Free Markets, Free People

Dale Franks

Dale Franks’ QandO posts

Economic Statistics for 24 Jul 12

The following statistics were released today on the state of the US economy:

The Richmond Fed manufacturing index contracted sharply in July to -14 versus -3 last month. New Orders fell to -25.

The FHFA purchase only house price index in May advanced 0.8%, following a 0.8% rise in April. The year-on-year rate is up 3.7%, vice 3.0% percent in April.

The Markit Economics’ PMI Flash for the US slowed to 51.8 in July versus the revised 52.5 in June.

In weekly retail sales, Redbook year-year chain store sales growth came in at a disappointing 1.3% rate, due to unseasonably hot weather. Conversely, ICSC-Goldman says cooler weather produced a 1.0% sales increase for the week, with a year-on-year rate of 3.3%.

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Dale Franks
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Observations: The QandO Podcast for 22 Jul 12

This week, Bruce, Michael, and Dale talk about Supreme Court, The state of the nation, and the Aurora, CO shooting.

The direct link to the podcast can be found here.

Observations

As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2010, they can be accessed through the RSS Archive Feed.

Economic Statistics for 19 Jul 12

The following statistics were released today on the state of the US economy:

In a week confused by seasonal adjustments, initial unemployment claims rose 34,000 in to 386,000, which is much higher than expected. But the 4-week average is actually lower, down 1,500 to a 375,500. Continuing claims rose 1,000 to 3.314 million. The 4-week average is also up 1,000 to 3.312 million.

The Bloomberg Consumer Comfort Index remained unchanged at -37.5 in the latest week.

Existing home sales fell 5.4% in June to a much weaker than expected 4.37 million annual rate, the lowest of the year. The declines are across the board in both single-family homes and condos, and in all geographical regions.

The Philadelphia Fed Survey rose to -12.9, indicating a slower rate of contraction in the district from last month.

The Conference Board’s index of leading indicators fell 0.3% in June. But the coincident index rose 0.2% in June, indicating current growth in the economy.

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Dale Franks
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Economic Statistics for 18 Jul 12 (Updated)

The following statistics were released today on the state of the US economy:

Housing starts rebounded 6.9% in June, to a 0.760 million annual rate. Housing permits, an indicator of future activity, fell -3.7% to a 0.755 million annual rate.

The Mortgage Bankers’ Association reports mortgage applications rose 16.9% last week, with purchases down -0.1%, and re-finance applications up 22.0%.

Update: The Fed’s Beige Book report on the economy, while still troubling, was a bit more optimistic than expected. Retail sales, housing, loan demand, and inflation were moderately positive. Manufacturing is still weak, however. Overall, though, the report indicates a weakening recovery and sluggish economy. The strength in retail sales also is at odds with the official reporting, which indicates substantially more weakness than the Beige Book reports.

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Dale Franks
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Economic Statistics for 17 Jul 12

The following statistics were released today on the state of the US economy:

The consumer price index was unchanged for June, and up 1.7% from last year. The core CPI rose 0.2%, and is up 2.2% from last year.

The Housing Market Index jumped the most in 10 years, rising a huge 6 points to 35, its highest level since March 2007. This has analysts hoping that the housing market has turned the corner.

Industrial production rose 0.4% in June, but capacity utilization at the nation’s factories fell slightly to 78.9%. Manufacturing output rose 0.7% for the month.

Net inflow of long-term securities rose $55.0 billion in May, up from April’s revised $27.2 billion. Foreign official institutions were the heaviest buyers of US securities in the month.

In weekly retail sales, Redbook shows a very disappointing 1.7% year-on-year sales increase, one of the lowest since April 2011. ICSC-Goldman Store Sales showed no increase from last week, and the year-on-year increase was 2.6%, which, while still on trend, is moving south.

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Dale Franks
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Economic Statistics for 16 Jul 12

The following statistics were released today on the state of the US economy:

Retail sales declined for the third month in a row, falling a greater-than-expected -0.5% in June. Less autos, sales fell -0.4%; less gas and autos, sales fell -0.2%. Retail sales on a year-ago basis were up 3.8%.

