Questions and Observations

Free Markets, Free People

Economic Statistics for 28 Sep 15

Personal income rose 0.3% in August, while spending rose 0.4%. The PCE Price index was unchanged overall, but up 0.1% at the core.

The Pending Home Sales Index fell a disappointing -1.4% in August, to 109.4.

The Dallas Fed Manufacturing survey rose 6.3 points, but remains deeply negative,  along with all the other Fed indicators, at -9.5.

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Pact with Iraq, Syria, Russia and Iran announced prior to UN talks with Putin

If ever there was proof of Russia’s intentions in the Middle East, it can be seen in a just announced 4 nation pact there:

Iraq joined Russia, Iran and Syria in a new agreement to strengthen cooperation against extremist group Islamic State, extending the Kremlin’s reach in the Middle East as it rivals Washington for influence.


Iraq’s Defense Ministry said Sunday that the country had signed an intelligence and security cooperation pact with Russia, Iran and Syria, pledging to cooperate in collecting information about Islamic State. The deal effectively formalizes years of military collaboration among the four nations, which have intermittently been allies since the 1980s.

Wonderful.  And who, pray, is on the outside looking in and surprised by the pact?

U.S. officials appeared to be taken by surprise by the announcement of the four-nation security pact and said they were still struggling to understand Mr. Putin’s long-term strategy for the region. Mr. Kerry, they said, kept open the possibility that the White House and Kremlin could coordinate, if not cooperate, in fighting Islamic State.

“We’re just at the beginning of trying to understand what the Russians’ intentions are in Syria, in Iraq, and to try to see if there are mutually beneficial ways forward here,” said a senior U.S. official who attended the Kerry-Lavrov meeting. “We’ve got a long way to go in that conversation.”

“Just in the beginning of trying to understand”?  Translation: “we’ve been caught flat-footed and hadn’t a clue that high-level talks between Russia and Iraq were happening”.  While Kerry may feel they have a “long way to go in that conversation,” Russia has obviously moved beyond the talking stage and is in the “taking action” stage.  The intent seems to be obvious to everyone but our State Department.

ISIS is the catalyst, or at least the excuse, for this alliance.  And most experts agree ISIS is mostly a result of the poor Iraq policy followed by the US after the Obama administration took over.  What Iraq is signaling here is no confidence in the US and with the pact, seems satisfied to let the US remain outside, looking in.  Why?  Well, take for example the fact that Russia sold fighter aircraft to Iraq last year to boost its ability to fight ISIS.  Where was the US?  It had delayed a promised shipment over political considerations.  Iraq is now negotiating with Moscow to buy more advanced weaponry.

Additionally, the Obama administration and the Russians and Iranians are at cross-purposes when it comes to Syria.  Both Russia and Iran have been very clear they support the Assad regime and hope to strengthen it.  The Obama administration has repeatedly said that Assad has to go.

What basis there are for talks between Russia and the US (at the UN this week) remain a mystery.  But what is very clear with the announcement of this pact just prior to those talks is the US enters them with an incredibly weak hand.  It has very little to use for leverage to get its way.  But one thing that can be determined for sure –  this administration’s past actions, or lack thereof, have put the US in this weak and unenviable diplomatic position.

Outfoxed again.  How “surprising”.


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Economic Statistics for 25 Sep 15

The final revision to 2nd Quarter GDP came in with an increase to 3.9% annualized, while the GDP Price index was unchanged at 2.1%.

Corporate profits in the second quarter came in at a revised $1.845 trillion, up a year-on-year 8.5%. 

The PMI Service flash for September rose 0.4 points to 55.6.

The University of Michigan’s Consumer Sentiment Index jumped 1.5 points in September to 87.2.

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“They can’t get to yes” = “They won’t give the Democrats everything they want”

In case you had not yet heard, Speaker Boehner is resigning.

As we say in the South, that’s fine and all, but it won’t really change anything. He will likely be replaced by Kevin McCarthy, who has been Boehner’s lieutenant for a long time. McCarthy is apparently better at soft-soaping the limited government Republicans in Congress, so it looks like they will go along with his election. They might even think he’ll make a difference, though I hope most of them are not that naive.

When I was reading the NYT article linked above, however, one sentence by Representative Charlie Dent of Pennsylvania stood out to me:

Mr. Dent said there was “a lot of sadness in the room” when Mr. Boehner made his announcement to colleagues. He blamed the hard-right members, who he said were unwilling to govern. “It’s clear to me that the rejectionist members of our conference clearly had an influence on his decision,” Mr. Dent said. “That’s why I’m not happy about what happened today. We still have important issues to deal with, and this will not be easier for the next guy.”

“The fundamental dynamics don’t change,” Mr. Dent said. “The dynamics are this: There are anywhere from two to four dozen members who don’t have an affirmative sense of governance. They can’t get to yes. [Emphasis mine] They just can’t get to yes, and so they undermine the ability of the speaker to lead. And not only do they undermine the ability of the speaker to lead, but they undermine the entire Republican conference and also help to weaken the institution of Congress itself.

