Economy

News Flash: Economy is Really Lousy

Mark Noonan3 Comments

When the Ruling Class starts to admit it, you know we’re in a world of hurt – from the Washington Times:

Vice Chair of the Federal Reserve Board of Governors Sarah Bloom Raskin said today that unemployment numbers present too positive a view of the economy, adding that the Federal Reserve might need to take more action to stabilize the economy.

Nonetheless, as many families know,” said Raskin, an appointee of President Obama’s, “the headline unemployment numbers don’t fully capture the weakness in labor market conditions.”…

Later, though, she returned to Ruling Class type and asserted that she and the rest of the people running our economy are just wise, old owls and are carefully doing what needs to be done.  And, hey, if we hadn’t done all that money printing, it would have been worse!  She failed to explain how all the wisdom deployed so far has led to such a lousy economy.  You’d think that with a multi-trillion dollar price tag, we’d get more than a “it could have been worse” statement.

These people don’t really know what to do because they are working from a false theory – a theory that has it being consumption which makes the economy go ’round, rather than production.  It is the wealth we make which makes us rich, not the money we spend…especially not borrowed or printed money.  Until we start making money again (creating wealth via making, mining and growing things) we simply will not improve.  People like Ms. Raskin, I suspect, haven’t the foggiest notion of this.  How did the Chinese build up a couple trillion dollars of our money in their vaults?  Not by spending, but by making, mining and growing things.  Amazing that more people can’t see this (though being Ruling Class types, themselves, the Chinese leadership has also embarked upon a bonanza of printing and borrowing since 2008…and that will tip China in to recession in the by and by…even with their own example right in front of them, the Chinese leadership couldn’t see it).

Revolt of the Tax Slaves

Mark Noonan24 Comments

From Der Speigel:

The people who could ultimately give Greece the coup de grace are not the kind to throw stones or Molotov cocktails, and they have yet to torch any cars. Instead, they are people like 60-year-old beverage distributor Angelos Belitsakos, people who might soon turn into a real problem for the economically unstable country. Feeling cornered, he and other private business owners want to go on the offensive. But instead fighting with weapons, they are using something much more dangerous. They are fighting with money.

Belitsakos is a short, slim and alert man who lives in the middle-class Athenian suburb of Holargos. He is also the physical and spiritual leader of a movement of businesspeople in Greece that is recruiting new members with growing speed. While Greece’s government is desperately trying to combat its ballooning budget deficit by raising taxes and imposing new fees, people like Belitsakos are putting their faith in passive resistance.

The group’s slogan is as simple as it is stoic: “We Won’t Pay.”…

Greece, like all socialist countries is, of course, over run by moochers.  People who, by one means or another, get all or most of their income via government funding.  Whether its by special tax breaks, government employment or direct welfare payments, a huge number of people (and perhaps a majority, once you total it all up) in Europe either don’t work at all, or don’t work much, or don’t work at anything which creates wealth…but they still manage to live pretty well.  And, meanwhile, it is people like Mr. Belitsakos who have been paying for it all.  And now that Greece’s socialist fantasy has come economically crashing down, the government wants people like Mr. Belitsakos to pony up even more.  And a revolt is brewing.

Do keep in mind that those people you remember rioting from time to time in Greece (and Britain and Spain…and soon to spread elsewhere in Europe) were not hard working, middle class people…they were the moochers who are ticked off that even a small amount of their welfare is being cut.  Around the world a revolution is brewing…those who are hard working, play by the rules and try to do the right thing are starting to wake up and shake off those who have lived off them for nigh on a century.  There won’t be much room for either a George Soros to manipulate governments to make billions, nor for the welfare bum who runs riot when his stipend is cut.

While there is no way for us to shake off our moral responsibility to those who cannot work through no fault of their own, we must all admit that this moral obligation has been much abused.  A gigantic amount of money is siphoned away from the productive in the name of helping the less fortunate, but we know where a large amount (possibly a majority) of it goes:  to over paid bureaucrats, crony-capitalists and people who could darn well work, but choose not to.  The moochers have, by this point, driven us in to bankruptcy…and their only real answer is to demand more from us…and to take it by taxing it, or by devaluing the currency, which steals the wealth we’ve already created.

