Sunday, December 30, 2012

Obama Orders Pay Raises Mocking Fiscal Cliff

Believe it or not the left leaning Huffington Post reported yesterday that resident Barack Obama gave a New Year's gift to returning members of Congress, Vice President Joe Biden and a slew of other federal workers. On Thursday Obama , signing an executive order calling for an end to a years-long pay freeze. By taking this action while many Americans are suffering and America's budget is out of control Obama makes a mockery of claims that he is concerned.

Obama's order made no mention of the merit for these raises, HuffPost's Amanda Terkel reported on Friday that the 112th Congress is set to end the session as the most unproductive since the 1940s, with only 219 bills passed by the body becoming law. The raise will effect the incoming 113th Congress, outgoing members will see no effect from the order. Obama ordered the raise as he continues to negotiate unsuccessfully with congressional leaders to find a deal in order to avoid the fiscal cliff at the end of the year. If no agreement is met, over $500 billion in planned tax increases and spending cuts will be implemented. 

As of March 27, 2013, federal employees will see a half-percent to one percent pay increase, marking the end of a pay freeze that has been in place since late 2010. According to the order, Biden's pay will increase from $225,521 to $231,900 a year. House Speaker John Boehner (R-Ohio) will see his salary increased to $224,500 and Senate Majority Leader Harry Reid (D-Nev.) will take home an annual pay of $194,400 after his raise. While the raises are small this again shows Washington has no interest in finding a serious starting point in addressing the nations problems, it is always somewhere else, it is always starting at some later date. 

Sunday, December 23, 2012

Grand Bargain or The Great Betrayal?

I was recently surprised to find that William K Black, a man that I learned of back in 2009 during the depth of the banking crises had written an article in the left-leaning Huffington Post saying that cutting back government spending and  unraveling the safety net is a terrible thing. It appears that Black, a Democrat is unhappy about the goal of addressing the budget through a so-called "Grand Bargain", he sees this as more of a betrayal of the people.

On April 3, 2009, Black appeared on Bill Moyers Journal on PBS and provided critical commentary on the U.S. banking crisis. In the interview with Moyer, Black asserted that the banking crisis in the United States that started in late 2008 is a big Ponzi scheme; that the "liar loans" and other financial tricks were essentially illegal frauds; and that the triple-A ratings given to these loans was part of a criminal cover-up. He said that the "Prompt corrective Action Law" passed after the Savings and loan crisis mandated that ailing banks should be put into receivership. Black said that trying to hide how bad the situation is will simply prolong the problem, as happened in Japan's lost decade. Black also stated that Timothy Geithner is engaged in a cover-up and that the Obama administration does not want people to understand what went wrong or how bad the banking situation is today.

In the recent Huffington Post article, Black writes, Wall Street's greatest desire is privatizing Social Security. Wall Street stands to make scores of billions of dollars annually in additional fees should it ever buy enough politicians to privatize Social Security. The Republican Party's greatest goal is unraveling the safety net. They always wish to attack the most successful and popular programs introduced by the Democratic Party. Their problem is that they know it is toxic for Republican candidates to try to destroy the safety net. Only Democrats, through a "Great Betrayal", can give Republicans the political cover they need to unravel the safety net.

He goes on to say, The safety net is so popular with the American people because it consists of superb programs that constantly put the lie to Republican memes that the government is incapable of success.   Obama is telling the media that the Great Betrayal is his first, and overarching, priority should he be re-elected. We are forewarned and we must act now to make clear that we will block the Great Betrayal and crush at the polls any member of Congress who supports it. Do not concede the phrase "grand bargain" to the proponents of the betrayal. We went on to say that it is essential to call a plague by its real name if one is to resist it.

In 2009 Black was one of the very few really informed as to the facts. A lawyer, academic, author, and a former bank regulator, his expertise is in white-collar crime, public finance, regulation, law, and economics. He developed the concept of "control fraud", in which a business or national executive uses the entity he or she controls as a "weapon" to commit fraud.  I found it interesting that Black and I interpret what is going on with the Fiscal Cliff debate in Washington and the solution from totally different perspectives. His flaw may be that "government is the answer", my flaw hoping that the Republicans care more about the American people than their own self-interest. In the end, Black and I agree on one thing, the government, and financial system is corrupt.

If you are up for more please read my prior post;

Less Gifts and More Christmas

This time of year I find the mind numbing barrage from stuff peddlers rushing to fill my every need overwhelming. Needs both real and imagined, I'm even asked to reach out and consider, and speculate, on the needs and desires that others might have. Peoples lives are crammed with material goods, our drawers and closets are chucked full of the trendy apparel of last season, exercise equipment, knick- knacks, and electronic equipment, until they threaten to explode unless they move to a larger house or rent a storage unit.  Neurotic people with over active pack-rat syndrome literally destroy their quality of life with clutter and junk that sits in one place for years while they can’t find a chair to sit in or a clean table top on which to eat. 
Ads like - "get it all" or "have it all" with Dell, live on the cutting edge, buy all of these high powered models and "put your life in the zone." This new fangled electronic gizmo does it all and more, look at the art work, let it wash over you, surround you, and cover you up.  Check out that car, is it not perfect?  Wouldn’t driving it make life a zen like experience - got to have it, no payment for 90 days.

We get caught up in the game of finding the perfect patio furniture and after we buy it we use it twice. It then sits on our deck only to fade in the sun over the next three years.  Never before has man had so much, but its far from enough.  Things will be “swell and down right peachy” only after you fill it with the right kind of stuff. Then your life will be nearly perfect in every way till . . . . .  No, the new model’s here, and its better, sleeker and cheaper, Nooooooooo!

Great are the efforts we make to fill our needs with material objects in an effort to achieve happiness. We rush around with our video and digital cameras in a desire to preserve those precious moments.  We capture so many images that we forget to download, view and print them.  We now have the ability to collect and store vast quantities of information and data, much of which is never processed or utilized.  Poor quality or obsolete data entered into our system downgrades the output, "garbage in - garbage out."  
What is real?  The Sunday paper weighs ten pounds, the ads, the ads, the ads.  What store is that?  Never heard of it?  They are all the same, junk, junk, junk, buy me some happiness!! It is only natural to be drawn to nice things but new is merely a point in time, and not a reflection on quality or utility value. We have so much junk we can’t find the item we need or want, so we are forced to buy a replacement until we find where it was placed.  You know it’s true  – yes, you are guilty, so are we all.

We have even been convinced that we should not leave our house or office without a bottle of water, if it were not for bottled water, we would all be dead.  Bottled water was a two hundred billion dollar industry last year.  Oh, how our needs have grown.  Well, all I really need is a lamp, an ashtray and well maybe a yogurt maker.  That’ all I need!  Using a line by the song writer-singer Jimmy Buffet, I want to go where the women and water are free.

PART OF THIS POST WAS LIFTED FROM MY BOOK "ADVANCING TIME". If you glance over at the archives over the months you will see other post concerning social commentary, sustainability,  or the environment.

Lotto Madness

The  "Lotto Madness" that has swept across America reveals something about our culture. While this might not reach the level of needing a post event "debriefing" a closer look at how these large lotteries effect our culture may be important. A close inspection of how people react to the idea of winning a large sum of money exposes more then a few flaws in our values and the way we think. It seems that we reached the point where the road to riches is not through the valley of hard work and savings and that we by-pass the important area known as sacrifice.

This has even influenced television shows like the animated comedy "Family Guy" where in a recent episode the family finds themselves living on a strict budget until a local news story on the lottery influences Peter to buy a ticket in hopes that he will win and set the family on a better financial platform. Peter reveals to his family that he has bought several thousand lottery tickets, admitting that he has taken out a second mortgage on the house in order to buy them. After watching the results of the lottery that night, they discover that they have indeed won it yes, they have obtained the American dream.

When weekly periodicals are placed as inserts in Sundays papers across the nation with front page revelations of comparison incomes comparing salaries.  An athlete making $15,900,000 a year, next to a government employee making $130,000, a CEO at $120,000,000 a year, and a business owner at $24,000 dollars a year causes pause.  No wonder we as a society are totally screwed up.  We must question our values, we must question the fairness.  It is hard to measure the discontent generated by irresponsible articles like these.

 Many people feel the trade offs we face in life within our free market-consumer based society. The fact is economic growth is accompanied  by  “wheel spinning”, inefficiencies and waste.  While the benefits of our system often outweigh the negatives we find society is paying a toll through increased rates of addiction, depression and economic inequality.  On the emotional side many people are not achieving the degree of being content or happy they had hoped for and are left with feelings of insecurity.

