So how is it that the economy is only growing 3.5%? (and 2.5% of that is imputations, seasonal adjustments, and guesses.) What will happen to "growth" when budget deficits are stopped (they WILL BE stopped, although perhaps not by our political leaders... "it takes 2 to Tango", as the saying goes... the international bond market will - absolutely and positively - shut that down at some point, trees don't grow to the sky...)
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As I said in my previous post, we all love it when someone agrees with our positions... even if it IS the Main Stream Media.
That doesn't mean one should be encouraged or affirmed by the folks that "Coal Guy" accused of not committing "an act of journalism in years". Take this drek from from the Associated Press.
The higher deficit is evidence of an improving economy. It shows demand is picking up in the United States following the recession, which had cut the trade gap last year to the lowest level in eight years.
While that concept might be accurate, it does not describe the current situation. Our trade deficit is nearly 100% OIL. The trade deficit will go up and down with the price (and volume available) of Oil. PERIOD.
This issue/risk is simply not being priced into the markets.
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The Euro will not survive. No way. You have the crazy circumstance of a "Union" in which the parts each engage in insane fiscal policies, while the "Central Union" can only control monetary policy. Add to this Europe's moral hazards (their safety nets and social programs) which has put them at a tremendous competitive disadvantage vis a vi the ROW (the Left's answer? Use FORCE, read government thugs, to stop international trade. I wonder what history they have been reading... "if goods and services do not cross borders, armies will"). As Jimmy Rogers correctly pointed out, the Greek Bailout means that the Eurozone has effectively given up on the Euro, and that eventually means the end of the Eurozone itself.
Not to worry, though... the Obama administration is going to do the EXACT SAME THING with California. Sometime in Q4'10/Q1'11 the U.S. will have to bailout California.
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"Those that do not know their history are condemned to repeat it."
The truly sad thing here is that as the social programs model fails, its supporters will decry that the problem was NOT ENOUGH of the poison that killed us. Sooner or later humanity WILL get back to the only model that has ever worked in the long term - personal responsibility, family, clan, community... the current model of enacting ever larger bureaucracies to administer the enforcement "make life fair" government intrusion will come to an end one way or another. How many people are murdered or imprisoned around the globe before we come back to that reality is the point we should be debating at this time - but that's not how it works, is it? The way it works is on display in Greece and at every union hall for the public employees here in the U.S.
29 comments:
Greg,
Have you looked at the EIA data today. Look how imports are climbing as well as oil being put into storage. Up more than a million barrels per day compared to a few months ago. It's reasonable to assume that we are buying all the oil we can get our hands on. This indicates that a million barrels per day of slack in demand from the ROW has occurred. Somebody's economy is soiling the bedsheets, or that much more oil has come on line.
Regards,
Coal Guy
CA being bailed out I think will happen within a much bigger package in 2011--a State bailout package. As the stimulus money runs out, and as State's cut jobs a new economic stimulus package will be proposed as direct state aid--to all 50 states. This will include smaller sums for infrastructure projects and green energy projects for the 3 states, not in the red. CA may be the main impetus, but I don't think they are going to let the other 46 states with billion dollar budget deficits sit idly by as more money is handed out.
The personal responsibility, family first old school "safety net" will not occur until serious decline/drama/pain is suffered...until then most will attempt to add to the welfare state, and blame some group they hate be it racial, political groups Reps vs. Dems. Of course some major unknown unknowns are likley to occur before then, wars and natural disasters...to add to the mix.
-Meiyo
IF they bailout California it will have to be before the elections. There is no way the taxpayers from other states will go for that. Without a dem house and huge dem (55 seats plus) majority in the senate there will not be the will to do this. There is going to be a landslide this fall. Republicans are going to gain minimum of forty in the house and I am thinking 60 to 80 realistically from polling I have looked at. The Senate will probably be around 51-53 dem, 1independent and 46-48 republicans... They don't have much time to bailout their union buddies and they know it. Plus I could see Lieberman switching to the republicans if they offer him a chairmanship somewhere. That is assuming republicans are at 49 or 50.
