Category Archives: Economy

Please Don‘t Shut Down The Government, Democrats, Because That Would Be Awful (Not), by Kurt Schlichter

Shutting down the government for a while over the “Dreamers” controversy isn’t really going to upset too many Trump voters. From Kurt Schlichter at theburningplatform.com:

What a tragedy it would be if Democrats made good on their threat and decided DACA was so important that they must shut down the federal government over it. Please don’t! Why, I’d be heartbroken if the government did less and a bunch of foreigners didn’t get rewarded for ignoring our laws. I think this is just the right hill for the Democrats to choose to fight to the death on, and I encourage them to do so. Throw us right in that briar patch, because you are smart and savvy and there’s no way a big dummy like Trump could beat you and make you look like fools.

You remember DACA? It’s an acronym that stands for “That Thing Democrats Want To Use To Fill The Voter Rolls With Foreigners And GOP Donors Want To Use To Get More Serfs To Work For Peanuts While Actual Americans Get Shafted And Called ‘Racist’ If They Dare Complain.” The Democrats desperately want DACA because you Normal people have let them down and voted for your own interests rather than in the way Nancy Pelosi instructed you. Bad, bad electorate! You definitely need to be replaced.

The GOP wants it because its big money donors want it because you actual Americans demand to be treated with respect by your employers and, well, paying Americans what they’re worth is bad for business. And the Senate GOP Sissy Caucus of sanctimonious twits wants it because it gives them a chance to pose and preen and pretend to have the moral high ground over those wicked evil bad bad bad Republicans who want to do what actual Republican voters want done instead of being guided by the eccentric moral compass that Jeff Flake keeps inside himself right next to his head.

The “Schumerhole” controversy arose because Donald Trump indicated that giving Big Amnesty everything it wanted, and in return allowing him to totally alienate his base, was a bad deal. “Perhaps creating a controversy wherein a bunch of liberals and simpering Republican Fredocons would go into full fake high-dudgeon mode might coerce Trump into doing something he was not inclined to do,” thought some dummy who had apparently not paid any attention to how Trump operates for a single second in the last two-and-a-half years.

 

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Why California Has the Nation’s Worst Poverty Rate, by Ryan McMaken

One thing governments are good at producing is poverty, and California has lots of government. From Ryan McMaken at mises.org:

Earlier this week, the LA Times reminded its readers that California has the highest poverty rate in the nation.

Specifically, when using the Census Bureau’s most recent” Supplemental Poverty Measure” (SPM), California clocks in with a poverty rate of 20 percent, which places it as worst in the nation.

To be sure, California is running quite closely with Florida and Louisiana, but we can certainly say that California is a top contender when it comes to poverty:

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This continues to be something of a black eye for California politicians who imagine themselves to be the enlightened elite of North America. The fact that one in five Californians is below this poverty line doesn’t exactly lend itself to crowing about the state’s success in its various wars on poverty.

Many conservative sites have seized on the information to say “I told you so” and claim this shows that “blue-state” policies fail. One should be careful with this, of course, since there are plenty of red states in the top ten as well. Moreover, some blue states, like Massachusetts, are doing moderately well by this measure:

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In the realm of political punditry,  though, it matters a great deal whether one is using the regular poverty measure, or the SPM. For one, in the regular poverty measure, California ranks better than Texas, and leftists love to use the standard poverty rate to talk about how truly awful Texas and other red states are. The Supplemental Poverty Measure allows Texans to talk about how awful California is.

If we’re going to use census data to guess the prevalence of low-income households, though, the SPM is greatly superior to the old poverty rate. There’s a reason, after all, that the Census Bureau developed it, and the Bureau has long warned that poverty rates using the old measure don’t make for good comparisons across state lines.

The old poverty measure was a far more crude measure that did not take local costs into account, did not include poverty-assistance income, and basically ignored what can be immense differences in the cost of living in different locations. Many commentators often love to note how the median household income in many red states are below the national average — but then conveniently ignore how low the cost of living is in those places.

To continue reading: Why California Has the Nation’s Worst Poverty Rate

The Virtuous Poor in America, by xrugger

The money sentence: “The majority of the American underclass are neither virtuous nor (by any rational standard of true poverty) are they poor.” From xrugger at theburningplatform.com:

I’ve read a few things recently that might lead one to believe that the poor in America are held down solely by the machinations of the rich and connected. There seems to be a sentiment out there that the poor are simply not responsible for the state in which they find themselves and that one day they will rise up and throw off the shackles that bind them in poverty and want. Everything has been done to them; therefore, we are obligated to do everything for them. As will be obvious shortly, I disagree.