This is a consummate member of the political class spinning excuses for why nothing ever changes, and we get ever-increasing government. It’s the “dynamics”. Opposing more government “undermines the ability of the speaker to lead”. Those who do so are “rejectionist”.

I’m not surprised the Times sought out such a pathetic specimen of the Political Class (GOP Kabuki Failure Theater Division). They’re totally in on the gag. They know that the easiest way to get big government is to make it look inevitable, and to paint anyone who opposes it as one step short of ready for commitment to an insane asylum.

“They can’t get to yes.” Meaning they won’t cave. They won’t give Democrats yet another round of big spending, more regulation, more debt, more secrecy, and more corruption.

When means Dent is right in on it. Oh, I’m sure when he looks at himself in the mirror, he sees a fine, upstanding practical politician, constantly grappling with important issues and making wise decisions about how government will solve them. Because, like so many in the political class bubble, he lacks the context and awareness to see what he really is: a pathetic liar and coward who pretends to his constituents that he cares about limited, responsible government, and then does everything in his power to satisfy collectivists so that he can get a nice mention in the New York Times.


On a related subject, I think Boehner’s exit is connected, at least peripherally, with the rise of Trump.

(Oh, and could we please, please, please avoid another “Trump is not conservative, and he’s a fraud, and he’s a collectivist at heart, and a crony capitalist, and blah, blah, blah” argument in the comments? I don’t know how others feel, but that has been done to death. Everyone has made their points, and going over it another round isn’t doing anything but pissing people off.)

No matter what you think of Trump, he is effectively running against the GOP establishment just as much (or more) as he is running against the other primary candidates. I said so over at Daily Pundit when the rumors of Boehner’s exit first surfaced. I think Trump would have probably preferred for Boehner to stay where he was until the nomination was locked up.

I have to wonder if at least part of Boehner’s exit was due to the GOP establishment wanting to defuse Trump’s appeal by saying “See? We get your anger. We’re doing something about it. So you don’t need to nominate Trump, who will be a disaster, blah blah.”

I wonder, too, if part of Boehner’s motivation is to see the chaos that results, and tell himself that he really was the indispensable man. The timing means that the whole shutdown debate will happen right after he leaves. He strikes me as just the sort of guy to hope for vindication by seeing bad things happen.

But, as I said above, in the end it won’t mean much either way. The GOP will find a way to cave. Another establishment drone will take Boehner’s place. The government will spend more, oppress more people via regulation and security theater, keep letting millions on new Democratic voters illegally enter the country, keep on colluding with crony capitalists and financial types to extract more money by any means necessary, and keep on giving spiffs to the media to blunt the effects.

That’s called “getting to yes”.

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Economic Statistics for 24 Sep 15

Durable Goods orders fell 0-.2% in August, while ex-transportation orders were unchanged. Core capital goods orders also fell -0.2%. On a year-over-year basis, Durable goods orders are down -2.3%, ex-trasportation orders are down -3.9%, and core capital goods are up 0.8%.

The Chicago Fed National Activity Index joins other Fed indexes in moving to negative territory, falling from 0.34 to -0.41 in August.

The Kansas City Fed Manufacturing Index rose just 1 point to -8 in September.

New home sales hit a surprising annual rate of 552,000, the highest since February, 2008. Supply to sales dropped to 4.7 months.

Initial weekly jobless claims rose 3,000 to 267,000. The 4-week average fell 750 to 271,750. Continuing claims fell 25,000 to 2.242 million.

The Bloomberg Consumer Comfort Index rose 1.7 points to 41.9 in the latest week.

The Fed’s balance sheet rose $9.7 billion last week, with total assets of $4.498 trillion. Reserve bank credit rose $10.9 billion.

The Fed reports that M2 money supply rose by $36.7 billion in the latest week.

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Obama’s weakness is Russia’s strength

One of the many lowlights of this administration has been its many foreign policy failures.  Many, if not most, are attributable to a lack of leadership and an abdication of the US’s role in world politics.  As most observers of international politics have understood for centuries, when one power withdraws or becomes weak, other powers will both test it and fill the vacuum their withdrawal creates.

The NY Post editorial board provides a perfect example of this administration’s poor “policy” concerning Syria:

Secretary of State John Kerry says Syrian despot Bashar al-Assad has got to go. Where have we heard that one before?

Of course, it’s been a regular refrain of President Obama and both of his secretaries of state — Hillary Clinton even more than Kerry — for years now.

Kerry repeated the demand after talks with the British foreign secretary last week — but with one new wrinkle: Assad must step aside, said Kerry — but there’ s no rush. He added: “We’re not being doctrinaire about the specific date or time; we’re open.”

Not only is he not being “doctrinaire” he’s broadcasting weakness like a clear channel radio station.  “We’re open” tells the world they haven’t a plan, a demand, or frankly, a clue.  He’s telling Syria, and specifically Assad, that there is nothing to fear from the US.  Nothing.

Remember those red lines we drew?  Disappearing ink.  Once they were crossed, it was like they never existed.

Cue the power vacuum.  And, who moves in?

