Economy

Poll: 26% Approve of Obama on Economy

Mark Noonan37 Comments

From Gallup:

A new low of 26% of Americans approve of President Barack Obama’s handling of the economy, down 11 percentage points since Gallup last measured it in mid-May and well below his previous low of 35% in November 2010.

Fully 71% disapprove.  And I would really like to meet someone who approves of Obama’s economic policies.  I guess that number is proof that some people will never shift away once they decide to back a man.

Just wait until unemployment starts to tick upwards and economic activity goes completely flat, or even negative.

Obamunism! Food Inflation Starts to Hurt

Mark Noonan51 Comments

From Zero Hedge:

Somehow even as all that deflation in home prices continues, like perfectly joined communicating vessels, countervailing inflation continues seeping into pretty much every other aspect of society. But don’t take our word for it, (or even gold’s, which is just under all time record notional highs): according to Rasmussen, “Americans nationwide continue to lose faith in the Federal Reserve Board to keep inflation under control, with the number who say they are paying more for groceries now at an all-time high.” Specifically, “93% of adults report paying more for groceries now than they did a year ago, the highest finding to date…

I still tend to agree with those who hold we are in a long-term, deflationary trend…but this doesn’t mean we can’t have short-term, inflationary spikes…like we’re having right now.  While oil prices have tumbled from their highs of the Spring, the fact remains that gasoline prices are still significantly higher than they were a year ago…and I don’t know about the rest of you, but I get sticker shock when I go grocery shopping.

All of this inflation is the result of Bernanke printing up money.  Remember, he did this so that he would have the money necessary to bail out the banksters – and all the money printing works out to picking your pocket.  The dollars you have, you see?, are now worth less…but those with things of actual value to sell simply cannot take less than fair value for their goods.  If they did, then they’d go out of business.  This means that everyone with things of real value to sell (gasoline or food, for instance) must charge more.  This isn’t price-gouging as liberal class-warfare talking points would have it…it is a logical, reasonable response to events.  In this case, the deliberate devaluing of our currency by our central bank in order that very rich people who run very large financial institutions shall not feel pain.

This is the final price of liberalism – our money being stolen by an agency of government so those most closely connected to government can be bailed out.  Bernanke bailed out the banks, Obama/Pelosi/Reid bailed out the unions…they were looking out for their own, and the rest of us got screwed in the process.  The cure is to end the relationship – and the primary means of doing that is to kill off Big Government, so that no corporation or union can, by manipulating government, gain the power to loot the people of their hard-earned wealth.

Financial Crash, The Sequel

Mark Noonan5 Comments

From Gonzalo Lira over at Zero Hedge:

…Now, I used to write for the movies—I can tell you the secret to writing a good sequel: Use the exact same elements, the exact same story structure—hell, even use the exact same lines!—but make sure the sequel is bigger: Bigger sets, bigger explosions, bigger stars, bigger everything—a bigger bang for the buck.

2011’s The Sequel is certainly going to deliver that bigger bang—because it’s a lot bigger than 2008: The total sovereign debt of the PIIGS is about €3.1 trillion. That’s 20% of the eurozone’s GDP—just the PIIGS, just those five, forget about France, Belgium and the UK, which if added up easily doubles that €3.1 trillion figure.

Compare that to 2008, when the total toxic assets the Federal Reserve wound up having to buy amounted to about $1.5 trillion—about 11.5% of the U.S.’s 2008 GDP.

In other words, the current situation is over twice what 2008 was—and might wind up being four times the 2008 price tag. And that’s just the nominal value of the toxic debt at the core of the current situation. We have no idea what the total value of the indirect exposure via derivatives is going to add up to.

So! We’ve seen that we’re structurally at the same place we were in 2008: Unpayable debts held by a fragile financial sector, with massive indirect exposure by way of derivatives that no one has bothered to tally up and regulate.

