Americans harbor a negative stereotype of a used car salesmen as someone who will try to sell you a car by emphasizing the positives and hiding those ugly flaws that often turn your shiny new purchase into a lemon. That's what the President did on Thursday, when he began to hype his record on the economy.
While he can talk about all kinds of economic positives since taking office, there is really only one thing that my countrymen use to measure the economy: their paychecks.
And, this is where the Obama-economy falls far short.
In 2009, when the President took office, the median household income was $51,190. In the latest report, the Census Bureau shows the median household income in 2013 was $51,900 or up just 1.3%. That's an average increase of only $177 a year. At the same time, the prices of many of the things we buy have gone through the roof. Beef, for example, has gone up 56% since 2010. In fact, most food prices, this year alone, are rising faster than both incomes and inflation. Additionally, despite a wealth of low-cost natural gas, electricity rates are soaring because of the high cost of adding wind and solar.
This simple fact is why Obama, in poll after poll, gets horrible marks on his handling of the economy. In a recent Pew poll, respondents only gave the President a 39% approval. Worse than that was the recent Gallup poll where he only scored a 35% approval on the economy.
Obama appears to be on a fool's errand. He runs around the country, making speech after speech, telling Americans how great the economy is. People aren't going to buy it because they clearly aren't feeling it.
References:
Obama Touts Economic Gains Under His Watch: http://abcnews.go.com/Politics/wireStory/obama-speak-economy-northwestern-25909807
Household Incomes 2009 and 2010: http://www.census.gov/prod/2011pubs/acsbr10-02.pdf
Five Years Of Recovery Haven’t Boosted The Median Household Income: http://fivethirtyeight.com/datalab/five-years-of-recovery-havent-boosted-the-median-household-income/
Beef prices hit record high: http://money.cnn.com/2014/04/14/news/economy/beef-prices/
As Food Prices Rise, Fed Keeps a Watchful Eye: http://online.wsj.com/articles/as-food-prices-rise-fed-keeps-a-wary-eye-1404672384
Electricity Price Index Soars to New Record at Start of 2014: http://cnsnews.com/news/article/terence-p-jeffrey/electricity-price-index-soars-new-record-start-2014-us-electricity
Summary of Polls: President Obama and the Obama Administration: http://www.pollingreport.com/obama_ad.htm
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Saturday, October 4, 2014
Monday, August 18, 2014
With The Death Of A Teenager Comes The Death Of Ferguson, Missouri
On either a social or economic basis, rarely does a community ever recover from racially motivated rioting and looting.
What little trust that existed between a predominately white police force and a predominately black community has to have been eroded even further; meaning that, possibly many of the current white police are going to move elsewhere, resulting in a loss of good and experienced officers. And, equally good officers aren't going to want to come to Ferguson because of its reputation. Those that remain, fearing another Michael Brown situation, will be less aggressive towards crime in the city. Ultimately, the town will become less protected and crime rates, already higher than the national average, will increase.
Some shop owners and other businesses may also move on. As a result, the already high 13 percent unemployment rate will only rise
If Ferguson follows the pattern of other communities that saw rioting in the 1960's, then both whites and blacks will decide to leave the city. But, the combination of the town's reputation and the fact that many may want to leave, will seriously depress home prices. Home values in the communities where there was rioting in the 1960's saw a drop in values from 14 to 20%.
The longer the looting and rioting persist, the more damage will be done, but, even now, the damage to the future of Ferguson might be quite severe. Left behind by all those outsiders who helped foment the anger and rage.
Reference:
The Consequences of the 1960's Race Riots Come Into View: http://www.nytimes.com/2004/12/30/business/30scene.html?pagewanted=print&position=
Ferguson, MO Crime and Crime Rate: http://www.usa.com/ferguson-mo-crime-and-crime-rate.htm
Ferguson, Mo. Emblematic of Growing Suburban Poverty: http://www.brookings.edu/blogs/the-avenue/posts/2014/08/15-ferguson-suburban-poverty
What little trust that existed between a predominately white police force and a predominately black community has to have been eroded even further; meaning that, possibly many of the current white police are going to move elsewhere, resulting in a loss of good and experienced officers. And, equally good officers aren't going to want to come to Ferguson because of its reputation. Those that remain, fearing another Michael Brown situation, will be less aggressive towards crime in the city. Ultimately, the town will become less protected and crime rates, already higher than the national average, will increase.
Some shop owners and other businesses may also move on. As a result, the already high 13 percent unemployment rate will only rise
If Ferguson follows the pattern of other communities that saw rioting in the 1960's, then both whites and blacks will decide to leave the city. But, the combination of the town's reputation and the fact that many may want to leave, will seriously depress home prices. Home values in the communities where there was rioting in the 1960's saw a drop in values from 14 to 20%.
The longer the looting and rioting persist, the more damage will be done, but, even now, the damage to the future of Ferguson might be quite severe. Left behind by all those outsiders who helped foment the anger and rage.
Reference:
The Consequences of the 1960's Race Riots Come Into View: http://www.nytimes.com/2004/12/30/business/30scene.html?pagewanted=print&position=
Ferguson, MO Crime and Crime Rate: http://www.usa.com/ferguson-mo-crime-and-crime-rate.htm
Ferguson, Mo. Emblematic of Growing Suburban Poverty: http://www.brookings.edu/blogs/the-avenue/posts/2014/08/15-ferguson-suburban-poverty
Monday, April 28, 2014
Thomas Piketty: Another Socialist Solution To Income Inequality
For years, the rock star economist for the political left was Nobel Prize winner Paul Krugman. His endorsement of taxing wealth and encouraging massive government spending -- as a means of driving the economy -- has been music to the ears of all those who love and worship big government. Now, the left has found a new leader to follow. He is a French economist by the name of Thomas Piketty. The recently released English language version of his book -- Capital in the Twenty-First Century -- has every socialist-minded politician and media type going gaga over his proposed solution to income inequality.
Essentially, Piketty believes that capitalism -- and democracy -- is doomed to collapse because it creates an ever increasing disparity between the rich and the poor. It does this because, over time, capitalism spawns a faster growth rate in the return on capital investment versus any real growth in wages. Thus, the rich, by using their wealth as investment, are able to grow their status much quicker than the majority of citizens. So, Piketty's solution to this fatal flaw of capitalism is to force the rich out of existence by imposing an 80% tax on incomes above $500,000 and a 50-60% tax on those with incomes between $200,000 and $500,000. This way there will be no rich and our democracy will be saved.
But, then there's this: What if society is actually able to eliminate all of that rich class? What then?
Well, first of all, all those people who had careers that support the rich would lose their jobs. Jobs such as the staff of upscale restauranteurs, landscapers, caterers, housekeepers, expensive fine artists and craftsmen, boat and private airplane builders, and so many others. Then, too, high taxation of the so-called "rich" will only reduce overall spending. Since our economy is 70% driven by consumer spending, we would be sure to fall into a recession. Additionally, the $200,000-and-above crowd are givers. Not necessarily in direct charitable giving, but as the primary supporters of the arts and culture in America. They are a dominant source of non-Pell grant college scholarships and fellowships. Most private colleges and hospital expansions would not happen if it weren't because of their generosity. Without outside donations, does anyone think that a religious college or university would receive a grant from the federal government? Not with the ALCU jumping in to cite the separation of Church and State.
More importantly, the rich provide an essential economic benefit to society by providing the seed money to promote the development of inventions, new products and new businesses; all of which create new jobs. Under Piketty's flawed beliefs, the concept of wealth investment would simply cease to exist. And, don't think for one minute that the government, with all that new found money is going to pick up the torch and act as America's new Venture Capitalists. All it would do is fuel more crony capitalism so that we wind up with endless failed ventures like Solyndra.
The problem I have will people like Piketty is that they never once have a solution that elevates people out of poverty. Their answer is to always attack the rich; as if they are somehow the wealth takers and not the wealth creators. Economists aren't sociologists; but, they should be. Only then would they understand what the real reasons are for income inequality. Totally missing in most left-wing proposals is the concept of income mobility where 80% of the of the rich, today, are first generation millionaires; and, in as little two generations, much of that wealth (60%) will be gone. At the same time, nearly 85% of all Americans have wealth greater than their parents. Studies have also shown that between 86% and 95% of all those who were once living in poverty would shed that condition in as little as 15 years. The bottom line is that people, whether they be rich or poor, are likely to reverse that status, through their own initiative, in just a few years. Because of capitalism, poverty is not necessarily a permanent condition.
If Mr. Piketty is so sure of his beliefs, he should implement them in his home country of France and then we'll see what that country looks like in, say, 5 or 10 years. Lastly, Picketty's book is so hot that 80,000 copies were sold in just two months and it is now back-ordered. Apparently, it is a must read among all socialist Democrats. At a list price of $39.95, it's pretty pricey. So, I guess it's Mr. Piketty's goal to get rich before anyone can impose that 80% tax on his rich-guy income.
References:
Thomas Piketty Revives Marx for the 21st Century: http://online.wsj.com/news/articles/SB10001424052702303825604579515452952131592
Piketty's 'Capital': A Hit That Was, Wasn't, Then Was Again How the French tome has rocked the tiny Harvard University Press : http://www.newrepublic.com/article/117498/pikettys-capital-sold-out-harvard-press-scrambling
The Facts About Income Mobility: https://www.youtube.com/watch?feature=player_embedded&v=vDhcqua3_W8
29 Valuable Facts About Millionaires and Billionaires: http://facts.randomhistory.com/millionaires-facts.html
Essentially, Piketty believes that capitalism -- and democracy -- is doomed to collapse because it creates an ever increasing disparity between the rich and the poor. It does this because, over time, capitalism spawns a faster growth rate in the return on capital investment versus any real growth in wages. Thus, the rich, by using their wealth as investment, are able to grow their status much quicker than the majority of citizens. So, Piketty's solution to this fatal flaw of capitalism is to force the rich out of existence by imposing an 80% tax on incomes above $500,000 and a 50-60% tax on those with incomes between $200,000 and $500,000. This way there will be no rich and our democracy will be saved.
