Friday, August 16, 2013

Huff Puff ... Gasp

Last week's 320,000 new unemployment claims was the lowest weekly number since Oct 2007, this of course was before the Bush Crash really started to pick up speed. Back then 300,000 plus in weekly claims was seen as disturbingly high, but those weekly numbers would seem tame by the time Bush left office for a career in painting self portraits.

Core inflation has ticked up to 1.7%, and this with better unemployment numbers is reinforcing cries about the "imminent tapering of the Federal Reserve's bond purchases". The pundits who make their living predicting what the Federal Reserve is going to do have really latched on to this one, nobody seems to care that they're always less accurate than a coin flip. The Fed will at some point have to cut back on bond purchases, so they will someday be right. At the moment the Federal Government isn't creating any new bonds (except to roll over existing bonds) since they're up against the debt ceiling.

The Fed's target for inflation is 2% so they really aren't close to shutting down the printing press. Printing money like this drives the rightwingers nuts, but this is what the Fed is supposed to do, it is in the money printing business after all. Rand Paul got himself into a bit a pickle by suggesting Fed Chairman nominees of Fredrick Hayek and Milton Freedman. I suppose he thought he was safe since they're both dead, and they are heroes of far right crazies in the way Ayn Rand is. All three were writers of absurd right-wing fiction.

Nobody took Hayek seriously when he was alive since he was wrong about everything to do with economics, he thought the Great Depression was a fine thing. Freedman was taken seriously until Chile brought him in to redo their economy and completely destroyed it. That didn't stop Reagan from implementing as many of the same policies as he could. Milton Friedman wasn't a committed ideologue however, and favored printing massive amounts money the way the Fed is doing it as preferential to sliding into a Great Depression. Rand Paul seems undeterred by this small fact.

Rand Paul doesn't really favor either Hayek's or Friedman's approach to economics, he seems to believe in magical gold coins. The Paul family never explains how the government would go about putting a lot of gold into circulation without doing the very things they oppose being done with paper money. A really basic thing is that gold coins are no different than paper money when they circulate as money, the value is stamped on them, otherwise you'd have to check the gold market every time you went to the cash register. In that reality the price of gold would be listed in Yuan, since China would be the only major economy. Wait, we're in that reality already.

You can still have inflation and deflation with gold coins since prices are really set by the surplus or the scarcity of goods, and not just the money supply. The fact that there is a tiny market for gold in fillings and computer circuits doesn't really 'set the value' of gold. If people started hoarding gold coins the Treasury would have to issue more of them the same way the Federal Reserve is printing electronic money to defeat billionaire cash hoarders, and take the coins out of circulation to prevent inflation just like with paper money.

We're not seeing massive hyper-inflation that the far right is always predicting because there is no mechanism to make that happen. Wages continue fall with the corporate created labor surplus plus de-unionization, and there is a constant surplus of goods with factories operating far below capacity. You only see the situation of a wheelbarrow of money needed to buy bread when there's little bread to be had, but people continue to get paid ever increasing amounts of money.

The price increases we have been seeing are entirely due to the huge run up in oil prices by the Bush-Cheney regime, and from the market manipulation of fuel prices by the Wall Street banks. This pressure is starting to wane and we could see falling prices instead. It would be a great time to dramatically raise the minimum wage, but that's going to take getting rid of the Republicans. Twitter @BruceEnberg There's no hyper-inflation on twitter, just hyper-ventilation

Wednesday, August 14, 2013

Until the canned goods run out

We're still getting cries from the Rightwing business pundits that hyper-inflation is just around the corner, or better yet that it's already happening. This would mean that the government numbers on inflation are lies, all lies (lies, lies, I tell you, sputter, sputter, drool). How many years do they think they can keep saying this without anybody catching on? For the brain dead right, the answer is, forever. Most people are starting to grasp that it's nothing but 'Horse Feathers' (uncensored internet radio, pleazzzee).

The proof that the 'untethered' right has been using throughout Obama's two terms has been that gold's steadily increasing price 'proves' inflation has been happening at a horrific pace. They've kept saying this even as gold prices have been falling by a third. (oops) Now they're claiming that 'real' gold, that is physical gold that you buy at the pawn shop hasn't gone down, and is in short supply. Except that it has gone down, the market is the market.

Oil is supposed to be the other harbinger of hyper-inflation, except that hasn't been going up either. Sure Bush taking Saddam's massive oil production off the market did drive the price of oil from $18/barrel (& falling) to $140/barrel until it collapsed the banking system, but that increase has been incorporated into the price of everything like you would expect, and it has stabilized.

