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.

Tuesday, December 23, 2014

It's only Common Sense

It's been widely reported that Wall Street bankers won a guarantee of bailouts from Obama's budget. It's true that they did get the 'Push Out Rule' eliminated from the Dodd - Frank Act so that they can continue to use depositors money to back risky financial instruments. It was junk like derivatives based on collateralized home loans that crashed the banks in 2008. But, this doesn't guarantee the banks themselves will be bailed out, only that the FDIC will pay out the insurance on deposit accounts up to the legal limit.

There were six other provisions attached to the House Bill that would have gutted Dodd - Frank but thanks to Senator Elizabeth Warren those were all killed. So if the Wall Street banks crash again the FDIC will be able to take a meat ax to them the way they do to smaller banks. That won't keep crooked bankers from sucking billions from them between now and then, but there is such a thing as 'Claw Back' to recover ill gotten gains when this happens. It just depends on who is in charge at the time, President Warren for example could be such a person.  

I've been saying for years that President Obama was deliberately stalling the Keystone Pipeline with the ultimate goal of killing it. With the falling price of oil it looks like that will happen as it's simply no longer feasible to make a profit from the convoluted process of obtaining oil from tar sands.  

The 3rd quarter GDP numbers have been revised upward to a 5% annualized growth rate. This is in line with higher job numbers and continued low weekly unemployment claims. The far right continues to claim that the government is simply faking the numbers month after month, year after year. I hate the expression 'common sense', mainly because Conservatives think it's a substitute for science, but in this case it's appropriate. As bad as things were six years ago can anyone seriously claim it's been getting worse all this time? Sure, the wealth of the Middle Class continues to erode, people will get used to being poor, but they don't get used to starving. Contrary to the Conservative Talking Point, Obama has not put millions on welfare instead of into jobs. The elderly and the working poor (who have jobs) get 85% of the food stamp benefits, this is from corporate low wage policy, not Obama's doing.

The Right also insists that the Government is hiding run-away inflation. If you point to the gas pump they'll say with a straight face that gas was cheaper when Obama took office. Sure, it went from $4.25 to under $2 for a couple of months as the we teetered on the edge of total economic collapse. Of course now they say Obama can't keep the price up anymore, with no explanation of how he's been doing that.

Will gas prices stay down? Considering that we have a new Congress coming in that will do everything they can sabotage the economy, probably not. The only difference now is we have Elizabeth Warren pointing out what's really in these Republican bills, and that takes away the cover of 'claiming ignorance' that Conservatives always use. It's not true that they don't know what's in these massive bills, they just hope the voters will believe that.

Twitter @BruceEnberg - this just in: the Sun is again climbing in the sky again. Burning yule logs and decorating Evergreen trees worked to save us from the eternal night once more, it's only common sense.

Friday, December 5, 2014

Party like it's 1999

You're one of the 321,000 people who got a new job that was created in November and you are really stoked, but some dude at work just won't leave you alone. He rants about the President being impeached and says how he's wrecking the economy by raising taxes. You really don't know what to think about that stuff because for you things are looking up. Now he's telling you that at the end of the month the world as we know it is going to end. What he's telling you about now sort of makes sense, so you make a mental note to buy extra batteries for your portable CD player on the way home. You know just in case the computers all crash because of Y2K and we're back in the stone age on New Year's Day.

1999 was the last time we had 321,000 new jobs in one month. Clinton had survived impeachment early in the year and the budget was running a $250 billion annual surplus. It was projected that by the end of Al Gore's second term that all the Federal debt except for the Social Security Trust Fund would be retired. Republicans were talking about a Lock Box for the Social Security money and Clinton tried to endorse the concept, but what the GOP really meant was passing a law that would reduce the debt ceiling for every dollar added to the Social Security Trust.

This was all turned on its head by Bush who would in a couple of years be telling everyone that those bonds were worthless and Social Security should be privatised. Bush of course was spending money on the credit card almost as fast as Reagan did. Not a penny of Reagan's debt was ever repaid and was  original paying as much as 20% interest. Clinton was able to refinance it with low interest bonds. Under Obama we're paying nearly zero interest, but you can guess what will happen if the GOP were to actually get control again. It is possible to drive interest rates up to Reagan levels and drown the Federal Government in interest payments, that being their goal all along.

Back to the Future, today we have a huge number of new jobs in November and the gains for September and October together were revised upward by 44,000 new jobs. Job gains have been broad based with substantial increases in manufacturing, transportation and construction jobs. Healthcare continues to add jobs defying Conservative claims that people are losing access due to Obamacare.