But, then there's this: What if society is actually able to eliminate all of that rich class? What then?
Well, first of all, all those people who had careers that support the rich would lose their jobs. Jobs such as the staff of upscale restauranteurs, landscapers, caterers, housekeepers, expensive fine artists and craftsmen, boat and private airplane builders, and so many others. Then, too, high taxation of the so-called "rich" will only reduce overall spending. Since our economy is 70% driven by consumer spending, we would be sure to fall into a recession. Additionally, the $200,000-and-above crowd are givers. Not necessarily in direct charitable giving, but as the primary supporters of the arts and culture in America. They are a dominant source of non-Pell grant college scholarships and fellowships. Most private colleges and hospital expansions would not happen if it weren't because of their generosity. Without outside donations, does anyone think that a religious college or university would receive a grant from the federal government? Not with the ALCU jumping in to cite the separation of Church and State.
More importantly, the rich provide an essential economic benefit to society by providing the seed money to promote the development of inventions, new products and new businesses; all of which create new jobs. Under Piketty's flawed beliefs, the concept of wealth investment would simply cease to exist. And, don't think for one minute that the government, with all that new found money is going to pick up the torch and act as America's new Venture Capitalists. All it would do is fuel more crony capitalism so that we wind up with endless failed ventures like Solyndra.
The problem I have will people like Piketty is that they never once have a solution that elevates people out of poverty. Their answer is to always attack the rich; as if they are somehow the wealth takers and not the wealth creators. Economists aren't sociologists; but, they should be. Only then would they understand what the real reasons are for income inequality. Totally missing in most left-wing proposals is the concept of income mobility where 80% of the of the rich, today, are first generation millionaires; and, in as little two generations, much of that wealth (60%) will be gone. At the same time, nearly 85% of all Americans have wealth greater than their parents. Studies have also shown that between 86% and 95% of all those who were once living in poverty would shed that condition in as little as 15 years. The bottom line is that people, whether they be rich or poor, are likely to reverse that status, through their own initiative, in just a few years. Because of capitalism, poverty is not necessarily a permanent condition.
If Mr. Piketty is so sure of his beliefs, he should implement them in his home country of France and then we'll see what that country looks like in, say, 5 or 10 years. Lastly, Picketty's book is so hot that 80,000 copies were sold in just two months and it is now back-ordered. Apparently, it is a must read among all socialist Democrats. At a list price of $39.95, it's pretty pricey. So, I guess it's Mr. Piketty's goal to get rich before anyone can impose that 80% tax on his rich-guy income.
References:
Thomas Piketty Revives Marx for the 21st Century: http://online.wsj.com/news/articles/SB10001424052702303825604579515452952131592
Piketty's 'Capital': A Hit That Was, Wasn't, Then Was Again How the French tome has rocked the tiny Harvard University Press : http://www.newrepublic.com/article/117498/pikettys-capital-sold-out-harvard-press-scrambling
The Facts About Income Mobility: https://www.youtube.com/watch?feature=player_embedded&v=vDhcqua3_W8
29 Valuable Facts About Millionaires and Billionaires: http://facts.randomhistory.com/millionaires-facts.html
Monday, October 22, 2012
CNN: Misery Index Predicts Obama Will Win The Election
On October 17, a CNN reporter, Annalyn Censky, wrote an article titled: "Misery Index predicts Obama will win the election." I can't even fathom that CNN would take the time and space to produce such a major piece of dribble; unless, of course, they're actually in the tank for Obama.
If you're not familiar with the Misery Index, it is a simple number made up of two factors: (1) the current inflation rate added to (2) the current unemployment rate. Theoretically, if the index is below 12%, the incumbent President will win because the average voter isn't really suffering any serious economic pain. Today, that number stands at 11.8% -- 2% for inflation and 7.8% for unemployment -- and that is why Ms. Censky is saying that "Obama will win...".
My problem with the 11.8% number is that it grossly understates the true economic pain that most Americans are feeling right now.
First of all, there's the understatement of the inflation rate at 2%. By protocol, the United States and many other countries measure inflation by "excluding" what they call volatile changes in both food and energy prices. As a result, the Misery Index automatically doesn't include the "misery" of having to pay double at the gasoline pump since Obama took office. This represents an additional expense of at least $2000 a year for the average, 2-car, middle class family. Nor, does it take into account the misery of dramatically higher food prices. Further, the inflation rate calculation uses the lowering of costs for non-essential things like cell phones and flat-screen TV's to hide the fact that essential expenses, such as electrical energy and clothing prices, have gone up significantly. Then, there's the two most critical inflationary factors of all: The average family income has fallen by $4019 and health care insurance premiums have gone up by $2370 since Obama took office.
So, if you simply add up all the easy-to-identify negatives from the above paragraph (gasoline, health insurance, and income), you come up with a number of $8,389. Taken against the average family income of $54,983 in January of 2009, it means that the average American family has lost more than 15% in purchasing power since Obama has been President. That to me, is the same as having an "additional" 15% inflation. This means that the true Misery Index is a lot closer to 26.8% than the calculated 11.8%.
Then, there is the understated unemployment rate of 7.8% that assumes only 12.1 million Americans are out of work. But, in reality, that number doesn't include the misery of 8.6 million having to work part-time because they can't find full-time jobs, or, the nearly 10 million Americans who have just stopped looking because there aren't any jobs to look for. When, all is added up, you get a real unemployment rate that is 14.7%. That, then, means that the true Misery Index should be raised again; from 27% (above) to 33.7%.
Lastly, there's an immeasurable factor when it comes economic misery in the U.S. And, that's the misery of having to lose your home to foreclosure or being so underwater on your mortgage that you have no other choice but to walk away from your home through a short sale.
For Ms. Censky to simply conclude that Obama will win because of some artificially low Misery Index is consistent with what I have always stated in the blog: There are lies, damn lies, and statistics.
Note: The above annual gasoline expense is calculated on the basis that the average American car uses about 558 gallons of gasoline per year. This is based on an average driving range of 12,500 miles per year with an average fuel consumption rate of 22.4 miles-per-gallon. This is a somewhat conservative estimate since "averages" on the Internet vary from 12,000 to 15,000 miles driven per year with mileage rates of anywhere from 21 to 24 mpg.
References:
--- CNN: Misery Index predicts Obama will win the election: http://economy.money.cnn.com/2012/10/17/misery-index-obama-will-win-the-election/
--- Forbes On Losses In Median Income: http://www.forbes.com/sites/peterferrara/2012/09/02/obamas-accelerating-downward-spiral-for-america/
--- Investor's Business Daily: Health Premiums Up $3,000; Obama Vowed $2,500 Cut: http://news.investors.com/092412-626848-health-premiums-up-3065-obama-vowed-2500-cut.aspx?p=full
--- September Unemployment Report: http://www.bls.gov/news.release/empsit.nr0.htm
--- Historical Gasoline Prices (interactive Chart): http://gasbuddy.com/gb_retail_price_chart.aspx
If you're not familiar with the Misery Index, it is a simple number made up of two factors: (1) the current inflation rate added to (2) the current unemployment rate. Theoretically, if the index is below 12%, the incumbent President will win because the average voter isn't really suffering any serious economic pain. Today, that number stands at 11.8% -- 2% for inflation and 7.8% for unemployment -- and that is why Ms. Censky is saying that "Obama will win...".
My problem with the 11.8% number is that it grossly understates the true economic pain that most Americans are feeling right now.
First of all, there's the understatement of the inflation rate at 2%. By protocol, the United States and many other countries measure inflation by "excluding" what they call volatile changes in both food and energy prices. As a result, the Misery Index automatically doesn't include the "misery" of having to pay double at the gasoline pump since Obama took office. This represents an additional expense of at least $2000 a year for the average, 2-car, middle class family. Nor, does it take into account the misery of dramatically higher food prices. Further, the inflation rate calculation uses the lowering of costs for non-essential things like cell phones and flat-screen TV's to hide the fact that essential expenses, such as electrical energy and clothing prices, have gone up significantly. Then, there's the two most critical inflationary factors of all: The average family income has fallen by $4019 and health care insurance premiums have gone up by $2370 since Obama took office.
So, if you simply add up all the easy-to-identify negatives from the above paragraph (gasoline, health insurance, and income), you come up with a number of $8,389. Taken against the average family income of $54,983 in January of 2009, it means that the average American family has lost more than 15% in purchasing power since Obama has been President. That to me, is the same as having an "additional" 15% inflation. This means that the true Misery Index is a lot closer to 26.8% than the calculated 11.8%.
Then, there is the understated unemployment rate of 7.8% that assumes only 12.1 million Americans are out of work. But, in reality, that number doesn't include the misery of 8.6 million having to work part-time because they can't find full-time jobs, or, the nearly 10 million Americans who have just stopped looking because there aren't any jobs to look for. When, all is added up, you get a real unemployment rate that is 14.7%. That, then, means that the true Misery Index should be raised again; from 27% (above) to 33.7%.
Lastly, there's an immeasurable factor when it comes economic misery in the U.S. And, that's the misery of having to lose your home to foreclosure or being so underwater on your mortgage that you have no other choice but to walk away from your home through a short sale.
For Ms. Censky to simply conclude that Obama will win because of some artificially low Misery Index is consistent with what I have always stated in the blog: There are lies, damn lies, and statistics.
Note: The above annual gasoline expense is calculated on the basis that the average American car uses about 558 gallons of gasoline per year. This is based on an average driving range of 12,500 miles per year with an average fuel consumption rate of 22.4 miles-per-gallon. This is a somewhat conservative estimate since "averages" on the Internet vary from 12,000 to 15,000 miles driven per year with mileage rates of anywhere from 21 to 24 mpg.
