Free Markets, Free People

Economy

Economic Statistics for 27 Feb 11

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

The National Association of Realtors reports the Pending Home Sales Index rose nearly 2 points to 97.0. Year-on-year, pending sales were up 5.6%.

In the Dallas Fed’s manufacturing survey, the business activity index rose to 17.8, and the production index rose to 11.2.

~
Dale Franks
Google+ Profile
Twitter Feed

Obama’s “all-of-the-above” energy policy is really a “some-of-the-favored-above” political strategy

As usual President Obama has said one thing while demonstrating another.  He claimed, in his much panned energy speech, that the right energy strategy is to pursue an “all of the above” policy which includes not only fossil fuel, but alternative fuels as well.

“If we’re going to avoid being at the mercy of these world events, we’ve got to have a sustained, all-of-the-above strategy that develops every available source of American energy.”

And he claims that’s what he’s done.  Of course that’s nonsense as has been demonstrated many times on this blog.  His administration has done everything in its power for the past three years to block oil exploitation on federal land.  His administration has issued fewer permits for shorter times, slow walked those which have been let and disapproved such projects as the Keystone XL pipeline which is critical to any “all-of-the-above” strategy.

To make the point that fossil fuels are not in his “all of the above” plan, one only need look at his recent corporate income tax proposal in which petroleum companies are singled out for punitive treatment.  Hardly the move of a person interested in what he’s claiming.

“Since it’s an election year, they’re already dusting off their three-point plans for $2 gas. I’ll save you the suspense: Step one is drill, step two is drill, and step three is keep drilling,” Obama said. “Well, the American people aren’t stupid. You know that’s not a plan. . . . It’s a strategy to get politicians through an election. You know there are no quick fixes to this problem, and you know we can’t just drill our to lower prices.”

We can’t drill ourselves to lower gas prices?  But of course we can, if we will.  Remember that for 25 years, Democrats, who’ve taken every opportunity to block additional drilling, tell us it takes 3 to 10 years for us to benefit from new drilling.  Well, here we are, a quarter century later still in the same shape we were then and we have this guy telling us we can’t lower prices by increasing production?

Really?  So is there a new law of economics at work none of us have been privy too?  Supply and demand no longer work?

Rising prices now are a symptom of failing to do what we should have done over the previous quarter century.  Because of that we remain (as does the market) vulnerable to problems in supply elsewhere.   Like Iran, which is now cutting supplies to Europe and causing the market to react with higher prices due to a smaller supply.

Econ 101.  gas_prices_large3

If we had been drilling and producing for 25 years, we or the market wouldn’t be as susceptible to those sorts of shocks.   There’d be more supply and a greater diversity of supply.  That means lower prices.   And it would certainly mean more oil security for us.  Whether or not much of it is exported is irrelevant.  In time of emergency we would have a domestic supply that could be diverted to secure our energy needs.

Instead, we have a president who is reduced to claiming Americans “aren’t stupid” while he treats them as if they are.

He claims that you can’t reduce the price of oil by drilling for more oil (you can’t lower prices by meeting demand with increased product?)?  Now who is stupid.

And speaking of politics, because of his failure to enable the exploitation of petroleum products during his term in office, what is the only option Obama has in his bag of tricks?  Looting the Strategic Petroleum Reserve in order to help his re-election chances.  Who is it that doesn’t have much of a plan?

If you’re not tired of the double-speak from this man, you’re not paying attention.  His energy speech was pure blarney.

“There is no silver bullet. There never has been,” Obama said. “It’s the easiest thing in the world to make phony election-year promises about lower gas prices.”

Nonsense.  There certainly is a “silver bullet” way of lowering gasoline prices.  Produce more of it.  The reason there is no “silver bullet” in the offing is because he and people like him have stood in the way of its production.

You can’t make a silver bullet if you won’t let anyone mine the silver.  And that is precisely what Mr. Obama and the Democrats have done for 25 years.

~McQ

Twitter: @McQandO

Economic Statistics for 23 Feb 12

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

Initial jobless claims remain unchanged at 351,000 for the latest week. The 4-week moving average fell 7,000 to 359,000. The recent decreases in claims indicate that a positive Employment Situation report for the month.

The Bloomberg Consumer Comfort Index rose to the highest reading since April, 2008, coming in at -38.4. Of, course, that’s still a minus sign in front of that number.

The FHFA reports house prices improved a bit in December, rising 0.7%. That’s still down -0.8% on a year-over-year basis.

The Kansas City Fed Manufacturing Index came in well above expectations, rising from 7 last month to 13 in February.

~
Dale Franks
Google+ Profile
Twitter Feed

Energy prices are rising, but energy demand is declining.

We’ve been seeing some better—if not good—economic numbers lately, mainly in employment, but also in industrial production, and general business conditions. One might be tempted to believe there’s at least a mild recovery on the way. That’d be nice.

