around the stockpile of derivatives or bets reached a thousand trillion dollars before the banks couldn't handle the volume of defaults.  You wouldn't think anybody would be stupid enough to buy them, but people managing other people's money like the returns this nonsense creates on paper. So we'll see how long it takes to collapse this time around.

Twitter @BruceEnberg - all my tweets are bespoke.


Monday, January 26, 2015

What do you call a dozen bankers in a jail cell? a) A good start.

The screaming headline is 'Greece Elects Far Left Syriza (SIH-reez-ah) party to run Government', the reality is they're on par with other left leaning mainstream European governments, it's just that they aren't taking this austerity crap anymore. The Greeks have paid a cruel price to demonstrate how bad right-wing economics really is. 'Austerity driven growth' is right up there with Bernie Madoff fund management, sounds great until you see the actual results.

The Wall St and London bankers caused the Greek debt crisis by selling the Greek government risky financial instruments to replace sovereign debt and then created derivatives that bet against these same instruments. This drove the cost of servicing Greek debt through the roof. A modest cost to service debt doubled and redoubled driving up the operating deficit requiring more and more borrowing at ever higher interest.

The people of Greece weren't to blame for this and have suffered needlessly. Iceland found itself a similar position and instead of suffering for the actions of bankers, they put the bankers in jail and Iceland's economy is doing fine.

US Conservatives instead blame the Greeks for being lazy but in fact the average Greek citizen is more productive than some of those US Red states that are supposed to be Conservative models for the rest of us. You know, the ones that get $2 back from the Federal Government for every $1 they send to Washington. If the European Union operated on that basis Greece wouldn't be having a problem.

The problem with the Euro is that it's really a de facto German Mark as they control and benefit from the flow of euros. Germany did with currency what they couldn't do with Panzer tanks and now control most of Europe. So the Germans could try to buy Greece off with debt restructuring and such things. If the Greeks are smart they'll tell Germany where to stick its euros and start printing drachmas. Sure, in the short term there would be some considerable pain but Greece's primary industry is tourism, a weak drachma would make vacationing in Greece very attractive and the hard currency would pour in. Greece is also a big trading partner with China and you can bet a workable plan would appeal to The Peoples Republic to get a foothold in Europe's economy. Greece could probably borrow all the renminbi that they want for next to zero interest.

The ball is really in the the German's court, do they want to risk much larger Spain doing the same thing if they don't make a deal, or let Greece go and try to deal separately with Spain? Iceland proved that a really small country can make a go in the World economy, if you develop a reputation for jailing bankers.

Update: Germany has issued a statement late today that they "expect Greece to live up to its commitments". I don't know if Germany thought that through, Syriza (SIH-reez-ah) has made it clear they want Germany to eat a big chunk of debt, but they say they're committed to negotiation (before Greece dumps the euro). Oh well, they couldn't hold Europe with Panzers either.    

Twitter @BruceEnberg - If you want a nice vacation from politics in 2016, I'll bet that a USD will buy a lot of drachma.

Friday, January 23, 2015

The Ups and the Downs

Job openings are up by two tenths of a point, according to a private company that does monthly surveys of employers. Last weeks new unemployment claims were down.

Mitt Romney's 47%, the people that he doesn't care about, is down to only 40% of the population. The slowly recovering economy has resulted in more of the Working Poor making enough to pay some income tax.

Overall inflation (including fuel & food) was down to 0.8% in December, although core inflation (non-volatile items) was neither up nor down. The Federal Reserve has a target of 2% annual inflation in order spur investment rather than cash hoarding in anticipation of deflation. Fed Chair Janet Yellen's concern level is not up despite the weak inflation numbers, but you can expect interest rates to stay down, I'm guessing for years to come.

Falling commodity prices are starting to affect non-volatile prices with airfares down 5% in December. Average hourly wages fell five cents last month, there's that hint of deflation we don't want to see.

Obama has proposed raising up capital gains taxes from a top rate of 20% to 28% on incomes over $500k. He'd also like to close down the Capital Gains Loophole on Estate Taxes. This would be bad news for the 97% of billionaires who are not entrepreneurs but increase their wealth by manipulating the rest of us with the power of their money. It won't actually get rid of the inherited wealth that makes the upper class the useless parasites that they are.

Obama would use the increased revenue to dramatically raise earned income credits. The problem with that is it's also the Walmart subsidy. Earned Income Tax Credits help the working poor and enable these low wage business models that have destroyed all the Mom & Pop businesses in the US.

Obama doesn't expect any of this to pass, but in point of fact the Republicans were considering raising the subsidy for Walmart workers, however by Obama backing it this will make sure it won't happen. This is a good strategy for 2016 and you could say the politics are hurting the working poor, but having Republicans in charge is far worse for people than them just being poor.