Government sanctioned gambling and especially lotteries send a message to the populace that conflicts with many important values.  These messages promote a "let it roll" mentality.  Simply allowing such activities and promoting them are two different issues.  Government has climbed into bed with the devil to gain revenue from taxing these activities.  Gaming does not benefit the average man.  Truth is the laws of nature and the odds are against you, that’s why they call it gambling and not winning.

Huge sums of money from lotteries are unmanageable by the average man and often cause adjustment difficulties, resulting in pain and not happiness.  Large jackpots also result in a disconnect in true and associated values causing unrealistic expectations.  Thoughts that jackpots in excess of one hundred million dollars can be ours gives a false impression of reality that is harmful in cultivating positive work ethics and makes a mockery of those who toil to produce a better life.

Our modern consumer based society has made us slaves to material objects and producers of waste.  Many economist urge us to consume, even when we must borrow to do so, saying it creates ever more jobs. We follow Governments and leaders that we often neither like nor trust.  Today’s youth growing up besieged by marketers, are now vilified for being materialistic, marred by too little perspective, they find themselves angry and disappointed. During the latest lotto that sported a massive well publicized jackpot people used money that was intended to be used to pay rent and even the food stamp money given to them by tax payers to buy tickets. This is indeed madness.

Wednesday, December 19, 2012

Dividend and Capital Gains Tax

The special breaks and deduction that make up Americas tax code are massively confusing. Most people are totally ignorant of tax law and  have no idea what they are talking about when they express an opinion on what policy changes should be made,or how they will effect the economy. In 2003, President Bush proposed to eliminate the U.S. dividend tax saying that "double taxation is bad for our economy and falls especially hard on retired people", this is questionable. He also argued that while "it's fair to tax a company's profits, it's not fair to double-tax by taxing the shareholder on the same profits." This formed the bases for the following tax table.

Dividend Taxation in the United States since 2003
2003–2007 2008–2012 2013 -
Ordinary Income Tax Rate Ordinary Dividend
Tax Rate
Qualified Dividend
Tax Rate
Ordinary Income Tax Rate Ordinary Dividend
Tax Rate
Qualified Dividend
Tax Rate
Ordinary Income Tax Rate Ordinary Dividend
Tax Rate
Qualified Dividend
Tax Rate
10% 10% 5% 10% 10% 0% 15% 15% 15%
15% 15% 5% 15% 15% 0% 28% 28% 28%
25% 25% 15% 25% 25% 15% 31% 31% 31%
28% 28% 15% 28% 28% 15% 36% 36% 36%
33% 33% 15% 33% 33% 15% 39.6% 39.6% 39.6%
35% 35% 15% 35% 35% 15%

Soon after, Congress passed the Jobs and Growth Tax Relief Reconciliation Act of 2003, "JGTRRA"), which included some of the cuts Bush requested and he signed into law on May 28, 2003. Under the new law most dividends are taxed at the same rate as long-term capital gains, which is 15 percent for most individual taxpayers. Qualified dividends received by individuals in the lower 10% and 15% income tax brackets taxed at 5% from 2003 to 2007. The qualified dividend tax rate was set to expire December 31, 2008; however, a tax bill in 2005 extended the lower tax rate through 2010 and further cut the tax rate on qualified dividends to 0% for individuals in the 10% and 15% income tax brackets. In December of 2010, President Obama signed into law the Tax Relief, Unemployment Insurance Re-authorization and Job Creation Act of 2010. The legislation extends for two additional years the changes enacted to the taxation of dividends in these laws.

What happens to the tax rate on dividends will have more effect on high income earners that receive this type of income then the tax rates now being debated. Other tax issues of major importance have been placed on the back burner but must be addressed, these include the Inheritance Tax, and the Minimum Alternative Tax. With only thirty present of taxpayers itemizing deductions the explosive implications of capping certain deductions  will soon resurface as will several tax credits that cost the government revenue. This needed debate will go on for a long time.

Monday, December 17, 2012

Nothing Has Changed In The Economy

Economically speaking the numbers out this morning would lead any sane person to say, "nothing has changed on the ground" even after central banks have dumped trillions of dollars into the system. Much like in 2007 when the markets ignored reality, the markets are generally moving upward on the bad news, the following article by Gregg Robb was placed on Market Watch following the release of the data: 

WASHINGTON (MarketWatch) - The Empire State manufacturing index remained in negative territory for the fifth month in a row, the New York Federal Reserve Bank said Monday. The index fell to negative 8.1 in December from negative 5.2 in November. Readings below zero indicate a decline in activity. Economists polled by MarketWatch expected the index to return to positive territory near 5.2. Details of the report were also weak. The key new orders sub-index fell below zero after returning to positive territory in November and shipments also retreated.

Another article went on to explain that investors are shrugging off economic data to focus instead on budget negotiations in Washington which appeared to make some progress over the weekend. When will people realize that nothing has changed? Like a boat on the ocean the economy is riding the wave of deficit spending.

A Foot Note, added January 9th; A headline like the one this morning, should give one pause, "floundering food stamp growth will hurt grocers".


Sunday, December 9, 2012

What is the definition of "IS"?

When it comes to the way many media host conduct their interviews on the Sunday morning talk shows the spin is incredible. The host often loads the question then bends the answer. Bias moderators who lead talk shows concerning important topics in America and Washington ask a question then interject their opinions and ideas right over the top of the guest answers. It is not uncommon to hear questions asked that can't be answered or the answers have nothing to do with the question. I'm reminded of the infamous response Bill Clinton gave to a question during an interview, "it all depends on your definition of is."

As an example imagine a host allowing the following answer from a man with a history of violence that was recently released from prison to the following question. Have you stopped beating your wife? The convict would say: "That depends on your definition of beating. I may rough her up a little now and then, you know, back hand her across the mouth or kick her, but no I don't beat her anymore." I suppose if when you use the term "beat", you mean with an object like a pipe or stick, the answer would be, yes this man has reformed.

When trying to interpret the information we garner from these shows we should ask, does the host have an agenda? Till the American people and the networks begin to demand more fair and balanced information and fact finding do not expect the quality of these shows to improve. A sad commentary on the pace of modern life is that we have little time to reflect and correct problems like these. When it comes to an event that moves us emotionally we vow to remember it forever but within a few hours it becomes lost in the chaos of everyday life. Do not expect the media to improve or change any time soon.

Footnote; If you can handle a stronger rant on the clowns of media and the so called experts, please view the posts below,

Government Includes Quasi Government Ventures

The role of the government in America is changing on federal, state and local levels.  Mandates often unfunded are fostered upon business organizations and private citizens. If unchecked government grows - it is the nature of bureaucracy to expand.  The use of sun-set legislation is underused or the bar set too low when it comes to extending and renewing government bodies. Politicians and bureaucrats deterred from expanding or funding programs by a few vigilant citizens, wait and find creative ways to reach their objective at a later date.  Creating special bonds, attaching fees to needed services or narrow taxes that go on to fund new authorities, commissions, and districts.

The government need not be efficient, we see this in issues small and large, for example in our currency. Not only is the penny still being used, four new versions of it were released in 2009.  The penny is totally antiquated and illogical if an employee is paid only $12.00 per hour it cost twenty cents per minute.  How can businesses afford to pay that employee to count and handle pennies when the labor exceeds its value?  According to the “citizens to retire the penny” it cost the Country more than $15 Billion Dollars annually, but to the government that matters naught.

The Government hurls money at inefficient programs to assist the poor.  Government has spent a fortune in housing for low-income people offering low prices to the applicants, they compete with private enterprise but due to subsidizes are able to “cherry pick” those that will be good residents, rejecting to the streets the more troubled.  They ignore that this is is in conflict with their mission of helping the most needy.  Food stamps do not limit the user to economical healthy basic foods but allow even a recipient to pick up steak and lobster that they can give to friends and family at Christmas, a blind eye is turned towards this glaring flaw.
I often sit and have coffee in a chair near the front window in the building where my office is located, this window looks out on what might be called the crossroads of America.  Across the street is a Target store that was recently expanded into a super-target, behind it a toxic waste site cleaned up to where it may be used in a limited way.  A bank on the corner, built eight years ago after demolishing the preexisting buildings, has changed its name five times through acquisitions.  Miscellaneous stores and offices line the street, coming and going, with all for lease signs that accompany such a changing landscape.

Unneeded quasi-government organizations by nature reach out to expand the influence and power of their directors. Instead of focusing on the business of government and simplicity, this new proactive movement, one of "cuteness", disguised in the shawl of flexible and diversity is being expanded, and we are paying the tab.  Government is proud of pet projects, it allows bureaucrats to experiment and try new things without the personal financial risk forced upon those in business, they are creative and tinkering on our dime and this is a problem for concern. The best time to kill a monster is while its still small, that time has passed, now we can only hope to slow its growth through starvation, and that is unlikely.

