In some ways it just doesn't matter why the Dow Jones and S&P are climbing: they are. Various Baroque theories are advanced to explain the improvement. For example, a lot of the trading is actually the result of Wall Street banking institutions playing games in the equity markets with essentially free cash from the Federal Reserve. This one makes particularly good sense. The Wall Street-Washington Axis is now one of the more seamless connections in world finance. It's all manipulation, all the time. One must titter a little at those who are terribly concerned that Obama is a "Socialist." (Even stranger are the claims that he's a Fascist; huh?) Where were such critics when George W. Bush and Paulson held a gun to Congress's head and said, give us the $700 billion or we blow this place up? From TARP to TALF to giving Goldman Sachs a library card as a "bank holding company" so it could have free cash from the Federal Reserve's discount window, the federal government has essentially taken over the financial sector completely. Add that control to its ownership of the military-industrial complex, and what's really left that you would call "private?" Why is what has happened under Obama any different at all from the policies of his predecessor? Okay, aside from the fact that Obama is partly African-American?
August 07, 2009
August 06, 2009
"There’s no amount of evidence or data that will change somebody’s mind,” says Michael Shermer, who is the publisher of Skeptic magazine and a columnist for Scientific American, and who holds an undergraduate and a master’s degree in psychology. “The more data you present a person, the more they doubt it … Once you’re committed, especially behaviorally committed or financially committed, the more impossible it becomes to change your mind.”
August 05, 2009
I suppose one problem about hanging out in the Grand Ballroom of the Titanic post-collision is that the issues to which I might bring more familiarity (such as civil liberties questions regarding America's POWOTS (prisoners of war on terror) recede into the background as the deck begins to list heavily to starboard. It is, indeed, the Economy, Stupid. The economy all the time. Well, as I've noted before, Walden's longest chapter was about the Economy - it's basic, and Thoreau reduced it to its basic basics: maintaining one's vital heat. As I've noted before, the U.S. is actually one of those countries (unlike the Sudan, for example) which could actually maintain the vital heat of its entire citizenry without importing anything. Not saying it would be the most interesting or creative of existences, but it could be done. We could feed everyone and supply the basic energy for keeping warm, which would include insulated residences. As Thoreau warned, we decided instead to use solutions which are more complicated than the problem itself ("to speculate on the world market to buy one's shoelaces"), and through the mechanisms of capitalism some people became as rich as Croesus and others became too poor to own a pot to piss in. And guess which side America's Christians tend to be on (no fair peeking)?
The details in today's report left something to be desired. Consumer spending came in at -1.2% annualized, twice the decline expected by the consensus. This occurred in the face of gargantuan fiscal stimulus and leaves wondering how this critical 70% chunk of the economy is going to perform as the cash-flow boost from Uncle Sam's generosity recedes in the second half of the year. Imagine, government transfers to the household sector exploded at a 33% annual rate, while tax payments imploded at a 33% annual rate and the best we can do is a -1.2% annualized decline in consumer spending in real terms and flat in nominal terms? What do we do for an encore? In the absence of the fiscal largesse, it is quite conceivable that consumer spending would have shrunk at a 10% annual rate last quarter! Nonresidential construction action sagged at an 8.9% annual rate and this was on top of a 44.0% detonation in the first quarter. Ditto for equipment & software 'capex' spending, also down at a 9.0% annual rate and this too followed a 36.0% collapse in the first quarter. Residential construction slumped sharply yet again, this time at a 29.0% annual rate. These are the guts of private sector spending and collectively, they contracted at a 3.3% annual rate -- the sixth decline in a row. So while there are many calls out there for the recession's end, it remains a forecast as opposed to a present-day reality.
August 04, 2009
August 03, 2009
Friday's Happy Face entry was, I guess, somewhat satirical. Actually, I simply do not see how the United States economy can recover in anything under a decade or so. The interesting part for me is the study of the various components, or shells, under which the Powers That Be are hiding the grim truth from their subjects. In this regard, the "Audit the Fed!" Brigade forming in Congress strikes me as a kind of Suicide Cult. It's borderline treason, in fact, for otherwise estimable pols like Ron Paul to suggest we really, really ought to kick over the slimy rock called the Federal Reserve Bank and see what slithers out. I'm pretty sure we don't want to know.