You know that things are changing when even in socialist Europe, something akin to the TEA Party emerges.  This will be quite an interesting decade, I’m thinking.

HAT TIP:  Dan Mitchell

Germany Wants 50% Default for Greece

Mark Noonan3 Comments

From Zero Hedge:

…the debt rollover plan has imploded and means that the entire Greek bailout has collapsed as some had expected. And now that it is clear that contagion is threatening to sweep through the core, it is back to Germany to prevent the gangrene, no longer contagion, from advancing beyond the PIIGS. However, in order to prevent a full out revolution, Germany’s economic elite has said it would agree to an EFSF expansion and hence installation of European firewall, but at a price: a “controlled” default by Greece and 50% haircuts for private bondholders (as German banks have long since offloaded their Greek bonds).

This means that “Lehman” is indeed here: just like back in 2008 Paulson et al thought they could contain the adverse effects of a Lehman bankruptcy, while the financial system ground to a halt 4 days later when money market funds broke the buck, so now Greece is somehow expected to remain in the eurozone even as it files bankruptcy…

The bottom line appears to be that the Europeans need to come up with $2 trillion to keep their financial system afloat – that is, to keep the bad news confined to the PIIGS (Portugal, Ireland, Italy, Greece and Spain) and keep it out of France. What Germany seems to want – and it is reasonable – is an end to the Greek problem.  That if this is going to happen, it happens once and for all.  The Greek bondholders lose 50%, Greece gets bailed out…and hopefully Greece manages to get its finances in order sufficiently to service the rest of their debt.

The trouble is whether or not bailing out Greece – even with a 50% “haircut” for bondholders – will really do the trick.  Greece is pretty small potatoes as far as the Eurzone economy goes.  Looming gigantically larger are Spain and Italy.  As far as I can determine, both of those nations are already fundamentally bankrupt and cannot rely upon the private economy to service their debt as their bonds come due.  The only entity out there with the willingness to heavily purchase Spanish and Italian bonds would be the European Central Bank, or whatever financial bail out structure the Europeans come up with.  And where does the money come for that? From the Germans who will have already bailed out Greece and have no spare money left?  From the European Central Bank printing up a bucket of money?  Where?

It is the lack of real money – someone out there with trillions not already committed to some other enterprise – which makes me figure all these efforts to avert collapse are meaningless in an economic sense.  In a political sense, they may help the Ruling Class (European and American) ride out the political storm now through 2013.  The cost will be enormous, but such things never disturb people who are rich, in charge and determined to stay that way.

 

Obama, Ruling Class Desperate for Europe to Act

Mark Noonan3 Comments

From Zero Hedge:

The Obama administration has been fiercely lobbying European governments and central banks to shut up and do something. No more disagreements in public, Timothy Geithner told them in Poland. No more disputes over fundamental issues. To heck with democratic problem resolution. The world is collapsing, and it’s time to act boldly and decisively. Hank Paulson’s extortion racket is back.

This time, it isn’t Congress and American taxpayers that are targeted, but the Europeans, or rather a select few, in particular certain recalcitrant elements in the German government and in the Bundesbank. The White House brandishes the big fix of 2008 and 2009. That’s how we fixed our crisis, that’s how you should fix yours, they say.

Alas, the big fix of 2008 and 2009 today: Withered green shoots, high unemployment, annual budget deficits near 10% of GDP, and a gargantuan pile of debt…

So, why would Obama and Co want the Europeans to do that?  Because they are afraid that an European collapse will drop the whole world in to Depression and that would kill off any chance of Obama getting re-elected.  It doesn’t matter that duplicating our efforts 2008-09 would ultimately fail and,  indeed, leave Europe and the world worse off…all that matters is getting the economy to limp past November, 2012 without a Great Depression.

This is a Ruling Class in panic…worried that it really is all coming to an end.  But here’s Obama’s problem – he’s got to get the Germans to agree to kill their own economy in order to bail out Greece, Spain, etc…and if Germany agrees to do that, then Chancellor Merkel will be crushed at the next German elections.  Merkel must politically die so that Obama may politically live…and, if you polled the Ruling Class, that would probably be considered a good outcome.  Obama has become the lynch pin of a corrupt, self-serving, global elite…if he goes, the sort of reforms to be enacted in the United States would pave the way for the rest of the world’s people to reform themselves.  But, will Merkel do it?