Footnote; this dovetails with a post on February 6th, 2012 titled The Assault of Growing Government, it can be accessed at

Tuesday, November 20, 2012

Taxation Discourages Savings

    No where are laws and legislation a stronger form of social engineering then when it involves the economy and taxation. Tax incentives and the fuzzy math that surrounds our complicated tax system often clouds the issues. Its often not how much money is spent but rather how the money is spent that determines the value of an investment. One obvious place this plays out is in savings, by taxing interest of a simple savings account the government makes the act a far less compelling investment.

    America’s lack of savings is repeatedly pointed to as a problem, yet laws, that tax  interest  make small savings accounts a non-starter when coupled with the factors of  inflation and bank fees. For a long time  I’ve promoted a program that makes the first Two Hundred Dollars of interest from a savings account non-taxable as a way to encourage savings.  At a four percent interest rate it would allow for the interest on a five thousand dollar savings account not to be taxed, currently rates are paying a much lower rate.

    This change would create a more positive savings environment for those most likely to need a safety net from job layoffs, auto repairs, illness, and other misfortunes.  Cost to the Federal Government if the holder of such an account were in the twenty percent tax bracket would be Forty Dollars per year.  This is far less costly than the assistance programs we must put in effect to help when bad things happen to those with no buffer or savings and their financial house then collapses.

    Considering all the complex tax laws and legislation Congress enacts this would be one of the simplest to write and enact.  This is an easy to implement alternative to complex schemes like former President Bush’s Social Security Reform and ownership society plans.  That plan and many others would create huge administrative problems further adding to Governments growth and intrusion into our lives. Something that encourages middle and lower income Americans to save should be built into and tax reform legislation put forth.

Footnote;  The special breaks and deduction that make up Americas tax code are massively confusing. Most people are totally ignorant of tax law and  have no idea what they are talking about when they express an opinion on what policy changes should be made,or how they will effect the economy. More on the subject of taxation below,

Sunday, November 18, 2012

What Is Something Worth?

The value of "something" is not an issue to take lightly. Value is not a constant and can be derived from several factors such as supply and demand or utility value, things can spoil or become obsolete making where you invest very important. Value is not as constant as many people think or always destined to rise. I have discovered that when you start buying things at ten cents on the dollar your money begins to go a long way. This is a lesson many people may soon learn, or maybe not.

To buy things at deep discount it helps to have money or the equivalent, it also helps to be able to move quickly. Years ago a business venture took me into an area where I had the opportunity to attend many auto auctions, and often I actually made the bids. I soon learned getting the best price is an art. It is a combination of things, like timing, you soon learned when to step in or how to slow the bidding down thus cooling the animal spirits. Often simply not bidding against yourself was a good start.

When it comes to value the market place is the final judge and shows little favor or mercy. One of the favorite stories garnered from this experience came from when a seller complained to the auctioneer  about the low bids he was receiving on a car he was selling. When the high bid came in at one thousand dollars the surprised seller said, "but I paid four thousand for that car just last week". The auctioneer's response said it all , "well sir, it is a thousand dollar car today"!

This "theory of value" is something that also extends to stocks. These are promises that were at one time no more then a piece of paper known as a certificate that signified part ownership in a company, now it is just a line on a financial statement. How many investors have seen that line vanish? "Value" can change in a heart beat, and we live in a time that information travels at the speed of light. May I mention just two of the great teachers of what I call financial reality, Bernie Madoff and Enron.

When it comes to real estate low interest rates and liquidity have a huge impact on value effecting both the value by making it easier to purchase thus driving up prices, and at the same time allowing more building to take place and increasing the supply. When we exceed demand rents fall and people stop buying it as an "investment". Prices must rise more then the natural depreciation from the wear and tear of age or the main driver for owning real estate vanishes. Oversupply is the bane of real estate and crushes the value of this hard and expensive to maintain commodity.

Call me a skeptic but I contend that the illusion of value should not be held to close. The value of a building can be altered when a tenant goes bankrupt. The value of a currency drops when everyone starts to sell it and even the value of gold can drastically change if a government confiscates it and makes it illegal to buy, sell or even own can. What something is worth can be difficult to determine. And most of all tell me the value of a promise on paper or implied, remember if you own gold that is represented by a certificate, you own a piece of paper.

Footnote;  Your comments are welcome and encouraged. If you have time check out the archives for other post that may be of interest to you. The two post below delve deeper into how the value of money can quickly change,


Saturday, November 17, 2012

Under Reported Weather Events

Venice Italy Knee Deep In On Water
In our fast moving world some stories that should be noted often are overlooked and ignored. We all saw and heard about hurricane Sandy, in addition to flooding the subway system of New York and halting financial trading Sandy may of even tilted the Presidential election. If Sandy had indeed made a difference in the election outcome one might say Sandy has had the impact of also altering our future. While we are becoming more use to these uncommon "weather occurrences", it is possible that we should be viewing them as a warning of worse yet to come.

Most of the world took little notice that on July 21 Beijing suffered its largest rainfall in 60 years. The storm caused widespread destruction and tragedy throughout China's capital, leaving 37 people dead. The rainstorm that created a record breaking 16 inches of rain and has caused $1.6 billion in flood damage. The storm started on Saturday afternoon and continued late into the night flooding everything in its path including major roads and underpasses while also crushing and collapsing homes.

I recently saw a picture of Venice Italy where the tourist in the famous Saint Marx Square found more then a little water. Heavy rain and a storm surge had left Venice severely flooded, it was the lagoon city's sixth worst flood on record. Residents and tourists were left to wade through the city on Sunday, with 70 percent of the city flooded, including pathways along Venice's fabled canals. By late afternoon the level had receded slightly to 4.6 feet above normal. The storm has also caused chaos across northern Italy, including Tuscany. Heavy rainfall and floods in Toscana caused hundreds of residents to flee their homes, in one area 9 inches of rainfall was recorded in just four hours.

Are stories like these that a busy world often overlooks or discounts the "canary in the coal mine"? A great number of hot and cold record breaking temperatures have been shattered across the world over the last few years. Droughts and other harsh climate changes that negatively effects crop yields hold the potential to turn our lives upside-down.This is not a new concern for me, for years I have preached quality over quantity and questioned the sustainability of the course mankind has chosen to pursue. It will take years or even decades to make a difference after we alter our lifestyles. Sadly efforts and pain to reset our course will not take place till the pain becomes massive.

To those interested the two post below also deal with the issue of sustainability;

Thursday, November 15, 2012

The Looming Financial Cliff

Are we headed for a double dip, and will we go over the looming financial cliff? Many economist question whether we ever really exited the grip of the "great recession". We should note that the Great Depression had more then one stage. I find myself wondering if the recent higher consumer confidence is merely based on an acceptance of a economic reality called "the new normal" and the result of a positive spin manufactured by a pro Obama media during the election?

To my surprise I recently discovered that many people are so poorly informed that they do not even know about the fast approaching fiscal cliff. This term refers to the convergence of two events on December 31, 2012 — the expiration of almost every tax cut enacted since 2001, and a scheduled reduction in government spending. If the experts are to be believed, when taken together these two events threaten to bring the American economy to a schreaching halt.

Middle and higher income earners will most likely receive a tax increase, but reality is that all, including the poor are looking at less disposable income going forward. All the government's spending does have a price. To many the answer is  putting on another patch attached to another promise, hope abounds we can avoid the pain tomorrow and kick the can further down the road into the future. 

Just yesterday I heard several financial television shows putting out the idea that the "fiscal cliff" may be more like a "bunny slope" and not have the impact that many of us fear. One fella pointed out that the financial cliff is not etched on the earths landscape but made by man. This optimist went on to say that Washington was ready to make the hard choices and do the right thing.

Is this really our economic doomsday? Even the most diabolical demons could not have created a more daunting economic ditch or troubling monetary trough. If the most optimistic forecasters wish to call what faces the American economy a bunny slope they should at least be honest enough to concede that it is ugly. Their so called "bunny slope" may go on, and on, and on forever, and only end when it reaches the depths of hell. 

If you have time please go on to read my post about government debt;

Post Office Blues, a sinking ship

The Post Office also known as the USPS has just announced that last year it lost a staggering 15.9 billion dollars. If  Washington cannot, or will not deal with fixing this broken arm of government how can we take confidence that they will deal with the far larger problems facing America? The Postal Service employs some 530,000 workers, if this is the governments answer on how to keep Americans working we have bigger problems then most voters can imagine.