The Republicans won't give Obama credit for $2.00 gasoline even though it was his fault when it was pushing $4.00. The GOP is also floating the meme that low gas prices are destructive to the economy, and they say THAT is Obama's fault. With the Conservatives keeping score, he can't win. Rapidly falling fuel prices are deflationary and that can be bad. Average hourly wages are actually going up and that's inflationary, hopefully reaching a balance point that produces growth. As long as the Federal Reserve continues to ignore the Conservatives and keep interest rates low we could see a semblance of prosperity. That's assuming that Obama continues to out think the half witted Republicans and they can't throw a wrench into the works.

Things actually look pretty good for 2015, more jobs, higher wages, low gas price and declining deficit. Sure, most government economic policies still suck, but at least the computers aren't going to crash.

Twitter @BruceEnberg - let's all party like it's 1999 again.

Friday, November 7, 2014

Say it ain't so. Okay I will.

The Federal Reserve called off its QE3 asset buying program last week and with the sudden end to Obama's cash printing spree the the stock market went into immediate free fall. There are more stock brokers on the ledges than pigeons.... what? That didn't happen? Not to fear the Republicans have a talking point to cover this, you see they're in charge now so the markets are up and will continue to surge. Never mind that the Dow had nearly tripled while Obama was in charge, and really he's just as much in charge today as he was on Monday. The reality is that the dead weight in Congress really hasn't changed that much. The only difference is we'll have two years with no Senate confirmations much like Obama's first four years.

It should be noted that the markets are more than a little concerned about the prospect of the Tealiban shutting down government. They might do it just because they don't have the power to do anything else, and they feel the need to be in charge at all costs.

The implementation of ObamaCare is destroying jobs by the millions, we lost 800,000 jobs last month alone.... Oh wait that was the last year of the Bush Administration. We actually added another 220,000 jobs in October extending the record number of continuous months of job growth to 57. Add another 31,000 jobs from upward revisions to August and September numbers.

Nobody can get health care with Obama forcing burdensome regulations on doctors, but oddly enough the healthcare sector has added a million new employees anyway. And unemployment ticked down another tenth of a point, because the out of work people have simply died. Conservatives haven't used that one yet, but it would go great with Obama's IRS Death Panels giving all the Conservative Christian White People Benghazi Strain Ebola.

From the really bad investment advice file: Pat Robertson is telling his faithful to buy oil company stocks. It's something about Pat not wanting to support the manufacture of condoms by buying into non-oil companies which are often conglomerates that make god knows what sort of evil contraption. Oil is mentioned in the Bible so it's holy. He probably doesn't realize that providing chemicals to industry that make evil contraptions is where oil companies make their real money, you can see that Satan's hand is everywhere. Never mind that the price of oil is falling through floor and oil company stock is not going to be a winner. You have to wonder if Pat has been caught in a bad market position and is just trying to get a price bump before he unloads his stock, especially if God told him that the Teabillies in Congress will manage to crash the market.

And from the really crazy file: There is a public referendum in Switzerland this month that would force their central bank to buy 1500 tons of gold because... well you know... because. The Swiss government sold off 1000 tons back in 2000 when it was a quarter of its current price and a lot of people are peeved about this. What's really driving this of course is that the gold bugs have lost 32% in the past two years and the price is likely to collapse further.

The Swiss are already the seventh largest owner of gold in the world so there's no justification for a country that size to put still more useless metal into their vaults. The fear of doomsday or the idea that gold is some sort of hedge against inflation convinces people to buy the stuff. But if you compare inflation to the gold price there's actually no correlation. Gold goes up and gold goes down. It would need to be $2500/oz to equal the buying power at its peak price during the Reagan administration. If you bought gold back then, you have lost a lot of money let alone you're getting no return on the investment.

In all the popular doomsday scenarios you never see anybody scrounging for gold in that type of movies, they're always looking for canned goods and ammunition. Unless gold bullets work better to kill zombies it sounds like a bad investment to me. I've never seen the Left Behind movies, maybe there's actually going to be a huge market for golden calves.

Twitter @BruceEnberg - I'm going to have my Swiss Army knife with can opener attachment gold plated, just because....


Thursday, October 30, 2014

Everybody's getting Wifi these days

New claims for Unemployment Benefits have for some time been in the neighborhood of 285,000 each week. This hasn't been seen consistently since Clinton was President. It means either business is good and employers aren't laying off, or the outsourcing of jobs has tapered off dramatically so that people aren't permanently losing jobs. Since we've seen a record 56 continuous months of job growth it's likely the economy is in fact picking up speed.

