Questions and Observations

Free Markets, Free People


Economic Statistics for 17 Mar 14

The National Association of Home Builders’ Housing Market Index rose 1 point to a lower-than-expected 47 in March.

The New York Fed’s Empire State Manufacturing Survey rose to to 5.61 in March from 4.48 in February.

The Fed reports that Industrial Production rose an unexpectedly strong 0.6% in March. Capacity Utilization in the nation’s factories rose 0.3% to 78.8%.


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Prepare for more foreign policy disasters

One of the foreign policy promises Barack Obama made was that during his presidency, America would have a “light footprint” on world affairs. Our first indicator of what that meant was the action in Libya when the US “led from behind”. The Obama administration belived that pulling back from our strong presence and position in the world would help mollify other powers and usher in a new era of peaceful cooperation with America as a partner and not necessarily the leader.

How has that worked out?

Ask Russia, China and a few others:

The White House was taken by surprise by Vladimir V. Putin’s decisions to invade Crimea, but also by China’s increasingly assertive declaration of exclusive rights to airspace and barren islands.

Neither the economic pressure nor the cyberattacks that forced Iran to reconsider its approach have prevented North Korea’s stealthy revitalization of its nuclear and missile programs. In short, America’s adversaries are testing the limits of America’s post-Iraq, post-Afghanistan moment.

“We’re seeing the ‘light footprint’ run out of gas,” said one of Mr. Obama’s former senior national security aides, who would not speak on the record about his ex-boss.

What we’re actually seeing is naivete in foreign policy head toward a predictable conclusion. Foreign policy isn’t bean bag and it has been established many times in history that the retreat of a great power from the world’s stage will see other seemingly lesser powers attempt to fill or take advantage of that power vacuum.

The “light footprint” didn’t “run out of gas”, the light footprint was foreign policy destined for failure from its inception. Mr. Obama and his foreign policy team were warned about that constantly and preferred to ignore both the warnings and history.

Mr. Obama acknowledges, at least in private, that he is managing an era of American retrenchment. History suggests that such eras — akin to what the United States went through after the two world wars and Vietnam — often look like weakness to the rest of the world. His former national security adviser Thomas Donilon seemed to acknowledge the critical nature of the moment on Sunday when he said on “Face the Nation” that what Mr. Obama was facing was “a challenge to the post-Cold War order in Europe, an order that we have a lot to do with.”

But while Mr. Donilon expressed confidence that over time the United States holds powerful tools against Russia and other nations, in the short term challengers like Mr. Putin have the advantage on the ground.

Mr. Obama is managing “an era of American retrenchment” he initiated.

It doesn’t look like a period of weakness to the rest of the world, it is a period of weakness that is compounded by our weak leadership. We’re engaged in bringing our military down to pre-WWII levels and we’ve made it clear that we’re not interested in fulfilling treaty obligations with the likes of the Ukraine. How else would one interpret our actions?

And, of course, one of the best ways we could address this particular crisis is to up our shipments of natural gas to Europe so they weren’t dependent of Russian pipeline supplies that flow through the Ukraine. That would give Europe some leverage because they wouldn’t be held hostage by their need for Russian petro supplies. But on the domestic front, the Obama administration has made building the necessary infrastructure to cash in on our growing natural gas boom almost impossible.

Are Russia and others testing the limits? You bet they are and all of those interested in those limits are watching this drama unfold. To this point, it appears Russia sees no downside to its action. Should that continue to be the case, you can be assured other nations will also “test the limits.”

This is Mr. Obama’s 3am phone call. And it appears he has let it go to the answering machine.

~McQ

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Observations: The QandO Podcast for 16 Mar 14

This week, Bruce, Michael and Dale talk about Tesla, Ukraine, and the missing Malaysian airliner.

The podcast can be found on Stitcher here. Please remember the feed may take a couple of hours to update after this is first posted.

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 Stitcher. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here.

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Economic Statistics for 13 Mar 14

The Bloomberg Consumer Comfort Index rose 0.9 points to -27.6 in the latest week, the highest since last August.

Initial jobless claims fell 9,000 to 315,000. The 4-week average fell 6,000 to 330,500. Continuing claims fell 48,000 to 2.855 million.

The Fed’s balance sheet rose $9.6 billion last week, with total assets of $4.181 trillion. Reserve Bank credit increased $11.2 billion.

The Fed reports that M2 money supply fell by $-13.9 billion in the latest week.

February retail sales rose 0.3% in February across the board, overall, less gas, and less gas and autos.

February export prices rose 0.6%, while import prices rose 0.9%. On a year-over-year basis, export prices fell 01.3%, while import prices fell -1.1%.