References:
--- CNN: Misery Index predicts Obama will win the election: http://economy.money.cnn.com/2012/10/17/misery-index-obama-will-win-the-election/
--- Forbes On Losses In Median Income: http://www.forbes.com/sites/peterferrara/2012/09/02/obamas-accelerating-downward-spiral-for-america/
--- Investor's Business Daily: Health Premiums Up $3,000; Obama Vowed $2,500 Cut: http://news.investors.com/092412-626848-health-premiums-up-3065-obama-vowed-2500-cut.aspx?p=full
--- September Unemployment Report: http://www.bls.gov/news.release/empsit.nr0.htm
--- Historical Gasoline Prices (interactive Chart): http://gasbuddy.com/gb_retail_price_chart.aspx
Tuesday, July 31, 2012
Milton Friedman's Words Ring As True Today
If he had lived, economist Milton Friedman would have been 100 years old today. To me, personally, Friedman was a mentor. He, as an adviser, was what helped make Ronald Reagan so economically successful. And, to those who call themselves Keynesians, Friedman was their worst nightmare; exposing the myth of government spending as a means of stimulating an economy. At the same time, he destroyed the typical liberal concept that increasing taxes have no consequences.
For the most part, his economic principals emanated from a simple, old saying: "There is no such thing as a free lunch". Friedman's use of those words to explain economic principals is as true today as when he first started popularizing them; especially, now, with Obama and Bernanke spending like the proverbial drunken sailors and, with Obama and the Democrats planning new taxes for the so-called rich. For this reason, I present one of Friedman's many speeches. This one titled: "The Free Lunch Myth":
Finally, there is this 1978 speech that Mr. Friedman gave on the impact of the government takeover of healthcare. Again, as pertinent today, with ObamaCare, as it was in 1978.
For the most part, his economic principals emanated from a simple, old saying: "There is no such thing as a free lunch". Friedman's use of those words to explain economic principals is as true today as when he first started popularizing them; especially, now, with Obama and Bernanke spending like the proverbial drunken sailors and, with Obama and the Democrats planning new taxes for the so-called rich. For this reason, I present one of Friedman's many speeches. This one titled: "The Free Lunch Myth":
Finally, there is this 1978 speech that Mr. Friedman gave on the impact of the government takeover of healthcare. Again, as pertinent today, with ObamaCare, as it was in 1978.
Saturday, February 18, 2012
The Hypocrisy of the Democrat's Calls For No Spending Cuts
From President Obama and his staff to Congressional Democrats and a bunch of left-leaning economists, all claim that any cuts in federal spending could damage our fragile economic recovery. Yet, not one of those "economic alarmists" seems to mind that Obama intends to cut billions of dollars in military spending; starting this year. Billions that go to support thousands of American jobs.
This hypocrisy just proves that the calls for cutting military spending while refusing to cut liberal, governmental programs is all about a left-wing, anti-war ideology and not about what's good for this country's long-term economic survival and protection.
This hypocrisy just proves that the calls for cutting military spending while refusing to cut liberal, governmental programs is all about a left-wing, anti-war ideology and not about what's good for this country's long-term economic survival and protection.
Saturday, July 2, 2011
The Release of Oil Reserves: Another Failed Obama Econ Plan
On August 23, just 9 days ago, trading for domestic crude oil opened up at $94.47 a barrel and was heading south when Obama and the Int'l Energy Agency (IEA) announced the release of 60 million barrels of oil from the Strategic Oil Reserves of 28 countries. Our share of that release was to be 30 of the 60 million barrels.
As of today, the price of oil sits at $94.95 and is now higher than it was before the announcement. Once again, this President and his frat-boy and sorority-girl advisers got it all wrong. They don't seem to understand markets or even simple economics. You "can not" use a "reserve" whose replenishment is mandated by law to drive down prices. Sure, there was a quick price drop for a couple of days but, that was because a few novice traders bailed to protect their profits. However, the smart money simply saw it as another buying opportunity for a commodity that could easily be in short supply if there were any supply disruptions in the Middle East or elsewhere or if the economies of the world perked up again.
The thing is, when releasing oil from the strategic reserves you, in theory, create a "supply" imbalance and, based on the Law of Supply and Demand, prices should go down; and, they did. But, what team Obama completely missed is the fact that, at the same time, you have created a future "demand" imbalance that will completely offset the advantage of that original "supply" imbalance. That's because the amount of oil that was released will have to be bought back to make the reserves whole again. What's worse, because prices are rising, the repurchase will be, more than likely, at a price higher than what the original reserves were sold at; meaning that, once again, Obama has just wasted more tax payers money in another failed economic plan.
As of today, the price of oil sits at $94.95 and is now higher than it was before the announcement. Once again, this President and his frat-boy and sorority-girl advisers got it all wrong. They don't seem to understand markets or even simple economics. You "can not" use a "reserve" whose replenishment is mandated by law to drive down prices. Sure, there was a quick price drop for a couple of days but, that was because a few novice traders bailed to protect their profits. However, the smart money simply saw it as another buying opportunity for a commodity that could easily be in short supply if there were any supply disruptions in the Middle East or elsewhere or if the economies of the world perked up again.
The thing is, when releasing oil from the strategic reserves you, in theory, create a "supply" imbalance and, based on the Law of Supply and Demand, prices should go down; and, they did. But, what team Obama completely missed is the fact that, at the same time, you have created a future "demand" imbalance that will completely offset the advantage of that original "supply" imbalance. That's because the amount of oil that was released will have to be bought back to make the reserves whole again. What's worse, because prices are rising, the repurchase will be, more than likely, at a price higher than what the original reserves were sold at; meaning that, once again, Obama has just wasted more tax payers money in another failed economic plan.
Monday, June 28, 2010
Another Black And Blue Uemployment Report?
The next unemployment report is due out Friday. The previous report was both dismal and disappointing with only 21k net jobs being created after deducting the Census Worker count. The next report, based on the economists being surveyed, is expected to be even worse, with a drop of as many as 145,000 workers in June. Also, the survey expects the unemployment rate to rise from 9.7% to 9.8% for the month.
Since the economic surveys of the last 3 years have always been wrong and, since the economy seems to be weakening, my guess is that Friday's numbers will be another shocker to the downside. I don't think that the ripple effect of the Gulf oil spill is being fully taken into consideration in that 145K jobs estimate. Further, the GDP number came in below the expected 3% level at a dismal 2.7% rate. What's important about that number is the fact that history has proven that you need at least a 3% growth in GDP to just to account for population growth. Further, a number higher than 3% is actually needed to address any additional job growth due to immigration; legal or otherwise. A number of 2.7% means that a lot more people may have lost their jobs as our country's production output falls. I wouldn't be the least surprised if Friday will see a near 200,000 jobs lost in June, with the unemployment rate upped to 9.8% or, even hitting 9.9% again.
Of course, my crystal ball hasn't been that perfect, either. To know this, you just have look back at my predictions for oil and gasoline prices of just a few months ago. Predictions that were completely blown out of the water by the potential collapse of some of the European Union's member states and the Union's currency: the Euro. However, my predictions on our economy have been fairly accurate. For that I can thank Obama and the Democrats for making that job much easier because of all their foolish policies.
Since the economic surveys of the last 3 years have always been wrong and, since the economy seems to be weakening, my guess is that Friday's numbers will be another shocker to the downside. I don't think that the ripple effect of the Gulf oil spill is being fully taken into consideration in that 145K jobs estimate. Further, the GDP number came in below the expected 3% level at a dismal 2.7% rate. What's important about that number is the fact that history has proven that you need at least a 3% growth in GDP to just to account for population growth. Further, a number higher than 3% is actually needed to address any additional job growth due to immigration; legal or otherwise. A number of 2.7% means that a lot more people may have lost their jobs as our country's production output falls. I wouldn't be the least surprised if Friday will see a near 200,000 jobs lost in June, with the unemployment rate upped to 9.8% or, even hitting 9.9% again.
Of course, my crystal ball hasn't been that perfect, either. To know this, you just have look back at my predictions for oil and gasoline prices of just a few months ago. Predictions that were completely blown out of the water by the potential collapse of some of the European Union's member states and the Union's currency: the Euro. However, my predictions on our economy have been fairly accurate. For that I can thank Obama and the Democrats for making that job much easier because of all their foolish policies.
Wednesday, February 24, 2010
The Consumer Is Literally Frightened
In my opinion, any economic recession is primarily driven by the negative mental attitudes of both the consumer and business owners rather than any amount of bad economic conditions.
If there is any fear in the minds of the consumer that they may lose their jobs, they will refrain from spending. When, business owners sense that the consumer is pulling back, they will, in turn, start letting people go and refrain from their own spending in an effort to preserve their profits. In a way, these fears, as harbored by both consumers and businesses, help to feed off of each other and a recession can get deeper and deeper; purely, for psychological reasons.
Yesterday, the Conference Board, a collective of more than 12,000 senior business executives, announced the results of their latest Consumer Confidence Report and their findings were greatly lower than had been expected. In fact, in a single month, the overall Consumer Confidence rating dropped by nearly 20% from a metric of 56.5% in January to a 10-month low of 46% in February (Click to See Full Story: Consumer confidence falls sharply).
Typically, when there is a reading above 50%, the majority of consumers are feeling good about both themselves and the economy; implying that they will probably spend. However, below 50% --- as in this report -- the consumer is likely to slow their spending because they don't feel good about themselves, their jobs, or the economy.
This is more proof that the American public isn't confident about their situations. It is also another slam against Obama and the Democrats because it shows that their fake and continuing mantra that jobs were saved and created isn't working and it isn't making people feel safe enough to start spending as if things were back to normal. People aren't buying it because they aren't seeing any results. The phony manipulation of the unemployment numbers isn't playing well either. And, it is just more proof that the Massachusetts election was a true referendum against Obama and the Democrat's policies and not simply a referendum against health care reform.
