Economy

Gold Goes to $1,700 an Ounce

Mark Noonan4 Comments

The signal of absolute no confidence in the fiat money, usury-based economy…from Reuters:

Gold vaulted above $1,700 an ounce for the first time on Monday, after the respective pledges by the G7 and the European Central Bank to quell the turbulence in the financial markets did nothing to put investors at ease…

Of course it didn’t, because the ECB if bankrupt, all its money already having gone to shore up Greece and Portugal and there not being enough money in Europe to bail out Spain and Italy.

Going to be an interesting day – in the “Chinese curse” sense of the word.

Municipal Bonds on the Chopping Block?

Mark Noonan5 Comments

From Zero Hedge:

While the impact on Treasuries as a result of the downgrade may be limited (after all the other side of the Atlantic is about as ugly as the US, so where could $8 trillion in marketable USTs practically go… at least for now), the same may not be said about the far smaller, $2.9 trillion municipal market, which is about to see a blanket downgrade tomorrow as S&P warned on Friday night, and of which Matt Fabian of Municipal Market Advisors earlier said that “There will be hundreds and hundreds of municipal downgrades, which will not do well to bolster investor confidence.” The scary bit: “Treasuries may be able to shake off a real impact from the downgrade. Munis I’m less sure about…

This could be devastating to the already stressed budgets of municipalities – many of them, burdened under bloated pension budgets and other foolhardy spending, are just an ace away from bankruptcy, as it is.  Put a bit more pressure on them and a lot could fail.  And even if they manage to scrape through, this will mean less money for police, fire and schools…and likely further rounds of government worker layoffs (which, in a macro sense, aren’t bad, but are plain and simple lousy for the people losing their jobs).

Learn the lesson – debt is poison.  No government should ever carry any of it – certainly not for anything less important than fighting a World War.  To mortgage the future under the best of circumstances is foolish..to mortgage it in order to keep up a bloated, wasteful government entity is criminal.  The change must come, and we might as well get over the worst of it right away…slash budgets until no more bonds need to be sold, and then rebuild from there.

Did You Ever See a Stock Market Crash?

Mark Noonan40 Comments

The Tel Aviv market gives a good indication of what it looks like – and here’s the really bad news:  Israel’s economy is healthy.

Of course, by the time the markets open tomorrow Bernanke and the boys might have figured out some way to finesse around the downgrade and the spreading crisis in the Eurozone.  I honestly don’t know what will happen tomorrow – but things are looking really dicey both in the short and long term.

We’ve got one heck of a mess and it won’t be easy to get out of…and we need a government which recognizes the mess (no more happy talk about how things are moving in the right direction when they’re not) and has the guts to do what is right.  We need to massively reduce spending, reform taxes and entitlements and free up the wealth-creating capacity of the American economy.  This will infuriate all those special interests who are still living off the carcass of Big Government, but it has to be done.

Huckabee: Replace Geithner with Trump

Mark Noonan11 Comments

From CNN:

Amid calls by the GOP for Treasury Secretary Timothy Geithner’s resignation, one Republican is offering an unorthodox choice for a potential replacement.

“Ask Donald Trump to be Treasury secretary,” Mike Huckabee said on Fox News Channel.

The former Arkansas governor elaborated: “Have Donald Trump take the job for 90 days. It’s a game changer.”…

Trump certainly wouldn’t be worse than Geithner and may end up a lot better.  Certainly, unless Obama really changes course at this point we’re heading for a really bad time.  Even a major course change won’t completely get us out of the soup…but swift action, now, can prevent “bad” from becoming “hideous”.  If not Trump, then someone who has a bit of guts and a bit of knowledge of business.

But I doubt we’ll see it – Obama may call in Underbus to rid himself of a political liability, but I doubt Obama even sees the need for a real change, let alone what that change might entail.

 

S&P Downgrades USA

Mark Noonan29 Comments

From the Washington Post:

Standard & Poor’s announced Friday night that it has downgraded the U.S. credit rating for the first time, dealing a symbolic blow to the world’s economic superpower in what was a sharply worded critique of the American political system.

Lowering the nation’s rating to one notch below AAA, the credit rating company said “political brinkmanship” in the debate over the debt had made the U.S. government’s ability to manage its finances “less stable, less effective and less predictable.” It said the bipartisan agreement reached this week to find at least $2.1 trillion in budget savings “fell short” of what was necessary to tame the nation’s debt over time and predicted that leaders would not be likely to achieve more savings in the future…

Conveniently done after the markets close in order to avoid a crash…and remember why we’re here:  because Obama and his Democrats tacked on an additional trillion a year in spending and didn’t want to give any of it up.  Just a couple hundred billion dollar cut next year – which would have had us still spending hundreds of billions more than in 2008 – would have done the trick.  It would have showed that we have the political will, right now, to deal with the debt.  But, nothing doing from Obama…he has to keep the money flowing to his special interest groups no matter what.