Business Inventories rose 0.4% in January, while a steep -0.6% drop in sales pushed the stock-to-sales ratio up to a troubling 1.32.


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More business busting regulatory abuse by the imperial President

Market?  What market?  We haven’t had a free market for much of anything in at least the last 75 years:

Business groups and congressional Republicans are blasting regulations President Obama will announce Thursday that could extend overtime pay to as many as 10 million workers who are now ineligible for it.

While liberals lauded the plan as putting more cash in the pockets of millions of workers, business groups warned it would damage the economy and Republicans said it was another example of executive overreach.

That’s right friends, now it appears that the Obama administration has decided … that’s right, “decided” … that in addition to the increase in the minimum wage, now it needs to redefine who is eligible for overtime. And, of course, that redefinition is going to negatively impact who?  Businesses.  And if they have to live with the changes, who then will it effect?

Oh, yeah, those that can least afford it.  Why?  Because it will increase the cost of doing business.  And what do businesses do when their costs increase?  Pass it on to the consumer.

Now, I ask, was that so hard to spell out?  No.  And is it hard to understand?  Again, no.

So why is it liberals can’t follow the logic train to its final destination?

Well that’s fairly simple, they don’t think, they emote.  The bureaucrats, who’ve never had to run a business or turn a profit in order to meet a payroll are experts in what others “need”.  And they’re convinced those who are involved in running a business are just greedy.

“What we’re trying to take a look at is how we can make the labor force as fair as possible for all workers and that people get rewarded for a hard day’s work with a fair wage,” Betsey Stevenson, a member of the White House Council of Economic Advisers, told reporters Wednesday.

Right.  Because, you know, the guy who risked everything and has succeeded to the point that he can hire others and thereby give the abysmal unemployment numbers some relief aren’t “fair” – by definition I guess.

“Changing the rules for overtime eligibility will, just like increasing the minimum wage, make employees more expensive and will force employers to look for ways to cover these increased costs,” said Marc Freedman, executive director of labor law policy at the U.S. Chamber of Commerce.

Meanwhile in fantasyland:

Stevenson, however, contended that there would likely be an increase in employment as a result of the change, with companies deciding to hire more employees rather than paying existing workers at a higher rate.

Really?  Or perhaps they’ll hire less and use technology to fill the bill.  Technological answers don’t ask for raises, don’t require health care coverage, don’t need overtime, etc.  In fact, it is likely to lead to less employment and more mechanization.

But we should understand the BIG reason:

Proponents say the regulations are an issue of fairness.

“I think that if you put in a full week’s work and you end up being asked by your employer to work longer hours, you deserve to be paid a little extra,” said Rep. Xavier Becerra (D-Calif.).

Is that right?  Well, frankly, Rep. Becerra, that’s none of your freakin’ business.  But, I assume you can point out the Constitutional basis for your “thought”, right?

Bunch of idiots.  They are bound and determined to destroy the golden goose because they’re are woefully ignorant of the goose’s anatomy and how it works.

~McQ

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Elizabeth Warren: Poster woman for progressivism

If ever there was a poster woman for progressivism, MA Senator Elizabeth Warren fills the bill.  Known as “Fauxahontas” for using fake indian credentials to cash in on minority preferences, she has taken the Ted Kennedy Senate seat from the hapless Scott Brown and is now on target to out-liberal the liberal Lion.

One of the more interesting things to do with her is to disect her thinking via reading what she has to say about certain subjects.  It gives  one a good peek behind the curtain and into the “progressive” mind.  For instance, here she is talking about the school loan program the government unilaterally took over:

Right now, in order to finance the United States government, we take in billions of dollars of profits for student loans, but permit billionaires to have enough loopholes that they pay at tax rates that can be lower than those of their secretaries.

This is a straightforward choice: We can take $75 billion and either way we’ll use it to protect tax loopholes for billionaires or $75 billion can be used to help students to refinance their outstanding student loan debt. It’s billionaires or students.

This particular quote is instructive in so many ways.  First, note how she makes the point that government “permits” billionairs to keep their money via loopholes.  Obviously she believes that’s something that shouldn’t be permitted, but more importantly in infers a belief that everything you earn belongs to government.  The student loan program is simply an excuse for taking it if she has her way.  If it weren’t that, it would be something else.  But bottom line she believes government has a right to that money in the name of  … well you call it – fairness?  Equality?  Whatever.

Secondly, what is the problem right now in terms of the cost of schooling?  The price is to high.  How does one get the price down?  Competiton.  That and you don’t subsidize the cost and lay off the cost of that subsizidation on students.  If there is limited competition and vast subsidization, what is the incentive for colleges and universities to cut costs to compete for students?

