Monday, November 17, 2014

The latest news on the economy

I've deliberately avoided writing any doom-and-gloom articles about the economy recently, because I get the feeling not many people want to read them or are listening to the harsh realities knocking at our collective front door.  Nevertheless, the decline continues, and the head of steam continues to build in the economic boiler.  I only hope the safety valve can cope with it, because if it can't . . .

Here are some recent headlines, with brief comments about them.

The Financial Crisis: Why Have No High-Level Executives Been Prosecuted?  That's a very good question, and one that has never been answered.  This article looks behind the scenes.

Tim Geithner reveals in the raw how Europe's leaders tried to commit financial suicide.  Revealing financial and economic history behind the mess that is Europe's economy right now.  I found it intriguing to see that the economic powers that be knew what was coming, yet proceeded to do all the wrong things - thereby making it worse, as Jeremy Warner points out in a very good article:  'Europe: the storm clouds are gathering once more'.

Europe's bond yields lowest since 15th century Genoa:  'Bond yields have fallen to the lowest level in modern history in Germany, France and the eurozone’s core states, signalling a high risk of deflation and mounting concerns about sanctions against Russia'.  And this is a surprise... how?

Cameron: world facing second economic crash.  The British Prime Minister lays it on the line.  I fear he's right.

Take Cover Now—They Don’t Ring A Bell At The Top.  Distinguished financial commentator David Stockman agrees that the stock market's looking very dangerous right now.  He warns that any unexpected blow could cause a collapse.

Russell Napier Declares November 16, 2014 The Day Money Dies.  He warns that under new IMF rules, "bank deposits are just part of commercial banks’ capital structure", and can therefore be seized and used to offset debts in the event of a bank failure.  This was widely forecast after Cyprus did it to its depositors -  we discussed it here, if you recall.  Now it's official international monetary policy.  If you needed a good reason to keep at least part of your savings at home, in cash, you now have one.  (I already do so as an emergency reserve, but after reading this report I'm going to significantly increase the amount I keep on hand.  I trust my local credit union, but they may not have any say in what happens to deposits.)

US and China on brink of bitter trade war.  China's still producing half the world's steel, and refuses to cut back even though its internal demand has greatly declined.  Instead, it's dumping its surplus production on world markets, adversely affecting producers in other countries.

Giving up: 40% women, 28% men, 39% youth don't want a job.  The job market is so bad that it actively discourages those who've been looking for employment for a long time.  Furthermore, easy access to study loans and unemployment benefits acts as a disincentive to look for work, where the return per hour of labor is often less than can be obtained through non-employment means.  (You might recall it was pointed out earlier this year that Obamacare is also a disincentive to work.)

If you're under 30, bad luck. You're screwed.  The article's from a British perspective, but it applies just as much to the USA and other countries - particularly in light of the article immediately above.  Baby Boomers have feathered their own nests, but in doing so they've taxed younger workers to pay for the benefits they currently enjoyed, and have spent their childrens' economic future on themselves.  Could this spark a taxpayer revolt?

Report: 25 Percent Of Connecticut Households Above Federal Poverty Level But Struggle To Meet Basic Needs.  I take this report with a hefty pinch of salt, because it claims (among other figures) that 'A single mother with three children would need to have a combined $64,689 in wages and child support to get past what the agency characterizes as a "survival budget".'  I don't know what they've been smoking, but to most families $65K per year would be a very healthy income, thank you very much!  (After all, U.S. real [inflation adjusted] median household income was $51,939 in 2013.)  Nevertheless, I can accept that 25% of Connecticut households are 'struggling', as are nearly half of Florida households.  Most of us are struggling, if it comes to that.

Manipulating the Consumer Price Index: Hedonic Quality Adjustments.  How the government manipulates the inflation rate to 'prove' that it's low, when all the time those of us who have to spend our hard-earned money on essentials know the politicians and bureaucrats are lying through their teeth.  Again, we've been through this before - see here and here.

The Fed’s Paint-By-The-Numbers Delusions About The Labor Market.  David Stockman points out that the labor market is at the same level as 1999, according to one key measurement.  What's happened to the tens of millions who've joined the workforce since then?  Most of them are working part-time, or have been hired at much lower wages and salaries to replace more expensive, more highly qualified older workers - who are now struggling to survive.  Basically, he concludes, government statistics about the labor market are just smoke and mirrors.  I agree.

Guess who's coming for your job?  CNN concludes it'll be robots and artificial intelligence, as I've warned before.  Europe's no better - the Telegraph warns:  'Ten million jobs at risk from advancing technology'.

Fear Your Platinum American Express Card.  Dennis Miller advises that if you want to accumulate enough money to retire one day, you've got to start by reducing your debt load as much as possible - and that includes getting out of the 'credit card culture'.  Good advice, IMHO.  Miss D. and I share one credit card account between us for regular use.  We pay it off in full every month, never carrying over a balance to the following month.  It's a good discipline.

California Faces Death by Pension.  What happens when the unions control everything?  The individual worker and taxpayer gets screwed.  Again, we've already discussed the problem here.  Nor is California alone:  Illinois Pension Debt Soars To $111 Billion.

That should be enough to keep you reading for a couple of hours.  I do recommend that you read those articles in full, if you have the time.  They may be depressing, but they're factual, and facts about the economy are hard to come by from official sources.  Remember, 'forewarned is forearmed' - and the powers that be don't want you to be forewarned, because then you'd blame them for landing us in this mess.



Anonymous said...

Don't comment much, but thank you very much for covering the economy. Your blog is in my top 5 of daily reads.

A.B. Prosper said...

I live in California and I can see the writing on the wall.

There are just too many problems, most the fault of the legislature that the state has no future to speak of.

I suspect the result will be even more flight from remaining productive industries and people and eventual bankruptcy.

I suspect there will also not be a Federal bailout as the state is hoping and a couple of legislatures down the line, after Brown is gone and taxes are even higher will have tough choices to make on the day that no one wants their bond or IUO's

I suppose though its only fitting, the California of the past now has a 3rd world demography and culture and deserves the economy to go with it.

JMD said...

I will be curious if the "holiday" shopping is a big turn out or if people are going for a very modest one.

John B. said...

Thanks for this interesting economic blogroll. I would like to point out that it is important to see that almost all topics are interconnected to a certain extent.
Young people do not want to work. Why? A number of explanations. They are lazy? Why? Or they lack incentives? Why - Obamacare, taxes, education, mortgage, lowering real income. Any of these options is plausible and together they constitute our reality. Future prospects? Technology is taking over. Lower educated people struggle to get better jobs (Google self-driven car, civil drones, modernizations in the industry, etc etc.
And then you have the problem of more and more people without sufficient income. Why? - maybe bailout of banks instead of people was the problem. Maybe its the technology. Maybe they get paid less as a consequence of bad laws that would demand liveable minimal wage. This is our reality. We have to deal with it. But honestly, we will have to rethink our options if we really wanna survive.