That remains to be seen.  It also remains to be seen whether such actions by Europe can really save the day.  I don’t think they can…I think the debt has piled so high and the insolvency has spread to widely in the financial system that nothing can really stop the crash.  But, we shall see.  But remember what is going on here – the Ruling Class is trying to save itself.  Whatever they say, remember what the real goal is:  Saving Obama.

Can a Recession be Avoided?

Mark Noonan10 Comments

The G20, faced with a global slump in stock prices, has pledged to keep things afloat.  This, I think, makes at least a half dozen Ruling Class efforts I’ve seen over the past month to stave off disaster…each assertion (by a central bank, by China, by the European Union, etc) is that no one should worry…they’re on it and they’ll never let it all fall apart.  Usually, when such announcements are made, stock prices shoot up.  I guess because people who buy stocks are stupid enough to actually believe such stories.  Naturally, there is a renewed slump…and the slumps come faster after each “we’ve got a cure!” announcement.

Sure enough, European stocks inched off their lows…but a Mish points out, Asian stocks weren’t even phased by the announcement:  they resumed their slide from the day before.  Essentially, the Masters of the Universe are running out of even fake things they can do stave off collapse.  I don’t know what they’ll do next, but I guess the maximum half-life of this latest pledge from the G20 is about 5 days.  It might see us through the weekend.

But they can’t prevent the crash – they can only delay it, and the longer they delay it, the worse it will be.  The economy is bad – not just the US economy, but the global economy.  It is honeycombed with bad debt, corruption and political blindness.  Some nations have managed to fake it to prosperity the last three years (most notably China), a few nations actually did well (Australia and Canada, who sell a lot of things to China), but all nations are doomed to an economic downturn.  No part of the world will escape it, and it will be a hard landing.  I just don’t know when it will happen…depends on how badly the Ruling Class wants to cling on to power.  A bad economy going in to 2012 means not only Obama loses, but may well mean an historic electoral blowout of the Democrats.  The people in charge don’t want that…same thing around the world.  The Chinese don’t want revolution, the Eurocrats want the people to keep quiet, etc, etc, etc.  So, these clowns will go to very great lengths to patch up the sinking ship.

And that means – what?  Beats me…could be they hold it together until 2013…could be that the market crashes tomorrow or Monday.  We’ll have to wait and see…

UPDATE:  Want a little more proof that the global economy is lousy?  According to this news report – about a new supertanker being mothballed – back in 2007 you had to pay $229,000.00 a day to lease a tanker…this supertanker is being mothballed because they could only get $1,000.000 a day.  This is where economic rubber hits to road…not in phonied-up government statistics, not in stock prices and bond yields (though these things can be important) but in whether or not people are actually doing things.  Ships lying idle is an indicator of an economy in desperate straights.

The Big Government Economy-Killer

Mark Noonan18 Comments

From Real Clear Politics:

From Peter Schiff’s prepared remarks to Congress. Schiff is the CEO of Euro Pacific Capital.

In my own business, securities regulations have prohibited me from hiring brokers for more than three years. I was even fined fifteen thousand dollar expressly for hiring too many brokers in 2008. In the process I incurred more than $500,000 in legal bills to mitigate a more severe regulatory outcome as a result of hiring too many workers. I have also been prohibited from opening up additional offices. I had a major expansion plan that would have resulted in my creating hundreds of additional jobs. Regulations have forced me to put those jobs on hold...

Not that I’m too interested in bigger financial firms…but the main thing is to understand that more people would be working today if government didn’t have insane regulations.  It is like this all up and down the economy…pushing up costs, driving down wages, ensuring that businesses either never get started, or don’t expand if they already exist.

It is time, I think, for a re-codification of US law.  Figure out what we really want as law, pass that and in that same act repeal every other law and regulation on the books.  A bit of wisdom and we can probably do the whole thing in a couple hundred pages…and dispose of tens of thousands of pages which serve only to empower un-elected bureaucrats and give lobbyists the ability to create or expand loopholes for those who have deep pockets and no honor.  This isn’t, by the way, about changing the Constitution in any way…just repealing all the laws and regulations we currently have and replacing them with a smaller number of laws, easily understandable by all Americans.