But I’m…troubled. First, there’s this:

Oil prices aren’t high right now. In fact, they are unusually low. Gasoline prices would have to rise by another $0.65 to $0.75 per gallon from where they are now just to be “normal”. And, because gasoline prices are low right now, it is very likely that they are going to go up more—perhaps a lot more…

In terms of judging whether the price of WTI is high or low, here is the price that truly matters: 0.0602 ounces of gold per barrel (which can be written as Au0.0602/bbl). What this number means is that, right now, a barrel of WTI has the same market value as 0.0602 ounces of gold.

During the 493 months since January 1, 1971, the price of WTI has averaged Au0.0732/bbl…

At this point, we can be certain that, unless gold prices come down, gasoline prices are going to go up—by a lot.

In other words, there’s at least an 18% price differential in the current price of oil compared to gold, compared to the historical average.

Another important thing to remember is that the current rise in energy prices does NOT appear to be related to demand for energy. According to the US Energy Information Agency, the US demand for both electricity and petroleum has been decreasing.

Statistics for energy use usually run a couple of months behind, but the recent figures for petroleum are that from August, 2011 until November 11, Total Crude Oil and Petroleum Products consumed, in thousands of barrels per month, fell from 593,757 to 562,019. Figures for the same months in 2010 are 609,517 and 569,312, respectively.

Similarly, the most recent electrical generation numbers, in millions of kilowatt hours, show that from August to November, 2011, total electricity consumption fell from 370,073 to 273,053. Both figures are about 2 million kWh less than the same months in 2010.

Now, maybe in the last two months there’s been a huge turnaround in energy consumption, but please note that the year-on-year demand is declining, and in general, has been since 2006.

So, if energy use is declining, while prices are increasing, and supply remains steady—or is increasing—then we can reasonably look to monetary reasons for the price increase, as the economic fundamentals do not explain the price changes.

The implications for energy prices, therefore, are not good. Start saving those pennies, kids.

For all the good it’ll do you.

Oh, and by the way, if the economy is recovering, why is energy demand decreasing, rather than increasing? Just asking.

~
Dale Franks
Google+ Profile
Twitter Feed

Had Christy Romer gotten her way, the stimulus could have been much worse

When Larry Summers and team were preparing a memo for Barack Obama on the planned stimulus, Christina Romer was a part of the effort.  The New Republic brings to light a conflict within that team about how much stimulus they should recommend.  As you recall, the final recommendation included two options.  Option one was a “modest” stimulus in the rage of $550 to $670 of legislated money (about the same amount that Paul Krugman first recommended).  The second option was for $850 billion and was the option Obama chose.

Summers mentions in the memo that in order to make a bigger impact on the “output gap”, a stimulus of over a trillion dollars was needed but most likely “not accomplish the goal” of reducing the “output gap” because of the “impact it would have on markets”.

Romer, on the other hand, felt that closing the “output gap” was much more important than the impact such a move might have on markets and recommended a much higher stimulus.  How much higher?  Approximately twice the level of the highest option presented to Obama of $850 billion.  That’s right, about $1.7 trillion dollars.  Romer claimed that doing so would bring the unemployment rate to “5.1%”.  But then, as we remember, the country was promised that if the stimulus that was eventually passed was made law, unemployment would remain under 8%.  

Of course it didn’t rising to 10.5%.  However the prediction came directly from the memo Summers presented to the president – $880 billion stimulus would create 3.4 million jobs and keep the unemployment rate at 7.3%..  Neither of those came true and the administration was reduced to claiming “saved” jobs in its defense.

Romer’s predictions were even rosier.  She believed that a $900 billion stimulus would create 3.75 million jobs and put the unemployment rate at 6.6%.  Again, not even close.

Yet, when you read the comments of others out there, you find some of them still implying that a larger stimulus would have been better for what ailed us.  That our problem was the size of the stimulus, not its design.

Of course that’s patent nonsense.  The stimulus failed because it was horribly designed and terribly executed.  And it was aimed at the wrong things.   It became a combination of slush fund for politicians and budget short-fall device for states.  Where what little was aimed at it supposed purpose (creating jobs) it failed.  We discovered that “shovel ready” was anything but.  Additionally it was used to bail out industries government had no business bailing out.

Whether it was $900 billion or $1.7 trillion, those facts wouldn’t have changed one bit.  About all that might have happened had Romer gotten her way is a few states might have been able to delay their financial reckoning for another year or so.

Noam Scheiber, the author of the TNR article (and an upcoming book on how the Obama White House “fumbled” the recovery) doesn’t go as far as to claim the larger stimulus would have been a better choice although he certainly implies it.  He argues that Obama wouldn’t have proposed it because Congress – even a totally Democratic Congress – wouldn’t have passed a $1.8 trillion dollar stimulus.

