Friday, November 6, 2015

Keystone is dead and the economy is off and running.

There were 271,000 new jobs created in October and the unemployment rate remains at 5%. Low gasoline prices have been driving up consumer spending and creating jobs. Obama has driven a stake through the heart of Keystone XL pipeline ensuring that oil from the northern tier states will continue to stay in the US instead being exported and that will keep the price down.

Right wing pundits have be saying that low gas prices don't translate into increased consumer spending, but an extensive study by JP Morgan Chase shows that the average consumer is spending 80% of what they save on gas. This translates into billions of dollars that actually goes into an increase in demand for goods and services which is where jobs actually come from. Conservatives continue to sputter about Supply Side job creation, those are what they call the job creators, even though this economic theory was first debunked nearly a century ago.

The death rate of middle aged Americans is up significantly, this is of course directly caused by the GOP war on the Middle Class. Russia experienced the exact same thing after the Soviet Union collapsed leaving the Oligarchs in charge. The numbers aren't anywhere near as bad here, but only because Obama has been able to hold the US oligarchs at bay for now.

Based on the 'runaway' growth of the US economy the Federal Reserve is hinting that they may start raising interest rates. Contrary to the Right Wing crazies bloviations, Obama doesn't control the Fed, he dis appoint the Chair, but she doesn't have any real say about interest rates. Those are set by a board of made up of bankers, and they're just been itching to raise rates from the first month with a increase in jobs. The only thing slowing them down is a practice of transparency started by Ben Bernanke and continued by his protege Janet Yellen. The weasels aren't willing to eat the chickens if everyone knows who exactly is doing it.

China has run out of storage space for oil and they're still buying oil to build up reserves, so the sea of oil we're swimming in is going to suddenly get much deeper when they let up on purchases and that will drive the oil price even lower.

The Rightwing crazies thought the economic Armageddon they've been jonesing for on Obama's watch had come because China has been "dumping" US debt and surprise, no one cares. There is plenty of demand for US debt and as economy improves that demand will only increase while the need for debt will continue to decline.

Predictions that China's economy is collapsing need to be contrasted with the fact China has just launched a yuan based worldwide payment system. Anyone doing business with China can simply use yuans and avoid the Money Changers down at the Temple that prefer make you convert back and forth to USD or Euros or whatever.  

Walmart has been forced to remove "Made in USA" logos from its websites, it seems China isn't a US state, who knew?

Twitter @BruceEnberg - I checked the map, there really isn't a US state called China. I guess that explains all the boarded up factories.

Friday, September 25, 2015

Is the GOP Clown Car a Volkswagen? It should be.

China marked its President's visit to the US by announcing a cap and trade program on the burning of carbon starting in 2017. Now the Right Wing Nut Jobs really can call Obama's Cap and Trade proposal a Commie Plot with some small measure of truth.

China's economic problems are likely to get somewhat worse, but it's hardly the global disaster the short sellers would like you to bet on. Literally bet on, Wall Street has instruments to sell you that will cover you against China's collapse for a small fee. Check out their Brooklyn Bridge penny stocks while you're at it.

It appears China's problem revolves around moving to a consumer driven economy, they have 600 million middle class to serve and are planning for 400 million more over the next 15 years.

A number of past officials in China have become absurdly rich 'investing' in the stock market and are facing long prison terms for corruption. They were also resisting the move to consumerism but that is rapidly coming to an end. So it's unclear what exactly they're being prosecuted for, corruption which is usually tolerated or for resisting the new Five Year Plan from Comrade Chairman. That's the real title of China's 'President', he's really just the Chairman of the 205 member Central Committee and they represent every major power base in China.

Speaking of dodgy investments, I hope you weren't too heavy into German car companies. It's not just Volkswagen that's coming under scrutiny, it seems you really can't build a small cheap diesel engine that violates the laws of physics. It's not difficult to clean the sulfur out of diesel exhaust, but it's too expensive for a small engine, VW and other companies claimed they had a magic way to do it involving computer control, except the computer was lying and cheating like a Conservative politician.

The scheme was simple, the factory designed test of exhaust output involved taking control of the onboard computer from the testing equipment, but that actually triggered the computer to run a secret program that leaned out the engine so it ran clean. Conveniently, no provision was made for also testing horsepower output as that went to zero. You can have clean car that goes slow or a dirty car that goes fast, VW was pretending you could have both at a cheap price. The fallout from this could kill the company.