Simplicity and predictability of law is required for their to be justice…and, indeed, respect for law.  By doing things like fining someone for hiring “too many” employees, all we’re doing is engendering contempt for law.  The next firm so situated will just try to bribe their way out of it (via donations and lobbyists to write special rules just for them), or they’ll open up the firm in a foreign country.  The average people are also losing their respect for law…and how can it be otherwise when each of us likely violates several federal laws and regulations each day?  Tear down the legal and regulatory structure and replace it…that is the only way we’re going to clear out this part of the mess.

 

Our Really Lousy Housing Market

Mark Noonan25 Comments

From Zero Hedge:

In its schizophrenic manner, the media across the country lamented the housing-starts numbers, which were ugly: 571,000 annualized in August, down 5% from July, down 5.8% from August 2010, and down 75% from its peak of 2.3 million in January 2006. But for the housing market to heal, that number should be near zero for years.

18 million vacant units, that’s the problem. While some people dispute that number, everyone agrees that the inventory of vacant units is huge. Whether it’s 18 million or 12 million doesn’t change the problem. It only changes the duration of the healing process. This is the hangover from the housing bubble when the industry built millions of units for speculators who never had any intention of living there. And now, no one lives there…

Believe it or not, even out here in Las Vegas some new homes continue to be built – and I can’t see why.  To be sure, if someone actually came up to a home builder and specifically ordered a new home built, I could see that.  But we’re actually arguing right now over whether a developer should be able to start a new, high-end housing development near Red Rock canyon (I’m forthrightly opposed…first off, because we don’t need additional housing in the metropolitan Las Vegas area, secondly because I don’t want to see the Red Rock area marred by another round of cookie cutter houses…and if you do come to visit Las Vegas, do head out to Red Rock; you’ll not be disappointed and its not a long drive…you can even go horseback riding out there).  That aside, the article is right – we should be building zero new homes…now and for  many years.  We’re already glutted…and now that the courts have ok’d it, the banks are about to proceed with another very large round of foreclosures.  The problem will get massively worse before it ever gets better.

As for what to do with all the construction workers – my best idea for them is to shift them over to manufacturing, farming and mining…and, of course, whatever related construction will be necessary for an expansion of those industries.  We simply do not need houses…not only are we over-built but we’re running out of people to put in the houses, anyways.  The Boomers are retiring and, if anything, downsizing their housing…the follow-on generations are much smaller.  The idea that housing will be a core component of American wealth creation is over with  – it won’t be, not for another 50 years, and even then only if we throttle the Culture of Death and start having children again. There will always be a need for some home construction, of course…houses do deteriorate over time, but we’ll not need as much home construction as before.  And perhaps our home builders instead of throwing up cracker box houses can work on building houses designed to last a century with no major repairs?  More brick and stone, less drywall and stucco-over-chicken wire?  Housing which uses wind and solar to provide some  of their own electricity?  Houses that dispose of more of their own waste?  Maybe houses with bigger lots and built to make a neighborhood look normal rather than manufactured?  Just a thought…

A complete re-working of our economy will be necessary in order for full recovery to occur.  As I’ve endlessly harped upon – Making, Mining and Growing things.  We can’t live on home construction, auto manufacturing will never be as premier as it once was…and the cool, electronic gadgets are nice (and we should strive to lead the world in this area) but they can’t provide the literal tens of millions of jobs we’re going to need.  Only getting out there in to factories to make our own mundane items – clothes, tools, etc – and mining our own wealth out of the ground and growing not only our own food, but the world’s food will do it.  And in order to get there, we have to re-work our tax and regulatory systems to ensure that those who are willing to make, mine and grow things are left unhindered and, indeed, fostered by government action.  And even then, good people, it will be 20 years before American prosperity returns fully.

But, we can do it, if we want…now, do we want to?

Liberal States Worst for Business

Mark Noonan36 Comments

Another example of the results of applied liberalism – from the Chicago Tribune:

…Nearly one quarter of the survey’s 322 respondents said Illinois had one of the least favorable business climates, according to Development Counsellors International, which specializes in economic development and tourism marketing.

Taxes and high costs were among the factors that contributed to the state’s poor showing in the survey. California was deemed to have the worst business climate, followed by New York and Illinois…

…Texas, North Carolina and South Carolina were viewed as having the best business climates, according to the survey.