That’s right, none.  So what the government program that she wants to tax billionaires for is doing is helping to sustain, maintain and grow the higher education bubble.

Heritage’s Brittany Corona, a research assistant in education policy, has criticized the federal government’s involvement in the student-loan business, citing, in particular, the unknown long-term costs to taxpayers.

“Continuing to expand higher education subsidies through subsidized federal student loans and grants does nothing to put pressure on colleges to lower costs,” Corona warned. “In fact, access to easy money does the opposite, enabling universities to raise prices, knowing students can return to the federal trough for more financing.”

Sound familiar at all?  Have we had previous experience with this sort of nonsense in the last 5 or 6 years?

When this bubble pops and collapses, I’m sure the Warren’s of the world will find some “private” boogyman to blame it on.  But in reality, it will again be a government program that fueled the expansion of the bubble and the eventual collapse.

And the students?  Well, they’ll still be on the hook to pay for their overpriced education for the rest of their lives, regardless of the interest rate.

~McQ

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Economic Statistics for 11 Mar 13

Wholesale inventories rose 0.6% in January, while sales plunged -1.9%. That drove the sector’s stock-to-sales ratio up to a hefty 1.20.

The NFIB Small Business Optimism Index fell 3 points to 91.4 in February.

In weekly retail sales, ICSC Goldman reports a 1.3% weekly sales increase, and a 2.1% year-on-year increase. Meanwhile, Redbook says sales rose a weak 2.5% on a year-ago basis.


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How to destroy property rights in one easy lesson

Give government bureaucracy the power to nullify your ownership rights in the name of a “higher good”.

You’re all familiar with the poly.  The WSJ describes it:

In partnership with green activists, the Department of Interior may attempt one of the largest federal land grabs in modern times, using a familiar vehicle—the Endangered Species Act (ESA). A record 757 new species could be added to the protected list by 2018. The two species with the greatest impact on private development are range birds—the greater sage grouse and the lesser prairie chicken, both about the size of a barnyard chicken. The economic stakes are high because of the birds’ vast habitat.

Interior is expected to decide sometime this month whether to list the lesser prairie chicken, which inhabits five western prairie states, as “threatened” under the Endangered Species Act. Meantime, the Bureau of Land Management and U.S. Forest Service are considering land-use amendments to protect the greater sage grouse, which would lay the groundwork for an ESA listing next year.

One of the birds resides mostly on federal land (remember, the federal government owns most of the west of the US).  It is on these lands and the little private land there that the sage grouse is found:

The sage grouse is found in 11 western states—California, Colorado, Idaho, Montana, Nevada, North Dakota, Oregon, South Dakota, Utah, Washington, and Wyoming. Most of the areas affected are federal lands routinely used for farming, ranching, mining, road building, water projects and oil and gas drilling.

Ah, gas drilling.  Well here we go:

Interior’s proposed “land use” amendments are draconian. They require a four-mile “buffer zone” whenever a sage-grouse mating ground is discovered on federal land. The American Petroleum Institute calls the proposed rules a “de facto ban on drilling.” It fears that compliance could cost tens of millions of dollars in legal fees and cause years of drilling delays.

Well of course it would.  That’s the whole point.  To make it economically unfeasible to fight this.  Never mind that the technology exists to make the foot print tiny (horizontal drilling), you still have to get permission to do it – time and mucho money.

But that’s on federal land.  How about private land.  Well it just so happens that’s where the prairie chicken comes in (along with the sage grouse).  Any idea of where they’re found?

The prairie chicken sits atop Texas’s Permian Basin oil bonanza, and the sage grouse is near the Bakken Shale in North Dakota.

So a bird that is found in 11 western states is apparently “endangered” and also sits conveniently on one of the most productive finds in modern history (Bakken) and the other bird just happens to be in Texas’ big petroleum find?  How ironic, no?

Politics in the service of activism.  And if the activists don’t get their way?

Environmental groups have won victories by using a strategy called “sue and settle” under which groups propose species for protected status and then sue the federal government, which settles the lawsuit on terms favorable to the greens rather than fight. These settlements typically bypass a thorough review of the scientific evidence and exclude affected parties, such as industry and local communities.

According to Kent Holsinger, a natural resources attorney in Denver heavily involved in these cases, “Wildlife Guardians and Center for Biological Diversity have been party to more than 1,000 lawsuits between 1990 and the present.” The Center for Biological Diversity has made no secret of wanting to end fossil-fuel production in the U.S.

In the case of the Obama administration, it is more likely that this won’t be an antagonistic process, at least where the econuts are concerned.  Instead it will be a cooperative process while they bleed the destroy the concept of private property once and for all.

~McQ

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