Questions and Observations

Free Markets, Free People


Economic Statistics for 20 Mar 14

Initial jobless claims rose 5,000 to 320,000. The 4-week average fell 3,500 to 327,000. Continuing claims rose 41,000 to 2.889 million.

The Bloomberg Consumer Comfort Index fell -1.4 points to -29.0 in the latest week.

The general business conditions index of the Philadelphia Fed’s Business Outlook Survey rose from -6.3 to 9.0 in March.

Existing home sales fell -0.4% in February to a 4.6 million annual rate. On a year-over-year basis, sales are down -7.1%.

The Conference Board’s index of leading indicators rose a solid 0.5% in February.

The Fed’s balance sheet rose $40.7 billion last week, with total assets of $4.222 trillion. Reserve Bank credit increased $39.1 billion.

The Fed reports that M2 money supply rose by $23.7 billion in the latest week.


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Europe discovers its gas problem

German Chancellor Angela Merkel has declared the G8 to be dead, thanks to Russia’s take over of the Crimea:

German Chancellor Angela Merkel declared the Group of Eight leading nations defunct given the current crisis in Ukraine, in a clear message to Russia that the world’s seven other major industrialized countries consider its actions in Ukraine unacceptable. “As long as there is no political environment for such an important political format as the G-8, the G-8 doesn’t exist anymore, not the summit nor the format,” said Ms. Merkel, in Germany’s parliament, the Bundestag. “Russia is widely isolated in all international organizations,” the chancellor said.

Ah, yes, the old “isolated in all international organizations” gambit.  And what have all the “international organizations” done in reaction to Russia’s Crimean takeover?  About what they did when Russia pushed into Georgia.  A whole lot of nothing. It is one thing to have international organizations that have teeth and are willing to do something in reaction to such a blatant act.  But when they mostly issue statements condeming the action and void the Netflix accounts of certain Russian officals, being isolated from those organizations isn’t such a big deal.  All it does is make further diplomatic efforts more difficult, not that it is clear that Russia is open to diplomatic overtures.

Another thing that is happening is Europe is discovering it has managed to put itself in an energy situation that isn’t at all to its advantage.  30% of Europe’s natural gas flows through Russian pipelines (Germany gets 40% of its natural gas supplies from Russia).

So the scramble is purportedly on to change that situation.

European leaders will seek ways to cut their multi-billion-dollar dependence on Russian gas at talks in Brussels on Thursday and Friday, while stopping short of severing energy ties with Moscow for now. EU officials said the current Ukraine crisis had convinced many in Europe that Russia was no longer reliable and the political will to end its supply dominance had never been greater. “Everyone recognises a major change of pace is needed on the part of the European Union,” one EU official said on condition of anonymity. As alternatives to imported gas, the Brussels talks will debate the European Union’s “indigenous supplies”, which include renewable energy and shale gas.

Now, one would think that such a situation would call for drastic and speedy action.  Anyone want to bet how long they dither and, should they decide to exploit their “indigenous supplies”, how onerous the rules and regulations will be?

When leaders of the European Union’s member states meet today and tomorrow (20-21 March) in Brussels, they hope to reach consensus on the EU’s long-term climate goals. But agreement appears unlikely because of deep divisions between east and west. Ahead of the summit, ministers from 13 member states signed a declaration supporting a European Commission proposal for an EU commitment to reduce carbon dioxide emissions by 40% from 1990 levels by 2030 – up from a 20% target set for 2020. This ‘green growth group’ includes France, Germany, Italy and the UK. But Bulgaria, the Czech Republic, Hungary, Poland, Romania and Slovakia are wary of the target and the timeline, and are resisting any such commitment.

The latter group will most likely be all for moving ahead as speedily as possible to exploit “indigenous supplies”.  They’ll meet some pretty stiff headwinds, apparently, from the Western EU nations. You can almost see this train wreck coming.

Meanwhile in the pursuit of “green energy”, Europe is apparently ready to toss in the towel:

Governments across Europe, regretting the over-generous deals doled out to the renewable energy sector, have begun reneging on them. To slow ruinous power bills hikes, governments are unilaterally rewriting contracts and clawing back unseemly profits.

You have to laugh.  “Unseemly profits”?  They’re subsidies, sir.  Not profit.

It’ll be interesting to see if the EU has the will to sort this all out in the next couple of days.  If one is a betting person, you’d have to guess that the odds for success are long, given the EU’s recent history.