Standard & Poors is down in the dumps having been suspended by the SEC from rating mortgages for one year & being fined $80m. None of those responsible for rating worthless mortgages AAA investments like they were Treasury bonds will go to prison and S&P has not been put out of business. A real downer for actual Justice.

The long term outlook for the poor is down, with the bottom 60% holding just 1.7% of all US wealth. Very few people in the bottom 60% can raise a $1000 cash for an emergency. Funny to think about almost 2/3 of Americans as being at "The Bottom". Funny in that Conservatives still talk about how great America is.

Obama was pretty upbeat with his State of the Union speech, not that the US is doing so great, but compared to the state of the European Union it's time to sing Happy Days are Here Again. The European Central Bank has begun its own QE money printing program to buy $70b/month of bonds.

Countries that lifted up two fingers to austerity like France did are doing pretty well just the same, but the Euro itself is in trouble. This is great for the USD unless things really start to get out of hand, then it's a big downer for everybody, except maybe China, they are the only people who actually seem to know what they're up to.

Twitter @BruceEnberg - Mitt Romney and Jeb Bush agree that income inequality is real and only Conservative values can fix the problem. Yeah, everybody raise up a digit to salute to that.

Friday, January 9, 2015

First they mock you, then they obstruct you, then they take credit for your economy.

It's good news for Mitch McConnell, the economy gained 252,000 jobs in December validating his contention that the Republican takeover of Congress has been much anticipated by business. In fact business has been anticipating this shift away from Obama's failed policies for 57 straight months of job growth. This is a new record every month, and consistent with the pattern the previous two months were revised upward by 50,000 new jobs combined.

This indicates the growth of the economy is more robust than the traditional models of employer surveys account for, and is further borne out by a drop in jobless rate to 5.6%, a drop of two tenths in one month. The unemployment rate is determined by a direct survey of households by the Census Bureau on behalf of the Dept of Labor. This process is slammed by the right as a farce because the Job Participation rate continues to climb. It has been ever since Baby Boomers began to retire 15 years ago, but nobody noticed this until Obama took office. This problem is also exacerbated by high unemployment among the Millennial Generation which is an even larger demographic than the record setting Baby Boom. The average age of minimum wage workers is 35, closing out first time job opportunities for teenagers.

Of course you can't give Obama a lot of credit for the economy other than keeping Republicans away from the gears that they are constantly itching to throw a monkey wrench into. You can give some credit to the Federal Reserve for maintaining low interest rates despite calls from the right to raise rates to ward off the imminent hyperinflation that we're going to see any day now. The so-called printing of USD that Obama gets blamed for is also done by the Federal Reserve, and it too is guaranteed to produce Hyperinflation any day now. This QE program pushed lending for new growth by making bonds unavailable for 'safe' investment as over $3t of them now rest in the Federal Reserves vaults.

One small blur on the otherwise clear x-ray was that average wages fell by five cents per hour in December. One month doesn't make a trend, so it's not time to panic just yet even though we haven't seen this in a very long time. It's no secret that Conservatives have been actively driving down wages for decades, but now we're actually seeing it out pace inflation. The part that makes this really scary is that if declining wages really become a month after month occurrence is that it signals deflation setting in. The whole purpose of the Fed's actions has been to program 2% inflation into the economy and thus prevent deflation and stimulate investment instead of cash hoarding. Commodity prices have fallen sharply and that's great for consumers, but not if wages start to fall too.

With the minimum wage only a third of what it should be and almost no union influence there's not really anything keeping wages up. In fact economists were surprised that wages didn't drop before when unemployment was at 10%. It's a phenomenon that economists call "sticky" where prices or wages don't fall as the model predicts. It seems most humans are not ruthless sociopaths and won't behave that way until they feel they have no choice.

The danger of deflation is that consumers and businesses can't pay their debts if wages and prices fall too much and you get into a economic death spiral where everyone starts cutting back. Even those who don't need to cut back start stuffing cash under their mattresses. The famous FDR quote, "...all we have to fear is fear itself..." wasn't about the War as people tend to assume, but about the economic panic happening as his first inauguration was taking place. The picture of the ship gliding along smoothly may only be an illusion. With rats infesting Capitol Hill you know nothing productive will be done there, and it should go without saying that you can't trust Wall Street not to do something destructive. The malaise setting in over in Europe or Russia or China or (fill in the blank) could trigger events, or maybe not. Don't forget to rotate the canned goods just the same.

Twitter @BruceEnberg - where we're always glad to share recipes made with canned beans and fresh game.