If there is any fear in the minds of the consumer that they may lose their jobs, they will refrain from spending. When, business owners sense that the consumer is pulling back, they will, in turn, start letting people go and refrain from their own spending in an effort to preserve their profits. In a way, these fears, as harbored by both consumers and businesses, help to feed off of each other and a recession can get deeper and deeper; purely, for psychological reasons.
Yesterday, the Conference Board, a collective of more than 12,000 senior business executives, announced the results of their latest Consumer Confidence Report and their findings were greatly lower than had been expected. In fact, in a single month, the overall Consumer Confidence rating dropped by nearly 20% from a metric of 56.5% in January to a 10-month low of 46% in February (Click to See Full Story: Consumer confidence falls sharply).
Typically, when there is a reading above 50%, the majority of consumers are feeling good about both themselves and the economy; implying that they will probably spend. However, below 50% --- as in this report -- the consumer is likely to slow their spending because they don't feel good about themselves, their jobs, or the economy.
This is more proof that the American public isn't confident about their situations. It is also another slam against Obama and the Democrats because it shows that their fake and continuing mantra that jobs were saved and created isn't working and it isn't making people feel safe enough to start spending as if things were back to normal. People aren't buying it because they aren't seeing any results. The phony manipulation of the unemployment numbers isn't playing well either. And, it is just more proof that the Massachusetts election was a true referendum against Obama and the Democrat's policies and not simply a referendum against health care reform.
Friday, February 19, 2010
Another Take On Producer Prices and Inflation
Yesterday, my blog entry took aim at Obama's Keynesian economics policies and the potential for double-digit inflation that could result from excessive governmental spending. In that same vein, Patrick Murphy, a Senior fellow in business and economic studies at the Pacific Research Institute, wrote an excellent commentary and I would like to pass it on to you (the link is at the end of this entry).
His commentary, like my blog entry, refers back to the Carter years of the 1970's and early 1980's when there was both a recession and rampant inflation -- a condition often referred to as stagflation. When you really think about it, the Cash for Clunkers program was inflationary relative to the Law of Supply and Demand because it artificially increased the demand for new cars and reduced the supply of used cars that were destroyed in the process. In fact, used car prices had marked price increases following the end of that program. Since most people bought a car that they were going to buy anyway, that program only served to inflate prices and did nothing to get the economy back on track.
At the same time, the $8000 tax credit for first time home buyers is also creating inflationary demand. Furthermore, the monthly statistics show that new home builders are actively building homes. Given the fact that we already have a glut of vacant foreclosed-on homes, the amount of new home building is just insane. But, people are buying new homes rather than buy existing ones that are selling for the same price because the real estate taxes for the older homes remain at the same level that they were when those older homes were double their existing value. That, too, is insane.
Obama's entire Stimulus Package, is pretty much inflationary because it keeps government spending levels high; thus, feeding inflation. To stimulate an economy without inflation, you need to cut taxes and stop playing games with targeted tax credits. And, for sure, you need to reduce government spending; not keep increasing it. Otherwise, you will encounter stagflation and, as I said yesterday, we will have another "Carter-like economic fiasco on our hands".
Anyway, please take the time to read this excellent commentary: "MURPHY: Setting the stage for stagflation".
His commentary, like my blog entry, refers back to the Carter years of the 1970's and early 1980's when there was both a recession and rampant inflation -- a condition often referred to as stagflation. When you really think about it, the Cash for Clunkers program was inflationary relative to the Law of Supply and Demand because it artificially increased the demand for new cars and reduced the supply of used cars that were destroyed in the process. In fact, used car prices had marked price increases following the end of that program. Since most people bought a car that they were going to buy anyway, that program only served to inflate prices and did nothing to get the economy back on track.
At the same time, the $8000 tax credit for first time home buyers is also creating inflationary demand. Furthermore, the monthly statistics show that new home builders are actively building homes. Given the fact that we already have a glut of vacant foreclosed-on homes, the amount of new home building is just insane. But, people are buying new homes rather than buy existing ones that are selling for the same price because the real estate taxes for the older homes remain at the same level that they were when those older homes were double their existing value. That, too, is insane.
Obama's entire Stimulus Package, is pretty much inflationary because it keeps government spending levels high; thus, feeding inflation. To stimulate an economy without inflation, you need to cut taxes and stop playing games with targeted tax credits. And, for sure, you need to reduce government spending; not keep increasing it. Otherwise, you will encounter stagflation and, as I said yesterday, we will have another "Carter-like economic fiasco on our hands".
Anyway, please take the time to read this excellent commentary: "MURPHY: Setting the stage for stagflation".
Thursday, February 18, 2010
The Vicious Circle Of Producer Price Inflation
This morning, the producer price data was released for the month of January and those prices soared 1.4 percent for that month (Click to See Full Story: January Producer Prices Rise More Than Expected). Producer prices reflect the cost of finished products that are making their way through the retail market system. These finished goods can be gasoline, heating oil and things like picked, packaged, and processed food stuffs and dairy products being delivered to the markets for retail sale.
The reason that producer prices are such a closely watched metric is because it is producer prices that will ultimately force retail prices up and that, in turn, will eventually hit us all in our wallets in the form of inflation. At the heart of any past rampant inflationary period has been the rapid rise of producer prices. If you assume that normally acceptable inflation rates should be at about 3 to 4 percent in an entire year then, having a 1.4 percent increase in a single month (as in this report) is very worrisome.
Producer price increases are a double edged sword; especially in a time of recession.
Any retailer who is hit with a big jump in the prices they pay for the products that they intend to sell are typically faced with only one of two choices: Either raise prices or hold the line. In the majority of cases, they will raise prices.
However, if a retailer fears that they won't remain price competitive in their own market space, they will hold their pricing. In doing so, this action means that their profits will be reduced. When profits are reduced, the income taxes that they will pay will also be reduced. The vicious circle that results from this decision is the fact that State and Federal taxing agencies will now see lower revenues; and, as usual, they will be forced to raise taxes in order to compensate for that loss. Then, in turn, all retailers will be forced to make another pricing decision to compensate for the new higher tax rates.
As I said before, most retailers will make the decision to raise their prices. But, what that does is take disposable income away from the consumer. If the consumer's paychecks don't rise at the same rate as inflation, then we could see a variety of bad things happening in our economy. And, it is typical, in a recession, that workers have little or no leverage to demand salary increases in the face of rising prices. Therefore, the amount of people who are unable to pay their bills will rise. This could also result in higher number of bankruptcies, foreclosures, and defaults on other loans and credit cards. It also means that non-essential spending will be curtailed and the retail sales for things other than food and clothing could suffer a setback and cause a double-dip recession. Once again, tax revenues will be reduced; forcing taxing agencies to raise taxes. And, so, higher taxes will force higher prices and the vicious circle will just keep repeating.
Normally, the Federal Reserve would fight inflation by raising interest rates. However, with business loans and mortgages already hurting, raising interest rates will only continue to reduce bank lending. Therefore, the Federal Reserve is in no good position to do anything because their actions to fight inflation could be as bad for the economy as the unbridled inflation they are trying to fight.
Any way you shake it, the continued high spending rate by this Congress and this President is probably at the core of this month's high rate of producer price increase; and, it is an early sign of the double-digit inflation we could see in the next 2 to 3 years; as most non-Keynesian theory economists have predicted. This is why the theory of Keynesian Economics to use a high rate of government spending to pull us out of recession is so wrong. What should have been done is broad base of tax cuts to stimulate our economy -- as was so effective under Reagan's watch. But this President doesn't seem to get it. It appears now that we have another Carter-like economic fiasco on our hands as this President continues to pursue an economy-killing, liberal agenda with high taxes and outrageous government spending.
Lastly, I would like to point out that I, in this blog, and along with many many others in this world have been more accurate about the direction of this economy and the failure of Obama's economic policies than either Obama or his economic advisers. In most cases, economics is just common sense -- something that Obama and his academics don't seem to understand. But, then, how could they? None of them has ever run a business or managed anything other than their personal trips to the bathroom. And, based on the amount "crap" and B.S. that we keep getting from them, those trips are quite frequent.
The reason that producer prices are such a closely watched metric is because it is producer prices that will ultimately force retail prices up and that, in turn, will eventually hit us all in our wallets in the form of inflation. At the heart of any past rampant inflationary period has been the rapid rise of producer prices. If you assume that normally acceptable inflation rates should be at about 3 to 4 percent in an entire year then, having a 1.4 percent increase in a single month (as in this report) is very worrisome.
Producer price increases are a double edged sword; especially in a time of recession.
Any retailer who is hit with a big jump in the prices they pay for the products that they intend to sell are typically faced with only one of two choices: Either raise prices or hold the line. In the majority of cases, they will raise prices.
However, if a retailer fears that they won't remain price competitive in their own market space, they will hold their pricing. In doing so, this action means that their profits will be reduced. When profits are reduced, the income taxes that they will pay will also be reduced. The vicious circle that results from this decision is the fact that State and Federal taxing agencies will now see lower revenues; and, as usual, they will be forced to raise taxes in order to compensate for that loss. Then, in turn, all retailers will be forced to make another pricing decision to compensate for the new higher tax rates.
As I said before, most retailers will make the decision to raise their prices. But, what that does is take disposable income away from the consumer. If the consumer's paychecks don't rise at the same rate as inflation, then we could see a variety of bad things happening in our economy. And, it is typical, in a recession, that workers have little or no leverage to demand salary increases in the face of rising prices. Therefore, the amount of people who are unable to pay their bills will rise. This could also result in higher number of bankruptcies, foreclosures, and defaults on other loans and credit cards. It also means that non-essential spending will be curtailed and the retail sales for things other than food and clothing could suffer a setback and cause a double-dip recession. Once again, tax revenues will be reduced; forcing taxing agencies to raise taxes. And, so, higher taxes will force higher prices and the vicious circle will just keep repeating.
