Free Markets, Free People

Dale Franks

Dale Franks’ QandO posts

Economic Statistics for 26 Dec 12

The following US economic statistics were announced today:

In weekly retail sales, Redbook reports a relatively weak 2.9% increase from the previous year. ICSC-Goldman reports a weekly sales increase of 0.7%, and a 3.2% increase on a year-over-year basis.

The S&P Case-Shiller Home Price Index rose a seasonally-adjusted 0.7% in October, which is 4.3% higher on a year-over-year basis.

The Richmond Fed Manufacturing Index declined from 9 last month, to 5 in December.

State Street’s investor confidence index rose 0.4 points to 80.9 in December. The report says confidence is "weak".

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Dale Franks
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A government we can’t afford

In the Telegraph today, Janet Daley tries to explain the same thing I’ve been trying to explain here for, well, years.

Any political leader prepared to deceive the electorate into believing that government spending, and the vast system of services that it provides, can go on as before – or that they will be able to resume as soon as this momentary emergency is over – was propelled into office virtually by acclamation.

So universal has this rule turned out to be that parties and leaders who know better – whose economic literacy is beyond question – are now afraid even to hint at the fact which must eventually be faced. The promises that governments are making to their electorates are not just misleading: they are unforgivably dishonest. It will not be possible to go on as we are, or to return to the expectations that we once had. The immediate emergency created by the crash of 2008 was not some temporary blip in the infinitely expanding growth of the beneficent state. It was, in fact, almost irrelevant to the larger truth which it happened, by coincidence, to bring into view. Government on the scale established in most modern western countries is simply unaffordable. In Britain, the disagreement between Labour and the Conservatives over how to reduce the deficit (cut spending or increase borrowing?) is ridiculously insignificant and out of touch with the actual proportions of the problem.

Just as our debate here on what constitutes a "balanced approach" to cutting the deficit. The truly silly part of that debate is the demand that "the rich" pay more in taxes, as if that money would somehow close the gap in financing the welfare state. In France, the government wants a 75% tax rate, but…

Barack Obama knows that a tax rise of those proportions in the US would be politically suicidal, so he proposes a much more modest increase – an income tax rate of around 40 per cent on the highest earners sounds very modest indeed to British ears. But that is precisely the problem. If a tax rise is modest enough to be politically acceptable to much of the electorate, it will not produce anything like enough to finance the universal American entitlement programmes, social security and Medicare, into a future with an ageing population. There is no way that “taxing the rich” – that irresistibly glib Left-wing solution to everything – can make present and projected levels of government spending affordable.

Right now, mandatory entitlement spending alone is 62% of the Federal budget, and it will rise continuously under present law. At the same time, federal revenues don’t even cover the cost of those entitlements, plus interest payment on the national debt.

Think about that. We could eliminate the entire Federal Government except for entitlement spending and interest on the national debt, and we would still have to borrow money to pay for it.

The president’s proposal for increasing taxes on "the rich" would bring in an extra $40 billion dollars next year. So, instead of borrowing $1.1 Trillion next year, we’ll only have to borrow $1.06 Trillion. Somehow, we are told, this will be massively helpful.

Meanwhile, if interest rates return to their historic average levels the cost of debt service alone will rise from $250 billion per year to $750 billion per year.

But, really, anyone who isn’t as dumb as a bag of hammers already knows that the amount of government we have is unaffordable, simply by noting that we’ve increased the national debt from $1 trillion to $16.3 trillion since 1980. It took us 190 years to accumulate $1 trillion in debt. And 32 years to multiply it more than 15 times.

We have three choices. We can cut all Federal spending by half. We can have massive tax increases on the middle class. We can do nothing and eventually default/hyperinflate our monetary and financial system away.

Based on the politics of 2012, I assume it will be the latter.

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Dale Franks
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Economic Statistics for 21 Dec 12

The following US economic statistics were announced today:

The Reuter’s/University of Michigan’s consumer sentiment index is down nearly 10 points in December to 72.9  from last month’s 82.7.