I recently posted on this subject, please view;

Saturday, November 10, 2012

Natural Gas Prices Have Been A Tailwind

We should stop every now and then and count our blessings, America has been lucky during the great recession that new methods of locating and taping into deposits of natural gas have increased the availability and lowered its cost. It should be pointed out that natural gas prices have been a huge tailwind to the economy for several years. This is in effect the equivalent of a huge tax cut.

While economist often focus on the price of gasoline and oil, natural gas is often overlooked. The drop in price has helped lower the cost of generating electricity as well as the cost of producing many goods, natural gas is a huge component in many plastic and polymer materials. Natural gas has been trading for about $3 per 1,000 cubic feet across the country through much of this year. In Asia, it costs closer to $12.

This means that consumers have had more money to spend on retail goods because it has not cost an arm and a leg to heat their homes. It also means a bunch of good paying new jobs in exploration and development in the coming years. America would do well not to squander this good fortune and make the best use of this resource. This type of luck does not often occur.

I would be hiring if.......

I recently heard a CEO that was being interviewed say he would be putting people on his payroll if he had some clarity as to where the economy was heading. He indicated he was looking for a positive sign before committing to expanding, Duh!  The gal doing the interview acted as if she had discovered the answer to all our economic problems. This is another way of saying "confidence" is the problem, but its not.

The reality is that much of what we see on the economic landscape is a mirage, all of us who own businesses would be adding workers if our phone was ringing off the hook and a demand existed for our products, but that situation simply does not exist. Like everyone else in my industry I'm sitting on empty office space and buildings, cutting cost, and waiting for demand to increase. Constructing more new buildings while paying taxes, insurance, and maintaining a huge supply of empty space makes no sense except to those in government that are not using their own money.

If things were so good, or getting better, the Federal Reserve would not have recently been forced to add new props to the economy through more monetary easing. During a interview last week when asked about the looming "fiscal cliff" former Congressman Ron Paul said we had already gone over it. If he is correct the reason we are not feeling a great deal of pain is that we have not yet hit bottom. The numbers we have to deal with are incredible, they do not add up, they do not work. Much like Greece and Spain who also kicked the can down the road, America can not avoid reality for ever.

It appears many people have been caught up in the hype that things are getting better, but that does not make it so. What I am seeing is "fluff", much like what Texans years ago referred to "all hat and no cattle", the people I'm coming in contact with lately lack substance. Like a Texan that is all talk and has neither a ranch or any money most new business start-ups lack funding and have a weak business plan, this bodes poorly for the hiring picture going forward.

Footnote; A recent post on April 21, 2013 goes into the issue of inequality and how the burden of work must be spread out over a larger part of the population, if you have time the link is below,


Thursday, November 1, 2012

Election Disgust

It is disgusting that this country has such a pathetic and stupid method to select a president. It is now clear that only a few states and counties will decide who will hold the oval office. Recent polling over the past few days shows Mitt Romney enjoying a slight advantage nationwide and Barack Obama holding the edge in the electoral college. This election has been called "too close to call" by many, in truth it is "impossible to call". The final results will depend on what happens on the ground. The latest polls indicate we risk Romney getting a majority of the popular vote but Obama being reelected based on the electoral college.

In 1992, millionaire Ross Perot damaged the incumbent George H W Bush and helped to propel Bill Clinton to the White House with only 43% of the popular vote. And Ralph Nader is still vilified by some Democrats for taking crucial votes away from Al Gore in Florida. It is most likely that the few minor party candidates that are running will not effect this election, but they could, as even a few votes could skew the results and tilt the election. If  a gap exists between the enthusiasm of either candidate's supporters it will determine who is the next President. The so-called "swing states" will make our choice for us.

As we look at a swing state, we must ask what influences the vote in that particular state. Factors like their unemployment rate and the demographics, Obama benefits if a state has an unemployment rate below the national average or a large number of minorities reside in the state. One thing is clear, this system needs to be changed, it makes a mockery of the idea that every vote counts. If you look at the areas getting attention, or where the money is being spent, you quickly realize some votes count a lot more than others.

Sunday, October 28, 2012

The Financial-Political Complex

The authorities are acting primarily to prop up governments as well as the economy by saving the financial system. It is important to remember these authorities are politicians and bureaucrats that want increased power and influence, and guess what, they may have hit the jackpot. Those in power have joined with the banks to create the "Financial-Political Complex" that promotes the current fiscal policy and supports banks that are "too big to fail". Many people say that the way out of the housing crisis is to let everyone fix their mortgage debt at super low fixed rates, then inflate, inflate, inflate? Well, perhaps the government's way out of its own debt is to secure low fixed rates for itself then inflate away when it becomes necessary.It should not bring comfort to the average man that these to unholy forces have joined together in such a union.

Who is the principal borrower at today's rates? The banks don't seem to be using the cheap money for their traditional business of lending, but it is the government that is doing the borrowing, and getting away with amazingly low rates for long-term debt. I wouldn't buy a 10 year Treasury at today's rates - I have no idea why others are doing it - unless it's the Chinese exporters who figure they still benefit. I bet the politicians can't believe their luck at being able to borrow and spend at these rates, the printing press is being used to keep the game going. As unstabilizing as the military and war can be to our lives, financial disruptions can also have devastating effects.

Banks have been big buyers of government bonds in the past couple of years because of the “carry trade,” this allows them to borrow money from the central banks at low rates and lend it back to the government at a higher yield. In effect, this is a subsidy to the banking sector. Banks may buy even more government bonds in future because international regulations assign a low capital charge to government debt and because banks will be required to hold a store of liquid assets, of which bonds will be a big part. So the government stands behind the banking system, and in turn, the banks are big buyers of government debt. This financial-political complex is reinforced by the general unwillingness of governments to let banks go bust. Better to intervene so heavily in markets, the argument runs, than do nothing and repeat the mistake of the Depression.

The cumulative effect of steps taken by the authorities over the past five years designed to prop up the economy and save the financial system has resulted in the creeping nationalization of markets. Central banks are the biggest players in many rich-world government-bond markets. Equity markets seem to perk up only when central banks are expanding the money supply. Banks exist to channel funds from savers to borrowers, traditionally from the household sector to companies. But modern banks raise funds not just from retail deposits, but also from the markets. Until 2007, European banks were able to borrow more cheaply from the markets than the better corporate borrowers. But for the past five years, banks’ borrowing costs have been consistently higher than those of non-financial firms. This raises huge question-marks over the banks’ role as intermediaries.

Loans from the official sector are being used to reduce the impact of private-sector capital flight. Huge amounts of money have left Spain and Italy, largely as foreigners withdrew bank deposits or sold government bonds. The net effect is that several countries are substantial debtors of the ECB, while Germany, Finland, and Luxembourg are net creditors. Money is flowing across borders at record rates. Funding pressures have been relieved by massive amounts of liquidity from central banks. Private-sector funding has been replaced with official lending. Central banks have been “lenders of last resort” for banks since the mid-19th century making short-term loans made at moments of panic. This time the ECB has lent a staggering €1 trillion ($1.3 trillion) on a three-year basis. The hope is that these loans can be refinanced via the private sector in 2014 or 2015. But this may be too sanguine. The funding woes of banks are already almost five years old.

The bond market has never been fully free of central-bank influence: expectations about the future level of short-term rates have always influenced yields. But the Federal Reserve has said that it will keep rates at current low levels until late 2014, an unprecedented commitment. Central banks have been putting downward pressure on yields through substantial quantitative easing (QE) programs. The Bank of England owns almost a third of the gilt market, this means that yields are not set solely by the balance of supply and private-sector demand.

Nor is this the only rigged market. Many countries are following policies that are designed to drive the value of their currencies down. And the authorities are helping to prop up share prices: Ben Bernanke, chairman of the Fed, has welcomed a higher stock-market as a side-effect of QE. As a result, it is difficult to say what message the markets are sending. Do low bond yields show that investors are endorsing Britain’s deficit-reduction program, for example? Or do they mean that the government has plenty of room to ease fiscal policy and borrow more? Thanks to QE, it is hard to be sure.

History suggests that once governments get involved in a sector, they find it hard to withdraw. Given the weak outlook, it is hard to imagine the circumstances in which liquidity support for the banks will be withdrawn, or the policy of low-interest rates abandoned. This is a new financial and economic era. QE and ZiRP haven't forced investment but rather sent people running for cover. More of the same is not a resolution to deep-rooted problems but does represent the evil character of finance for the moment.

I predict a financial washing machine in the near future that will repeatedly agitate, rinse, spin, and strip away the wealth and savings of most citizens. It seems to me there is every chance that in time the people and the market will regain control of money from big banks and governments, after all, banks only exist to distribute money, and for this minor service they are paid exorbitantly well. The character of money is changing with technology, that determines who can raise it, and how it is exchanged.  It will take time as our culture changes but technically we no longer need banks or even the government for this. We should be very afraid of the "Financial-Political Complex" and the current policies because both have disaster written all over them.