Do not put your hope for change in the poor and downtrodden of this country. Your faith in the supposed virtuous poor is badly misplaced. The majority of the American underclass are neither virtuous nor (by any rational standard of true poverty) are they poor. This is not a statement meant to absolve the wealthy and powerful of their sins in that they have done much to degrade and destroy the “disadvantaged” of this nation. They will have their own millstone to deal with. Having said that, let’s chat a little bit about the true state of the American underclass.

First, let’s dispel the notion that the American poor are truly poor. Oh sure, by the standards of the poor in other western industrial nations, the American version may indeed be worse in some ways than, say, the German poor, or the British poor, or the Australian poor. However, when you bring the grinding poverty of Africa, India, or rural China into the calculation, then what it means to be poor in America becomes discernable in its proper context.

If you have central heat and air conditioning in your subsidized housing, or even in the homeless shelter for that matter, then you are far better off than sub-Saharan Africans who burn buffalo dung for heat. If you cook your subsidized meals on an electric or gas stove under an electric light, then you and yours exist at a level of comfort unknown to huge numbers of the truly destitute. If you have the luxury of indoor plumbing, then you have far exceeded the standards of the rural poor in India where the majority of the population still defecate in the open.

To continue reading: The Virtuous Poor in America

An “Extreme Warning” From Our Doom Index, by Bill Bonner

Here’s another bearish prognostication, from Bill Bonner at bonnerandpartners.com:

BALTIMORE – When we left you yesterday, we were describing why the situation is getting dangerous for investors, and how the lessons learned over the last 30 years may backfire in the next crisis.

“Dow over 26,000… bitcoin under $10,000,” reports this morning’s news… “but could crypto panic spill over into stocks?”

Investors are accustomed to depending on the Greenspan-Bernanke-Yellen Put… which is to say, they are pretty sure that the feds will come in with more booze when the party starts to flag.

“Buy the dip,” they tell each other, confident that the feds can be counted on in a pinch.

Many think the recently passed tax bill is 80-proof, too – sure to rev things up by putting more money in the hands of shareholders and consumers.

Maybe it will raise stock prices. Or maybe it won’t. What it won’t do is make the next crisis disappear.

Bad Tidings

We hate to be the bearer of bad tidings, but bad tidings are all we have to bear.

Corporate America is already pretty flush. The price-to-earnings (P/E) ratio for the S&P 500 is now 70% above its long-term average.

In fact, the price of stocks relative to earnings has only been near this high three times in the last 118 years… each time caused by the aforementioned Fed party favors.

And if stocks go higher, it merely gives them further to fall.

In order to get back to more traditional levels, notes Martin Feldstein in yesterday’s Wall Street Journal, the next bear market would have to wipe out some $10 trillion of stock market wealth.

This, he says, would take 2% off annual GDP… tipping the country into recession.

Extreme Warning

How close is this crisis?

We turn to our Doom Index, put together by our ace researcher, Joe Withrow:

The Doom Index spiked back up to “7” this month – our extreme warning level.

After a surprisingly expansive third quarter in 2017, credit growth fell back to 1.6% in the fourth quarter. Paraphrasing your friend and economist Richard Duncan, bad things happen when credit growth falls below 2%.

Looking at the credit markets, corporate bond downgrades continued to come in at an elevated level last quarter. And junk bonds are starting to show some cracks, falling more than 1% on the quarter. That said, junk bonds still closed out 2017 in positive territory.

To continue reading: An “Extreme Warning” From Our Doom Index

Punch-Drunk Investors & Extinct Bears, Part 1: by Pater Tenebrarum

The age old question: if everybody’s bullish (or bearish) who’s left to buy (or sell)? From Pater Tenebrarum at acting-man.com:

The Mother of All Blow-Offs

We didn’t really plan on writing about investor sentiment again so soon, but last week a few articles in the financial press caught our eye and after reviewing the data, we thought it would be a good idea to post a brief update. When positioning and sentiment reach levels that were never seen before after the market has gone through a blow-off move for more than a year, it may well be that it means something for once.

Sloshed as we are…   a group of professional investors prepares for a day of hard work on Wall Street. The tedium of a market that goes up a little bit every day, day in day out, is taking its toll.

Interestingly, the DJIA has fully participated in the blow-off this time, contrary to what happened at the end of the 1990s bull market and the first echo boom that ended in 2007. On the monthly chart the venerable Dow Industrials Average now sports on RSI of roughly 90, which is really quite rare.

 

The “slightly overbought” DJIA sports an RSI of 89.59 on its monthly chart in the wake of the blow-off move over the past year.

If you think this looks like the exact opposite of what we have seen at the lows in 2009, you are entirely correct – it is indeed the opposite in every conceivable respect. In 2009 the news were uniformly bad; nowadays, we are flooded with good news on the economy and corporate earnings. In 2009 stocks were cheap  – if not really historically cheap – now they are in many ways at their most expensive in history, particularly if one considers the median stock rather than  just the capitalization-weighted indexes.