In another unwelcome sign for the economy, Business inventories in May rose 0.3%, while sales fell 0.1% for the second month in a row. This raised the stock-to-sales ratio to 1.27. That’s the highest level since May 2011.

The Empire State Mfg Survey rose more than 5 points to 7.39, but new orders, an indication of future activity, fell to -2.69. Unfilled orders are also contracting, at a very steep -13.58.

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Dale Franks
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Economic Statistics for 13 Jul 12

The following statistics were released today on the state of the US economy:

The Producer Price Index rose 0.1% in June, and up 0.8% on a year-over-year basis. Ex-food and transportation, the Core PPI was up 0.2%, and 2.6% year-over-year.

While some increasing optimism is evident in the underlying numbers, the overall consumer sentiment index fell 1.2 points to 72.0.

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Dale Franks
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We’re gonna ride this puppy down in flames

It’s no secret that my optimism well has about run dry. Signs like this don’t make the level rise any. Read the whole thing. Go on. I’ll wait.

You see here’s the thing: I’ve been writing about how close we are to and economic and currency meltdown, but not a lot about societal meltdown. But troubling signs are there, too. There’s a fundamental and growing lack of respect for the government. Not because we’re bad people, but because we recognize the growing divergence between what the government does and what common sense tells us.

So, as the linked article points out, we engage in an endless list of violations. It’s estimated that in perhaps in the course of a day, and almost certainly in the course of a week, all of us commit some act that, statutorily, makes us criminals. The range of government powers, and the scope of activities they cover, make it almost possible to obey the law in it’s entirety. We know this, and we know, just as surely, that there is something wrong about it at a very basic level. And we respond to that knowledge.

It’s not civil disobedience that I’m talking about. It’s the opposite: Civil disobedience is meant to be noticed. It is a price paid in the hope of creating social change. What I’m talking about is not based on hope; in fact, it has given up much hope on social change. It thinks the government is a colossal amoeba twitching mindlessly in response to tiny pinpricks of pain from an endless army of micro-brained interest groups. The point is not to teach the amoeba nor to guide it, but simply to stay away from the lethal stupidity of its pseudopods.

The amoeba does not get smarter but it does get hungrier and bigger. On the other hand, we get smarter. More and more of our life takes place outside of the amoeba’s reach: in the privacy of our own homes, or in capital accounts in other nations, or in the fastest growing amoeba avoidance zone ever created, cyberspace. We revolt decision by decision, transaction by transaction, because we believe deep down that most of what government tells us to do is at bottom illegitimate.

In other words, in a thousand small ways, an increasing number of us are learning the power of "no". We just haven’t started acting on it seriously yet. And, of course, it’s not all of us. There are still a fair number of people whose faith in the government to be everyone’s mommy and daddy would be touching, if it weren’t so frightening. But a lot of people are waking up to the fact that the government, in matter both large and small, is increasingly incompetent.

Now we might never act on the increasing size and scope of government, if we felt we were getting some value out of it. If it could keep the trains running on time, we might think we’d gotten a fair trade-off, or, at least, enough of us would that society would keep humming along in a fairly stable trajectory. Sadly, it’s increasingly obvious that ever-larger government not only can’t keep the trains running on time, it actively prevents them from doing so.

Nowhere is this more clear than in the economy, and the government’s response to an increasingly irrational monetary and fiscal policy.

After World War II, the debt:GDP ratio stood at 128%, approximately 24% higher than it is now.  How did we reduce that debt? First, the entirety of wartime regulation was eliminated practically overnight. Rationing, wage and price controls, industrial production controls, confiscatory business and personal taxes…all gone. And, in the three years after the war, government spending was cut by half.

That would be impossible today, of course. Social Security and Medicare alone make up more than half of government spending. Unless we gut entitlements—along with everything else—we will never have a balanced budget again. This is especially true when you consider that, though debt service is just under 6% of the Federal Budget today, that’s only true because we have artificially low interest rates. If interest rates return to the 1996 levels, then over 20% of the budget will have go to debt service payments alone…a percentage that will steadily increase as the amount of debt increases. That means 80%+ of the federal budget will be Social Security, Medicare, and interest payments on the debt.