The Chicago Fed National Activity Index turned positive, coming in at 0.10 vice a revised -0.64 in October.

Personal income in October was up 0.6%, following a flat October. Consumer spending rose 0.4%, compared to a -0.2% drop in October. For inflation, the PCE price index fell -0.2% while the core rate was unchanged. On a year-over-year basis, income is up 4.1% while spending is up 3.5%; the PCE is up 1.4% at the headline level and 1.5% at the core.

Durable goods orders in November rose 0.7%, while ex-transportation orders were up 1.6%. This is the second consecutive monthly increase.

The Kansas City Fed manufacturing index fell to -6 in November from -4 in October.

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Dale Franks
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Economic Statistics for 20 Dec 12

The following US economic statistics were announced today:

The index of leading indicators fell -0.2% in November, as expected, due mainly to temporary, Sandy-related weakness in employment.

The Bloomberg Consumer Comfort Index rose to an eight month high of -31.9 from -34.5.

Initial claims for unemployment rose 17,000 last week, to 361,000. The 4-week moving average fell 14,000 to 367,750. Continuing claims rose 12,000 to 3.225 million.

Corporate profits in the third quarter rose 17.9% to $1.742 trillion annualized.

Existing home sales rose 5.9% to a much better than expected 5.04 million annual rate.

Philadelphia Fed Survey took a big jump back into positive territory, rising to 8.1 from last month’s -10.7.

The FHFA House Price Index rose 0.5% in October, which is up 5.6% on a year-over-year basis.

3rd quarter GDP was revised up to an annualized 3.1% in the final estimate, a big change from the initial 2.0% estimate. A big change. The GDP price index, an inflation measure, rose 2.7%.

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Dale Franks
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Economic Statistics for 19 Dec 12

The following US economic statistics were announced today:

November housing starts came in at a slightly les than expected 0.861 million pace, but building permits rose 3.6 percent to an annual pace of 0.899 million.

The MBA reports that higher interest rates made mortgage applications plunge -12.3% last week, with purchases down -5.0% and refinancings down -14.0%. An increase in mortgage rates caused the drop in activity.

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Dale Franks
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Economic Statistics for 18 Dec 12

The following US economic statistics were announced today:

In weekly retail sales, Redbook reports a 2.4% increase from the previous year. ICSC-Goldman reports a strong weekly sales increase of 4.3%, and a 3.5% increase on a year-over-year basis.

The Housing Market Index tose to 47, as homebuilders report the best conditions in more than five years.

The US current account deficit fell by $11 billion in the 3rd quarter, to -$107.5 billion. 

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Dale Franks
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Observations: The QandO Podcast for 16 Dec 12

This week, Bruce, Michael, and Dale discuss the Newtown shootings.

The direct link to the podcast can be found here.

Observations

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What’s happening to us?

I‘m just sick about today. It’s really incomprehensible, isn’t it? Sure, it was the act of a lunatic, and lunatics are, almost by definition, incomprehensible. So, I can’t even begin to get my mind into the sort of space where you massacre children. It’s just been a day of grief and depression.

These kinds of shootings seem to be coming ever faster, and I honestly don’t know what we can do about them. I’m sure that we’ll be spending a lot of time talking about gun control for the foreseeable future, but…well…that’s not really going to solve anything. Quite apart from anything else, there’s 300 million guns floating around in the US. Good luck rounding them all up.

Besides, that’s not really the root of the problem.

I just can’t escape the sense that we are watching our society and culture slouching towards collapse, and that what happened today is a symptom of that. There’s a streak of mad decadence in American culture; a streak of anger, and a lack of civility, and a surfeit of selfishness that can’t sustain a functional civil society.

Our politics are so angry that otherwise sane men physically attack other men, and scream at them like angry children for holding a different political opinion. Our popular media is drenched in sex and violence. Our news media are little more than mouthpieces for socialist pieties. Traditional religion is belittled and reviled in popular entertainment as New Wave beliefs are treated with credulity. Individual responsibility is ignored, while victimization is fetishized.