However, he argues, the inclusion of the higher stimulus number would have gotten Obama to “have felt a greater sense of urgency had he better understood how far he was from the ideal.”

First, I don’t agree that a Nancy Peolosi/Harry Reid controlled Congress wouldn’t have done exactly that, i.e. passed an almost $2 trillion dollar stimulus package.  One only has to remember how they steamrolled the health care bill through to doubt such a thing couldn’t have happened with a larger stimulus.  Secondly, it is highly debatable that Romer’s number was any sort of an “ideal”.

It was, at most, a “best guess” and given her predictions of the effect of a $900 billion stimulus (the size eventually passed) on job creation and unemployment, it is a suspect “best guess”.

And finally, regardless of the numbers proposed, it was a terribly designed and executed program that redefined “waste, fraud and abuse”.  Doubling that wouldn’t have made it better.

Unlike some out there lamenting Summers refusal to have included Romer’s recommendation, I applaud it.  That doesn’t mean I agree with the number he came up with, but to use Washington DC budgetspeak, he “saved” us about a trillion dollars.

~McQ

Twitter: @McQandO

Economic Statistics for 22 Feb 12

 

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

ICSC-Goldman reports store sales were driven up 3% last week by Valentines Day. Sales are 3.2% higher than last year. Predictions for the whole month however, are still below trend. Redbook’s same-store sales rate, at only a 2.9% year-over-year increase last week, continues to hold almost at the lows for the year. Conversely, Redbook is signaling a strong 1.4% gain for the month, in opposition to the ICSC-Goldman forecast.

Existing home sales rose 4.3% in January to a 4.57 million annual rate. But the median price still fell sharply, down -4.6% to $154,700.

The Mortgage Bakers Association reports mortgage applications fell -4.5%, with purchase apps down -2.9%, and refinance apps down -4.8%.

~
Dale Franks
Google+ Profile
Twitter Feed

Economic Statistics for 21 Feb 12

This is a fairly thin week for economic data, and today only has one statistics release of any interest.

The Chicago Fed National Activity Index rose from 0.17 last month, to 0.22 this month. The 3 month moving average was up sharply, though, to 0.14 from last month’s -0.19. Production, consumption, and housing remain a drag on the economy, however.

~
Dale Franks
Google+ Profile
Twitter Feed

So how do you talk about contraception without going all “SoCon?”

Or, as I recommend in my previous post, how do you make issues such as contraception relevant to the economy and point out its real cost?

Well, don’t forget, at base it is another government mandate.  It is government deciding what private employers and insurers will cover and how they’ll cover it.  It is obviously not “free” as they claim, but another in a long line of redistribution schemes cloaked in “good intentions” and the “common good”.

It is, in fact, just another straw on the back of the private insurance camel, the addition of which this administration hopes will eventually break its back and allow government to take over that role.

Having directed all insurance companies to provide it at “no cost” to their insured and falsely claiming to the public that they’re getting something for nothing, the administration takes a step toward that goal.

How?

One major feature of the ACA [ObamaCare] is to put so many mandates on private insurance plans (abortion pills and contraception being just a couple of them) that it becomes increasingly difficult for employers to afford private health benefits for their employees.

As more and more employers have to dump private insurance, the idea is that people will demand a government replacement plan. Lurking in the back of the ACA is the public option, which will spring to life once enough people have lost their private insurance. (This can very well happen even if the Supreme Court declares the individual mandate unconstitutional.) Once it is activated, the public option will enroll more and more Americans until it effectively wipes private options off the table.

Socialized health care through the back door.

Precisely.  There is more than one way to skin a cat.  And that’s what is evident here.  This is an alternative cat-skinning method.

The White House argues the new plan will save money for the health system.

"Covering contraception is cost neutral since it saves money by keeping women healthy and preventing spending on other health services," the White House said in a fact sheet.

"For example, there was no increase in premiums when contraception was added to the Federal Employees Health Benefit System and required of non-religious employers in Hawaii. One study found that covering contraception saved employees $97 per year, per employee."

But it isn’t cost neutral at all.  And whatever an employee “saves” on the one hand, goes away plus some to cover the expense, because here’s reality:

[I]nsurers say there’s nothing "free" about preventing unwarranted pregnancies. They say the mandate also covers costly surgical sterilization procedures, and that in any case even the pill has up-front costs.

"Saying it’s revenue-neutral doesn’t mean it’s free and that you’re not paying for it," an industry source told The Hill.

Doctors still have to be paid to prescribe the pill, drugmakers and pharmacists have to be paid to provide it – and all that money has to come from insurance premiums, not future hypothetical savings, the source said.