~McQ

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Economic Statistics for 19 Mar 14

The MBA reports that mortgage applications fell -1.2% last week, with purchases and re-fis both down -1.0%.

Strong exports narrowed the nation’s current account deficit to $81.1 billion in the 4th quarter of 2013, down from a revised $96.4 billion in the 3rd quarter.

The Federal Open markets Committee announced that interest rate policy will remain unchanged, with the Federal Funds Rate target at 0% to 0.25%. The FOMC released their projections for US GDP Growth: 2014: 2.8 to 3.0 %; 2015: 3.0 to 3.2 %; 2016: 2.5 to 3.0 %; longer run: 2.2 to 2.2 %.


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The most transparent administration in history … not

The Obama White House has quietly rewritten a portion of the Freedom Of Information Act to exclude what it calls “White House equities” from being released without a White House review.  The rewrite was inspired by a 2009 memo by then White House counsel, Greg Craig:

The Greg memo is described in detail in a new study made public today by Cause of Action, a Washington-based nonprofit watchdog group that monitors government transparency and accountability.

How serious an attack on the public’s right to know is the Obama administration’s invention of the “White House equities” exception?

“FOIA is designed to inform the public on government behavior; White House equities allow the government to withhold information from the media, and therefore the public, by having media requests forwarded for review. This not only politicizes federal agencies, it impairs fundamental First Amendment liberties,” Cause of Action explains in its report.

The equities exception is breathtaking in its breadth. As the Greg memo put it, any document request is covered, including “congressional committee requests, GAO requests, judicial subpoenas and FOIA requests.”

And it doesn’t matter what format the documents happen to be in because, according to Greg, the equities exception “applies to all documents and records, whether in oral, paper, or electronic form, that relate to communications to and from the White House, including preparations for such communications.”

What this effectively does is stop federal agencies from answering FOIA requests which might include “White House equities” within the 20 days required by law.  There is no apparent limit to the review time the White House can take with its “review” of such requests.  Since the White House gets to decide what are “White House equities” and how long it will take to review requests which include them, the change effectively neuters the intent of the FOIA law.  This gives the White House the ability to delay release of such information until it is politically beneficial for them to do so (or, in reality, not at all):

In one case cited by Cause of Action, the response to a request from a Los Angeles Times reporter to the Department of the Interior for “communications between the White House and high-ranking Interior officials on various politically sensitive topics” was delayed at least two years by the equities review.

And that isn’t the only department in which such delays have become common:

“Cause of Action is still waiting for documents from 16 federal agencies, with the Department of Treasury having the longest pending request of 202 business days.

“The Department of Energy is a close second at 169 business days. The requests to the Department of Defense and Department of Health and Human Services have been pending for 138 business days,” the report said.

This is what political subversion looks like.  It is also a fairly common example of this administration saying one thing and actually doing the opposite.

Most transparent administration ever.  Another lie worthy of 4 Pinocchios.

~McQ

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Economic Statistics for 18 Mar 14

In weekly retail sales, Redbook reports a soft 2.8% increase from the previous year. ICSC-Goldman reports a weekly sales increase of 0.7%, and a 1.5% increase on a year-over-year basis.

Consumer Prices rose 0.1% in February at both the headline and core level. On a year-over-year basis, consumer prices are up 1.1% overall and 1.6% less food and energy.

February housing starts dropped 0.2% to a 0.907 million annual rate, but building permits rose 7.7% to a 1.018 million annual rate.

The Treasury Department reports that net inflow of long-term securities totaled $7.3 billion in January vice a revised $-49.5 billion in December.


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College professor calls for jailing climate “deniers”

It never fails.  At some point, the mask slips among the “tolerant” members of academia and we are exposed to their real controlling and authoritarian face.  Over the past few weeks there have been two good examples of this.  At Harvard, we had senior Sandra Korn (“a joint history of science and studies of women, gender and sexuality concentrator”, whatever that might be) declare that academic freedom is an outdated concept and that “academic justice” is a much better concept:

In its oft-cited Statement of Principles on Academic Freedom and Tenure, the American Association of University Professors declares that “Teachers are entitled to full freedom in research and in the publication of the results.” In principle, this policy seems sound: It would not do for academics to have their research restricted by the political whims of the moment.