2012 can’t get here fast enough.

 

Behind the Unemployment Numbers

Mark Noonan65 Comments

Mish gathered the details:

  • US Payrolls +117,000
  • US Unemployment Rate -.1 to 9.1%
  • Participation Rate -.2 to 63.9% accounting for drop in unemployment rate
  • Actual number of Employed (by Household Survey) fell by 38,000
  • Unemployment rose by 156,000
  • Those dropping out of the labor force rose by 374,000
  • Civilian population rose by 182,000, Labor Force declined by 193,000
  • Average Weekly Workweek was unchanged at 34.3 hours
  • Average Private Hourly Earnings Increased by 10 Cents
  • Government employment decreased by 37,000 – a genuine bright-spot

Without that drop in the labor force, unemployment would have risen – as soon as I saw the headline number of +117,000 and a drop in unemployment I knew, without even checking, that something was wrong.  If we gained 250,000 jobs a month, unemployment would remain high for years.  A plus 117K just wasn’t enough to lower the unemployment rate unless someone decided that fewer people were in the labor force.  Presto!, that is what we got.  Amazing, huh?  Great how that works out when we’ve got a President desperately seeking re-election…

UPDATE:  The headline that says it all, from Bloomberg:

Bernanke Models Prove Faulty as Fed Forecasts Succumb to Downward Revision

How to Fix the Economy

Mark Noonan37 Comments

I’ve been yammering on about it for years, so maybe you’re tired of reading my views…so, here’s someone else to say it.  Victor Davis Hanson over at NRO’s The Corner:

…If the government were an individual household, the only way out would be to cut spending and find new sources of wealth. Given worldwide demand for food and fuel, and given recent quite astounding new finds of natural gas and oil in the Dakotas, the eastern seaboard, offshore, the American west, Alaska, and Canada, it seems that we should be hell-bent on recovering these high-value fuels through new drilling, refineries, and pipelines, including ways to power our heavy trucks and equipment on natural gas. We should be planting acre to acre and end nonsensical biofuel subsidies and artificial limitations on irrigation deliveries to California’s West Side and elsewhere in the West. We need a national manufacturing policy that prunes regulations and encourages investment here in the U.S., ceases talk of new taxes, repeals the trillion-dollar take-over of the health-care industry, and stops hectoring Boeing about opening a new facility or trying to shut down energy generation plants…

As I’ve been saying – make, mine and grow more of our own stuff.  That is the only way out of this…we have to start creating wealth again.  Of course, this does require hard work, does require getting a little dirty and doesn’t allow for nearly the current number of government bureaucrats, mid-level managers and diversity coordinators, but that is just some of the heavy sacrifices we’ll have to make.

I believe it was Reagan who once said there are no easy solutions, but there are simple ones.  Getting our nation back on track will not be easy, but it is quite simple.  Ditch the idiot liberalism of the past few decades, insist everyone pull their weight and just get to work.  It’ll all be ok, if we do that…no easily; not with out a lot of tears and sweat, but it’ll all be ok.

Asia-Pacific Markets Getting Hammered

Mark Noonan1 Comment

Mish has the details and a roundup of really, really lousy economic headlines.

My take:  if the employment report comes in better than expected tomorrow, then the sheep who run our financial system will some how, some way, hold it to be evidence that things aren’t as bad as they look…the market might surge by hundreds of points.  On the other hand, if it comes in worse than expected, then watch out.

The bottom line for the global economy is, as it has been for years, that there is way too much debt.  Each and every nation – yes, including China – is honeycombed with bad debt which cannot be repaid…in some cases never, in other cases just not in the contractual time frame.  We borrowed ourselves in to a global boom and now the piper has to be paid.  We might dodge this one more time but no matter how many times we pull back from the cliff, we are still ultimately heading for a crash.  Default is the only way out for some nations, while a quasi-default will be required of all other nations.

The lesson to be learned is that debt is poison…we’ve been hoodwinked; suckered by a classic, get-rich-quick ponzi scheme which held that we could borrow forever, live like kings and never have to repay.  Don’t get me wrong, here – we, the people, for the most part eagerly joined in the scam.  We lost our heads – and, more importantly, we lost our sense of moral rightness.  Once we pay this price, it is to be hoped that we’ll take our lesson to heart and build an economy based on hard work, savings and careful investment.

Financial Crisis, Part 2: Welcome Back, 2008?

Mark Noonan17 Comments

Quite a slide in stocks today, huh?  As for me, I’m congratulating myself on shifting all my 401k funds from stocks to bonds just yesterday.  I’m not sure that this move, in the end, will really save my 401k, but I was seeking some means of avoiding the crash in value I had back in 2008.

So, what now?  Do we keep crashing, or does something happen to make it all go away, at least for a while?  I honestly don’t know – but over at Zero Hedge a dire warning that there is no way out:

…Nothing from 2008 has actually been fixed. Faith and trust do not exist in the financial system anymore. Everyone knows the deal… they just don’t want to admit it as it means GAME OVER for the system as we know it.

