Weekend Links: The Economy

It was quite a week for developments on the economic front.  I wish I could report it was good news.
First off, official unemployment hit 10.2% after October’s figures came in.  This indicates things are getting worse for the American worker – not better. Ed Morrisey at Hot Air has an excellent post on it including an updated Romer graph of what the stimulus promised to do versus what actually happened.  We are off the chart now.  Also from Ed is a post with links of what jobs were really saved by the stimulus, starting with California.  Hint: the state & federal governments aren’t honest.
Doesn’t get much more pointed than what India’s finance minister said when their central bank bought 200 tons of gold in order to reduce dollar holdings.  What did he say about the economies of Europe and the US?  That they had “collapsed.”  Asian countries are running from the US dollar now.
Makes the wrangling over how much to increase health care look silly if there won’t be any money at all.  Still, the Republican health care plan was rolled out Wednesday after having the CBO (Congressional Budget Office) go over the figures.  It would actually reduce the deficit by $68 million over a ten year span.  Sounds good compared to the trillion dollar increase in debt from ObamaCare.  Still, how will any of it be paid for? There is no answer on that, because there is no way to!

UPDATE:  I was wrong, the Democrats plan isn't a trillion dollar outlay, but $3,000,000,000,000 plus over 10 years according to the CBO! The Heritage foundation estimate comes in at $2.4 to 2.6 trillion.  This is insane.

Insecurity

Just a trio of links for the weekend, hopefully I’ll get a movie review up later.  Been a difficult week, with a sinus infection making things fun.

This weekend’s topic is insecurity on three fronts, something to put Halloween fright into all you kiddies!

First up, more bank closings happened Friday.  This time it was FBOP Corp., better known as Park National Bank that collapsed.  With nine banks failed it only cost the FDIC 2.5 billion dollars.  What made it very interesting is the connection to the Obama administration, via Timothy Geithner.  Earlier in the day the community development part of Park National received $50 million from the federal government to stimulate investment in low income areas. Makes you feel secure in how the Feds are handling things, doesn’t it?

Over across the pond, a police force in Surrey, England think they have the solution to increased crime around Halloween.  I bet the locals feel safer already…

If you are reading this on the Internet, be afraid.  That means you are depending on what may end up being a digital house of cards.  Not many are aware of the kind of warfare that is going on in cyberspace, but it is picking up of late.  The latest player in the game is North Korea who have been probing our defenses.  Quote of the article:

The report concludes by noting that the US, with its heavy reliance on a digital infrastructure and information-based economy, has the most to lose if sophisticated cyber weaponry makes its way into the hands of less advanced nations or non-governmental organizations.

It would be devastating if we lost Twitter and Facebook, I wonder if our society would survive it!

But seriously, we have become very dependant on our electronic networking in every facet of society, from government to military to social to workplace environments.  If things go south internationally, we will see attacks on all of those.

Have I scared you enough, kiddies?

Storm Clouds on the Horizon

Many attribute the current recession to the housing bubble bursting.  Home financing and equity loans were the most glaring examples of the larger credit bubble problems that had built up.  This problem is not unique to the United States and has afflicted Europe as well.  Remember Iceland failing as the first indication of impending financial disaster?

Supposedly, things have improved in Europe, but this commentary in the Telegraph makes me wonder.  The M3 money supply contracted despite the dumping of stimulus money by U.S. and European governments in an effort to free up credit liquidity.  Instead, loans to the private sector decreased for the first time since 1983.  Reading the analysis and quotes presented is not an exercise for the faint of heart, as it presents a very gloomy picture for 2010.  Any time the word “deflation” is used, be afraid.  So much for converting dollars to Euros to hedge your bets, at least in the long term.
So stocks are now looking unstable if things don’t improve in the credit picture.  Where do you invest if you are one of the fortunate who has extra money or want to get out of the stock market?  Well, the gold bugs have pushed gold to $1,000 an ounce and there have been run ups in oil, copper, and eve lead!  A lot of people have moved their money into commodities but there is peril there as well. The key quote from this:

"It seems to us that if output declines, then input of materials ought to be down by a similar order," said High Frequency Economics economist Carl Weinberg.