Normally, the Federal Reserve would fight inflation by raising interest rates. However, with business loans and mortgages already hurting, raising interest rates will only continue to reduce bank lending. Therefore, the Federal Reserve is in no good position to do anything because their actions to fight inflation could be as bad for the economy as the unbridled inflation they are trying to fight.
Any way you shake it, the continued high spending rate by this Congress and this President is probably at the core of this month's high rate of producer price increase; and, it is an early sign of the double-digit inflation we could see in the next 2 to 3 years; as most non-Keynesian theory economists have predicted. This is why the theory of Keynesian Economics to use a high rate of government spending to pull us out of recession is so wrong. What should have been done is broad base of tax cuts to stimulate our economy -- as was so effective under Reagan's watch. But this President doesn't seem to get it. It appears now that we have another Carter-like economic fiasco on our hands as this President continues to pursue an economy-killing, liberal agenda with high taxes and outrageous government spending.
Lastly, I would like to point out that I, in this blog, and along with many many others in this world have been more accurate about the direction of this economy and the failure of Obama's economic policies than either Obama or his economic advisers. In most cases, economics is just common sense -- something that Obama and his academics don't seem to understand. But, then, how could they? None of them has ever run a business or managed anything other than their personal trips to the bathroom. And, based on the amount "crap" and B.S. that we keep getting from them, those trips are quite frequent.
Tuesday, February 16, 2010
What Obama Didn't Count On
In the State of the Union Address, Barack Obama made the claim that his policies would double exports in 5 years (Click to See Full Story: Obama Sets Ambitious Export Goal ).
This just reaffirms what I have always felt about the President and his economic team. I have always believed that Obama and his academic elite economists have this untested plan to kill the U.S. dollar with higher and higher accumulated debt (deficit spending). This, in turn, would result in an extremely weak U.S. dollar. Then, as the dollar weakens, American products would become cheaper and cheaper in the world markets. That, in turn, would result in higher exports. And, as I have written in the past, a weak dollar will also punish us for the more than 60 percent of manufactured goods that we currently import.
But, what Obama didn't count on is the fact that other countries might be just as deep in their own debt -- resulting in the collapse of other world currencies like the EuroDollar.
Since December, the U.S. dollar has actually been strengthening after having dramatically fallen since Obama took office and passed his budget busting Stimulus Package. The reason for the dollar's strength today comes out of the assumption that, even though heavily wounded by high deficit spending, it is still a better bet to hold than other currencies; making it more attractive in the world markets. This attitude started when it was learned that the country of Dubai was at risk of defaulting on its loans. It has been furthered by the fact that Greece, Spain, Portugal and three Eastern European countries are also in jeopardy of not meeting their debts. Right now, the EuroDollar -- not the U.S. Dollar -- looks to be in serious trouble as Europe struggles with its collapsing economies (Click to See Full Story: Collapse of the euro is 'inevitable': Bailing out the Greek economy futile, says FRENCH banking chief).
With the dollar gaining strength, we now have another ill-thought-out Obama plan. That's because, besides having massive debt, we no longer have a promise of greater exports. In fact, just last month, U.S. exports fell more than expected because of the strengthening dollar (Click to See Full Story: U.S. trade deficit soars in December).
Every day, this President's plans continue to reflect the ineptness of his economic team. This is what happens when a bunch of "big idea" academics get a hold of a country. None of these people have any practical, real world experience and that fact keeps showing up in their failed policies. Failed policies that haven't created jobs or stemmed the tide of foreclosures and bankruptcies. Failed policies that haven't increased business and consumer loans. Failed policies that aren't stimulating this economy. And, now, a failed policy that will leave our children paying for the outrageous spending and the lack of promised increases in exports.
In the classroom, Obama's economic team's big ideas have no consequences. But in the real world, they have serious consequences that affect all of our lives. I am concerned that these experiments will leave us with the frightening reality of economic collapse.
The "hope and change" that America should be wishing for right now is the "hope" that it isn't too late to "change" before our own economy is completely destroyed by these people!
This just reaffirms what I have always felt about the President and his economic team. I have always believed that Obama and his academic elite economists have this untested plan to kill the U.S. dollar with higher and higher accumulated debt (deficit spending). This, in turn, would result in an extremely weak U.S. dollar. Then, as the dollar weakens, American products would become cheaper and cheaper in the world markets. That, in turn, would result in higher exports. And, as I have written in the past, a weak dollar will also punish us for the more than 60 percent of manufactured goods that we currently import.
But, what Obama didn't count on is the fact that other countries might be just as deep in their own debt -- resulting in the collapse of other world currencies like the EuroDollar.
Since December, the U.S. dollar has actually been strengthening after having dramatically fallen since Obama took office and passed his budget busting Stimulus Package. The reason for the dollar's strength today comes out of the assumption that, even though heavily wounded by high deficit spending, it is still a better bet to hold than other currencies; making it more attractive in the world markets. This attitude started when it was learned that the country of Dubai was at risk of defaulting on its loans. It has been furthered by the fact that Greece, Spain, Portugal and three Eastern European countries are also in jeopardy of not meeting their debts. Right now, the EuroDollar -- not the U.S. Dollar -- looks to be in serious trouble as Europe struggles with its collapsing economies (Click to See Full Story: Collapse of the euro is 'inevitable': Bailing out the Greek economy futile, says FRENCH banking chief).
With the dollar gaining strength, we now have another ill-thought-out Obama plan. That's because, besides having massive debt, we no longer have a promise of greater exports. In fact, just last month, U.S. exports fell more than expected because of the strengthening dollar (Click to See Full Story: U.S. trade deficit soars in December).
Every day, this President's plans continue to reflect the ineptness of his economic team. This is what happens when a bunch of "big idea" academics get a hold of a country. None of these people have any practical, real world experience and that fact keeps showing up in their failed policies. Failed policies that haven't created jobs or stemmed the tide of foreclosures and bankruptcies. Failed policies that haven't increased business and consumer loans. Failed policies that aren't stimulating this economy. And, now, a failed policy that will leave our children paying for the outrageous spending and the lack of promised increases in exports.
In the classroom, Obama's economic team's big ideas have no consequences. But in the real world, they have serious consequences that affect all of our lives. I am concerned that these experiments will leave us with the frightening reality of economic collapse.
The "hope and change" that America should be wishing for right now is the "hope" that it isn't too late to "change" before our own economy is completely destroyed by these people!
Thursday, September 3, 2009
One Who Lives In The Cuckoo's Nest
Today was quite the day for economic data:
He seems to overlook the fact that Americans have been losing their jobs, on a weekly basis, at a clip that is greater than all the jobs he seems to think were being saved or created by the stimulus plan. To say that the stimulus is more "than we hoped" is just as dopey. We are well past the 8% unemployment rate that Obama promised would be the unemployment ceiling when the stimulus bill was being rammed through Congress. Many economists now feel like we are beginning another downward fall in what could easily be a double-dip or "W-type" recession.
I don't know if Joe is off his meds or if he just woke up from some kind of "midsummer's night dream"; but, he must think that Americans are totally unaware of the real facts about the state of this economy. Maybe he was somewhat confused. Maybe he was referring to the 10-year budget deficit as being "more than we had hoped" which is now project to be $9 trillion after this President's economic team had originally said -- just 5 months ago -- that it would "only" be $7.4 trillion. Is that it, Joe!
- Just last week, 570,000 workers lost their jobs and those remaining on unemployment comp grew by 92,000.
- Retail sales were down an overall 2.1 percent despite back-to-school spending.
- It was announced that food stamps are now being used by more than 35 million people
- Also announced was the fact that 1.3 million unemployed will lose their benefits by the end of the year.
He seems to overlook the fact that Americans have been losing their jobs, on a weekly basis, at a clip that is greater than all the jobs he seems to think were being saved or created by the stimulus plan. To say that the stimulus is more "than we hoped" is just as dopey. We are well past the 8% unemployment rate that Obama promised would be the unemployment ceiling when the stimulus bill was being rammed through Congress. Many economists now feel like we are beginning another downward fall in what could easily be a double-dip or "W-type" recession.
I don't know if Joe is off his meds or if he just woke up from some kind of "midsummer's night dream"; but, he must think that Americans are totally unaware of the real facts about the state of this economy. Maybe he was somewhat confused. Maybe he was referring to the 10-year budget deficit as being "more than we had hoped" which is now project to be $9 trillion after this President's economic team had originally said -- just 5 months ago -- that it would "only" be $7.4 trillion. Is that it, Joe!
Saturday, June 13, 2009
Let Inflation Begin!
Pure economic theorists will tell you that you shouldn't have inflation when an economy is being staggered by a recession. But, in reality, an economic situation, called stagflation, can happen and create inflation during a time when it shouldn't happen and when the economy is in the worst shape to absorb it -- like the current recession. Typically, stagflation results from too much micro and macro management of the economy that forces external factors to have a greater effect on the economy than would otherwise be seen.
Stagflation can be disastrous during an economic downturn because it can either exacerbate or lengthen the recession. It hurts the poor and the lower classes the hardest because their salaries are unable to rise as fast as prices are rising. This is because recessions and high unemployment have a heavy impact on salaries because there are just too many unemployed "workers" available in the market place to replace those who are not willing to work for less. Further, because prices tend to rise faster than salaries, the consumer winds up with less money in their pockets to buy stuff.
Right now, stagflation and the potential of excessive inflation is at our doorsteps. Despite falling demand, oil prices have more than doubled to the current $73 a barrel from a previous low of around $32 a barrel in just less than 6 months. Corn prices are up by 37 percent. Gold is up 50% from $700 an ounce in just a few months. Similarly, other strategic metals such as silver, palladium, and platinum have had also had 50% gains in the last few weeks. Other grains and rice are also on the rise.
