Friday, October 26, 2012

1/3 Of GDP "Growth" Is Gov Spending

1/3 Of GDP "Growth" Is Gov Spending
The MSM are parading around today's Q3 GDP report, which beat expectations even though it printed at a pathetic 2%. Keeping with the tradition of producing rosy, Obama-friendly statistics, the feds this time showed modest growth from the last report while omitting a key point: more than 1/3 of the "growth" actually came from government spending, which, in economic depression America, is conducted with money that is either 1) printed out of thin air, 2) borrowed from China, or 3) seized from the productive economy.

1/3 Of GDP "Growth" Is Gov Spending - chart

Thursday, October 25, 2012

Obamnesia Cost Lives In Iraq

Obamnesia Cost Lives In Iraq
Obama has been on the campaign trail parroting the cutesy catchphrase "Romnesia" to describe Mitt Romney’s issue flip-flopping. Perhaps the president has "Obamnesia". Perhaps he forgot that he said on the campaign trail in 2007 that he would, on his 1st day in office, bring the troops home from Iraq. And when he took credit during the recent debates for ending the war in Iraq last December, perhaps he forgot that, in 2008, a proxy for President Bush signed the Status of Forces Agreement, which stipulated that the U.S. would withdraw in December 2011.

At least Romnesia doesn't cost American soldiers' lives.

Wednesday, October 24, 2012

Majority Of Jobs Created: Part-Time Senior Work

Majority Of Jobs Since '09: Part-Time For Seniors, one of my favorite sites on the web, parsed employment data going back to 2009 and found something extraordinary: The majority of the jobs created since the recession officially "ended" in June 2009 have been filled by Americans age 55 or older, a demographic challenged with the prospect of not having enough money to retire. It doesn't take a rocket scientist to deduce what that means about the quality of jobs created: they've been of the part-time, low-wage variety. Another extraordinary finding: there are 729,000 fewer Americans of prime working age (25-54 years old) employed now than there were 3 years ago. How about that recovery!

Majority Of Jobs Since '09: Part-Time For Seniors - chart

Younger Americans Never Able To Retire?

Younger Americans Never Able To Retire?
The economic depression and the Fed's incessant money printing and zero interest rate policy has threatened retirement plans of the Baby Boom generation and challenged those who have already retired, but it's the younger generations' golden years that look especially bleak. My generation--Americans in their 20's and 30's--faces an especially bleak future, carrying 75% of the more than $1 trillion (and growing) in outstanding student debt, struggling to make ends meet with an incredible underemployment rate of 32%, and facing a long-term economic outlook of crushing national debt (which has already passed the critical 90% debt-to-GDP threshold), insolvent Social Security and Medicare programs, "explosive" inflation, and significantly reduced economic freedom. The future looks awful for younger Americans, and my generation is taking notice.

The Pew Research Center recently published a survey that reveals that younger Americans are extremely concerned about their prospects of being able to retire. 40% of respondents age 44 and younger have "little or no confidence" they'll have enough money to retire, and nearly half of respondents in their late 30's and early 40's doubt they'll ever be able to. This is unprecedented. From the survey:
As a whole, retirement worries rose across all age groups — roughly 38 percent of U.S. adults say they are “not too” or “not at all” confident that they will have sufficiently sized financial nest eggs, according to the independent research group. That’s up from 25 percent in 2009.

But the concerns are increasing the greatest among younger adults approaching middle age, whose equity in their homes represents most of their net worth. About 49 percent of those ages 35-44 said they had little or no confidence that they will have enough money for retirement, more than double the 20 percent share in that age group who said so in 2009.

