Dale Franks’ QandO posts
In this podcast, Bruce Michael, and Dale discuss discuss the president’s proposed jobs bill, Gunwalker, and Solyndra.
The direct link to the podcast can be found here.
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.
You may have heard that, at about 15:38 Pacific time yesterday, an APS worker outside of Yuma, AZ, accidentally tripped a fault that shut off power to parts of Arizona, California, and Baja California in Mexico. So, one guy, apparently, can shut down power to 3 states in 2 countries. That really fills me with confidence about the robustness of the electrical grid.
Anyway, I was one of the 6 million people who lost power during this horrific crisis. In an instant, we were thrown into the stone age by the loss of modern technology, living in a world lit only by fire. I kept a diary of this frightening experience. Below are my diary notes, written contemporaneously during the collapse. I append it here so that historians can know how it really was.
1538: Crap! I just lost all electrical power at my house! So much for liveblogging tonight. My netbook and 4G modem work though.
1550: Can’t get to the SDG&E web site, or through on the phone. Odd.
1605: Liveblogging president’s jobs speech. Streaming video from White House via 4G modem on my netbook with its tiny screen. Inconvenient. Like being a settler in a covered wagon. Will the power ever come back?
1724: I’m learning how people lived in Oldy Days without electricity. This sucks. Why do these things always happen to me?
1745: Power outages throughout San Diego County, reports of outages in Mexico, AZ, NM. Millions without power. Trolleys dead. Massive traffic.
1840: Went out on my motorcycle for a pack of smokes. Stores closed, smokes hard to acquire. Had to go to 2 stores to find them. Civilization is breaking down. Loading my rifles now.
1930: Darkness is falling. Dinner time approaching. Must resist cannibalistic urges.
2018: So, ONE GUY can cut off power to three states in two countries? One guy? Seriously?
2100: SDG&E says, "If you have a personal family emergency plan, activate it now." My personal family emergency plan is to kill my neighbors for their food. Too soon? Or do they already suspect my plans?
2140: No power for 6 hours. Veneer of civilization crumbling away. Typing on a netbook via 4G in candlelight like some sort of animal.
2230: 7 hours without power. My white wines are perilously close to room temperature. We’re just living like wild beasts now.
2316: Must go to bed and try to sleep now. All windows are open to try to cool the house. Temperature must be approaching 80°. May start sweating at any minute. Physical torture affecting my thought processes.
2330: With the candles out, it’s pitch black. Strange noises outside the windows. What was once civilization may now be infested by wolves and mountain lions. Or possums.
2340: Must try to sleep. Thank God for the protection offered by my four large dogs. If I am alive in the morning, it is thanks to them.
0230: Am awoken by lights, television. Air conditioning back on, so I have to get up and close all the windows. That sucks, ’cause I have to be up at 0700. Will this horror never end!?
0231: Oh, wait…
Some may try to trivialize this blackout in the future. But now you know how it really was.
The gift that keeps on giving: The White House’s chart of unemployment predictions in the Stimulus/no Stimulus world. Superimposed is the graph of actual unemployment, but now, with wall street economists predictions for the near-term future.
I think a big speech will help, though. ‘Cause that’s what we’ve been missing. Speeches.
The analysis of that speech is pretty straightforward and simple. We’ve spent $800 billion for TARP, $1.4 trillion in the stimulus package, and $2 trillion in quantitative easing from the Fed. Now, if we spend another $430 billion on the American Jobs Act, that’ll be the fix we’ve been looking for, and everything will be peachy.
The president’s child-like faith in the power of government is touching. And frightening.
Today’s economic statistics releases:
Exports increased and imports decreased, resulting in a smaller than expected trade deficit of $44.8 billion. The trade gap in all three components—petroleum, non-petroleum, and services—declined.
Initial Jobless claims continue held steady in the last week, up 2,000 to 414,000. The four-week moving average rose 3,750 to 414,750 which is nearly 9,000 higher than last month.
U.S. consumer confidence last week fell to -49.3, the second-lowest reading this year.
UPDATE: Speaking of joblessness and jobs, as we await the president’s big jobs speech tonight, Darryl Issa’s House Oversight Committee reports on the depth of the employment problem. It doesn’t look good. The key takeaways:
Two and a half years after its implementation, at a cost of $825 billion, the economy has lost 2.3 million jobs
In the months following the stimulus, unemployment rose well above the ceiling of 8 percent promised by President Obama and Administration officials to over 10.1 percent
Less than 55 percent of Americans have full time jobs—the lowest percentage in modern times. Some 25 million people are unemployed or unable to find full time jobs
A study by Ohio State University in May found that instead of creating jobs, the stimulus "destroyed/forestalled one million private sector jobs" but did create 450,000 jobs in the government sector
8.1 million workers are employed part time because they are unable to find full-time jobs or their hours have been cut
An additional 1.1 million discouraged workers have stopped looking for jobs because they do not believe there were any available—taken together, true unemployment tops 16 percent
So, when you hear the president talk about jobs "saved or created" by the stimulus tonight, remember that the true phrase should be "destroyed or forestalled". Because the president seems to be wanting a Stimulus II, to add to the awesome economic power of Stimulus I. And TARP. And Quantitative Easing I. And Quantitative Easing II.
It’s not a big day for economic releases today, so we get a bit of a breather from major releases.
The Mortgage Bankers Association reports that their composite index fell once again, as mortgage applications dropped –4.9%, despite low interest rate. Purchase applications actually increased by 0.2%, but re-fi apps fell –6.3%.