Thanks for reading this post, if you haven't had enough or can stomach a bit more;

Friday, October 26, 2012

GDP up 2.0% because of Government spending

The GDP came out this morning, up 2.0% rather then the 1.8% that was expected. This is still very slow growth. What should be noted is that Government spending on defense outlays jumped 3.7%, the biggest increase since mid-2009. In all spending by the Federal Government was up a whopping 9.6%, this was responsible for the growth. Again this economy is being held up by the government, strange timing right before the election?

Another thing that should be called to our attention is inflation is again approaching the 3% area. With consumer spending around 2% we still see no real growth. Business investment outside the residential sector fell 1.3%, the biggest drop since late 2009. Disposable income moved up 2.6%, but that was down from a 3.8% increase in the second quarter. The personal savings rate fell to 3.7% from 4.0%. A celebration is not in order.

FOOT NOTE; entered mid January, 2013-------- Now that the holiday retail sales have been weighed and measured, they have come up short. Rolling into the fall many called for the best retail sales ever and imagined increases of around 5%.  After quietly tamping down their expectations, just yesterday it came out that sales beat expectations, with a gain of 0.3% excluding auto. This is pretty sad when you factor in inflation. I do love the way the media can spin a story.

Tuesday, October 23, 2012

The Second Debate Was Important

The CNN debate moderator Candy Crowley clearly was in the Obama campaign's corner giving him the close on 8 of 11 questions and only interrupting him 9 times while interrupting Romney 28 times. The lowest and most dishonest part of Crowley's disgraceful "moderation" was when she actually jumped into the debate to take Obama's side regarding the death of  four Americans in Benghazi. To cover for his administration and his lying for almost two weeks about the attack coming as the result of a spontaneous protest over a YouTube video. Obama attempted to use as cover the claim that he had called the attack a "terrorist attack" on that very first day during his Rose Garden statement. Romney correctly disputed that. Crowley, quite incorrectly, took Obama's side and the crowd exploded.

Yes, the most shocking thing in the debate was when Obama lied deliberately to us about what he said in the Rose Garden and Candy Crowley inappropriately backed him up. A gloating Obama chimed in, “Can you say that a little louder, Candy!” He later scolded Romney about how “offensive” it was for him to question the administration’s selfless intention. But even the hyper-partisan press could not sanction this lie for long. After the event, Ms. Crowley quickly backtracked, admitting that Romney was “right in the main.” This is like in an umpire deliberately getting in a runner’s way, calling him out during a decisive World Series moment, then admitting the call was blown at a post-game press conference. Benghazi, the White House cover-up, and an enabling media offer a microcosm for the whole Obama presidency. His economic policies have been wasteful and counterproductive; doing more to buttress cronyism than bring recovery. His social policies radically depart from traditional American values. Obama’s foreign policy is in shambles.

Obama came out on the anniversary of 911 speaking about the fact that we would not run from terrorists speaking generically with no reference to Benghazi. He then sent Susan Rice out to 5 times tell the news media the attack was due to a video, Hilary Clinton said the same, Obama said the same to the families and then he went before the UN and said 8 times, the problem was the video. At the debate, Romney asked Obama if he had come out immediately and called the attack what it was seen to be by the White House Security, a terrorist attack in real-time. Obama looked right at Romney and lied and said he did say it was a terrorist attack. 60 million people saw this man just sit there and not tell the truth. Romney looked stunned.

Why did Candy have a copy of the”transcript” of that one Obama Speech? And how did Obama know she had a copy of the transcript of that particular speech, he asked her to refer to it. Sounds like somebody (Obama) knew what the question was going to be, and sandbagged Romney by ensuring that Candy was going to have the “transcript” on her table and believed the answer Obama was going to give. Then the drama, Obama: “Please proceed Governor,” and Obama: “get the transcript.” How did Obama know what the question was going to be and how Candy would reply? Candy was the only one who picked the questions. What other documents did she have? Us with inquiring minds would like to know, and why is no one asking?

From the transcript on the Wall Street Journal site: "No acts of terror will ever shake the resolve of this great nation, alter that character, or eclipse the light of the values that we stand for. Today we mourn four more Americans who represent the very best of the United States of America. We will not waver in our commitment to see that justice is done for this terrible act. And make no mistake, justice will be done." To clarify, in this transcript of his speech Obama did not call the 9-11 attack in Benghazi a terrorist attack. When you watch a replay of the debate it is clear the American people are being set up and mislead. This was a cover-up by the Obama administration because it was too close to the election and it has blown up in their face.

In all 3 debates so far, the democrat has had several minutes more to speak than the republican. Obviously,  mainstream media is backing Obama, but the public is favoring Romney anyway, we could be looking at an election where Romney gets a majority of the vote yet Obama stays in office because of the electoral college. The media and the public seem to be viewing the debates as the MLB World Series. This is not a best of 7 games were playing here. Who wins the debate or blasts his opponent with a knuckle sandwich has no bearing on the outcome. The content of the candidates has become boring, predictive and a lathering of fixed message points hurling "you are bad" epitaphs at each other with little substantive content. It's not only America that is playing this distraught game. Governments all over the world are plunging into theatrics with hands waving, waiting for the audience applause. It's the wrong game at the wrong time and it's a very sad commentary on our culture.

Saturday, October 20, 2012

Bill Clinton verses George Bush

Is Bill Clinton running against George Bush in the 2012 Presidential election? With all the campaigning Bill Clinton is doing, and the constant line drumming from the White House that America is facing a return to the policies that got "America into this mess", a voter might get that impression. The truth is Barack Obama and Mitt Romney are the choice flavors of the day. While Obama holds the edge when it comes to style, and a "cute" use of words, such as "sketchy", this election is about the economy and getting America going. When you compare the resume of the two men that are running Romney wins hands down.

While the media has gone on to calling Bill Clinton, "the explainer and chief" I still remember him by the moniker, Slick Willie. Etched into my memory is the image of Bill Clinton during the Monica Lewinsky scandal pondering the definition of "IS". Sometimes as we look into the rear-view mirror things become bit distorted. To many Americans looking back in time and seeking a more gentle existence, Clinton has morphed into the best thing since sliced bread, but in reality he may not of been so good, he was just followed by something worse.

While not coming across as the most engaging and likable, Romney's resume shouts "most competent." Romney has a history of serving his fellow man but a religious background that makes talking about it a form of bragging. He is hard working and well anchored. I suspect that the American people would not see him taking expensive vacations with a large entourage at the taxpayers expense. The most telling sign, twice recently I witnessed on news clips that as Romney arrived at events he exited a car and his plane carrying his own bag.

Is Your Pension At Risk?

Is your pension at risk? Most companies have a product or service from which other lines of business can grow. Ford has cars and trucks, and Dell has computers. In the developed world as companies realize how costly guaranteed pensions can be, and how they impact profit, we are seeing pensions change. Although the shift to defined contribution (DC) schemes has been clear in America since the early 1990s, the financial crisis has accelerated this trend. Indeed, many Western firms no longer offer defined benefit schemes to new employees. Instead their far stingier cousin, the DC scheme, is the only option for fresh recruits as companies limit future liabilities.

During the Presidential campaign both Barack Obama and Mitt Romney raised concerns about underfunded pension programs as poor management has led many pension systems to seek bailouts. State pensions have reached deficit levels of $767 billion in the U.S. The largest 100 corporate-defined pensions have hit $454 billion in unfunded liabilities.The blame for the underfunding of retirement systems, on the public level, lies generally with legislatures, which have raised pension benefits to unaffordable levels while failing to contribute enough to properly fund obligations. They've also kept assumed return rates high, making plans appear better funded than they are. Private companies have simply promised too much to workers that are living longer at a time that business pressures are changing.

In the UK stock market turmoil and record low interest rates have left workers nearing retirement with private pensions worth substantially less than those who finished work three years ago. New figures show that overall pension incomes are now 30% lower than they were three years ago when the government began attempts to boost the economy through quantitative easing. Peter McDonald, a partner in the pension practice at PwC, warned that those retiring this year would be left "between a rock and a hard place", forced to defer claiming a pension until the market picks up. With stock market turmoil set to continue and this week's resumption of the Bank of England's quantitative easing program, injecting another £75bn of new money into the economy, annuity payouts are set to shrink further. The FTSE has fallen by about 15% since May, which has cut the value of many workers' private pensions schemes.