The price for West Texas Intermediate crude oil is continuing to slide and is approaching $80 a barrel. Wall Street banks are predicting it will go to $70 a barrel. One prominent analyst has even predicted $10 oil with the end of oil's stranglehold on the energy market. He's since backed off on this prediction but stands by his claim the oil will continue to fall. Of course what we're really talking about here is the small amount of oil that trades on the open market. They used to call this the spot market, as in "we've got a spot too much oil coming in from the wells today, what will you give us for it?" Most oil is firmly in the hands of the few Big Oil Companies, and they're not going to sell it cheap.  

Gasoline on the other hand is subject to market forces. Gasoline makes up between 40 and 50% of a barrel of crude oil. But, the big money is in the much desired chemical fractions that make up only a couple of percent at most of each barrel. Gasoline and fuel oils (like diesel, kerosene and jet fuel) are basically waste products of refining to get the good stuff. If the tank farms are all full and the tankers moored offshore are full they have no choice but to cut the price to increase consumption. They used to just burn it, but since the Koch brothers haven't been able to kill the EPA that's not an option in the US.

So now you know why higher mileage standards are fought tooth and nail by the Republicans. Big oil could refine the extra fuel into other useful products but that's way more investment than simply buying elections. Most people have no idea how any of this works and you'll never hear about on the network news. The bulk of Americans polled think the country is headed in the wrong direction. The networks wanting to maintain the election horse race let people believe that this means everyone will vote Republican. In fact liberals are probably more upset than conservatives since they have better idea of what's happening.

New calculations of China's gross domestic economy show that based on actual buying power China has passed the US in realistic GDP. This isn't really surprising since China has more middle class than the US has people and they intend to move another 300 million from rural poverty into newly built cities over the next decade.

To put into perspective how China has been able to do this, they own over half the world's large construction cranes and consume over half the world's cement. China is building tens of thousands of miles of light rail and 250 mph bullet trains that run on thousands of miles of high speed track. At the same time they're eliminating passenger service from heavy rail lines allowing for more freight trains. The US of course has no bullet trains and runs its extremely limited passenger service on poorly maintained freight lines at speeds lower than Casey Jones operated his coal fired steam train on the Illinois Central in 1900.

The Republicans say we can't build any of the things that China builds in huge volume, but they promise to bring America back to the good old days. Casey Jones is rolling in his grave.

Twitter @BruceEnberg - I finally hit 666 followers today with the addition of Andrew Breitbart. Thanks to Satan for installing Wifi service in Andy's circle of Hell.

Friday, October 3, 2014

Have you gotten any postcards from the FEMA Camps?

Unemployment has fallen to 5.9% based on the Census Bureau's Household Survey showing 329,000 fewer people responding that they were unemployed. The employer survey shows 248,000 new jobs created in September. The 80,000 difference between these two numbers will mean that the employer hiring number will be adjusted upward as more employer data is processed. Both July and August numbers were adjusted upward by 31,000 and 38,000 respectively.

The Conservative take on the falling unemployment rate is that it's because Obama's IRS Death Panels have infected White Conservatives with the Benghazi Strain of Ebola, and UN troops have moved them to FEMA camps. Once they get to the Saul Alinsky FEMA camps, the White Conservatives only get ObamaCare and die. This is freeing up jobs for illegal immigrants who bring more disease. Conservatives are doomed unless they buy gold from Glenn Beck.

It's not that you can give Obama any direct credit for the recovery other than holding the GOP crazies at bay. If they had been able eliminate safety net spending, totally deregulate everything, eliminate the minimum wage and on and on, we'd be living in 1932, except back then half the population lived on farms and had food. The dystopia the Republicans would have created as the country began to spiral toward the drain is hard to imagine. Their goal of course was to create a Fascist State, but the problem is that these people aren't half as smart as they think they are. Who knows how that would have turned out.

It's not that they've given up on their goals but the opportunity has been lost for now. They are however still actively engaged in the slow decline of America. You've probably heard that former Federal Reserve Chairman Ben Bernanke was refused a re-fi on his home loan. Rumor is that he's standing on a street corner wearing a sign that says, "Will manage financial markets for food". A report from one of the big banks says that half the people with Student Loan debt don't qualify for a home loan.

In the olden days a college a degree or a union job was the basis for the American Dream. Anymore if you want the American Dream you need to be born in China. They have more middle class then the US has people and are planning to bring another 300 million up to that level in ten years. In ten years will there be any middle class in the US?

Twitter @BruceEnberg - where you can keep up on reports from the FEMA camps
                                         in case your Conservative relatives disappear.