The Repubs and Democrats are the same party... just a few minor differences. These states will get bailed out, if not then what's the damn point of being in the Union?? Why not break away and print your own currency... I mean that's how our revolution got started.
Besides looking at the CDS spreads for CA it is clear that investors are betting on a bailout for the state and these bond traders aren't stupid. Also... who you think insured these state bonds?? Yeah you guessed it, Warren Buffet!
Gee, Coal Guy is starting to see what I've been screaming about for a year. While long term (4 years), oil imports have been dropping, recently they have been rising, likely because the rest of the world can't "afford" the oil anymore. Where to dump it? Where the Mastercards are, of course. ;)
The trade deficit is NOT 100% oil. A lot of it is oil, but we import a lot of things other than oil. I think the #2 thing we import is cars, and those cars are worth a few bucks. Oil is maybe 33-50% of trade deficit.
The ever larger bureaucracies, staffed by us ever larger bureaucrats :), came into existence because the "families" and "clans" and "churches" were unable to take care of the job, or they just relinquished their natural duties.
We bureaucrats really don't want to spend our minimal tax revenue fixing a problem that doesn't exist. Why did the government have to take away abused kids? Why did the government have to regulate homebuying? Why did the government have to regulate air and water? Cause the common people in families, clans, clubs, gangs, cooperatives, etc etc couldn't do it, for whatever reason. Simple as that. Think of even ONE example of something the government had to create a bureaucracy for that the private sector is handling just fine.
Bur,
Sometimes the cure is worse than the disease.
Coal Guy
Either a lot more oil has come on line, or the far east is fibbing about its growth numbers. I suspect the second. Good for the price of oil BAD for credit collapse problem.
Regards,
Coal Guy
Hey Jeffers, you may get another shot to ride a stock market rally, like the 16-month one you so stupidly missed!! :)))))) ....
From the Mogambo site today ...
"As to how this is insane, I agree that it is insane, and as to what becomes of all this money, I scratch my head, as there are not that many places where one can constantly invest tens of billions of new dollars at a crack.
Perhaps this is what caused Rick Ackerman of Rick’s Picks newsletter to say that he is “looking for an approximately 1400-point rally in the Dow Industrials this summer”, which sounds about right to me since I have no idea one way or the other, but I understand how avalanches of new money pouring into the economy have to go somewhere, and it will drive up prices, regardless of value."
Anonymous,
I have lived in Michigan my whole life. Let me tell you about the last 10 years. While the rest of the nation was growing, we were rotting. I think we cut over 20 agencies and consolidated them into 8. We have half of the state employees of ten yrs ago. I am pretty sure we have cut our budget for 10 straight yrs. We were the first example of the nation dying; now all the rest can see what's coming. I don’t mind it though, less cops to pull me over, less bloated government pensions to pay for and hopefully the thing will crater so bad we can actually lower are tax. When the ford plant went down in Ypsilanti it took 25% of the general budget with it. My point is that I do not think they can just bailout California. Jeffers could be right and it might be some kind of general national bailout, but would that fix anything? I thought that is what the stimulus was for. The federal Deficit just keeps getting bigger (87 billion for April alone.) Michigan did not get bailed out and we survived and so will they.
Coal Guy:
The Mad Scientist and I have been watching that thinking the same thing - and then Oil went straight up in our face...
My sense is that China is sh*ting the bed, and Europe, too. Oil SHOULD go DOWN, and should never have made it to $88... but it did.
I like Nat Gas here, especially after the BP accident.
Meiyo:
I did not say that the various governments WOULDN"T try that first... only that, in the end, this is where humanity is headed.
Dex:
Cal WILL get bailed out - too important to Obama and the Democrats.
I never said it would work in the long run... eventually, the music will stop on the debt shuffling musical chairs bit...
Greg what has happened to MS he hasn't posted anything on his site for 3 months.
I talk to him every day. We have been busy working on a research project and I guess he does not have time to post.
He reads here several times per week. If you have something you want to say to him - have at it.
Bur asked: "Think of even ONE example of something the government had to create a bureaucracy for that the private sector is handling just fine."
Interesting question you have there, but I'm trying to think of even ONE example of something the government is handling just fine."