Yet the liberal obsession with “academic freedom” seems a bit misplaced to me. After all, no one ever has “full freedom” in research and publication. Which research proposals receive funding and what papers are accepted for publication are always contingent on political priorities. The words used to articulate a research question can have implications for its outcome. No academic question is ever “free” from political realities. If our university community opposes racism, sexism, and heterosexism, why should we put up with research that counters our goals simply in the name of “academic freedom”?

Instead, I would like to propose a more rigorous standard: one of “academic justice.” When an academic community observes research promoting or justifying oppression, it should ensure that this research does not continue.

Tolerance of ideas you don’t like or agree with?  Forget about it.  Instead, refuse to fund research that doesn’t conform to your agenda and we’ll call that “academic justice”.  Feel a little chill?

Now we have an assistant professor of philosophy at the Rochester Institute of Technology who would like to see those who disagree with him on climate change put in jail.  Apparently freedom of thought and speech and the right to disagree are outdated concepts as well.  Eric Owens at the Daily Caller brings us up to date:

The professor is Lawrence Torcello. Last week, he published a 900-word-plus essay at an academic website called The Conversation.

His main complaint is his belief that certain nefarious, unidentified individuals have organized a “campaign funding misinformation.” Such a campaign, he argues, “ought to be considered criminally negligent.”

Torcello, who has a Ph.D. from the University at Buffalo, explains that there are times when criminal negligence and “science misinformation” must be linked. The threat of climate change, he says, is one of those times.

Throughout the piece, he refers to the bizarre political aftermath of an earthquake in L’Aquila, Italy, which saw six scientists imprisoned for six years each because they failed to “clearly communicate risks to the public” about living in an earthquake zone.

“Consider cases in which science communication is intentionally undermined for political and financial gain,” the assistant professor urges.

“Imagine if in L’Aquila, scientists themselves had made every effort to communicate the risks of living in an earthquake zone,” Torcello argues, but evil “financiers” of a “denialist campaign” “funded an organised [sic] campaign to discredit the consensus findings of seismology, and for that reason no preparations were made.”

“I submit that this is just what is happening with the current, well documented funding of global warming denialism,” Torcello asserts.

No mention of the current, well documented funding of global warming alarmism (Al Gore, call your booking agent).  No mention of the science that counters many of the claims of alarmists. No mention of the unexplained 15 year temperature pause.  In fact, no mention of anything that might derail his argument.  But that’s par for the course among alarmists, and Torcello is certainly one of them.  And, as he makes clear, he will not tolerate deniers because they’re not only wrong, they’re criminals:

Torcello says that people are already dying because of global warming. “Nonetheless, climate denial remains a serious deterrent against meaningful political action in the very countries most responsible for the crisis.”

As such, Torcello wants governments to make “the funding of climate denial” a crime.

“The charge of criminal and moral negligence ought to extend to all activities of the climate deniers who receive funding as part of a sustained campaign to undermine the public’s understanding of scientific consensus.”

Of course the reason he’s so upset is this new fangled thing called the internet has enabled anyone who is curious about the climate debate to actually see both sides of the argument layed out before them.   For the alarmists, that has inconveniently helped a majority of people realize that the science behind the alarmism is weak at best and fraudulent in some cases.  It has also helped them understand that the alarmist science that Torcello wants enshrined as “truth” was gathered from deeply flawed computer models and fudged data.  And, it has also let the voices of dissenting scientists be heard.  Finally, this ability for the public to weigh the arguments has found most of the public viewing climate change as a minor problem at best.

Torcello would like to make all of that a crimnal activity based simply on his belief that the alarmist argument is the accurate argument.  He’d jail the heretics and deny the public the opposing argument.  This is what you’re reduced to when you have no real scientifically based counter-arugment and are just pushing a belief.

The Torcellos of the world once tried to do this to a man named Gallileo.  And we know how that worked out.

It is always easy to wave away those like Torcello and claim they’re an anomoly.  But it seems we see more and more of them popping up each day.  The struggle to gain and maintain freedom is a daily struggle.  It is the Torcellos and the Korns of the world who would – for your own good, of course – be happy to help incrementally rob you of your freedoms.  They must be called out each and every time they do so and exposed for what they are.

~McQ

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Car Review

So, terms that don’t seem to go together. Like “military intelligence”. Or, in the case of this week’s car, “Korean Luxury”. Kia’s brand new K900 flagship sedan hit the shores of the United States this month. I drove it. I wrote about it.


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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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