Today, the Treasury announced that the June fiscal deficit was $904 Billion for the year so far. So, we’re going to have another $1 trillion deficit this year. Just like last year. Just like next year. And as far as the eye can see.

It doesn’t take any advanced math to see what’s going to happen. We’re going to default on our debt. Or, considering that, according to today’s announcement of the money supply, by next week, there’ll be $10 Trillion in M2 floating around out there, we’ll simply monetize it through inflation, which amounts to the same thing. But we’re clearly not going to restrain spending, which means we are years, if not months, from an economic and monetary collapse.

It shouldn’t come as a surprise to anyone when it comes. Anyone who can do simple math has the capability to see it coming. Anyone with common sense can see what we have to do to avoid it. Everyone knows that maintaining a reasonable fiscal policy and sound currency are two of the government’s primary domestic responsibilities, and everyone know that they simply aren’t doing it, and, worse, seem incapable of ever doing it again.

The excuses for not cutting government are innumerable. We can’t eliminate the Department of Education, or our children will become stumbling morons. We can’t cut Social Security, or seniors will be eating Alpo. We can’t cut the Department of the Environment, or we’ll die choking in the stinking gasses of industrial effluvia. We can’t cut Defense, or foreigners will walk openly on the streets of Washington. We can’t cut the DEA, or we’ll all be jumping out of windows from some sort of of acid-fueled illusion that we can fly over the pretty colors we smell. We can’t, in short, cut anything, because every penny of it is vital and necessary, and without it, we’ll be reduced to just a lucky few who flee from the zombie hordes inhabiting the stark, post-apocalyptic landscape brought on by smaller government. Assuming, of course, that anyone can "flee" with the acute diabetes they’ve acquired by lugging along an extra couple of hundred pounds they’ve gained from unrestricted access to 64-ounce Big Gulps.

So, not only are we gonna ride this puppy down in flames, anyone with any sense already knows that we’re gonna do it, if we stay on the current path.

The thing is: it’s no longer just some whacko fringe or criminal class who are turning into everyday scofflaws, it’s the middle class. The very people we depend upon for stability in society are the people who are now realizing that "society" is increasingly turning into a confidence game played to promote the interests of the politically powerful and their clients at the expense of the middle class. The people who aren’t rich enough to insulate themselves from the vagaries of fortune, but who are rich enough to have something to lose are supposed to be the stolid citizens, the defenders of the status quo. Increasingly, they aren’t.

So, the interesting question then becomes, what response will we see to the sort of entirely foreseeable and preventable collapse that is coming from a middle class that increasingly knows the government is a huge pile of fail? And how will they respond to the bleats of the not inconsiderable portion of their fellow citizens who will blame it not on government, but on "rootless cosmopolitans", "the 1%", "banksters", et al., and demand an even more powerful government to "fix" the problem?

Here’s another interesting question. Social Security and Medicare are about the only benefits the middle class has left. It’s almost the last thing they can expect to get back from all the money they’ve poured into the system their whole lives. How will they respond when you tell them that we can’t afford those entitlements anymore, and the only way to fix the fiscal disaster we’re facing is to take away the only skin they’ve got left in the game? What do they do when the advantages they receive from government are outweighed by the burden government puts on them?

Those are questions that really bear thinking on. Because if you lose the middle class, then their response to a crisis may not be to repair and reform the existing edifice in an attempt to return to status quo ante. Instead, it may be to simply burn the whole thing down, and start rebuilding something else from scratch. After all, when you’ve got nothing left to lose…what’ve you got to lose? What happens if the middle class are turned into revolutionaries?

Somebody may want to start figuring that out.

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Dale Franks
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Economic Statistics for 12 Jul 12

The following statistics were released today on the state of the US economy:

Initial jobless claims fell 26,000 to 350,000 last week, mainly due to seasonal distortions in the Auto Industry. The 4-week moving average fell to 376,500. Continuing claims fell to 3.304 million.

Import prices for June followed May’s 1.0% decline by falling -1.7%, with a year-over-year rate of -2.1%. Export prices fell -2.7%, with a year-over-year rate of -2.6%.

The Bloomberg Consumer Comfort Index remained unchanged at 37.5 in the latest week.

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