And all of that cost is going to be paid for by those employees who are “saving” money in higher premiums – especially those 50 somethings who are no longer in the child bearing years and ‘saving’ nothing but paying for it anyway.  By the way one of the ways to lower insurance cost is to do away with government mandates and let the insured choose what coverage they’d like to pay for.  But government will have none of that.  That would actually remove straws from the camel’s back.

Of course there are other free market approaches that would most likely be effective if government would allow them:

[P]arents who let their children become obese by feeding them irresponsibly should bear the financial cost of the extra health care that their children will require. This can, again, be done if private insurance companies are allowed to operate on the terms of free markets. Just like a smoker should have to pay a higher health insurance premium than a non-smoker, private insurance companies should be allowed to charge higher premiums of a family that eats themselves obese than of a family that eats responsibly and attends to their own health.

Find obesity to be a national problem?  What’s the most effective way to fight it?  Mandates and complicated and expensive government programs that only address the problem generally?  Or making the obese pay for the consequences of their irresponsible behavior?

I know, how horribly anti-American – making people take responsibility for their actions (something the GOP claims to believe in) and pay their own costs.  In the new America, apparently everyone has to pay, no one is held accountable and by the way, it “will be cheaper in the long run” if government does it.

The latter is the eternal promise of nanny government rarely if ever having come to fruition.

But, back to the title and the point – now if some want to add “and it’s against my religion”, fine, wonderful, great.  That’s added impetus on top of the economic one to reject Obama’s argument.  But it shouldn’t be the primary argument.  Instead it should be an argument that voters add themselves among themselves.  The broad economic argument about the real cost, not to mention the ideological argument against the growing social welfare state are extraordinarily powerful and appealing.  If others want to add their own arguments in addition to this, fine and dandy. 

That’s how you do it.

~McQ

Twitter: @McQandO

A post wherein I agree with Ron Paul

Actually, there’s a lot Ron Paul says I agree with, but there’s about 5 to 10% of what he says that makes him, at least to me, unsupportable.

But he and I see eye to eye on this thought (from an article about an interview he did with Candy Crowley):

Paul seemed almost baffled that everyone has been talking about social issues at a time when he and others are more concerned with preserving basic civil liberties and the economy.

Folks, for this election social issues is a loser.  Sorry to be so blunt, and burst the social issue’s activists bubble, but this is the distraction the Obama administration badly needs and it is playing out pretty much as they hoped, with the candidates concentrating in an area that is so removed from the real  problems of the day (and the real problems of the Obama record) that it gives relief.

Additionally, it gives visibility to the one area that usually scares the stuffing out of the big middle – the independents who are necessary to win any election (and, until this nonsense started, pretty much owned). 

What is going on now is a self-destruction derby.   And the tune is being called by the left (if you think the George Stephanopoulos question on contraception that started all this nonsense during one of the debates was delivered by an objective and unbiased journalist, I have some beachfront land in Arizona for you) and kept alive by the media.

How I see it is Americans, in general, don’t give much of a rat’s patootie about all this nonsense at this moment in history.  They’ve watched their economic world collapse, they’re upside down in their houses (or have lost them), they’re seeing their children, great grandchildren and great, great grandchildren enslaved to government debt, they’re out of work and they’re suffering – economically.

And the GOP goes off on the usual nonsensical social issue tangent when there is a table laden with a feast of issues that are relevant to the problems with which the majority of Americans are concerned.

Take a look at Memeorandum right now, for instance, and what headlines do you see?  “Santorum attacks Obama on prenatal screening”.

Really?  Could we maybe see attacks on Obama for adding 4 trillion to the debt, or the highest unemployment rate in decades, or the failed stimulus, or his persistent attacks on fossil fuel even while we sit on more of it than most of the world combined but are getting much less benefit from that because of him? How about Keystone?  Gulf permatorium?  Solyndra?  ObamaCare?

Instead what sort of attacks are made against Obama? Senior Obama Advisor: Rick Santorum’s ‘Phony Theology’ Comment ‘Well Over the Line’, which spawned, Santorum explains ‘phony theology’ comment, says Obama is ‘a Christian’ which results in, Santorum denies questioning Obama’s faith.

I cannot imagine a stupider subject being the focus of headlines at this time in our history nor a worse place  for a GOP candidate than talking about other people’s faith or lack thereof. There is no upside to that.  This is the sort of nonsense and ill discipline that has cost the GOP elections in the past, and is well on its way to doing it again.

The middle is watching and my guess is it is not happy with what it sees.  If ever the GOP wanted to lay out a strategy to drive independents back to the Democrats, they’re well on their way.  They are playing to every stereotype the left puts out about them.

What should the GOP be talking about?  Things like this and this.  The attacks should be on Obama’s economic record and leadership, not who is a better Christian.

Take a hint from the Clinton campaign GOP (as loath as they are to do so, I’m sure): “It’s the economy, stupid!”

~McQ

Twitter: @McQandO