We have furthermore seen that—like all good sequels—2011 is going to have a bigger bang: We currently have more debts on deck than in 2008, at least twice as much, as a matter of fact…

Do read the whole  thing – Lira is figuring September/October for the big meltdown, perhaps triggered by a major bank failure in the Eurozone.  Doesn’t matter what the trigger is of course…the fact is that the crash is already all set to go, it just takes an unmistakable exposure of just how bad it all is for the next financial crash to bury the world under a mountain of bankruptcies.  As I keep saying, there is too much debt in the world to be paid back…its not a matter of if we’ll crash, but of when.

 

Italy Seeks a Bail Out

Mark Noonan27 Comments

From Market Watch:

Italy’s economy minister has said that a solution to the euro zone’s current debt crisis would be the creation of euro bonds, according to a report published Saturday.

Reuters reported that Giulio Tremonti said that such bonds would have prevented the continent from reaching the point it has, with Greece, Ireland and Italy among countries pushing through austerity measures in the hope of avoiding sovereign defaults.

Tremonti said joint-issued bonds would make nations’ debt a shared burden, and was quoted by Reuters as saying that they would be “master solution” to the crisis…

It is actually a way of making Germany a co-signer on Italy’s debt…and Spain’s and Portugal’s and Greece’s, etc, etc etc.  I’m not enough of a finance guy to figure out exactly how such a thing would play out, but I do know enough to understand that Germany cannot underwrite the bad debt of the Eurozone.  This may well plug the leak, but only for a few months…and you’d have to get German taxpayers to agree to put their stellar bond rating on the line for Italy and the rest of the PIIGS.  That is a dicey proposition, at best.

In the end, the fact remains that the PIIGS (Portugal, Italy, Ireland, Greece and Spain) owe far more than their economies can pay back .  There is no way to make up for this deficit between debt and wealth…either by printing money (and thus devaluing the currency) or by straight default, those who hold the bonds of the PIIGS will have to take a loss.  There may be a way to soften the blow, but the blow must fall…default (straight up or disguised) absolutely will happen.

 

 

Europe Re-Enters Recession…US to Follow

Mark Noonan5 Comments

Mish has several articles detailing an economy on the rocks in Europe – a bit of an eye-opener is the news from Germany, Europe’s economy best until now:

German industrial production dropped by 1.1% in June. Early expectations stood on a rise of 0.1%. The rise of 1.2% that was reported for May was revised to only 0.9%. Altogether, the locomotive of the euro-zone cannot drive the train in high speed anymore…

Stocks in the US rose on a combination of BS and wishful thinking, coupled with a slight rise in consumer spending which will probably be found to be explainable as a temporary bump upwards in an otherwise downward slurge (all indicators are that things are starting to contract in the US…so a rise in consumer spending is an outlier).    Essentially, governments of the world printed and borrowed their way in to “growth” starting in the second half of 2009 and this has now sputtered to a halt in the second half of 2011.  I didn’t think it’d get this far – but, then again, I never figured Bernanke would print up quite as much as he did.

Now we’re kinda stuck…we can print and borrow the same amount of money, but it’d probably only buy us 6 to 9 months of “growth” (like heroin, fake and borrowed money to get your economy “high” always takes a larger dose the longer you do it).  Mish figures that the official data will eventually show the United States entered recession in June or July – over at Zero Hedge I recall one prognosticator figuring it would be back-dated to April or May, once all the data is in.  The bottom line here is that we either are in a recession, or so close to one as makes no matter.  The Obama boom times are over – we got as much as we could out of them.

The bad news is that because we did the Obama boom times we’ll now have a worse time of it going forward.  We’re massively more in debt, our dollar has dropped a gigantic amount of value, large swaths of American wealth-building capacity have been dismantled and the rest of the world – including China – is heading in to recession with us…there will be fewer buyers for our bonds, fewer places to export our inflation to, less ability to sell our exports.  Had we just let everything fall apart in 2008 (and so, yes, President Bush bears part of the blame), it’d all be finished by now and we’d be on the road to genuine recovery…because we bought Keynsian cure, and then elected Obama to quadruple down on it, we’re heading back in to recession, and perhaps a worse one than previous.  And looming in the background is the debt crisis – the thing which will financially kill us by 2015 or so if we don’t get our act together.  And getting it together is vastly more difficult now, thanks to Obama’s debt.