Pensions are also under attack in Canada where the Harper government has decided to tighten up and reduce many of the gold-plated retirement packages that MPs and public servants have enjoyed for decades. This follows the government's decision to raise the age of eligibility for the Old Age Supplement to 67 from 65. The government could not ask Canadians to take a hit, while allowing elected officials and public servants to conduct business as usual. Under the new terms, MPs will pay 50 per cent of contributions to their pensions or $39,000 a year compared to $11,000 now. They won't be able to collect a full pension until age 65, as opposed to 55. After just six years of service, MPs are eligible to receive one of the richest pensions in the country, courtesy of taxpayers, who have been contributing $24 for every $1 an MP puts into the program.

There is a new normal when it comes to investing that many have not accounted for, moderate portfolios these days are hoping for an annual gain of 5 to 7 percent. The likeliness that they will consistently earn 7.5 percent on a conservatively managed portfolio, as anticipated by its fund managers, is unlikely. Lately the markets have been hooked on monetary morphine and ignoring fundamentals. Many of the financial structures we have built are on flimsy foundations or unsustainable. If the wheels come off the financial system pension plans will take a direct hit. To those who base their future on money coming from these monthly payouts I urge caution, prepare to take a "haircut" or worse.

 Footnote; This post dovetails with many of my recent writings. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged. The posts below may be of interest,

Thursday, October 18, 2012

A Helicopter Drop For England?

Lord Turner is one of two leading contenders to succeed Sir Mervyn King, he has made comments in the past that might indicate what "still more innovative and unconventional" monetary policies might look like. The outgoing Financial Services Authority chief doesn't spell it out, but in the past he has talked privately about the possibility of pure money financing of the deficit, when a person's "private" comments have been mentioned publicly often enough, the word private rather loses its meaning. The most well known example of this is the so-called "helicopter drop".

For example, the government could simply send every family in the country a onetime "Christmas Bonus" of  a thousand pounds or roughly sixteen hundred dollars, directly financed by money created by the Bank of England. It is fair to say that Lord Turner has never publicly proposed this kind of money drop, or suggested that it should happen right away. Still  the fact that a man of Lord Turner's position and experience is even hinting at this kind of solution to the UK's problems might be thought to indicate how serious he thinks problems in England have become. Of course, it also indicates that Lord Turner would not be a cautious or placid Bank of England governor.

The easiest way to think about a "helicopter drop" is as a lump sum temporary tax cut, or a one-off reverse tax. This would be  financed by new government bonds which are purchased by the Bank of England on the secondary market with all interest and redemption payments etc transferred back to the Treasury. This is similar to quantitative easing, to the extent that it is one part of the government lending to and acquiring claims against another. It is also similar in that it is reversible. The government could have a one-off tax increase, two years later, to get back the money that has been paid out, just as the Bank can now sell back the gilts it has bought under QE.

The only real difference between QE and even more "unconventional" money financing is that, with QE, the terms on which the money is created "are flexible and sensitive to inflationary pressures", whereas in the case of a helicopter drop, the terms are more open, both can cause distortions within a market. As long as Bank rate is near zero and the Bank of England buys new gilts to replace the ones that mature, quantitative easing looks an awful lot like a "helicopter drop". But providing it has the political will, as soon as the Bank starts raising interest rates and selling back those government bonds, the similarity with Zimbabwe starts to disappear.

Is this the path to economic prosperity? I think not, some may argue that it gives us more time to make tough structural reforms, others argue it allows us to postpone them. But to be effective it must be noted that even helicopter money needs to be directed. Its no good showering the country with cash to buy cheap imports. . The only answer will be time, try this, try that. Maybe even sit it out, or have a really big war, which is very unappealing. But is not given the credit it deserves as opposed to Keynsian " new deal ". US recovery & growth had more to do with WW II than the "new deal".   

Then again we should remember that the velocity of money, the speed that it moves throughout  the system is also important and should not be underestimated. At some point one might begin to speculate that those in power might try to hit a "reset" and start over or try to introduce a new "world-currency" as a replacement to all those that are failing. As in the case of  previous stimulus acts, tax cuts, or other one-off acts to get the economy moving it all depends on details. Still a system based on debt and mass consumption heavily reinforced with promises of future entitlements may not be sustainable. In the end where the money is placed, what it is used for, and where it flows does matter.

 Footnote added February 2014; I recently wrote an article that expands on calls for a new world currency, the link is below. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged,

Monday, October 15, 2012

Unemployment Numbers Mask The Truth

 CNBC's Kelly Evans did some digging and found that one state's numbers were way off the expected tally. Either they didn't make the proper seasonal adjustment or that seasonal adjustment didn't actually happen. Later on, Business Insider's Henry Blodget got word from a source that California was the culprit, because it didn't include all of its claims when it submitted its numbers—not out of malice, but because they probably got overwhelmed and simply couldn't process them all in time for the reporting deadline. Those claims will still be counted eventually, either in a future report or in a revision to this report that will come in a few weeks.

With only weeks till the presidential election this left a sizable number of people thinking something fishy is going on. With a number that looks suspiciously positive for the president once again we find some conservatives refusing to believe the numbers are legitimate. But why are these statistics so questionable? The Labor Department will be the first to admit that there is considerable subjectivity in their reports. In fact, there's so much subjectivity that it is standard practice to change the numbers in the months that follow, as new, more concrete data is fed into the statistics. It is wiser to regard the report as a preliminary estimate, rather than a hard finding.

 There are three kinds of lies in the world. Lies, damn lies, and statistics, as the saying goes. Statistics now show that the unemployment rate plunged to 7.8 percent in September, its lowest level since Barack Obama took office in 2009. In part this was because the Bureau of Labor Statistics made big revisions to previous months, showing huge increases in the number of jobs being created. Total employment from the "household survey" showed an increase of 873,000 jobs last month, the biggest one-month jump since June of 1983.

Is America better off than four years ago? Things look significantly worse when one includes those shut out of the labor market, they are included in the number known as the U-6. The U-6 is, “Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force plus all persons marginally attached to the labor force.”  I know it sounds redundant, but that’s the Bureau of Labor Statistics definition. Thus we see a 14.7% U-6 rate for September. It was also 14.8% in May.  In all, for 2012, the U-6 has fluttered between 14.5% and 15.1%. In January 2009, when President Obama took office the rate was 14.2%

The spread between the U-3 and U-6 numbers have drastically increased by 50%. Of course, if you listen to the Obama camp, they're proud of the 7.8 figure and are trumpeting it at every opportunity as a sign that Obama's policies are finally paying off. Interesting, because that 7.8 percent number in any other year would be considered a source of shame for most presidents. The methods used to get this number include attempting to contact some 60,000 people, most by phone, and some by visit, to ask if they are working. The definition of who is and isn't working is fairly broad, Jack Welch explained in his op ed, a woman who is babysitting for a week to earn bus fare is counted as working. Welch says he believes the economy is improving, however he notes that the growth is very slow. 

Friday, October 12, 2012

Consumers Are In a Protracted Period Of Weakness

On Bloomberg Television recently Harvard economist Steven Roach put in her place a retail sales consultant who was crowing about strong retail growth. Roach pointed out that after discounting for inflation growth in retail sales compared to past years is mostly an illusion. I wish he had gone to the next step and pointed out that what little growth does exist is built on a foundation of demand from huge government deficit spending. To make things worse the government has been forced to borrow much of that money.

Part of the poor outlook for consumer spending comes from the inability for people to use their homes as a ATM, this abruptly ended in 2008 and was a large driver in causing the bubble to burst. While super low interest rates have allowed people to refinance homes and cut their monthly payments they have also devastated the incomes of those with savings causing them to curtail spending. Slow job creation, coupled with many of the jobs being created at the low end of the pay spectrum, is now being effected by another recent occurrence, hours are being cut by many employers because of Obamacare.

Bottom-line good jobs are scarce and incomes are not rising. More deleveraging is facing Americans, this will go on for years. Some consumers have worked hard and paid down the debt that they accumulated, others have simply walked away from their debts and taken the path of bankruptcy. Those that remain in houses where they have not paid their mortgage for months or years have supplemented discretionary spending.Consumers Are In a Protracted Period Of Weakness, you can stop talking about strong retail sales till more good jobs materialize.

Thank you for reading my post. Most economist see creating more jobs as a way out of this quagmire but this is no easy task. If you have time please read one or all of these post that focus on how difficult that tends to be;

Thursday, October 11, 2012

USADA Continues Attack on Armstrong

After Being massively criticized and talk about cutting taxpayer funds to the USADA a counter attack to justify its existence has begun. Aware of the criticism Tygart insisted his agency has handled this case under the same rules as any other. ''We focused solely on finding the truth without being influenced by celebrity or non-celebrity, threats, personal attacks or political pressure because that is what clean athletes deserve and demand,'' Tygart said. The report called the evidence ''as strong or stronger than any case brought in USADA's 12 years of existence.''