Singing From the Same Hymn Sheet

We recall that the reading of the Daily Sentiment Index of S&P futures traders stood at just 3% bulls on the day of the March 2009 low. Looking at sentiment data today, there are probably 3% bears left. What prompted us to take a closer look at the data was an article at Marketwatch about the positioning of Ameritrade customers – in other words, self-directed retail investors. The article is ominously entitled “Retail investor exposure to stock market is at an all-time high”. An all time high? Isn’t this supposed to be the “most hated” bull market ever? That hasn’t been true for quite a while actually. Ameritrade helpfully provided a chart of its “Investor Movement Index” (IM Index), which measures the aggregate stock market exposure of its clients.

At the height of the Fed’s QE3 operation in 2014, retail investors were almost “pessimistic” compared to today. The Ameritrade IM Index is currently above 8, but it already established a new record high when it crossed 7.0 for the first time last summer.

To continue reading: Punch-Drunk Investors & Extinct Bears, Part 1:

How drug lords make billions smuggling gold to Miami for your jewelry and phones, by Jay Weaver, Nicholas Nehamas, and Kyra Gurney

Cryptocurrencies haven’t made gold obsolete just yet. From Jay Weaver, Nicholas Nehamas, and Kyra Gurney at miamiherald.com:

When Juan Granda ventured into Peru’s Amazon rainforest to score another illicit load of gold, he boasted that he felt like legendary Colombian drug lord Pablo Escobar.

“I’m like Pablo coming … to get the coke,” he told two co-workers in a text message in 2014.

A 36-year-old Florida State University graduate who once sold subprime loans, Granda was no cartel kingpin. But his offhand comparison was apt: Gold has become the secret ingredient in the criminal alchemy of Latin American narco-traffickers who make billions turning cocaine into clean cash by exporting the metal to Miami.

The previous year, Granda’s employer, NTR Metals, a South Florida precious-metals trading company, had bought nearly $1 billion worth of Peruvian gold supplied by narcos — and Granda and NTR needed more.

The United States depends on Latin American gold to feed ravenous demand from its jewelry, bullion and electronics industries. The amount of gold going through Miami every year is equal to roughly 2 percent of the market value of the vast U.S. stockpile in Fort Knox.

But much of that gold comes from outlaw mines deep in the jungle where dangerous chemicals are poisoning rainforests and laborers who toil for scraps of metal, according to human rights watchdogs and industry executives. The environmental damage and human misery mirror the scale of Africa’s “blood diamonds,” experts say.

“A large part of the gold that’s commercialized in the world comes stained by blood and human rights abuses,” said Julian Bernardo Gonzalez, vice president of sustainability for Continental Gold, a Canadian mining company with operations in Colombia that holds legal titles and pays taxes, unlike many smaller mining operations.

Pope Francis is expected to condemn the horrors of illegal mining when he visits the Peruvian Amazon this week.

In Latin America, criminals see mining and trading precious metals as a lucrative growth business, carefully hidden from U.S. consumers who flaunt gold around their necks and fingers but have no idea where it comes from — or who gets hurt. The narcos know their market is strong: America’s addiction to the metal burns as insatiably as its craving for cocaine. NTR, for instance, was the subsidiary of a major U.S. gold refinery that supplied Apple and 67 other Fortune 500 companies, as well as Tiffany & Co., according to a Miami Herald analysis of corporate disclosures.

To continue reading: How drug lords make billions smuggling gold to Miami for your jewelry and phones

The Aristocratic Illusion, by Robert Gore

They’re not as smart as they think they are.

If you draw your sustenance from the government—as an employee, contractor, or beneficiary of redistributed funds—the money you receive comes from someone who had no choice whether or not you got paid. Except for those jobs the government mandates, private sector workers’ compensation comes from employers who have freely chosen to pay it. The jobs they perform are worth more to their employers than what they’re paid, or the jobs wouldn’t exist.

Here’s a new definition of aristocrat: a person legally entitled to take money from other people without their consent. This definition focuses on what aristocrats do and have done throughout the centuries, regardless of their labels.

If you’re an aristocrat, the thought that you’re living on somebody else’s dime may cause psychological stress. All sorts of rationales have been concocted to justify this privileged position. The most straightforward is the protection racket. In exchange for their subjects’ money, aristocrats protect them from external invasion and preserve domestic order. It’s not a voluntary trade—the subjects can’t say no—but at least both sides get something from it.