The rise in oil is especially troubling. This is because its rise affects almost everything we buy or do. For example, gasoline prices have jumped a full dollar in pricing at the pump from a low of $1.61 a gallon. Oil is also heavily used in plastics, paints, and fertilizers. Everything has to be shipped to its point of sale and, for that reason, the high cost of oil affects the price of all products that are being sold throughout the US. For sure, grocery prices will be going up because of the heavy influence of energy costs and the costs of fertilizers.
Oil is being driven by three factors.
First, proven reserves for oil began dropping this year (for the first time in 10 years) because no new oil reserves have been found this year. In fact, our Congress passed a bill earlier this year to protect known reserves in this country from being drilled on. This means that production will be declining as the demand keeps rising. Like anything with high demand and with limited supply, this makes oil very valuable. Further, Obama's plans for "oil independence" are being shirked-off because his plans for wind turbines, solar panels, and high mileage vehicles won't really reduce this country's and the world's dependence on oil.
Because of this, we have the second reason why oil is on the rise. There are mammoth amounts of cash in this world that are just sitting idle and not earning much money at all. This cash is the money that was pulled from the housing market and the stock markets when the recession reared its ugly head. That money is now finding its way into oil futures; thus, driving the prices up. Some say this is speculation. However, the people buying those tankers full of oil in terms of oil futures know exactly what they are doing. True speculation implies that traders blindly buy into something without any real knowledge of what they are buying. The people driving the price of oil know exactly what their doing and see only limited risk. If oil goes down, they can turn on a dime.
Lastly, oil is increasing in value because the U.S. dollar is falling. In fact, in just the last month, the U.S. dollar has been cheapened against other world currencies by about 16 percent. The dollar is losing value because of our high debt load under this President/Congress and because of the increasing possibility that we can't repay that debt. Since most of our oil is imported, the devalued dollar causes the importation price of oil to rise. That in turn, causes all oil in the world marketplace to rise. Besides oil, everything we import becomes more expensive. Because we import more than we export, this means that most everything we buy will be sold to us at a higher cost.
The massive accumulation of debt since Obama took office is the driver that could ultimately cause hyperinflation and, at the same time, destroy any possible recovery from this recession. Too much debt means that the one generating the debt becomes a higher risk and, because of that, will have to pay higher rates of return to compensate for that risk. That's why high risk credit card holders are charged a higher rate than low risk holders. The same is true with this country's increasing debt. In the recent weeks, the 10-year U. S. Treasury bond has jumped from a low of 2.56 percent to a high, just this week, of nearly 4%. This is because our bonds lack buyers; buyers not sure about the risk. The 10-year bond is key to the health of our economy because it is integral in setting mortgage and other credit rates. In essence that jump in rates from 2.56% to 4% will cause any new $100,000 mortgage loan payments to increase from about $398 a month to $477 a month on a 30-year basis. That is almost $1000 more per year for a $100,000 mortgage since Obama took office. This will ultimately keep marginal home buyers out of the market for new or existing homes. And, let us not forget, it is the housing market that got us into this recession and it is the housing market that has to become healthy in order to lead us out of this recession. Rising mortgage rates aren't going to make that happen.
The inflated costs for home loans is just the tip of the inflation iceberg. Obama's plans for "Cap and Trade" will impose high costs on everything that we manufacture and sell in this country. The average family might get hit for as much as $6000 more per year in inflated energy and product prices. The green technology effort will be more expensive than today's well-established energy pricing components. That too will add to the cost of everything that is made and sold in America. Obama's health care plan will probably cost the average family in excess of $1000 or more per year for the things they buy. Furthermore, if the full cost for all these Obama programs isn't passed onto the consumer, then that means that tax revenues will go down with profits going down and less taxes will be paid. That will only result in the need to raise taxes on everyone. That's inflationary too.
Lastly -- speaking of taxes -- taxes are being raised at a rapid rate by state and local legislators as a means to offset the loss of tax revenues during this recession. Real estate taxes, auto fees, sales taxes, and income taxes are all being raised and that is inflationary.
It really doesn't matter if it's high gasoline prices or if it's higher taxes or if it's higher prices for products we buy, all of these things put together are impinging on the buying power of the consumer. That's why this recession is probably going to be with us for a long, long, time.
Stagflation can be disastrous during an economic downturn because it can either exacerbate or lengthen the recession. It hurts the poor and the lower classes the hardest because their salaries are unable to rise as fast as prices are rising. This is because recessions and high unemployment have a heavy impact on salaries because there are just too many unemployed "workers" available in the market place to replace those who are not willing to work for less. Further, because prices tend to rise faster than salaries, the consumer winds up with less money in their pockets to buy stuff.
Right now, stagflation and the potential of excessive inflation is at our doorsteps. Despite falling demand, oil prices have more than doubled to the current $73 a barrel from a previous low of around $32 a barrel in just less than 6 months. Corn prices are up by 37 percent. Gold is up 50% from $700 an ounce in just a few months. Similarly, other strategic metals such as silver, palladium, and platinum have had also had 50% gains in the last few weeks. Other grains and rice are also on the rise.
The rise in oil is especially troubling. This is because its rise affects almost everything we buy or do. For example, gasoline prices have jumped a full dollar in pricing at the pump from a low of $1.61 a gallon. Oil is also heavily used in plastics, paints, and fertilizers. Everything has to be shipped to its point of sale and, for that reason, the high cost of oil affects the price of all products that are being sold throughout the US. For sure, grocery prices will be going up because of the heavy influence of energy costs and the costs of fertilizers.
Oil is being driven by three factors.
First, proven reserves for oil began dropping this year (for the first time in 10 years) because no new oil reserves have been found this year. In fact, our Congress passed a bill earlier this year to protect known reserves in this country from being drilled on. This means that production will be declining as the demand keeps rising. Like anything with high demand and with limited supply, this makes oil very valuable. Further, Obama's plans for "oil independence" are being shirked-off because his plans for wind turbines, solar panels, and high mileage vehicles won't really reduce this country's and the world's dependence on oil.
Because of this, we have the second reason why oil is on the rise. There are mammoth amounts of cash in this world that are just sitting idle and not earning much money at all. This cash is the money that was pulled from the housing market and the stock markets when the recession reared its ugly head. That money is now finding its way into oil futures; thus, driving the prices up. Some say this is speculation. However, the people buying those tankers full of oil in terms of oil futures know exactly what they are doing. True speculation implies that traders blindly buy into something without any real knowledge of what they are buying. The people driving the price of oil know exactly what their doing and see only limited risk. If oil goes down, they can turn on a dime.
Lastly, oil is increasing in value because the U.S. dollar is falling. In fact, in just the last month, the U.S. dollar has been cheapened against other world currencies by about 16 percent. The dollar is losing value because of our high debt load under this President/Congress and because of the increasing possibility that we can't repay that debt. Since most of our oil is imported, the devalued dollar causes the importation price of oil to rise. That in turn, causes all oil in the world marketplace to rise. Besides oil, everything we import becomes more expensive. Because we import more than we export, this means that most everything we buy will be sold to us at a higher cost.
The massive accumulation of debt since Obama took office is the driver that could ultimately cause hyperinflation and, at the same time, destroy any possible recovery from this recession. Too much debt means that the one generating the debt becomes a higher risk and, because of that, will have to pay higher rates of return to compensate for that risk. That's why high risk credit card holders are charged a higher rate than low risk holders. The same is true with this country's increasing debt. In the recent weeks, the 10-year U. S. Treasury bond has jumped from a low of 2.56 percent to a high, just this week, of nearly 4%. This is because our bonds lack buyers; buyers not sure about the risk. The 10-year bond is key to the health of our economy because it is integral in setting mortgage and other credit rates. In essence that jump in rates from 2.56% to 4% will cause any new $100,000 mortgage loan payments to increase from about $398 a month to $477 a month on a 30-year basis. That is almost $1000 more per year for a $100,000 mortgage since Obama took office. This will ultimately keep marginal home buyers out of the market for new or existing homes. And, let us not forget, it is the housing market that got us into this recession and it is the housing market that has to become healthy in order to lead us out of this recession. Rising mortgage rates aren't going to make that happen.
The inflated costs for home loans is just the tip of the inflation iceberg. Obama's plans for "Cap and Trade" will impose high costs on everything that we manufacture and sell in this country. The average family might get hit for as much as $6000 more per year in inflated energy and product prices. The green technology effort will be more expensive than today's well-established energy pricing components. That too will add to the cost of everything that is made and sold in America. Obama's health care plan will probably cost the average family in excess of $1000 or more per year for the things they buy. Furthermore, if the full cost for all these Obama programs isn't passed onto the consumer, then that means that tax revenues will go down with profits going down and less taxes will be paid. That will only result in the need to raise taxes on everyone. That's inflationary too.
Lastly -- speaking of taxes -- taxes are being raised at a rapid rate by state and local legislators as a means to offset the loss of tax revenues during this recession. Real estate taxes, auto fees, sales taxes, and income taxes are all being raised and that is inflationary.
It really doesn't matter if it's high gasoline prices or if it's higher taxes or if it's higher prices for products we buy, all of these things put together are impinging on the buying power of the consumer. That's why this recession is probably going to be with us for a long, long, time.
Saturday, June 6, 2009
More Confusing Unemployment Numbers
In past blog entries, I have expressed my confusion over the numbers being released by the Bureau of Labor and Statistics. Friday's employment report just deepened that confusion.
First let me say, a consensus of economists had predicted that the amount of jobs being lost for last month should exceed 500,000. Because of that, those same economists projected a 9.2 percent unemployment rate from the current rate of 8.9 percent.
Remarkably, only 345,000 jobs were actually lost last month. That was 155,000 jobs better than the estimates. Further, the two previous months were also adjusted retrospectively to reflect less jobs being lost than had been previously thought (See Full Story). I say remarkably, because the weekly unemployment reports have been showing an increasing number of workers who were remaining unemployed and collecting benefits. That's the primary reason why the surveyed economists projected a loss of jobs in excess of 500,000.