In retail sales for the week, ICSC-Goldman reports same-store sales fell steeply by 0.7% last week to pull down the year-on-year rate to 2.7%. Conversely, Redbook reports same-store year-on-year rose sharply by 0.9% last week, for a 4.9% rate.
UPDATE: The afternoon release of the Fed’s "Beige Book", prepared for the September 20-21 FOMC meeting, shows that the economy continues to expand at a "modest pace." Some Districts noted mixed or weakening activity, however the Fed believes that a double-dip recession is not in the offing. Overall, the report indicates that a sluggish recovery continues.
Michael Wade sent me and email a few days ago asking me what purpose I thought banks served any more. That email led to a phone conversation, and that conversation led to this post. Because that simple question opened up a whole area of investigation about not just banking, but a whole universe of institutions that may be near the end of their purpose.
The modern era has been an age of institutions. Banks, unions, governments, corporations—a whole panoply of organizations whose sole purpose was to provide a central clearinghouse for goods and services, and the regulatory rules and legal framework under which they operated. But we are now seeing glimpses of a future in which institutions simply have no purpose, or, at the very least, will serve a different purpose than they do now. The era of institutions is passing, and is being replaced by the era of…something else. I think—I hope—it will be the era of the individual.
Let’s take the example of banks, first. Currently, banks take deposits from their customers, then loan those deposits out—less a reserve requirement—for mortgages, revolving credit, business loans, etc. They also offer their customers the convenience of access to their money on a moment’s notice, almost anywhere in the civilized world.
Now, imagine a world where your money is stored on a personal biometric device. So, you no longer need an institution to store your money. You can carry it with you—perhaps implanted in you—everywhere you go. Your entire stock of cash and savings are now truly yours, and in your personal possession at all times. So what happens to banks? Without depositors, there are no longer any deposits to loan out in credit cards or home purchases. What happens to banks, then? More importantly, what happens to credit then? Perhaps banks will have to change from depository institutions to investor-funded lenders. Or be replaced by them, as there are already web sites where potential creditors and debtors can engage in micro-lending.
We are on the cusp of really transformative technological change, and if you want to see what the implications are for institutions, you need look no further than the music industry, where the RIAA is in a fierce rear-guard battle to maintain their viability. The entire music industry is being destroyed, as an institution, by the new digital technologies that were created just a decade ago. It may be a shock for some of you younger readers, but there was, at one time in the recent past, a world in which there were record stores in every shopping center and mall.
It used to be that the recording industry controlled every aspect of commercial music. They would underwrite the recording costs, would create the playable media and packaging, then pay for the distribution to music stores. If you wanted a piece of that pie, and hit it big in the music world, you had to scrape up enough money to make a demo tape, send it into Sony, BMG, RSO, etc., and hope that some executive was impressed enough to sign you to a contract to make your first album.
The world doesn’t work that way any more. For less than $1000, you can turn your dingy studio apartment into a multi-track recording studio. You can get a web site, upload your MP3 files onto it, and sell them online. You don’t need a record company, a distribution channel, or marketing money. This is killing the record industry. The RIAA is actually trying to extort royalty money from bar owners who have live bands play, on the theory that they should get a piece of the bar’s profits from the music performance. Good luck with that.
Digital publishing is starting to do the same thing to the publishing industry, as Amazon is making it possible for anyone to publish their book. Yes, a lot of less than stellar talents are publishing for the Kindle now, but some mainstream writers are now moving over to the Kindle platform. Publishing, as an institution, is in trouble.
Technology is now empowering individuals in ways that were undreamed of 20 years ago, and the pace of that change, and the vistas it’s opening up for individual empowerment is increasing every day.
Obviously, institutions, including governments, are going to become increasingly leery of this trend. After all, it is not in the best interests of institutions to allow individuals to be empowered. So there will be some sort of backlash at some point. Hopefully, that backlash will be as ineffective as the RIAA’s backlash against digital music has been. But some institutions have their own police and armies, and they have the potential to resist more strongly.
Of course, since we are now in the middle of what appears to be a huge test of government’s ability to manage the economy and currency—and government is not doing a very good job of demonstrating competence—maybe even that potential problem can be minimized.
We can only hope.
The podcast is on hiatus this week, as I am in Tucson to see my new grandson.
And, apparently, to fix my vehicle’s air conditioning, which stopped working just about as the sun came up to drench this blazing hellhole with nuclear fire. So, I got that going for me.
The Unemployment situation is the big report today, but it’s not the only one.
The Monster Employment Index rose slightly from 144 to 147 as the number of job want ads increased a bit.
Big deal. The headline number today is, of course, the Bureau of Labor Statistics’ report on the national employment situation, and it’s not good. The headline unemployment rate remains unchanged at 9.1%, and no net new payroll jobs were created last month. Last month’s increase in jobs was revised downward to 85,000.
To the extent there is any positive news to this report, it is in the underlying data. The labor force participation rate rose very slightly, from 63.9% to 64%. The U-4 unemployment rate (Total unemployed plus discouraged workers, as a percent of the civilian labor force) fell from 10% to 9.6%. The U-6 rate (Total unemployed, plus all persons marginally attached to the labor force, plus total employed part time for economic reasons, as a percent of the civilian labor force) also fell from 16.3% to 16.1%. The number of employed persons also rose from 139,296,000 to 139,627,000.
The bad headline number, though, pushed the Dow down more than 200 points as of 6:40 this morning.