Category Archives: Economics

Rule Five Friday

2014_05_30_Rule Five Friday (1)It seems recession has returned.  Two items on that tidbit:

From CNBC:  Frigid winter takes toll as US GDP contracts for first time in 3 years.

Bloomberg is a tad more optimistic, but not much:  U.S. Economy Shrinks for First Time Since 2011; Pent Demand Suggests Temporary Setback.

Key excerpt from CNBC:

The U.S. economy contracted in the first quarter for the first time in three years as it buckled under the weight of a severe winter, but there are signs activity has since rebounded.

2014_05_30_Rule Five Friday (4)The Commerce Department on Thursday revised down its growth estimate to show gross domestic product shrinking at a 1.0 annual rate.

It was the worst performance since the first quarter of 2011 and reflected a far slower pace of inventory accumulation and a bigger than previously estimated trade deficit.

Bloomberg agrees:

A pickup in receipts at retailers, stronger manufacturing and faster job growth indicate the first-quarter setback will prove temporary as pent-up demand is unleashed. Federal Reserve policy makers said at their April meeting that the economy has strengthened after adverse weather took its toll.

2014_05_30_Rule Five Friday (5)“The good news is that the first quarter is over, it was a difficult one for the U.S. economy,” said Ryan Sweet, senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania. “I wouldn’t worry too much about the decline, it’s mostly driven by less construction spending and less inventory accumulation. This quarter should be a good one.”

Oddly enough, in 2012 I remember being told that if I voted for Mitt Romney, that unemployment would stay above 5% and economic growth would go in the crapper.  And look – they were right!

I think both articles may have one good point; the bad winter did hurt retail movement, and there may be some rebound now that spring has well and truly sprung and people are moving about more.  But that’s not a major move, and the economy remains in an anemic growth cycle; really anemic if you remember the Roaring Eighties.

2014_05_30_Rule Five Friday (3)And we may be in for a major market move, too.  Excerpt:

Of these (indicators), the most important will likely be the first-quarter GDP due on Thursday. The last estimate was for growth of 0.1%, while expectations for the revision are a -0.6% decline in growth for the first quarter. A decline here would be an unwelcome development, as two consecutive quarters of negative GDP is the official definition of recession. While this will probably be blamed on bad winter weather, a slip into recession could easily trigger the next “Minksy moment” and escalate market volatility. I remain cautious as we enter the lazy, hazy, crazy days of summer.

Could that presage a crash?  It’s hard to tell, but the Fed can’t keep pumping cheap money in to the economy forever – and when they stop, a major adjustment is inevitable.  See Stein’s Law.

2014_05_30_Rule Five Friday (2)

Animal’s Hump Day News

Happy Hump Day!
Happy Hump Day!

Stupidity at this extreme should be physically painful:  Sen. Introduces Bill To Test Out Taxing Motorists For Every Mile They Drive.  Excerpt:

KCAL9’s Bobby Kaple reports that Sen. Mark DeSaulnier, D-Concord, introduced a bill to test out the vehicle miles traveled (VMT) tax because the state’s gas tax was no longer bringing in the revenue it used to due to people driving more fuel efficient vehicles.

The program is modeled after ones in Oregon and Washington.

“We want to do as Washington and Oregon have done in a much bigger state with much longer commutes…to make sure that we find out whether it would work, whether the public would like it or not,” DeSaulnier said.

triple-facepalmIt’s unknown how much the tax would be, but Oregon currently charges its volunteers 1.5 cents per mile.

See also PJMedia scribe Bryan Preston’s piece on the topic here.

Stupid Point #1:  Voluntary?  Who the hell will sign up for this?  1/10th of 1% of the population?  Do they actually expect to see any real revenue from this, or is it (more likely) a cheap piece of political theater?

Facepalm-bearStupid Point #2:  Who the hell will support this idea, knowing (as any thinking person should) that when the increasingly nutty California legislature sees zero revenue, or as close to zero as makes no difference, will make it mandatory?

After all, it’s only your money when the government is through taking what it wants, right?

Stupid Point #3:  Why the hell does anyone with any sense, any ambition, or any inclinations towards productivity stay in California any more?