VW only got caught because a small US environmental group was trying to collect data to promote clean diesel, not to prove it's not clean. They borrowed a exhaust gas tailpipe probe and not having a shop dynamo to run the car on, they loaded it in the trunk and went down the road. The onboard computer not being hooked to a dynamo had no idea it was time to cheat. Germans just don't understand that Americans don't always follow orders without question.

The final numbers for 2nd quarter GDP were a robust 3.9% growth. This is like we had before Reagan. Low gasoline prices are boosting consumer spending for housing and big ticket items. Factory numbers suggest there should be another small uptick for the 3rd quarter. Since Conservatives have run out of ways to drive up gas prices we could roll into the election year with what for these days passes for a truly booming economy.

Twitter @BruceEnberg - My new German computer says that I now have seven gazillion followers.

Monday, August 24, 2015

The ghost of 'Morning in America'

Today is being called Black Monday by Conservative types who are having a fit about the 4% drop in stockmarket. The scary news broadcasts are sure to mention how much the average 401(k) has lost, but they're careful to tell people not get out of the stock market as it always comes back. This is a bald faced lie as it concerns managed 401(k) accounts as they always burn through a big wad of your cash even when you're making money. When the market goes down you really feel it. If you're stuck in one of these traps put your money into an index fund so there are fewer fees and no losses from the fund manager trying to beat the market.

The last Black Monday was October 19, 1987 when the market dropped 22.6%, almost 6 times today's drop. Saint Reagan was in charge then so you don't hear anyone talk about that particular Monday. Reagan was cheerleading the switch to 401(k) but they were new and the amount lost was relatively small. Reagan didn't actually invent the 401(k), but he sure thought they were swell. The tradition of defined benefit pensions was converted to simply dumping your money into Wall Street. This was great for Ronnie's corporate buddies who were getting all manner corporate behavior de-criminalized, and they granted him Sainthood for it as he absolved them of all their sins.

Twitter @BruceEnberg - China is putting a lot of former high level officials in prison for corruption, we should import that instead of crap for Walmart.

Friday, August 14, 2015

"Was it over when the Germans bombed Pearl Harbor?"

China devaluing the yuan against the USD had everyone in a tizzy this week. Taking a 2% markdown in one day alone started a three day decline that ended Friday with China giving their currency a slight bump against the dollar. And China stated flatly that they will maintain this exchange rate. Mostly this devaluing against a strong dollar is a signal to China's own people that they will do what it takes to maintain their economy.

The usual suspects in Republican debates are screaming Currency War and China is about to crash the Dollar! Of course there is no way this is about to happen now, this isn't 2008. All the panic did push the price of gold up slightly or rather pause its decline. At some point the price of gold will get low enough that I'm going to treat myself to a solid gold can opener.

Right Wing trolls have been having a hard time coming up with new Talking Points, so they continue to use the old ones that are way past their 'lie by date'. Workforce Participation Rate is an oldy but a goody, they're now screaming about how it hasn't been this low since the early 70s. The fact is that the percentage of working adults over 16 and not in the military or an institution, began declining at the beginning of the 2000s as Baby Boomers began to retire.

The Right Wing's supplemental Talking Point is that the Workforce Participation shot way up under Reaganomics. Obama's economic numbers are better than Reagan's in any meaningful way and Obama didn't borrow current equivalent of $10t to give away to his cronies either. Of course Reagan could have never have won the Battle of Jutland without those four Iowa Class Battle Battleships and 250 ships he built to support them. (Jutland 1916 was last time battleships fought) And of course Reagan could have never have stopped the Soviet Nazis attack on Pearl Harbor without building the Star Wars missile defense system at the cost of $3t (adj dollars).

Oh yeah, the Job Participation Rate shooting up under Reagan. It was simply millions of women going to work even if they had young children because of Reagan's War on Middle Class wages. For those of you who don't remember the olden days before Reagan, it was common for married women to never work outside the home and with a union job not a difficult thing to do. Now only religious cultists observe that practice.

The current Job Participation rate for Prime Workers 25-55 years old has actually been climbing robustly since Obama put the brakes on the Bush Crash. Of course there have been no real gains in wages but it's up to Congress to reinstate the Hamilton Plan for Manufactures. It was originally enacted in 1792 and largely maintained until 1981 building America to the industrial juggernaut it once was. Now they want to take Hamilton off the money because nobody knows why he's there. China has actually been following his plan since 1981 has gone from building steam locomotives to being the number one world economy, maybe they'll put him on the ten yuan bill.

Twitter @BruceEnberg - where we flip the Right Wingers over and check their 'lie by date'.

Monday, July 13, 2015

The weekly Greek crisis.