Tuesday, October 23, 2012

What A Worthless Debate Lovefest

What A Worthless Debate Lovefest
If there was any question that both Obama and Romney believe in the same tired, disastrous Leo Strauss-influenced interventionist foreign policy, one need only watch last night's debate. While the two traded "that's what you said-that's not what I said" jabs, they, for the most part, agreed on every single opportunity for the United States to get mired in a new military quagmire. Sure, they tried their best to position themselves as non-interventionists. Both talked about providing "support" to insurgents in Syria and Iran, "allies" in Libya and Egypt, etc. But come on. Decades of American blood in the Middle East shows that when you get into bed with murderous, tyrannical religious zealots, you end up getting caught up in an armed conflict. Honestly, judging from the debate, the only stark difference I can see between Obama and Romney's foreign policy is that Romney would be quicker to get involved in an armed conflict with Iran. But that's not to say that Obama wouldn't send U.S. troops to Iran if Israel decided to strike. (He certainly would.)

As far as China was concerned, Obama and Romney's criticisms of China's "unfair" trade policies and human rights violations--yes, they agreed to criticize China as well--was pure political theatre. Considering America's reliance on cheap Chinese goods and China's mass purchases of U.S. debt, neither candidate dare challenge the dragon.

As far as Russia was concerned, both agreed to rattle their sabers a little at Putin.

Neither Obama nor Romney described how they would address the nation's trade deficit, a foreign policy issue that actually impacts the lives of average Americans, especially given that the country is muddling through an economic depression.

What a worthless "debate".

Monday, October 22, 2012

Fed Must Buy Riskier Debt With Moral Hazards

Fed Must Buy Riskier Debt With Moral Hazards
The Fed's unofficial 3rd mandate is propping up the stock market. Bernanke is a firm believer of the so-called "wealth effect" that inflated equity prices supposedly provide. While there is much criticism of the Fed's unofficial mandate, Bernanke has, by the Fed's own admission, inflated the S&P by as much as 50%.

In order to continue to prop up the market, the Fed stepped up from purchasing Treasuries to purchasing agency MBSes, a debt instrument with higher yields. But if the market faces stronger economic headwinds--which it likely will in short time--and Bernanke wishes to continue to prop up the market, the Fed will have no choice but to purchase debt with still higher yields. From an investment perspective, this means you should buy up as much high-yield debt as you can. Bill Gross of PIMCO made money hand-over-fist buying up MBSes in expectation of QE-Infinity. The smart money, therefore, is on non-agency MBSes. (See next paragraph.) From a macroecon perspective, this means that the effectiveness of future Fed money printing is limited by the law of diminishing returns: the Fed would have to buy riskier and riskier debt to maintain the same level of market propping. This means the probability of the fed successfully propping up the market in the face of future economic headwinds is reduced.

Notice that the next 2 debt instrument "steps" are municipal and corporate bonds. If Meridith Whitney is correct--and it appears that some of her prognostications regarding munis are finally coming to pass--the municipal bond market could crash in short time. But financial risk aside, there would be a huge moral hazard if the Fed not only continued to monetize the national debt, but started to monetize municipal debt as well: Which cities' debt should it buy? Should it buy all muni debt? If it buys muni debt, why shouldn't it buy debt from other public organizations? After munis, the next step up the yield ladder would be corporate bonds. If the Fed took that step, the moral hazard would be so great that people would take to the streets. Given these moral hazards, the Fed might be tempted to skip a few steps and proceed directly to much riskier non-agency MBSes.

Fed Must Buy Riskier Debt With Moral Hazards - chart

Sunday, October 21, 2012

Inside Look At NYPD's "Stop-And-Frisk"

Inside Look At NYPD's "Stop-And-Frisk"
Your humble blogger has been on quite the civil liberties tear as of late, exposing the rapid expansion of the police state with posts about TSA checkpoints in DC metro stations, the coming domestic surveillance drone fleet (which 1/2 of Americans welcome), and the local law enforcement investigation of a controversial political group. Today, I came across a brief documentary about the NYPD's "stop-and-frisk" program, a controversial policy of detaining pedestrians, questioning them, and frisking them with little probable cause.

The video, entitled The Hunted and the Hated: An Inside Look at the NYPD's Stop-and-Frisk Policy, gives us a taste of things of come: a complete disregard of the 4th Amendment by local law enforcement at the behest of the Department of Homeland Security, which local law enforcement agencies have increasingly relied upon for funding.