I’m afraid logic has nothing to do with economic behavior these days.  Where to put your money is becoming like shooting a moving target in an increasingly faster carnival game.  I’d thought maybe the Euro for very short term and silver (as a bargain compared to gold) for longer term, but nothing looks safe.

Do you trust the Federal Reserve?  I’m beginning to think we have nothing but incompetency at the top of our financial and political institutions.  Finding out the shell game involving AIG being forced to bail out big banks such as Goldman Sachs doesn’t add to confidence in the system.  The cover up following that action destroys it.

So we have major problems yet to fully come into play and an utterly incompetent response to what has already gone wrong – all on an international scale, not just domestic.  No sector is seeing concrete growth, except for bigger government of course. Now is not the time to relax thinking we are in safer waters, rather it is a time to batten down the hatches and ride the coming storms out.

Is the Economy Really Growing Again?

The Feds announced the end to the recession today,  but dig deeper into what’s being reported and it seems premature at best.  Personally, I’ve never bought into the concept of a “jobless recovery” and much prefer the drier term “recalculation” to describe the employment situation.  To be blunt, if the jobs don’t come back and new ones are not being created, it isn’t a recovery.

Ed Morrissey (formerly of Captain’s Quarters) blogs at Hot Air about some of the hidden problems of the 3.5% growth rate, pay particular attention to the commercial property market quotation.  This is the other shoe waiting to drop in real estate, as I’ve posted before that banks are failing because of loans in this sector.  Most of the growth noted is based on Cash for Clunkers and tax credit breaks for homes that will go away in the next quarter, so I suspect we’ll see worse figures next quarter.  Negative growth wouldn’t surprise me, but there will be Christmas shopping to temporarily buoy things.

Meanwhile, the jobs are still vanishing and people are running out of unemployment. The stimulus is not doing much to help and to further exacerbate the problem the Obama administration has come up with a bogus figure of 30,083 jobs saved.  Even the AP had a hard time buying that and figured out that 5,000 of those don’t exist.  With work scarce and salaries being reduced, consumer confidence index is still poor at 47.7.  That bodes poorly for consumer fueled growth.

Oh and if you thought Cash for Clunkers was a brilliant stroke of genius, please read this and you may change your mind.  With the major downturn in auto sales following the end of the program, it is obvious this was a poorly thought out stunt for PR purposes by the administration.

Right now, I don’t trust anything this government is saying or doing about the economy.  Things are looking bleaker as more instability is appearing on the horizon. I’ll cover that in my next post.

The AP Reports on Consumer Prices

Boring sounding, right?

Well, if you are concerned with the economy, it stops being boring once you hit a specific line in the article.

Selected quotes from the article:

Prices fell 2.1 percent over the past 12 months, the biggest annual decline since a similar drop in the period ending in January 1950. Most of the past year's decline reflects energy prices falling 28.1 percent since peaking in July
2008.

Well that doesn't sound so bad, the high energy prices inhibited any chance of a recovery.

Some economists have expressed concerns that the economy could be headed toward a dangerous period of falling prices, something the U.S. has not experienced since the Great Depression of the 1930s.

Okay, that isn't positive sounding. Deflation has been a worry of mine for some time now.

Wal-Mart Stores Inc. on Thursday reported its first-ever drop in same-store sales for its overall U.S. business for the quarter. The world's largest retailer said a big factor was price deflation, primarily in grocery products like dairy.

If Wal-Mart is taking a hit, things are bad. They are the last redoubt of the consumer being squeezed for cash. Meanwhile, desperate efforts to prop up dairy prices are occurring in Wisconsin, as input costs are far outstripping returns. Are our dairy producers the canary in the coal mine?

The longest recession since World War II has kept prices in check as wage pressures disappeared because of heavy job layoffs. Companies have been unable to boost prices because of weak demand.

Now this is really not good, as we are a service driven economy with 80% of it being the service industry. With a good chunk of the spending vanishing due to debt, unemployment, and depressed wages, the main fuel for the engine of the economy is in short supply. We don't have manufacturing to pull us out of this one, or an influx of new workers like women after WWII.

The gist of the article is that falling prices have reigned in inflation and how great a job the Fed has done. Me, I'm concerned, as I've been watching for deflation as a sign of another Great Depression. Time will tell if these are warning signs or just bumps in the road. Better buckle your seat belts!