Rule Five Friday

2014_04_04_Rule Five Fridy (1)To go along with some summery Friday Rule Five totty, we have an interestingly timed follow-up to Wednesday’s post regarding the Koch brothers comes today in the form of a Wall Street Journal article from Charles Koch himself.  Excerpt:

Unfortunately, the fundamental concepts of dignity, respect, equality before the law and personal freedom are under attack by the nation’s own government. That’s why, if we want to restore a free society and create greater well-being and opportunity for all Americans, we have no choice but to fight for those principles. I have been doing so for more than 50 years, primarily through educational efforts. It was only in the past decade that I realized the need to also engage in the political process.

2014_04_04_Rule Five Fridy (2)A truly free society is based on a vision of respect for people and what they value. In a truly free society, any business that disrespects its customers will fail, and deserves to do so. The same should be true of any government that disrespects its citizens. The central belief and fatal conceit of the current administration is that you are incapable of running your own life, but those in power are capable of running it for you. This is the essence of big government and collectivism.

There are plenty of pols on both sides of the aisle who fit the mind-set bemoaned by Mr. Koch, namely, that the typical American is incapable of managing his or her own life.  Example:  I favor 2014_04_04_Rule Five Fridy (3)privatizing Social Security at least to the extent that taxpayers should be able to manage their own money – that we do away with the idea of a “trust fund” that may be raided by Congress at will for whatever boondoggle strikes their fancy at the moment, the taxpayer’s “contributions” (use of scare quotes intentional; “contribution” implies that the transaction is voluntary.)  Instead, the taxpayer’s withholding would go into a fund, with their name on it, that they can manage and even pass on to their heirs.

“But Animal,” comes the inevitable question, “what if some people manage their funds badly and lose money?”

2014_04_04_Rule Five Fridy (4)The reply:  “How am I responsible for other people’s poor decisions?”

This is the kind of thing Mr. Koch is describing; the explosion of intrusive, overbearing government.  He concludes:

Those in power fail to see that more government means less liberty, and liberty is the essence of what it means to be American. Love of liberty is the American ideal.

If more businesses (and elected officials) were to embrace a vision of creating real value for people in a principled way, our nation would be far better off—not just today, but for generations to come. I’m dedicated to fighting for that vision. I’m convinced most Americans believe it’s worth fighting for, too.

I don’t know about most Americans – not any more – but I think it’s worth fighting for, too.

2014_04_04_Rule Five Fridy (5)

Animal’s Daily News

Cash
Money Matters.

Uh oh.  Crash of 2014: Like 1929, You’ll Never Hear it Coming.  Excerpt:

Through much of 2013, pundits warned how bad the market really was. Then in December the Wall Street Journal revealed that after 13 years in negative territory, Wall Street’s “Lost Decade” (which lasted from the 2000 crash to the end of 2013), finally broke even on an inflation-adjusted basis.

And here we are panicking again, fearing that 1929 will repeat in 2014: Wall Street, Main Street, tens of millions of Americans, the Fed, SEC, all of Washington. Yes, outward calm. Inside? You guessed it, total Panicville. Especially following Mark Hulbert’s thought-provoking: “Scary 1929 market chart gains traction.”

But even scarier? That “consensus,” the “predictably irrational” defense the bulls countered with in “Consensus on ‘scary’ 1929 chart: Enough already, it’s not happening.” For one thing, that so-called “consensus” actually proves Hulbert’s point: Investors really are worried he’s onto something, afraid the market may indeed be close to repeating the 1929 crash.

So what would happen now, today, in 2014, were a 1929-style market crash happen and the resulting depression ensue?

Shy BearIt’s hard to say; predictions are notoriously difficult to make, especially about the future.  Of course, things are a lot different now than in 1929; in those days, when my Old Man was six years old, charity was just that, administered mostly be churches and social organizations.  Now the social “safety net” has become a hammock.  So, unlike during the Great Depression, we won’t see people starving to death here in the United States; obesity will instead be a leading health problem among the cash-challenged.

But we do have in place an Administration which, like the FDR Administration during the Depression, will almost certainly meet any such crisis with actions that will prolong the crisis.  In fact, the Obama Administration has shown a breathtaking propensity for spending taxpayer dollars with a profligacy that would make FDR gasp in shock.

triple-facepalmOne wonders, if the White House were to catch fire, would the current residents attempt to solve the problem by pouring gasoline on the blaze?  That makes about as much sense as trying to spend our way out of debt.  Oh, and while we’re on the subject of debt, the GOP – supposedly the party of fiscal sanity – has rolled over like a dead carp on the debt limit, effectively handing the President a blank check and getting nothing – not a single concession, not even a decrease in the rate of increase on any spending issue.

Right now there’s damn little evidence of any intelligent life in Washington.