In a letter Tuesday to the U.S. Anti-Doping Agency, Armstrong attorney Tim Herman says the agency should send the International Cycling Union its entire evidence file, not just a limited report packaged to support the sanctions. Armstrong finally gave up fighting the USADA charges, but insists he never cheated. His attorney, Tim Herman, called the report ''a one-sided hatchet job - a taxpayer funded tabloid piece rehashing old, disproved, unreliable allegations based largely on axe-grinders, serial perjurers, coerced testimony, sweetheart deals and threat-induced stories.''

In a letter sent to USADA attorneys Tuesday, Herman dismissed any evidence provided by Landis and Hamilton, saying the riders are ''serial perjurers and have told diametrically contradictory stories under oath.'' The testimony of Hincapie, one of Armstrong's closest and most loyal teammates was one of the report's new revelations. ''I would have been much more comfortable talking only about myself, but understood that I was obligated to tell the truth about everything I knew. So that is what I did,'' Hincapie said of his testimony. His two-page statement did not mention Armstrong by name. Neither did statements from three other teammates-turned-witnesses.

It seems Tygart and the taxpayer funded USADA just won't let go of their mission to destroy Armstrong. Please take a moment to read my past post on the ;   More on Armstrong and the USADA

Monday, October 8, 2012

China's Currency Hits A New Reccord

China’s yuan climbed last week to its highest level against the U.S. dollar since the currency was reevaluated in July of 2005, The currency was buoyed by the U.S. Federal Reserve’s recent QE3 program as well as recent data showing that the People’s Bank of China has injected a record amount of cash into the financial system. While the yuan’s recent rise comes as a surprise to many considering all of the doom and gloom surrounding the Chinese economy, it is important to remember that the Fed’s QE3 program creates excess liquidity that in theory flows to the safest and highest-yielding assets.

With U.S. Treasury yields low, investors are being forced to search elsewhere for return and despite the Chinese economy’s recent weakness, it is still the world’s second-largest economy with a growth rate north of 7%. Data this week also showed that China's central bank injected 365 billion yuan ($57.9 billion) into the financial system via open-market operations. The news fed a rally in Chinese stocks on Thursday. Investors worried about the lack of action by the central government to prop up the economy as it has faltered  were pleased by the move to inject liquidity into the market in such a large scale and hope to see more stimulus coming down the pipeline.

Looking ahead many currency watchers expect more stimulus to come through before the once-in-a-decade regime change in China to help ease the transition. Expectations for fiscal stimulus from China are so strong that industrial commodity prices have managed to climb significantly higher despite disappointing news on U.S. economic industrial activity. The slowdown in economic growth in China is unlikely to end soon, Chinese growth is being hurt by the crisis in Europe as well as the anemic U.S. economy and growth is slowing faster than some expected.

"We will see the worst of the slowdown in the fourth quarter of this year, after that it will stabilize." said KimEng Tan, a senior director and analytical manager for a sovereign ratings team  based in Hong Kong.  He feels that while the euro-zone crisis has affected China, most of the exposure to Europe is short term and export related thus it will only hits Chinese banks indirectly. Mr. Tsang said. "Depositors have confidence in government-backed Chinese banks."  A side effect and another problem for the world economy is China's major trading partners like Australia and Japan will also be  hurt when China slows down.

Sunday, October 7, 2012

Jobs, or no jobs?

Jobs, or no jobs? Reports show that the September unemployment rate plunged, unexpectedly, to 7.8%, from 8.1% in August. It was the first time it fell below 8% since January, 2009, the month that Obama took office. More important was the reason, it fell was because people were finding work in large numbers, and not because they were just leaving the labor force as in prior months. Claims that things are kicking up came as a surprise to many of us surveying things here on the ground, and recently witnessing a slowdown in manufacturing.

Non-farm payroll employment rose by 114,000, a very unremarkable number in itself but, the two prior months of July and August were revised up sharply, payrolls are now being shown to have rose a cumulative 86,000 more than first reported. That, however, is not the full story. The Bureau of Labor Statistics measures jobs two ways: the well-known payroll survey of employers, and the lesser-known survey of households, which yields the unemployment rate. Most the ruckus is being caused by the latter survey which shows the number of people with jobs skyrocketed by 873,000 in September from August. It must be noted that the household survey numbers are extremely volatile.

So whats the bottom line, how should we interpret these numbers? This is the largest gain since January, 2003, but remember January figures are often distorted by annual revisions, you have to go back to 1983 to find a monthly gain this big outside January.  Moreover, the gains in payroll employment, for a change, got a big hand from government; state and local jobs have climbed a relatively hefty 72,000 in the last three months. This does not add to the argument that all is well in the private sector. Many of these new jobs are low paying and often part time, it should also be noted that we saw a huge jump in the hiring of new workers without highschool diplomas, that is somewhat baffling. I remain unconvinced.

Saturday, September 29, 2012

Post Office Defaults Again

The US Postal Service has announced that it will miss another payment to the U.S. Treasury, this one for $5.6 billion was due Sunday according to a report by the Associated Press. Postmaster General Patrick Donahoe said services won't be disrupted, but he sounded a cautionary note that the mail delivery agency has squeezed out all of the cost savings within its power, according to the report. One must wonder how such a large government agency fell into such disarray.

The Postal Service has been pushing for Congress to approve the necessary legislation needed to allow it to eliminate Saturday mail delivery and reduce its $5 billion annual payment for future retiree health benefits. Congress has wrapped up its session until after the November elections with no postal fix approved, this again helps keep up employment numbers and shield the public from the harsh economic realities facing America.

On Wednesday, April 25th I posted another article criticizing the waste of Saturday delivery and the stupidity of  delaying the necessary reforms,  Postal Service Reform Delayed

Thursday, September 27, 2012

Business Reinvetment verses New Investment

It seems that business reinvestment is not dead, the problem is that it is being done to reduce the amount of workers needed. A lack of growing demand for most products means that business has shifted its focus from growing and producing more, to cutting cost. Increasing productivity is a good thing in that it allows profits to grow and can reduce inflation, but this is a double edged sword in that it also reduced employment. Reinvestment should thus not be confused with new investment, new business start-ups tend to be far more job creative.

Today the government cut its calculation of U.S. growth in the second quarter to 1.3% from 1.7% in its third and final review, citing less consumer spending and business investment than previously estimated. Consumer spending rose 1.5% in the previous quarter instead of 1.7% as initially forecast. Business investment, excluding residential housing was revised down to a 3.6% increase from 4.2%. This trend should continue, expect consumers to spend less as business spends money in ways that reduce the numbers of high wage workers needed. 

On Sept.8th 2012, I posted a blog about how demand drives investment. When will policy makers begin to understand that demand drives investment, it is not about confidence, it is about lack of demand. Call it want you want, CEOs are unenthusiastic and banks have little incentive to loan money on half backed ideas for which their is little demand. It is becoming apparent to many that the financial system has become distorted and dysfunctional.  People are loaning money to governments and banks for five years with negative interest.  This is at a time that there is little demand for loans even at zero interest rates.

Those that have saved for years and had planned to retire on the interest are being forced to receive meager and historically low interest returns on their savings while inflation lowers their buying power. When it comes to the supply and demand part of the economy,  you would be surprised to the amount we can cut demand. Americans are so wasteful that often many of these cuts have little impact on their quality of life. Sometimes by cutting back people discover that "less is more", and that life is less cluttered. Till true demand increases do not expect the economy to move forward.

The Support System For Cars Is Massive

It should be noted that the automobile is not a stand-alone entity, it requires a massive support system. Roads and highways, parking areas, repair facilities, and fuel stations are just a few of the parts that make up the system. Most vehicles are used on average about one hour a day, this means the rest of their existence is spent in storage. The space built into, and allowed for in this system is always based on the largest vehicle using that space, even if it occurs infrequently. The issue of how large a vehicle "needs" to be is an area that needs to be addressed and rethought. For example, the insistence by the fire department to be able to turn around a large hook and ladder truck in a single-family residential neighborhood is a bit silly.

One of the unintended consequences of urban sprawl and a design flaw of modern communities is traffic patterns that make travel less efficient. The grid pattern, used in many cities after the inception of the automobile, has been replaced by a maze, or a can of worms design within a larger grid pattern. The case made for such a pattern in our neighborhoods is that it promotes privacy, safety, a better quality of life, and that it defuses traffic. These traffic patterns, however, often make it necessary for a person leaving their home to drive for several minutes just to reach the entrance of their sub-division that may be substantially closer as the crow flies.