However, “protection racket” doesn’t have quite the moral gloss aristocrats crave. Deities may not have been an aristocratic invention, but they jumped on the concept of divine favor to justify their position. It makes it harder to oppose the rulers if authority is bestowed by the gods or the government is a theocracy. Ultimately, regardless of rationale, the ideology always come down to: The aristocracy is superior to those they rule. The aristocrats have no trouble believing it; they have to psychologically justify their positions to themselves. The trick is to get the subjects to buy in.

In America, the myth is that the aristocracy is a meritocracy. Merit, in this formulation, means degrees from top academic institutions, and employment with government-aligned private sector firms, nonprofit organizations, and the government itself. Those who emerge from these backgrounds and worm their way to the top are the cream…or so the aristocrats like to believe. It can’t be labelled exclusionary, they claim, because many who make it came from modest beginnings: Truman, Eisenhower, Johnson, Nixon, Ford, Carter, Reagan, Clinton, and Obama.

The best and brightest notion crested with John F. Kennedy’s administration, stacked with Ivy Leaguers and whiz kids. David Halberstam, in his book The Best and the Brightest, asked how all that brain power managed to get us into the Vietnam mess. Hubris was the easy answer: they were smart but too cocky. However, another explanation surfaced, one the aristocracy resisted. In 2016 and 2017 it exploded into the popular consciousness.

These last two years have revealed a simple truth: regardless of résumés, the aristocrats are nowhere near as bright as they think they are. For instance, the identity politics so many have fecklessly pushed completely undermines their own meritocracy myth.

Barack Obama became president because he was black, not because of anything he had done in academia, as a community organizer, or in politics. Hillary Clinton was next in line because she was a woman. Without her husband, the world would have never heard of her. How, as an aristocrat, can you argue for your own special merit when you’ve replaced the idea of merit with race, gender, and ethnicity? An aristocracy that no longer has its mythical basis is left with the blandishments of power and treasure—and the armed might of the state—and is on its way out. The Divine Right of Kings notion died before Europe’s absolute monarchies crumbled.

In their self-congratulatory isolation, enjoying only the support which they had bought and paid for (with other people’s money), America’s aristocrats had no idea that millions of America’s had rejected their pompous posturing. Hillary Clinton couldn’t convincingly answer why she was running for president, yet she was presented as an exemplar of merit and ability. Even many of her own supporters didn’t buy it, but the aristocrats shut their eyes and foisted her on the voters.

Donald Trump’s greatest achievement has been his exposure of the hypocrisy, corruption, and stupidity of America’s aristocrats. Even as he mowed down Republican contenders and it was clear his message was resonating with substantial numbers of voters, they dismissed him. November 8, 2016 shattered for good the myth—in force since Franklin Roosevelt and his New Deal whiz kids—of the exceptional aristocracy.

If the aristocracy is unexceptional, it has no basis for its pretension and condescension. It takes smarts to graduate from Harvard Law School. But it also takes smarts—which the aristocrats either don’t recognize or disparage—to run a business, operate complicated machine tools, fly a jet, harvest crops, design a semiconductor, or build office towers.

The elite don’t even acknowledge that their sustenance comes from the entrepreneurs, builders, and doers they deride. Nothing could have been more symbolically appropriate than the aristocracy’s take down by a businessman who had never held a government job. Most of the aristocracy knows very little about actual business and the world of real work. (Cocktail parties with Silicon Valley CEOs don’t count.) Trump, on the other hand, has had extensive dealings with politicians, bureaucrats, and the government.

Compounding stupidity, the aristocracy bet on Russiagate in a vain attempt to drive out the interloper and preserve its position. The story was so transparently thin that nobody really believed it, but it was all they had and they were desperate. It has boomeranged disastrously, giving Trump ample ammunition for counterattack. It has also destroyed the credibility of the FBI and the Department of Justice.

Even if the aristocracy recovers and drives Trump from office, there’s no going back. The aristocratic illusion has been shattered. Their claims of superiority are nothing more than self-serving screeches of denial. Contempt has replaced whatever respect Americans once had for their rulers. The bought-and-paid-for’s loyalty extends only to the next payday. When the payola ends, chaos begins. Funded as it is by debt and taxes on increasingly restive producers, the payola will end.

A ruling class that has lost its last vestige of legitimacy has nothing but force and fear to perpetuate its rule. The nation will grow more bitterly fractured as the skims and scams fall apart. The American aristocracy had better be sure its surveillance apparatus is in order, that it has the wherewithal to pay the military and police, and that it has infiltrated the populace with trustworthy informants and quislings, if that’s not a contradiction in terms.

Even with all those “assets,” the aristocracy is vastly outnumbered and has no moral force against the disgusted and the enraged, who every year have less to lose. Force and fear are the last refuges of doomed regimes. It all may collapse of its own unsustainable weight or there may be chaos and bloodshed, but regardless of the ultimate outcome, the aristocracy’s days are numbered.

And after the downfall, mercy will be in short supply.

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