It is just a simple fact of life – the more taxes and regulations you throw on business, the harder it becomes for business to exist.  Liberals are steadily killing the goose which laws the golden eggs.  The only businesses which can do well are those who donate heavily to liberals…and in return such businesses get tax and regulatory breaks.  But, still, the overall effect on business is chilling…and the worst effect is not so much the actual taxes and regulations, but the fact that taxes and regulations can be increased or changed on a whim.  Some liberal State legislator gets a burr up his butt and all of a sudden a new tax is laid or another onerous regulation imposed.  Because of this, business either flees to friendlier jurisdictions or, at best, just stands pat and never expands.

We are getting a very useful course of instruction right now – our States are pretty much divided between Red and Blue.  Not too many States with a really divided government.  And, so, the experiment is proceeding…liberalism being applied here, conservatism being applied there.  In a few, short years the inescapable results will be in, and the people will be able to see, finally and for good, which set of policies actually works.  And not just in a purely business sense – the stunning turn around in Wisconsin following upon Walker’s reforms are showing that even in government action, applied conservatism provides better government at a lower cost.

We’re watching the process of liberalism killing itself off…it can no longer hide behind conservative forces coming to liberalism’s rescue.  No more can some like an uber-liberal Dukakis in Massachusetts claim a  liberal “economic miracle” which was actually brought about by Reagan policies nationally.  No longer can a liberal President take credit for welfare reform and a balanced budget brought forth by a Republican Congress.  Liberalism is out on its own…and it is failing, with no one to blame but liberalism.

We might be witnessing Liberalism’s last year…and it may come about that it will never trouble us again, at least through our life times.

HAT TIP:  Mish’s

Shocking News: Secretaries Don’t Pay More than Buffett

Mark Noonan10 Comments

Yet another liberal lie disposed of  – from the AP:

…There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. But that’s less than 1 percent of the nearly 237,000 returns with incomes above $1 million.

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes, payroll taxes and other taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay an average of 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent…

Doubling up on the dishonesty is the fact that Buffett routinely takes advantage of every tax break he can – and, indeed, has on-going disputes with the IRS as it claims Buffett owes more than he paid.  The bottom line is that the “millionaires pay more than secretaries” is a lie while the actions of people like Buffett prove that the call for a tax hike isn’t to make the rich “pay their fair share” but to allow Obama to more heavily tax the upper middle class (remember, in Obamunism, “millionaires and billionaires” start at $200,000.00 per year for individual income earners).

All part of the scam, at any rate.  Buffett makes his money off of the current, corrupt way of doing business.  If it weren’t for our Byzantine tax and regulatory codes and the ability of billionaires like Buffett to grease the palms of politicians, Buffett never would have made his money – certainly no where near the billions he currently has.  Buffett is a liberal financial shark who grows fat not out of creating wealth, but by siphoning it off from the productive by means of financial shennanigans.  But this does give Buffett a vested interest in the status quo…if the liberal State is swept away, so will Buffett’s ability to maintain and grow his horde.  And not just for Buffett, but for a host of such economic parasites.

So, come up with bogus stories claiming that secretaries pay more than billionaires, help Obama increase taxes on “the rich” which really works out to tax hikes on middle class people while the Buffetts of the world are unscathed…and finally hope that all the class warfare rhetoric and actions helps Obama get re-elected so the gravy train can keep rolling along.  That is all this was ever about…and it is all it ever will be about until we turn these cretins out.

 

The Results of Obamunism!

Mark Noonan15 Comments

From Gallup:

Three years after bankruptcy of Lehman Brothers jolted the U.S. economy into economic turmoil, job creation has rebounded from post-collapse lows, but economic confidence and consumer spending remain within the ranges seen in 2009. Gallup finds underemployment and unemployment essentially where they were a year ago…

All the trillions of borrowed and printed dollars – what did they get us?  Nowhere – in the larger sense, we’ve just marked time since 2008.  Oh, sure – we did “stop” the crash.  But we stopped it in mid-air; the crash still has to finish.  And now after devaluing our currency and piling up $4 trillion in additional debt, we’re going to get the rest of the crash we should have had three years ago.

Congratulations, Keynsians!  Heck of a job there, Barry!  All you’ve managed to do is make things worse.