Friday, June 27, 2014

Who's gouging who, get your score card here

The Federal Reserve has announced that they'll 'taper' bond purchases under QE3 by another $10b to $35b/month. Conservatives actually whine about this driving up the stock market as if that were a bad thing. All the people who bought into Reagan's 401(k) instead of a pension BS probably appreciate the market being saved, even if they didn't really get all of their money back with Wall Street capturing a huge chunk for themselves. That is why we have the big swings, there is simply no way to pay off everybody that thinks that they doubled or tripled their money in the market. And these same Conservatives want you to invest your Social Security in the market too. The Fed is also buying mortgage backed bonds and this appears to be having a positive effect with Housing Starts way up over this time last year.

Fed Chair Janet Yellen has said they'll keep interest rates low for some time even after the economy starts to recover. It may be premature to be talking about any sort of recovery however after the latest revision to the First quarter GDP. It apparently declined 2.9% on an annual basis caused by sagging consumer spending and some really bad export numbers. Since the GDP of the 4th quarter showed a 2.6% growth this downturn is probably just the result of the bad weather, so it won't be a problem unless the numbers that come out in July for the 2nd quarter are also negative.

The SEC is finally showing some interest in prosecuting the ratings firms who were instrumental in creating the Bush Crash. They were allowing mortgage companies & banks to sell junk bonds with little or no value by giving them AAA ratings the same as Treasury bonds. There's lots of guessing going on as to why the Feds might prosecute now and didn't have any interest in doing it before. My idle speculation is that the senior Bush people imbedded in the various gov't agencies to gum up the works are retiring and being replaced with people who might actually do their jobs.

Just in case you hadn't noticed, a new study shows that the average wealth of Americans is still 43% less than in 2007, even with the stock market recovery. It's also down 36% from 2003, meaning those glorious Bush years were worse than just a bust.

Even up in the top 5% where net worth averages about $1.4 million, they've seen a 16% decline from 2007. Of course when you get up into really big money as you might guess this isn't necessarily so at all, and their share of the national wealth continues to grow. It doesn't matter to a billionaire how many billions he has, it only matters that he has it all and you pesky peasants don't have anything.

It was all over the news today about how gasoline is going to be $5/gal if the Iraq unpleasantness continues, there are huge shortages don't you know. The reality is quite different, analysts had predicted a 2 million barrel decline in US stockpiles but reports to the government showed stockpiles of oil actually rose by 1.7 million barrels last week. Gasoline supplies climbed by 700,000 barrels and distillates like diesel, jet fuel and such rose by an additional 1.2 million barrels.

Fuel exports are still a big part of the US economy at 1.1 million barrels per day, if gasoline goes up at the pump it will be from old fashioned price gouging. And the Obama Commence Dept just eased the ban on the export of crude oil put in place 40 years ago, this is something you probably won't hear Sarah Palin mention while she's telling you how Obama has halted all oil drilling everywhere, all time forever, also too.

Twitter @BruceEnberg - where we tell you who's gouging who.