The litany is depressing, and none of it indicates a confident, forward-looking culture. And it puts out a vibe of craziness and violence that even lunatics can pick up. Maybe they could always pick up on it, but, at least prior to the 1970s, we could lock lunatics up through involuntary commitment. Since then, of course, we’ve ensured that we can only lock up lunatics after they violently act out. So there are a lot of them lurking about, now, many of them homeless, walking the streets.

I honestly have no idea how to fix this. Clearly, government isn’t the answer. A government that can’t even do what is obviously necessary to balance—or even produce—a budget certainly isn’t going to effect any useful cultural change. Besides in a democratic system, the government reflects the culture, not the reverse. Our government is increasingly one that is characterized simultaneously by arrogance and incompetence. Those would be incompatible characteristics in a rational culture, but they accurately describe our culture, the government that reflects it.

We’ve had it so good in this country, for so long, that I’m afraid the culture has internalized the idea that it’ll always be that way. There’ll always be second chances if you screw up, and someone will always be there to keep the machinery running. What problems we do have are First World problems: the free in-flight wi-fi doesn’t work; Starbucks ran out of Pumpkin Spice. We go into debt getting our degrees in Gender Studies, and we expect a lucrative job as a reward. Our kids come in last place in their soccer league, but they’ll always get their trophy for participation.

We’re living off the financial, moral, and intellectual capital of people who opened a continent-wide frontier, defeated horrific foreign tyrannies, and then sent men to the moon. We, of course, will do none of those things.

Quite apart from anything else, we couldn’t afford to. We’ve spent the last thirty years going ever deeper into debt to defer ever making any hard choices. Instead, everybody got everything they wanted. I mean, we got our Great Society, and our Cold War military build-up; Medicare Part D, and No Child Left Behind; wars in the Mideast, and subsidized college loans. We’ve denied ourselves nothing that we wanted, and now that the bill is coming due, all we can figure out how to do is raise taxes, and have the Fed buy back some bonds so we can keep the party going on longer, and stretch out the time that we’re allowed to go ever deeper into debt.

But, not only can we not afford to, we don’t want to embark on some great cultural mission whose rewards will be enjoyed by our children instead of ourselves. We just want to pull up some porn on our iPads, and watch Netflix after we finish.

The founders of the Republic understood that democratic self-governance is only suited to a moral, responsible people. A people who cannot strive to create a polity where ethics and responsibility are primary principles are a people who are not capable of governing themselves. And I no longer see us as a people who can create that kind of polity.

Some of my libertarian friends think that a financial or societal collapse will lead to a better understanding of the importance of freedom, and that a new flowering of liberty will bloom in the aftermath.

That’s a foolish and stupid idea.

What will actually happen is what happened when Rome fell: a period of barbarism and tyranny and darkness will sweep over us at worst, or at best, people will demand that a man on a white horse punish the appropriate scapegoats and make the trains run on time again. Sure, I hope I’m wrong, but history is on the side of pessimism. As nearly as I can tell, all we can do is hold on tight, because we’re getting ready to ride this puppy down in flames.

Still, Rome didn’t collapse in a day, and maybe we can manage to avoid a total collapse and ensuing Dark Age for another 30 years or so, until after I’m gone. Frankly, that’s about all the optimism I have left in me.

But, maybe, in 500 years or so, a confident, adventurous people will once again step onto the surface of the moon. No doubt they will be amazed to learn that the mythical figures of Buzz Aldrin, Alan Shepard, and their companions actually did exist, and set foot there once upon a time, and left behind six beautiful, red-striped banners, spangled with white stars on a field of blue.

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Dale Franks
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Economic Statistics for 14 Dec 12

The following US economic statistics were announced today:

The Fed reports that industrial production rose a strong 1.1% in November, while capacity utilization in the nation’s factories rose to 78.4%.

The Consumer Price Index fell -0.3% in November, but the core rate rose 0.1%. On a year-over-year basis, the CPI rose 1.8%, and the core rate rose 1.9%

The PMI Manufacturing Index Flash rose almost 2 points to 54.2 for the first half of December.

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Dale Franks
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