The kicker comes in with the new unemployment rate being higher than estimated or an actual 9.4 percent versus the expected 9.2 percent. This is despite the loss of "less" jobs last month and the favorable revision of job losses for the two previous months.
To me, this higher than expected unemployment rate is a result of the Bureau's understated unemployment rates in previous month's and, now, their attempts to rectify their bad math. Something that I had complained about before in this blog (See my blog: "Some Fuzzy Math On Unemployment").
I am still having problems with this month's numbers. For sure, the Census Bureau's hiring of over a million workers in the next 9 months is probably muddying up the facts. But, it is interesting that no additional jobs were shown in the "Government Jobs" category of the report; accounting for additional census workers being hired. In fact, the "Government" actually shed 7,000 jobs in the last month. That to me is a head scratcher since the initial batch of census employees began being hired last month.
All in all, the report has some real inconsistency issues. The unemployment rate jumping as it did with a less than expected loss of jobs makes absolutely no sense. The lighter than expected job losses is inconsistent with the weekly unemployment benefits claims. And, where are those Census Bureau hires?
As the above referenced article mentions, most analysts believe that unemployment will jump to a rate of 10 percent of more. Some say as much as 10.7 percent. It is hard to believe that we won't go above 10 percent with 7 months left to report for this year and with the rate now sitting at 9.4 percent. With thousands of jobs being lost in the auto industry (dealers and assembly line workers), it is my guess that the year end number will be closer to 10.7 percent; rather than 10. To date, only 4 percent of the stimulus package has been spent. But, if you look at the actual spending details, many of the jobs being created by the stimulus program are short-lived in nature; such as the filling of post-winter potholes in Iowa and other road repairs (See a typical story about the stimulus package spending). Once those projects are done, any people that were hired will be back on the streets.
Lastly, there will be a lot of college grads who are now entering the job market and, in most cases, won't be able to find jobs. This, too, will push the unemployment rate up.
In conclusion, expect the Obama Administration to spin the 345,000 job loss as a "BIG" improvement and try to give us all the impression that their Stimulus Package is working. Of course, they will completely ignore the inconsistencies that I have pointed out. Let's not forget that Obama's own economic team said that the unemployment rate would top out at 8 percent for this year. At the current rate of 9.4%, they missed that mark by over 17 percent. Now, I guess I shouldn't hold my breath waiting for an explanation of why they were so far off on that number! You've got to wonder how many "other" numbers they are off by at least 17 percent --- and still counting! That's why I believe we will be closer to a $2.2 trillion deficit for this year than the Administration's early estimate of $1.7 trillion.
I would hope that America wakes up to the fact that we are getting spin after spin and no real facts from this White House.
First let me say, a consensus of economists had predicted that the amount of jobs being lost for last month should exceed 500,000. Because of that, those same economists projected a 9.2 percent unemployment rate from the current rate of 8.9 percent.
Remarkably, only 345,000 jobs were actually lost last month. That was 155,000 jobs better than the estimates. Further, the two previous months were also adjusted retrospectively to reflect less jobs being lost than had been previously thought (See Full Story). I say remarkably, because the weekly unemployment reports have been showing an increasing number of workers who were remaining unemployed and collecting benefits. That's the primary reason why the surveyed economists projected a loss of jobs in excess of 500,000.
The kicker comes in with the new unemployment rate being higher than estimated or an actual 9.4 percent versus the expected 9.2 percent. This is despite the loss of "less" jobs last month and the favorable revision of job losses for the two previous months.
To me, this higher than expected unemployment rate is a result of the Bureau's understated unemployment rates in previous month's and, now, their attempts to rectify their bad math. Something that I had complained about before in this blog (See my blog: "Some Fuzzy Math On Unemployment").
I am still having problems with this month's numbers. For sure, the Census Bureau's hiring of over a million workers in the next 9 months is probably muddying up the facts. But, it is interesting that no additional jobs were shown in the "Government Jobs" category of the report; accounting for additional census workers being hired. In fact, the "Government" actually shed 7,000 jobs in the last month. That to me is a head scratcher since the initial batch of census employees began being hired last month.
All in all, the report has some real inconsistency issues. The unemployment rate jumping as it did with a less than expected loss of jobs makes absolutely no sense. The lighter than expected job losses is inconsistent with the weekly unemployment benefits claims. And, where are those Census Bureau hires?
As the above referenced article mentions, most analysts believe that unemployment will jump to a rate of 10 percent of more. Some say as much as 10.7 percent. It is hard to believe that we won't go above 10 percent with 7 months left to report for this year and with the rate now sitting at 9.4 percent. With thousands of jobs being lost in the auto industry (dealers and assembly line workers), it is my guess that the year end number will be closer to 10.7 percent; rather than 10. To date, only 4 percent of the stimulus package has been spent. But, if you look at the actual spending details, many of the jobs being created by the stimulus program are short-lived in nature; such as the filling of post-winter potholes in Iowa and other road repairs (See a typical story about the stimulus package spending). Once those projects are done, any people that were hired will be back on the streets.
Lastly, there will be a lot of college grads who are now entering the job market and, in most cases, won't be able to find jobs. This, too, will push the unemployment rate up.
In conclusion, expect the Obama Administration to spin the 345,000 job loss as a "BIG" improvement and try to give us all the impression that their Stimulus Package is working. Of course, they will completely ignore the inconsistencies that I have pointed out. Let's not forget that Obama's own economic team said that the unemployment rate would top out at 8 percent for this year. At the current rate of 9.4%, they missed that mark by over 17 percent. Now, I guess I shouldn't hold my breath waiting for an explanation of why they were so far off on that number! You've got to wonder how many "other" numbers they are off by at least 17 percent --- and still counting! That's why I believe we will be closer to a $2.2 trillion deficit for this year than the Administration's early estimate of $1.7 trillion.
I would hope that America wakes up to the fact that we are getting spin after spin and no real facts from this White House.
Friday, February 6, 2009
Democrats: By Not Voting, Republicans are Jeopadizing Their Political Futures
I really have to laugh at one comment that I keep hearing from Democrats. That comment is that Republicans are committing "political suicide" if they don't vote for this stimulus bill. In the same vein, I keep hearing Democrats say that Republicans are going to have to do a lot of explaining the next time they go to their home districts after having not voted for this bill.
Wow! Since when were Democrats so caring about Republicans losing their political futures? What a bunch of political hogwash that is. The last thing that Democrats ever want to do is save any Republican from losing their job. It just proves what I have always said. They will need the cover of bipartisanship in order to save their political you-know-whats when it is ultimately proven that this bill didn't save or create the jobs that Obama claims it will.
Wow! Since when were Democrats so caring about Republicans losing their political futures? What a bunch of political hogwash that is. The last thing that Democrats ever want to do is save any Republican from losing their job. It just proves what I have always said. They will need the cover of bipartisanship in order to save their political you-know-whats when it is ultimately proven that this bill didn't save or create the jobs that Obama claims it will.
Wednesday, February 4, 2009
Stimulus Package: Separating the Democrats from the Republicans
Like no other legislative event in our lifetime, the ideas about what should go into the stimulus package clearly delineate the major differences between our two political parties.
The bill that was passed by the Democrats in the House of Representatives was filled with social programs and with hardly any real stimulus to the private sector. The job creation aspects of that bill were aimed at union workers and could easily be viewed as political payback for help in winning the recent election. Almost all of the job creation is through government contracts. There are no mechanisms to stimulate business in the private sector so that those who lost their jobs from a company like Circuit City will find new work.
The Republicans, on the other hand, want to see loan guarantees and other mechanisms for stimulating jobs in the private sector. They want to focus on rebuilding the housing market. They want substantial tax cuts for those making less than $65,000 a year so they will start buying again. They want business stimulating tax cuts for small businesses and corporations.
The difference comes down to the old adage about teaching someone to fish rather than just giving someone a fish. The Democrats want to hand fish out. When they're gone, they're ready to give out more. But, they never want to teach people to fish so they can become self sufficient. It's never the hand up; only the hand out.
Even when our President talks about creating high paying green jobs that cannot be shifted overseas, that's just B.S. The motive of creating "green jobs" isn't to avoid foriegn oil imports and really create jobs but to satisfy the environmentalists who make up the Democratic Party. Those green jobs aren't aimed at creating new domestic jobs. Solar and wind technologies are aimed at eliminating coal and natural gas electricity production; both domestic and not foreign jobs and products. You might create a solar job on one hand but, on the other, you will kill a job in coal extraction, coal delivery, or some job at a coal-fired power plant. Solar and wind have nothing to really do with minimizing oil imports or keeping jobs in America. This kind of stuff is just a form of rearranging the deck chairs (as on the Titanic) and isn't really creating a larger job force and growing our economy to get us out of this mess.
I realize that, in times of trouble, people need safety nets. We don't want people starving on our streets. But, the goal of any stimulus package should not be just that. If you want a welfare package, then do that separately and call it that. The Democrats are trying to use this economic emergency as a cover to pass a whole litany of pent up social programs that they probably wouldn't have been able to pass into law if they didn't have this economic emergency to hide behind. The whole thing is a costume party being held by the Democrats. What you see isn't what you will be getting.
By the way. Friday will see the release of January's employment numbers from our Labor Department. There is no doubt that it be another horrible number of at least another 1/2 million in job losses. But, that is expected because jobs are a lagging indicator in terms of any economic recovery. By that, I mean that jobs aren't added back into the economy until and when the economy starts growing again. Expect Obama and the Democrats to use that number as evidence that this bill should be passed immediately, as is, and with no further scrutiny.
Remember. Haste makes waste. Especially in this case!
The bill that was passed by the Democrats in the House of Representatives was filled with social programs and with hardly any real stimulus to the private sector. The job creation aspects of that bill were aimed at union workers and could easily be viewed as political payback for help in winning the recent election. Almost all of the job creation is through government contracts. There are no mechanisms to stimulate business in the private sector so that those who lost their jobs from a company like Circuit City will find new work.