We're approaching a final showdown on the Greek/Euro crisis, of course we have one of those every week. The rhetoric in press is really heating up as their past attempts to force a collapse of the Greek government have so far failed. The Greek people spoke resoundly in their referendum that they don't want to be slaves to bankers, so now the rumor being spread is that their government made no plans about what to do if they actually won the referendum. Supposedly the Greek PM has now accepted worse terms than they were offered before the public voted. I can't count how many times in the past this a similar claim has been made in the media.

A bit of reality. Most of the so-called bailout loans from the europeans have gone to pay europeans holding Greek debt and not to actually keep Greece going. Greece has already accepted far more austerity than they should have to balance their budget, so in reality they're not that dependent on more loans to keep going. As long as Greece doesn't feed the parasitic bankers it can actually do okay.

Greece is not a failed state, it can collect most of the taxes due and it still has an economy. Greece has currency controls in place to keep the bad guys from simply draining all the euros from its banks.

Even if Greece isn't in a position to print drachmas right away it could easily begin issuing IOUs to pay its bills. These would begin trading on the open market for euros to maintain Greece's currency needs at what ever discount rate someone is willing to pay for them. These IOUs would become a defacto currency with a flexible exchange rate. A separate 'currency' for trade would make Greek exports far more competitive and grow its economy. This is the only solution that can work. Simple math requires that austerity measures will always shrink the economy by a greater amount than the austerity 'saves'.

A long term solution depends on whether Germany is really determined to make Greece suffer as a demonstration of the power wielded by the Aryan Master Race, (oops, I meant "the hard working German tax payer"). Greece is really insignificant to the euro, but the bankers have been pulling the same con on several much larger countries that are watching how this plays out.

The Gold Bugs are beside themselves that the Greek Crisis hasn't caused that huge spike in gold prices they've been waiting for ever since the price tanked a couple of years ago. There's even talk that this is the end for gold as a hedge. I've always wondered why I keep hearing the slogan, "Obama has debased the dollar" from Conservatives. The dollar is at its strongest in 20 years and inflation is nonexistent. It took a long time before I found one of them that could actually explain their talking point. They think the dollar is debased because the price of gold went down. Yeah, gold 'buys' fewer dollars so they think Obama is suppressing the price of gold. They of course have no explanation for how Obama is doing this. According to the Gold Bugs you should buy lots of gold because it is above all government influence, that is until the crazy claims they make about gold turn out to not be true, then as with all things, it's Obama's fault.

Twitter @BruceEnberg - oil prices keep falling which will likely bring back $2.00 gasoline by Labor Day, the one thing Conservatives won't blame Obama for.

Friday, June 12, 2015

Bring your own Unicorn

House Democrats lead by Nancy Pelosi have nixed a key provision of Obama's free trade Bill effectively killing it for the time being. In reality it was the failure of Republicans to pass it as they control the House, so it's probably just their way of embarrassing Obama before doing their Corporate Masters bidding next week. Republicans seem to keep forgetting that Obama isn't running for a third term, and this will give Democrats a stick to beat job exporting Republicans with before next year's election.

Job creation was a robust 280,000 for May and the March number was revised upward by 32,000 to 116,000. Hourly wages rose by 8 cents to 24.96 and over the past year wages rose 2.3 percent. Considering that the minimum wage should be $22/hour these positive numbers are rather lackluster and simply reflect the 'success' of Reagan's war on the Middle Class.

Greece appears to be getting close to an actual showdown with its creditors because the sticking point being their refusal eliminate old age pensions. Bankers really don't like keeping people alive who can no longer work.

There's still time for the European Central Bank and the IMF to come to an agreement with Greece. That is unless they are really set on making an example them. Spain is only months from going with a similar populist political party set to sweep into power before year's end. So far there have been no real negotiations, simply a slander campaign in the media with the hopes that the bankers could destabilize the populist Syriza Party government.

The wildcard in all of this are the Chinese who have made moves suggesting they might be inclined to help Greece if they drop out of the euro. These days yuans spend as good as anything and China would just love becoming a major player in the Reserve Currency business by pushing the euro into 3rd place. Once Greece drops out of the euro there would be incentive for a line of debt ridden countries to bail out if China provides a soft landing.

Twitter @BruceEnberg - where we are always holding out hope for a Fascism Free world. Bring your own Unicorn.

Tuesday, May 26, 2015

With Stetson in hand

Weekly unemployment claims continue to hover at levels that predate the Bush Administration, this despite the supposed boom that Bush created by cutting taxes for the rich & after Obama raising them back up again supposedly hurt investment from the Job Creators.

