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Serious business for the infantile November 20, 2010

Posted by WillardWhyte in Economy, Greed, Politics, U.S. Budget, Wall Street.
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Exactly when did these two guys — Simpson in particular — become the ultimate in Wise Men?

And from this piece, there seems to be a whole lot of chortling going on over the potential ruination of the U.S. economy if their particular strategy for reducing the deficit — and radically overhauling the entire tax code with little assessment of impact — is not swallowed pretty much whole. Get this:

“I can’t wait for the bloodbath in April,” Simpson said, relishing the prospect of political turmoil. “When debt limit time comes, they’re going to look around and say, ‘What in the hell do we do now? We’ve got guys who will not approve the debt limit extension unless we give ‘em a piece of meat, real meat” in the form of spending cuts. “And boy, the bloodbath will be extraordinary,” he said.

Extraordinary indeed. It’s all a game to him too — the graying, dottering Fox can’t wait for the Hen House to catch fire.



You can tax me now — or tax me later November 11, 2010

Posted by WillardWhyte in Economy, Politics.
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Twin stories from Bloomberg — here on Obama and there on Bernanke’s Bucks — have some unsettling news for the hundreds of millions out there waiting for an economic boost to follow the GOP ascent to House leadership, or from the Federal Reserve’s $600 billion buy of Treasuries.

Investors think they are going to get their cash reward with extended tax cuts, like the new climate for investments and see hope for a smaller U.S. budget deficit.

But the view is pessimistic when it comes to any GOP impact on the overall economy, job gains or credit.

And they think  — a whopping 76 percent of them — that Ben’s money move will have absolutely no effect on unemployment in the U.S. And by a 56-41 margin — with 3% too busy bidding up gold to answer — they said the Fed move would not bolster the U.S. economy in the coming year.

They know the purchasing power simply is not there — not across the board as it needs to be to sustain healthy production.

I say this and note this poll not to depress, but in the hope that it helps us all get to the place we need to be: One where we do not expect things to get radically better, radically soon — and govern our expectations well.

The devastation from the Crash of 2008 requires rebuilding the economy and we must demand from our elected officials plans for that — not snake oil promises or pledges or pablum suggesting they can do this overnight.

They can’t — we can’t. Anyone who says they have a magic elixir is lying, rendering them part of the problem.

Oh — I forgot to mention that those investors don’t like Obama.

Gold bars, future oil, cotton ain’t gonna hire Joe the Plumber November 8, 2010

Posted by WillardWhyte in Economy, Politics, Wall Street.
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I found this take on Ben’s money-move to be quite on target. This in particular from Richard Fisher, president of the Fed bank in Dallas:

I could envision such action would lead to a declining dollar, encouraging further speculation, provoking commodity hoarding, accelerate the transfer of wealth from the deliberate save and unfortunate, and possibly place at risk the stature and importance of the Fed.

But Ben knows this, just as he knows that the odds of monetary policy stimulating job growth and greater consumption in the U.S. are extremely long.  It’s his only play, knowing now the fiscal side is headed toward the austerity solution demanded by the voters, ostensibly. And that will take billions out of circulation in 6-8 months.

With no new wage growth on the horizon at anything but the top end, throwing accelerant on commodities and equities and potential bubbles abroad is intentioally destablizing, a sort of drop-the-gloves-and-hope-the-sparks-fly approach that depends on some of the embers landing in the deadwood and warming many.

But Ben undervalues the monkey still perched on the back of money markets —  the jonesing for fast money made with money, not output of goods and services in demand. The dice and spinning wheels and flashing lights still draw the biggest crowd, and garner the loudest roars from the onlookers.

It’s going to help some folks make a good chunk of change on the house, Ben. That’s about it, because a “real job” is still the chump play.

The folks sitting on the mounds of cash are not coming off until your cheap money is all gone and it becomes clear the only way to make money is the old-fashioned way.

Hey — thanks Ben. Working out well so far. November 4, 2010

Posted by WillardWhyte in Economy, Wall Street.
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That $600 billion juiced into the economy to jump-start hiring by boosting inflation and spooking folks into buying before things got more expensive?

Well, some of it seems to have leaked out into more commodity speculation, which will drive up prices nicely, but probably will leave most of us with even less disposable income after we buy cereal, beef, poultry and — it seems gasoline and distillates like heating oil this winter.

The WSJournal tells the tale here. The nut is this:

Crude oil futures shot higher on Thursday on the back of a weaker dollar following the Federal Reserve’s decision to inject $600 billion into the U.S. economy.

Futures Market News was looking down the road with this:

Consumers might want to stock up on fuel oil soon – analysts at Wall Street banks believe that oil futures might rise to over $100 per barrel for the first time since the credit crisis hit and wiped out asset classes across the board.

And from the AP regarding gasoline, consumption of which was down another 3% last week according to the Energy Department. Inventories are up as a result. But more cash chasing even high supplies means the price goes up:

The national average for a gallon of unleaded gasoline was $2.806 Thursday, according to AAA, Wright Express and Oil Price Information Service. That’s about 7 cents more than a month ago and 12 cents above a year ago. It will probably keep rising. Some analysts think the price could be a nickel to a dime more by Thanksgiving.

Ben’s betting on the fear of rising prices driving people to buy now, rather than later. That’s classical economics there folks; the data studied over 20 years shows that tendency.

But that was before everything changed, 15 million hit the bricks and stayed there and no one really thinks the bottom’s been hit. Not in their bones. Withthe current consumer mindset, the prospects of the basic necessities like heat, gas, food and medical care going up in the future means: Save more, spend less.

That’s a Depression mentality, Ben. I thought you were a big study of the Depression.

Meanwhile, domestic output is going to go down, at least as measured by GDP, because government outlays are going to go down. Consumer spending overall isn’t going to go up because your commodity inflation will simply transfer current spending levels from one household category to another — that’s mainly because we’re still deleveraging, rebuilding equity and for the most part anticipate no “real” wage gain and certain higher healthcare costs.

And any tick up in interest rates will immediately increase the cost of any debt we continue to carry, since card rates are tied to automatic inflators.

So as gas, food and lodging costs start to creep up in the next six weeks, someone gets whacked from the gift list.

Real wage growth and profit margin moderation will spark recovery, because, Bennie old buddy old pal, most of the nation has been dealing with deflation for more than a year now.

The only thing that hasn’t been deflating are prices of the basics. And now you’ve screwed that pooch too.