The argument can be made that the more time a vehicle is on the road and the greater distance it has to travel causes environmental damage using more gas and creating more pollutants, this would call into question the logic and benefits of such patterns. Incentives to vary times of travel thus reducing "rush hour" congestion, expedites the flow of traffic adding to efficiency. Increased efficiency eliminates the need for additional roadways and traffic controls, it would also save fuel and reduce pollution. Our goal should be to keep at a minimum the square footage of pavement necessary to accomplish efficient movement of traffic.

Traffic problems are often complex and the simplest changes can make a big difference.  Sometimes it comes down to something as simple as to, how or where cones are placed at a work area.  All inexpensive solutions to removing the "choke points" should be explored. The tendency to super-size is not always a good thing. I have written about this subject in my book, "Advancing Time". Our understanding of cities and people when dealing with urban planning is far from complete. In an ever-faster changing world, trying to apply a "one size fits all" strategy risk leaving everyone feeling poorly fit. We must carefully create homes for the "animal" known as man, instead of high maintenance concrete environments for the machines that serve us. 

Footnote; I'm not in any way advocating doing away with cars or trucks, they are important and add to our quality of life. I only want to point out that the support system for the automobile makes our imprint on the planet much larger then you might want to think. What's in my energy footprint? I fear the answer is far more than what most of us would like to admit. Below is a post concerning the true size of our footprint,

Tuesday, September 25, 2012

Mitt Romney and "The Millionaire Mind"

A thought occurred to me this morning, I recently saw some pictures of Mitt at home eating off a paper plate and how he goes about life. One of his business partners went so far as calling Mitt "cheap", I would use the term thrifty,  not being wasteful is a good thing. Ironically, the lifestyle that Michelle and Barack Obama appeared to have chosen to pursue reeks of the nouveau riche and elitism. The private concerts in the White House, lavish vacations at taxpayer expense, and their use of Presidential perks have not gone unnoticed at a time that the country struggles. This is an artical that I posted on June 7th 2012, it seems to describe Mitt Romney and his style. The article is as follows:

The Millionaire Mind

What have you been reading?  I was moving around some books the other day and opened a book by the name of “The Millionaire Mind”. The author Thomas Stanley also wrote the book  “The Millionaire Next Door” which was a best-seller a few years back. The people he studies are financially secure. This book takes a deeper look into how these people think and make their money.

Far from what many of us might think his studies and research show that millionaires are a real down to earth group of people, the kind that made America famous. He looks at where they live, their favorite leisure activities, and the different factors that make them wealthy. Somewhat obscure and not just off the press this book is an excellent read and a manual for those of us wanting to get ahead.                                                                                        

 Thomas Stanley reminds us you can’t judge a book by its cover, and that the fella you see mowing his yard or sitting next to you as you fly in coach may just be a millionaire. The book is about making and saving money the old fashion way, not through winning a lottery. This is a far more realistic look at the rich and wealth in America then the hyped and unhealthy fixation of the media on billionaires.

Monday, September 24, 2012

Afghanistan, Peace With Honor?

The situation developing in Afghanistan is beginning to remind me of the American exit from Vietnam, just a bit more mild and less rushed. With America scheduled to withdrawal troops from Afghanistan by the end of 2014 we must ask, is this really "peace with honor" all over again?  Many of us remember the vivid video of Americas exit from Vietnam so many years, planes lifting their wheels off the tarmac with bullets whizzing by, enemies hot on our tail. It was not our greatest moment, we stayed too long.

Recently Australia's former top commander in Afghanistan Retired Major General John Cantwell said of the war effort there "I think it's a very noble and brave and courageous experiment, but I think it's also not going to end well". Cantwell has also criticized how politicians are portraying Australia's role and success in Afghanistan, describing the comments as "misleading". His latest criticism of the war comes as Australia prepares to begin handing over control for local security in Uruzgan province to Afghan forces.

Afghanistan is a deeply divided country, it's riven by tribal enmities and hatreds, it's divided geographically, it's divided by economy, it's divided by politics, it is a mess and it's a mess which will be in the same terrible condition for decades to come. Cantwell went on to say "We are deluding ourselves if we think we're going to turn Afghanistan into some little democracy, some gleaming bastion of westernized ideas in that part of the world. It's just not going to happen." Mr Cantwell has described Australia's mission in Afghanistan as "elastic", given that troops are now involved in a "nation-building" program which is not what they were originally sent there for.

It is difficult to be optimistic that Afghanistan will be able to get its act together, this includes its government not only being able to function, but also being able to defend itself. It appears that this may be the a soft bottomed or murky road that America is destined to go down. It could be said that we will continue pouring money into the abyss in an effort to create the illusion that we have not "cut and run". The case could be made that we are fulfilling the minimum we promised, our heart is no longer behind the effort. This is being done so that it appears we kept, or made an effort to merely live up to the commitments we have made.

 Footnote; This post dovetails with many of my recent writings. Other related articles may be found in my blog archive, thanks for reading, your comments are encouraged. A more recent article on Afghanistan can be found below.

10 Things Apple Won't Tell You

This is the bulk of an article that appeared on MarketWatch on Aug. 7, 2012. It was penned by Quentin Fottrell who writes for can chase the article down but this will give you the general idea of its message.My comment is at the bottom with reference to a post I wrote some time ago

           10 things Apple won’t tell you

1. “Our customers are worn out.” All that initial excitement over the first iPhone or iPad has quickly given way to what analysts are dubbing “upgrade fatigue”—with even Apple’s most loyal customers upset about the steady stream of newer models 
2. “Be careful of that app.” Smurfberries—that virtual red fruit that’s the primary source of nutrition for Smurfs—may sound like cheap fun, but costs can add up. Madison Kay, an eight-year-old from Rockville, Md., unwittingly spent $1,400 buying Smurfberries while playing the game “Smurfs’ Village” 
3. “We’re getting in the way.” Checking an occasional Facebook update via iPhone during dinner is the least of some couple’s worries. One in five people reach for their phone as a 21st Century replacement for the post-coital cigarette 
4. “You may spend more with our devices.” Not only do Apple’s products tend to be pricier than those of competitors, people spend more using them. The average iPhone owner, for example, spends over 10% more on their monthly bills than other pre-paid smartphone users—$90 versus $81
5. “We need another game-changing gadget.” Upgrade fatigue isn’t the only thing critics dislike about Apple’s product rollouts; some say the new products aren’t new enough. Investors are growing impatient with Apple’s pipeline 
6. “The iPhone is overpriced—even compared to the iPad.” The iPhone costs hundreds of dollars less than the iPad, but Apple has much higher profit margins for the phone than the tablet, experts say. Here’s how it breaks down: Apple earned gross margins of up to 58% on its United States iPhone sales between April 2010 and March 2012 and margins of 23% to 32% on the iPad 
7. “Don’t be fooled by our soft sell.” When Carmine Gallo recently walked into the glass-fronted Apple Store in Pleasanton, Calif., the “concierge” wanted to talk to his two children about what Disney movies they could get on the iPad 
8. “Our features are falling behind.” Some consumers want Apple’s iPhone to follow the Android market’s lead by bringing out bigger screens. Nancy Batchelor, a teacher who lives in Washington D.C., recently gave up her iPhone because it was too small. “I seriously can’t read anything on that phone,” she says. Batchelor has plenty of other options to choose from that have larger screen, Samsung’s SII has a 4.8-inch display—dwarfing the iPhone’s 3.5 inches 
9. “We’ll hook you for life.” Storing digital content like movies, music and books on Apple’s “ecosystem”—the company’s compatible suite of hardware and software—may lock in customers for life. (that is the plan) 
10. “Our fans don’t care if we screw up.” Of course, many customers are happy to be part of Apple’s global community: A Facebook page, “Fans of Apple,” has over 935,000 members. And when it comes to controversy about or criticism of the company, experts say the company’s loyal fan base often have a blind spot. Apple’s marketing encourages this tribal following, industry pros say. The company’s borderline “fairytale” or “religious” language also helps stir up passionate support for the brand and upsets people when apple is criticized, says Lindstrom, the branding expert and author, who adds, “Apple knows how to inspire its customers.” Case in point: the company’s website contains this statement about the third incarnation of its tablet computer: “The iPad is a magical window where nothing comes between you and what you love.”

MY  COMMENT;  It appears that Apple continues to roll on like a juggernaut, nothing has been able to take the shine off this company. Apple has even enlisted the courts and legal system to fuel its advance, by attacking rivals and trying to ban competing products from the market place. I continue to be amazed at how much American taxpayer money is spent buying products from this "American company" that does all its manufacturing overseas. Schools, the military and government have poured massive amounts of  our tax dollars into Apple products.  Please take time to read my March 14th post, tHE pOISON aPPLE