Job creation numbers for April have moved back up to normal levels again now that the West Coast port strike is over and the truck driver labor actions to recover stolen wages have been successful. Trucking companies will no longer be able to pretend their drivers aren't employes and will pay huge amounts in back pay and penalties.

Greece is coming to its monthly crisis about paying its creditors or not. The IMF and private bankers are still demanding grueling austerity and the privatization of public assets. Greece's new government continues to simply say no. At some point the euro bankers are going to give in or Greece will start printing its own money.

The indignados (the outraged) Party has swept local elections across Spain to the chagrin of the ruling party. With General Elections required before the end of the year this anti-austerity party seems poised to take control of Spain less than a year after Syriza took control of Greece running on the same platform. This has to give the euro bankers pause or maybe they just don't care. It's not like their attempts conquer Europe will be met with War Crimes trials this time. There's always the potential for them to acquire more wealth and power next year.

The Texans have momentarily halted their threats of Secession to instead call on the Yankee Carpetbaggers to send them still more disaster relief. How can the Red States complain with a straight face about Federal Government spending when everyone of them get considerably more money back than they pay in? The Texas economy narrowly avoided free fall when the plunge in oil prices gave way to a partial recovery, it seems it wasn't Conservative pro-business policies causing the Texas Boom but simply the high price of oil.  

Twitter @BruceEnberg - where you can learn how Obama is using the cover of Jade Helm to invade Mexico and force them at gunpoint to take Texas back.

Friday, May 1, 2015

I'll bet you a Yuan to a Baklava

First Quarter US GDP came in at 0.2%, which is down from 2.2% in the Fourth Quarter. This isn't really a huge drop in US economic growth as you might think at first blush. When GDP is calculated exports are added and imports are subtracted. The strong USD is making imports 'cheaper' and throttling exports to euro using countries that must pay much higher prices for US goods. 

China of course is right there to sell the exact same things as the US at a more favorable exchange rate as more countries are simply trading in the yuan instead of converting them to USD first. Not that the US is a big exporter anyway, but Europe does use the US as a 'cheap labor' factory floor. Overall the top US exports are gasoline, fuel oil and petrochemicals. Our chief 'manufactured' export to China remains recycled cardboard.

Greece and Germany continue a tit for tat game of threats, insults and kabuki theater. Greece has made clear that they are tired of being taken advantage of while Germany pretends that they're the real victim of a lazy childish bully. Germany wasn't amused that some in Greek government pointed out that Germany still owes reparations for the occupation and looting of Greece during WWII. Today Germany does the looting with bankers and Current Account surpluses instead of Panzers and Messerschmidts.

So far the only ground the Greeks have given to the bankers is that Prime Minister Tsipras has rotated (but not removed) Finance Minister Varoufakis from his position as lead negotiator. The Germans and other European pirates (I mean bankers) really don't like him as he easily cuts through their BS of austerity

Varoufakis is an economics professor from an affluent family with dual Greek/Australian citizenship.  He is handsome, flamboyant & outspoken on issues of social justice worldwide having traveled extensively along the world's major dividing lines in Palestine, Ethiopia-Eritrea, Kosovo, Belfast, Cyprus, Kashmir and the US-Mexico border.  He's basically a combination of Paul Krugman, Alan Grayson and Bono. I'm guessing that the Greeks got some major concessions just for moving him out of the spotlight.     

A German newspaper is reporting that Germany intends to keep Greece in the euro even after default which everyone keeps saying is inevitable, even though each deadline passes with no actual crisis. As I predicted China has shown an interest in helping Greece and Greece is said to be preparing to issue its own parallel currency. This is likely why the European Central Bank has continued to make loans to Greek banks despite early threats to cut them off, they really don't want China getting a foothold among the southern European countries that they've been looting. 

It appears that Greece's creditors have just been running a Fox News style campaign hoping to undermine the Greek government to no avail. They've even gotten US Treasury Sec Jacob Lew to issue dire warnings about the suffering Greek citizens will endure if their government defaults to its creditors and drops out of the euro. But Greek citizens are suffering so much already and the demands of the bankers for even more draconian measures has those 'warnings' falling on deaf ears. 

Even though the media has labeled the ruling party as leftist and extremists, in reality they're competent, no nonsense centrists along the lines of FDR and the New Deal. Too bad we don't have that here. 
Twitter @BruceEnberg - I'll bet you a yuan to a baklava that Greece is going to win this game.

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.