So, just how is that hopey-changey thing working out for you?

Obamunism! Consumer Confidence Worst Since 1980

Mark Noonan2 Comments

From Fund My Mutual Fund:

During this entire ‘recovery’, the consumer confidence figures have been in the ‘recessionary’ camp.  That probably reflects the fact, that for many Americans there has really been no recovery at all.  This morning’s U-M consumer confidence really took a turn for the worse plunging to 54.9 vs expectations of 63.0.  I assume some of this had to do with the political dysfunction in D.C. over the debt ceiling issue, but its truly an awful figure.  To put the figure in perspective, the lowest reading during the Great Recession was 55.3 in November 08…

…Bad times in the economy were expected by 75 percent of all consumers in early August, just below the all-time peak of 82 percent in 1980.

My view is that we never emerged from recession – we certainly have not in Las Vegas (did you know the famed Las Vegas Hilton is actually in default?  That is like an ATM being in default…).  Just this morning I was running some errands and, once again, was just stunned at the rapidly spreading “for lease” signs on business property.  We’re pretty much doomed out here…until the pinheads in Carson City start trying to encourage new businesses, we’ll have no growth, because gaming won’t come back until the country comes back and that is a long way off.

I’m sure that most of you out there have similar views of your own, local areas…to be sure, there are bright spots in the country, but the trouble is that move of them are the result of (borrowed) government spending, and thus aren’t sustainable.  Recession is here – it never left; really all we’re doing now is playing a little game where we see how long it is before the government can no longer fudge the numbers to show “growth”.

Postal Service Seeks to Cut 120,000 Jobs

Mark Noonan32 Comments

From the Washington Post:

The financially strapped U.S. Postal Service is proposing to cut its workforce by 20 percent and to withdraw from the federal health and retirement plans because it believes it could provide benefits at a lower cost.

The layoffs would be achieved in part by breaking labor agreements, a proposal that drew swift fire from postal unions. The plan would require congressional approval but, if successful, could be precedent-setting, with possible ripple effects throughout government. It would also deliver a major blow to the nation’s labor movement…

First off, I’d like to say I never knew we had 120,000 postal workers.  Whenever I go to the post office I see 10 windows and two clerks.  Where are the rest?

That aside, this proposal will be fought tooth and nail – Democrats simply do not want 120,000 dues-paying (ie Democrat-donating) union workers let go, not right in front of an election year.  Doesn’t matter that the postal service is going bankrupt…all that matters is keeping the dues (donations) flowing.  But something does have to be done – and if any Democrat thinks there is an increased postal service subsidy waiting to come out of the House, he’s got rocks in his head (or, more accurately, more rocks than usual).

How this comes out in the end remains a mystery, but get ready for one heck of a fight…bet the Democrats try to tack a postal service rescue amendment to whatever the debt committee comes up with.

Obamunism! Confidence Drops Like a Rock

Mark Noonan5 Comments

From Gallup:

Americans’ economic confidence plunged to -53 in the week ending Aug. 7, a level not seen since the recession days of March 2009. This deterioration coincided with the final wrangling over the U.S. debt ceiling and Standard and Poor’s downgrade of the United States’ debt rating. Economic confidence is now far worse than the -43 of two weeks ago and the -34 of a month ago.

The 429 point gain by the Dow was the theater of the absurd…and it’ll be back down soon because, let’s face it, the Fed keeping interest rates as near zero for two more years is an admission that the recession will last at least two more years.  The people are right about this – the economy is bad, and getting worse.