The Republicans, on the other hand, want to see loan guarantees and other mechanisms for stimulating jobs in the private sector. They want to focus on rebuilding the housing market. They want substantial tax cuts for those making less than $65,000 a year so they will start buying again. They want business stimulating tax cuts for small businesses and corporations.
The difference comes down to the old adage about teaching someone to fish rather than just giving someone a fish. The Democrats want to hand fish out. When they're gone, they're ready to give out more. But, they never want to teach people to fish so they can become self sufficient. It's never the hand up; only the hand out.
Even when our President talks about creating high paying green jobs that cannot be shifted overseas, that's just B.S. The motive of creating "green jobs" isn't to avoid foriegn oil imports and really create jobs but to satisfy the environmentalists who make up the Democratic Party. Those green jobs aren't aimed at creating new domestic jobs. Solar and wind technologies are aimed at eliminating coal and natural gas electricity production; both domestic and not foreign jobs and products. You might create a solar job on one hand but, on the other, you will kill a job in coal extraction, coal delivery, or some job at a coal-fired power plant. Solar and wind have nothing to really do with minimizing oil imports or keeping jobs in America. This kind of stuff is just a form of rearranging the deck chairs (as on the Titanic) and isn't really creating a larger job force and growing our economy to get us out of this mess.
I realize that, in times of trouble, people need safety nets. We don't want people starving on our streets. But, the goal of any stimulus package should not be just that. If you want a welfare package, then do that separately and call it that. The Democrats are trying to use this economic emergency as a cover to pass a whole litany of pent up social programs that they probably wouldn't have been able to pass into law if they didn't have this economic emergency to hide behind. The whole thing is a costume party being held by the Democrats. What you see isn't what you will be getting.
By the way. Friday will see the release of January's employment numbers from our Labor Department. There is no doubt that it be another horrible number of at least another 1/2 million in job losses. But, that is expected because jobs are a lagging indicator in terms of any economic recovery. By that, I mean that jobs aren't added back into the economy until and when the economy starts growing again. Expect Obama and the Democrats to use that number as evidence that this bill should be passed immediately, as is, and with no further scrutiny.
Remember. Haste makes waste. Especially in this case!
Tuesday, February 3, 2009
A Chill Settles In, In Davos
Once a year, the titans of world industry, politics, economics, and intellectual thought, all meet in the mountains of Switzerland, in a place called Davos, to discuss world trade and economic and social development. As we all head towards an economic shambles, no other year at Davos could be deemed so important.
On election day, the world was enthralled with our new young President. But, now, in light of the economic crisis and his proposed handling of that crisis, they might be growing a little cold towards the new Obama administration. While not as cold as the Alps surrounding Davos, there appears to be quite a lot of reservation about the new administration's trends toward protectionism and towards steep and long-term indebtedness as a result of the Obama-proposed stimulus package (See Full Story).
Clearly, I expressed a similar concern in my recent blog entry of January 25th titled: "A New Era Of Trade Wars Looms." (See Full Blog Entry) History has shown us that the protectionism of the Smoot-Hawley Act of 1930 drove this country into retaliatory trade barriers and into the resulting prolongation of the economic oblivion that we call the Great Depression. With Obama and the Democrats apparently ready to retry that protectionist stupidity, you've really got to wonder. Did this former Clinton economic team, the one that Obama recently hired, read any of the books regarding the Great Depression? Or, did they just eat them? Along with potentially making the mistakes of JFK and Jimmy Carter, is the President now trying to be our new Herbert Hoover with trade barriers?
A near half-century before Christ was born, Marcus Tullius Cicero, the great Roman philosopher, once said: "History is indeed the witness of the times, the light of truth."
Please, Mr. Obama. Aren't you able to see that light?
On election day, the world was enthralled with our new young President. But, now, in light of the economic crisis and his proposed handling of that crisis, they might be growing a little cold towards the new Obama administration. While not as cold as the Alps surrounding Davos, there appears to be quite a lot of reservation about the new administration's trends toward protectionism and towards steep and long-term indebtedness as a result of the Obama-proposed stimulus package (See Full Story).
Clearly, I expressed a similar concern in my recent blog entry of January 25th titled: "A New Era Of Trade Wars Looms." (See Full Blog Entry) History has shown us that the protectionism of the Smoot-Hawley Act of 1930 drove this country into retaliatory trade barriers and into the resulting prolongation of the economic oblivion that we call the Great Depression. With Obama and the Democrats apparently ready to retry that protectionist stupidity, you've really got to wonder. Did this former Clinton economic team, the one that Obama recently hired, read any of the books regarding the Great Depression? Or, did they just eat them? Along with potentially making the mistakes of JFK and Jimmy Carter, is the President now trying to be our new Herbert Hoover with trade barriers?
A near half-century before Christ was born, Marcus Tullius Cicero, the great Roman philosopher, once said: "History is indeed the witness of the times, the light of truth."
Please, Mr. Obama. Aren't you able to see that light?
Sunday, January 11, 2009
Rough Seas Ahead?
Right now, Mr. Obama has loaded up his incoming Administration with ex-Clinton people. Apparently, Barack thinks life was great under Bill Clinton and wants to revive the feeling of those dot-com boom years that Clinton actually had nothing to do with. Before anyone gets too euphoric, just take a look at one of the key people that supposedly handed this country such a great economic ride during Bill's great adventure as President. That person was Bill Clinton's former Treasury Secretary, Robert Rubin.
Now, after being the senior economic adviser and board member to Citi Group/Bank, he has been forced to resign with a trail of $20 billion in losses to that company (See Full Story).
There appears to be a misconception that the Clinton years were perfect. They weren't. Clinton never was able to close a deal on the Palestine/Israeli tensions. He let Bin Laden slip through his fingers and strengthen operations in Afghanistan. The economy was good under Clinton but by no effort on his part. He road the wave of the dot-com boom until that bubble burst and the economy slipped into recession. Anyone knows that most any ship's crew can sail a boat in calm seas. But it is completely different in rough waters and in high seas. We are in high seas, now, and I just don't think these former Clinton people have the true experience to get us to a safe harbor. Just my opinion.
And, by the way. Before I get any emails pointing to the mess we are into today and how it is all Bush's fault, I would suggest you look at the real history of how the "cheap" housing credit situation came to be in this country. The problem had be brewing as a result of legislation that goes all the way back to the Carter Administration and was given further fuel under Clinton. Bush knew the problem was there and pointed it out in speeches going back to 2001. If Bush is to be blamed for anything, it is for his failure in being a more forceful manager and "red-flagger" on this specific issue. That's a burden of blame that his legacy will carry forward.
Now, after being the senior economic adviser and board member to Citi Group/Bank, he has been forced to resign with a trail of $20 billion in losses to that company (See Full Story).
There appears to be a misconception that the Clinton years were perfect. They weren't. Clinton never was able to close a deal on the Palestine/Israeli tensions. He let Bin Laden slip through his fingers and strengthen operations in Afghanistan. The economy was good under Clinton but by no effort on his part. He road the wave of the dot-com boom until that bubble burst and the economy slipped into recession. Anyone knows that most any ship's crew can sail a boat in calm seas. But it is completely different in rough waters and in high seas. We are in high seas, now, and I just don't think these former Clinton people have the true experience to get us to a safe harbor. Just my opinion.
And, by the way. Before I get any emails pointing to the mess we are into today and how it is all Bush's fault, I would suggest you look at the real history of how the "cheap" housing credit situation came to be in this country. The problem had be brewing as a result of legislation that goes all the way back to the Carter Administration and was given further fuel under Clinton. Bush knew the problem was there and pointed it out in speeches going back to 2001. If Bush is to be blamed for anything, it is for his failure in being a more forceful manager and "red-flagger" on this specific issue. That's a burden of blame that his legacy will carry forward.
Friday, December 19, 2008
Another Gold Rush
Over the last two weeks, the dollar has weakened by about 20 percent and gold is up over $100 dollars. That basically means that investors/speculators in the world are now dumping the greenbacks and buying the protection of gold. What that is saying is not good for the United States. The dumping of dollars shows fear in the United States. For weeks, the dollar had been strengthening against other currencies and gold had been falling. But, no longer. The investment community is now seeming to say they don't like all the additional bailout plans. It is no coincidence that the rise in other currencies and the fall in the dollar started with all the talk of bailing out the auto companies. Further, Mr. Obama's plans for another half to three-quarters of a trillion dollars or more in so-called stimulus plans is not setting well. I think the amount of debt that this country is quickly amassing is of considerable concern. And, that concern is driving gold prices up.
As a country, the United States will have accumulated a deficit against this year's tax revenues in excess of one trillion dollars. Mr. Obama plans another near trillion in spending programs and stimulus when he and the Democrats take control. Further, the national debt is ballooning and we are borrowing more and more to cover that debt. In the last two months alone, the interest that we will be paying on our national debt will be at a rate in excess of $18 billion a month; and growing (See Full Story). That means that every man, woman, and child needs to ante up at least $60 a month just to cover the interest on our national debt. We are up to our necks in debt and, possibly, approaching a tipping point where there is no reasonable way to pay everything back. That's why gold is on the way up again and our currency is weakening fast. The world is wondering if we will ever get the money back to pay for it all.
As a country, the United States will have accumulated a deficit against this year's tax revenues in excess of one trillion dollars. Mr. Obama plans another near trillion in spending programs and stimulus when he and the Democrats take control. Further, the national debt is ballooning and we are borrowing more and more to cover that debt. In the last two months alone, the interest that we will be paying on our national debt will be at a rate in excess of $18 billion a month; and growing (See Full Story). That means that every man, woman, and child needs to ante up at least $60 a month just to cover the interest on our national debt. We are up to our necks in debt and, possibly, approaching a tipping point where there is no reasonable way to pay everything back. That's why gold is on the way up again and our currency is weakening fast. The world is wondering if we will ever get the money back to pay for it all.
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