What is Hyper-Inflation really? It is the printing of massive amounts of money, and distributing it to people who will spend it to buy goods and services that are in short supply. This drives up prices in a fantastic way, but only if you keep printing money in ever increasing amounts. We don't have that problem. There is really downward pressure on wages that inhibits spending even if the workers have some money. We have far more goods than people can buy, you should expect prices to actually fall. When you start seeing empty shelves at Walmart then you can worry.

Most of the $85b per month in new money that the Federal Reserve (a private bank, if you didn't know that) is printing is going to people that already spend millions each month to maintain their 'way of life'. Buying a new, larger Italian yacht or a French helicopter isn't going to produce any inflation. Most likely the rich just launder their increased cash flow through a Cayman Islands account that is really held in New York so as to not pay any taxes, but not actually buy anything.

The real goal of the Fed is to convince the super rich that the Fed is printing sufficient money so that it will lead to inflation, and make their wealth decline in real terms. The idea being that the rich will need to actually 'make' some money, and they will be tempted to engage in some sort of real commerce that will inadvertently do us 'little people' some good. There have been some minor signs of this increased commerce, primarily in the easing of mortgage requirements so that a few more people can buy homes.

In short, you can forget about buying a wheelbarrow for your loaf of bread money, but stealing a shopping cart to transport your hoard of canned goods while you still have some money, that might be prudent. Deflation is still the real fear, this is what has always defined a Depression, and we're still in one for the foreseeable future. Why? Because billionaires flush with cash love a good bout of deflation so as to buy up your assets for 10 cents on the dollar, and they still hold sway.

Most of the really vast fortunes that old white men are sitting on today came from their daddies taking advantage of the last massive deflation in 1930. In short, we stand on the precipice, we can control our future, but only if a significant fraction of the people come to understand all of the things the rich don't want you to know anything about.

Twitter @BruceEnberg  Twitter isn't affected by deflation, at least until the canned goods run out....

remember the Census

Monday, August 12, 2013

Comrade Santorum says that workers are all the same.

There is no middle class in American according to former Senator Rick Santorum. "Don't use the term the other side uses. What does Barack Obama talk about all the time? The middle class," Santorum said at a fundraiser in Iowa. "Since when in America do we have classes? Since when in America are people stuck in areas or defined places called a class? That's Marxism talk."
He blathered on, "When Republicans get up and talk about middle class, we're buying into their rhetoric of dividing America. Stop it. There's no class in America. Call them on it." No word on how much this confused his middle class audience.
Where do you start with a guy this dumb? Saying everybody is exactly the same is MARXISM. Never mind that Santorum has always uses the term 'middle class' himself. He seems to think that when Democrats use the term 'middle class' that it's some sort of lower caste designation, you know like 'untouchables' or 'the 47%' also labeled by the Republicans as 'takers'. 
The question, is this classless society a new Republican meme, or just Santorum getting all frothy again? Has the 'middle class' ceased to be part of the Republican base, or do they think they can actually convince their brain dead followers that there is a country club pass waiting for them at the guard house of the gated community. The place behind high walls with armed guards that the people who aren't in the 'middle class' really do live.
The average High School graduate can hope to make close to $1 million in his lifetime. Somebody with a bachelor's degree can earn close to $2.5 million if they can find a job that still pays those wages, and they don't end up working at Best Buy. For somebody in the 'class' of people that Rick Santorum answers to, $2.5 m is the monthly expense account. 
He's right in the sense that the middle class is rapidly disappearing. For millions of Americans it happened suddenly: the job goes to China, the pension gets stolen gets by a Private Equity firm, and then they borrow to pay for expensive retraining to get a job they can't make a living on, and often this repeated 4 or 5 times. 
For most formerly Middle Class Americans the frog boiled slowly. Wages may have stayed the same while benefits were eliminated, but inflation has tripled the cost of everything over the past 30 years while many things that are needed to have a middle class lifestyle, like healthcare and college have gone from cheap to dearly expensive. The number of jobs per household has gone from 1.1 to close to two just to keep them at the dismal place they are at.
Median household income has declined to $45,000 per year when it should be $90,000 per year to claim the middle class share of productivity gains. This is the face of austerity, there is no middle class, everybody is poor. The 'poor folks' in the gated community just burn through a lifetime of income each month, because you know times are hard.   Twitter @BruceEnberg we're all equal on twitter comrade