Which is why now that the next round of the Financial Crisis has hit, there’s really nothing the Fed or anyone can do about it. They had their big chance to fix things in 2008 and failed. This time around, no one will believe the Fed can fix anything. And what’s coming will make 2008 look like a joke….

Could be – but I still think that the Federal Reserve and the US Treasury can pull a couple more rabbits out of the hat.  They can’t fix it, but they may be able to juggle the financial balls until after election day, next year.  Which is, by the way, the primary aim of the Ruling Class…keeping things together until after the election and hoping that no TEA Party-backed candidate wins the White House.  Their ultimate nightmare is a President who will actually change the system…the corrupt system, that is, which benefits the Ruling Class.

As for me, I admit to a tremor of fear today … I work at a firm highly sensitive to things like stock market crashes; this recession could become a depression right quick (on the “a recession is when your neighbor looses his job, a depression is when you lose yours” theory).  But, with all that, things will be as they will.  We’re in one heck of a mess – the end of Big Government liberalism will not be easy and it won’t be pretty.  Decades of living by lies has to be paid for…and we who are in the work force today will just have to pay.  But, also, we must change things…so that the children and grandchildren have that better future the liberals of the 60’s told our parents we’d be living today.

Capitalism or Socialism?

Mark Noonan23 Comments

Donald Byrne over at Catholic Journal has an excellent look at both our horrid fiscal situation (yes, we really are going bankrupt) and points out that that in our most-desired goals (prosperity and equity), free market capitalism does much better than State socialism.  Essentially, the imposition of socialistic policies in the United States have exacerbated wealth disparities – if Obama’s goal was really to “spread the wealth around”, he’d be reading Hayek and changing course.  Byrne concludes:

…The goals that competitive free market capitalism brings society toward are efficiency and equity on the microeconomic level and high employment and a reasonable degree of price level stability as well as a consensus driven rate of economic growth.  The decisions of the many, NOT the few, dictate what an economy will produce in the way of goods and services, in what manner those goods will be produced and in distribution of income (the reward of the goods and services produced) with maximum freedom to the people as consumers and productive resources.  It is an economic system that is based on the principle of subsidiarity, again, where the decision-making is driven down to the lowest level possible…after all, who knows/understands better than the individual (in most cases) what is best for them?

And there’s that word I keep using – “subsidiarity”.  Remember, in the end all our fights are to secure for us “subsidiarity” – the right of individuals and localities to decide for themselves the best means of living their lives.  It is at the core of American political morality – it is why our Declaration asserts that government’s must rule by consent, and why the 9th and 10th amendments were added to the Constitution.  It is doubtful that many of the Founders had read deeply in to Catholic social teaching, but in this case they didn’t have to….anyone with a bit of wisdom will swiftly understand his inability to dictate to others, and others far away from his own community.

Obama’s crime against Americanism (because that is what is amounts to) is to suppose that he and those in power with him can determine what is best for everyone.  That they can justly “spread the wealth around” and come to a superior outcome than the individuals, themselves, could achieve.  Not only is this wrong philosophically, it is also wrong in strictly practical terms.  The erosion of the middle class, the destruction of America’s ability to make, mine and grow things, the bankrupting of our nation and the moral decline of the populace are directly traceable to socialistic attempts to decree an outcome, rather than allow things two work themselves out through the interplay of free people.

The only quibble I have with Byrne is over the use of the word “capitalism”.  We should more emphasize the term “free market” than the word “capitalism” because capitalism has come to mean in the public mind a collection of Ivy League educated board room trolls, and the government-subsidized crony-capitalist.  Our fight is not to make the world safe for GE; not to make smooth the path of Government Motors…but to free up the market so that average men and women can enter it, using their own means of production, to create wealth for themselves, their families and their communities.

In practical, political terms I think we’d do much better this way.  What we have growing in the United States is a populist revolt against the Ruling Class.  Sickened by the corruption of politics and the economy, the people are demanding that those who have ruined things be tossed out, while those who are willing to work obtain the greatest reward.  We’ll go further – obtain more power to reform, that is – if we hitch ourselves to this popular revolt, and we can best do that by clearly identifying ourselves in complete opposition to what is currently wrong.

As we enter the Great Debate of 2012, we’ll have Obama telling everyone that a victory for free markets means granny being thrown over the cliff.  Allied with Obama will be those crony capitalists who will warn that failure to support “too big to fail” corporations will be a disaster.  We must expose these lies – we must present a vision of America free and prosperous, and explain that all socialist plans (regardless of what label they are given) will lead to poverty, dependence and a divided, dysfunctional America sliding towards tyranny.  Our question must be – who do you trust:  Obama or yourself?  Make that the issue of 2012 and we’ll win so big a victory that liberalism will not trouble us again for 20 years.