Gold Hits $1,750 an Ounce

Mark Noonan1 Comment

From Bloomberg:

Gold futures exceeded $1,750 an ounce for the first time as the global rout in equities and commodities deepened on concern the economic slowdown will worsen after Standard & Poor’s cut the U.S. credit rating.

Gold for December delivery in New York advanced 2.5 percent to a record $1,756.80 an ounce and traded at $1,752.60 at 1:17 p.m. in Melbourne. Immediate-delivery gold rose as much as 2 percent to $1,754.63, also an all-time high…

Meanwhile, the Asian markets are getting slaughtered (Hong Kong was down more than 7% at one point, but it has bounced back a bit), while London looks for a bad day, partially fueled by the increasingly out of control riots.

What will happen tomorrow?  Beats the heck out of me…could be that stocks will surge a bit as some people figure they’re beat down enough and its time to buy.  Could be that Bernanke will announce right at market opening that he’s firing up the printing presses.  Could be that it drops another 500 points in the first hour.  We’ll have to just see.  But as I keep saying – even if we dodge this bullet, we won’t dodge them all…the crash is coming, because there is simply too much debt.

On the Economy: What to do Now

Mark Noonan33 Comments

It is clear to all, it is hoped, that the US and global economy is on the verge of collapse.  While we might dodge the bullet this week, it is only a matter of a short time before all possible Big Government and fiat money expedients are exhausted, if they aren’t, already.  We need bold, firm action – to do what needs to be done, endure the pain we’ll have to endure, and get on with the job of building American prosperity.

While there are no silver bullets, we can take some concrete steps which will ensure that the United States, at least, weathers the storm without too much pain.  In light of the extreme danger, I suggest the following:

1.  An immediate, across the board spending cut of $50 billion for the FY 2011 budget…that means what we’ll spend between now and October 1st.  Every department, sparing only social security and military pay, gets cut in proportion as necessary to produce $50 billion in spending reduction.

2.  For the FY 2012 budget, a reduction in spending – once again across the board and only sparing social security and military pay – of $500 billion.

3.  An elimination of the corporate income tax on corporations employing 500 or less employees; a 50% reduction in the corporate income tax on corporations employing 501 to 1,000; a 25% reduction on all other corporations.

The cuts in spending are necessary to demonstrate to the world that even with the downgrade, the United States is deadly serious about reducing spending and thus restoring our bond rating in short order…in other words, to make certain that as the global economy goes “plop” that the United States is seen as a safe haven for money.  And this feeds in to the tax reductions – the reductions in corporate taxes will not only spur domestic investment, it will also massively encourage the inflow of foreign capital as well as capital held by US corporations overseas.  This could amount to trillions more dollars being injected in to our economy over the next 12 months, thus spurring the growth necessary to repair the damage already done, and that which is about to happen.

Because make no mistake about it:  there is no easy way out.  We are going to go through hard time.  How hard depends on us – hope for more money printing and government spending and  the reward may be a couple more quarters of “growth” but then a collapse which will make the Great Depression look like a picnic.  Or we can take the adult course and realize that the free ride is over…that we will have to have a bit less nanny State and a bit more hard work on our part.

The choice is ours.   We can do this, now; or we can flub it, and pay the price.

UPDATE:  Asian stocks continue to slide.  I’m less and less certain that anyone will be able to figure out how to dodge the bullet, even for a little while…but, we shall see.

UPDATE II:  From Mish:

…being the ever-optimist, I prefer to look at the bright side of things. Get your party hats ready. Another DOW 10,000 party may be on the way…

If the only thing you can do is weep, then you might as well laugh…God is still there, and all will be well.

UDPATE III:  From Instapundit:

PRESIDENT DOWNGRADE: Dow Finishes Down 634 Points. Obama’s speech certainly did nothing to slow the drop, though I suppose the White House will argue that it would have been 734 without the speech, meaning that Obama saved or created 100 Dow points . . . .

A friend of mine did note it rather amusing to watch the Dow drop 100 points while the Bamster was speaking…