And the situation just got infinitely more complicated by Russia’s active military involvement in Syria. As Kerry said, the Russians “are bringing in more equipment to shore up Assad at the same time they say they are going after” ISIS.

That position, he said, has “a lack of logic.”

No: It makes perfect sense when Washington has abdicated leadership. Nature abhors a vacuum — especially on the world stage.

Exactly.  What, you may ask, is in it for Russia?  Well, for one it can put a thumb in the eye of the US (and it is).   But it also helps reestablish old “client links” that the former USSR had in the area.  And, as Russia works with Iran to defeat ISIS, it establishes links there and it is in a position to have a big say in Iraq.  And it certainly makes sense that should Russia help Assad hang on and retake the country, Putin would have a solid client state in the middle east from which to base Russia’s influence operation.

So what has the US done?  Well, according to testimony given last week before Congress, we’ve spent half a billion dollars training up 4 or 5 soldiers in an anti-ISIS effort.  In fact, the effort has been so poor and haphazard that the chief anti-ISIS coordinator, ex-Gen. John Allen, is leaving out of frustration with the lack of a strategy or results.

Meanwhile our Secretary of State is left weakly complaining:

Meanwhile, Kerry complains that “Assad has refused to have a serious discussion and Russia has refused to help bring him to the table in order to do that. So that’s why we are where we are.”

Why in the world should Assad have a serious discussion with a paper tiger?  Or Russia for that matter?  What in the world is the downside for either if they don’t cooperate?

More disappearing red lines?


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Hillary Clinton’s latest position of political convenience – opposition to the Keystone pipeline

As one might imagine, her opposition comes as somewhat of a surprise:

Her comments made her the last major Democratic presidential candidate to come out against Keystone, a project that has dragged through more than seven years of wrangling and several environmental reviews that appeared to favor the pipeline — most of them produced by the State Department when Clinton was secretary. Obama remains the project’s biggest wildcard: He hasn’t said whether he will grant or deny a permit for the pipeline, or when he’ll decide, even as Republicans lambaste him for repeatedly postponing the issue.

As secretary, Clinton had galvanized a nationwide activist campaign against Keystone with her off-the-cuff remarks in 2010 that the department was “inclined” to approve the $8 billion-plus project. That was her last substantive public statement on the issue until Tuesday.

But then, when poll numbers are sinking and momentum is waning, what better than to flip-flop (when you favor the candidate, it’s called a “pivot”) and throw a bone to a particular core constituency to shore up that vote? Its a move any political opportunist would surely applaud.

Why the Keystone XL pipeline has remained such a political football remains a mystery.  All the past routing problems that first held up the pipeline have been satisfactorily resolved.   And, after all, there are 2.3 million miles of existing oil and natural gas pipelines in the US.  Why has this one remained in the news?

Simple answer?  Politics.  It’s about voting constituencies and keeping them happy.  It certainly isn’t about what is best for the US.

As The Hill points out, it has now officially taken longer for the federal government to review the Keystone XL pipeline’s permit application than it did to build the entire transcontinental railroad 150 years ago.

Amazing and typical.  As for the party that continues to tell us it is for jobs and economic growth, it blatantly turns its back on both with its opposition to the pipeline’s approval:

Consider the economic opportunity this $5.4 billion pipeline presents. The Canadian Economic Research Institute estimates it could add $172 billion in U.S. economic growth over 25 years. Meanwhile, President Obama’s own U.S. State Department estimates construction would support over 42,000 jobs. Nearly 10,000 would be skilled—aka, well-paying—jobs like steel welders, pipefitters, electricians, and heavy equipment operators.

There’s also the potential for gas prices to go even lower than they are today. According to a February 2015 report from IHS, a leading energy research firm, the “vast majority” of Keystone XL’s refined oil will stay right here in the U.S. In other words, it could further add to America’s surging oil supply that has sent gas prices plummeting over the past year.

And yes, as mentioned, that’s the US State Department estimate made while Hillary Clinton was SecState.

Environmentalists live with the fantasy that if the Keystone pipeline is blocked, the oil to be found in the oil sands of Canada and in North Dakota will simply have to be left in the ground.  Of course, that’s nonsense.  Instead is it is shipped by rail, a much less safe and less efficient means of transportation (but one that does amply reward a Democratic donor) than a state of the art pipeline :

This is especially so when you consider pipelines—particularly new, state-of-the-art ones like Keystone XL—are the safest mode of transportation. Ensuring we’re using the safest and most efficient methods possible only makes sense.

Indeed.  So, why is Hillary Clinton opposed to safe transportation of oil and gas, the jobs and income that would come from the construction of the pipeline and economic boost it would give our economy?

Perhaps someone will ask her that at the first Democratic debate.

Yeah, I know, I’m laughing too.


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Economic Statistics for 22 Sep 15

Redbook reports that last week’s retail sales plunged to 0.9% on a year-ago basis, from the previous week’s already-soft 1.7%.

The FHFA House Price Index rose 0.6% in July, with year-on-year growth of 5.8%.

The Richmond Fed Manufacturing Index joined other Fed manufacturing indexes in going negative, falling to -5 in September.

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