My point is that on the grand scale, government people will always be able to point to things that the private sector couldn't handle well while the private sector can always find govt. screw ups to prove their points as well.
One thing I know that govt. has TOTALLY screwed up over the past 40 years or so is replacing daddy to a couple of generations of poor kids, first kids of color, but now for every color and ethnicity. Welfare checks have completely destroyed families in that it lets Mom go it alone without a steady man of the house. It isn't good living by any means, but it's possible just the same. The effect this has on little, fatherless boys is profound. You could write a book about it as many have.
Don't bother to argue otherwise with me either as I work with disadvantaged kids and have seen this sad story of welfare checks replacing dads more times than you ever will, unless you are in similar work yourself.
Moving welfare out of town, city, and charitable hands and onto the state and federals' hands has done more to undo this society than anything else I can think of.
I used to work in the inner City with clients who were entirely Medicaid/welfare and there were almost never a father in the house. Actually, I only ever saw 2 father's in the home in years. But, you make the point that welfare did this? My experience was that many of these "fathers" were in prison, or had been in prison, so it wasn't purely a matter of the woman living off welfare rather than having a man around.
I've seen how people work the system, not getting married purposely to get welfare money, then trying to use the mental health system to get as many of their children SSI money as possible. I used to get pretty angry when some welfare families who also got SSI money were doing much better financially then my wife and I when we first started out--if you have 4 kids all on SSI, that 650$/month starts to add up quick.
It becomes financially the "smartest" if not the most economical way for many of these people to live--and with all the "disability" lawyers out there handing out money for a whole range of things from ADHD to Bi-Polar II disorder, when the REAL problem for Most of these cases is a messed up Mother, NO father around, being raises by other messed up children, and a strange sense of entitlement--mixed with learned helplessness. But, the problem remains, most people aren't willing to watch children suffer, for the 'sins' of their parents.
Welfare most certainly creates a permanent underclass, despite changes in the laws from the 90's, now mental illness is the new 'welfare' for many families---which is a sad misuse of the system, and takes away from those few children/adults that actually have a severe mental illness that prevents work--but someone explain to me why a rude ADHD 8 year old needs $650 a month in SSI??? I refuse to work in the social work-esque field again, it made me ill on a regular basis and their were so many counter motivations to positive change--many of them financial.
-Meiyo
Yes, I say the various welfare and other financial handouts did this. I have known plenty of families where the dad simply wasn't around, not because he was incarcerated, but simply because either he or the mother just didn't want to stay together anymore. (But yes, incarceration is significant too. Even then, however, dad was in and out of the house before being jailed.)
Prior to the 1960s Great Society giveaway, black families actually had a lower divorce rate, lower single mother rate, than white families I have read and all that changed once govt. financial handouts made it possible for mom to do without dad. Then as welfare programs crept into other ethnicities, they too suffered the same fate.
All the govt. did was to give cash benefits for food and housing. The destruction of the family was caused by the destruction of American jobs. A guy with no job is of no use to anyone, including a family. All the government was asked to do was to supply food and housing to families with no real breadwinner. The government welfare at least stopped women and children from starving and freezing. There is no "daddy replacement" bureaucracy. But don't worry. Once the Chinese thing implodes and shipping stuff across the sea becomes prohibitively expensive, the factories, such as they are, will come home. Presto .. jobs. :)
I read Dr. Cosby's and Poussaint's book "Come on People" basically a similar argument to your's Stephen. I spent 6 years of my career working in that field, much of it directly--going into the homes. And yes, I found the same thing, beyond the high incarceration rate--they weren't "families" before that typically, but rather just people who had sex with one another and produced children--no real relationships beyond that typically.
I agree with Bur, jobs are key. If people could make a lot more money via non-welfare (work) then many would. Many sell drugs or other higher risk activities that gain them money, well beyond the pittance that welfare provides. But I've been in plenty of homes that I was pretty sure that the older son/mom's boyfriend were drug dealers--in addition to living off welfare, and having their children all diagnosed and collecting SSI. Typically, the adults would also get diagnosed and collect SSI as well. I've heard in court many time's "parents" complaining about losing their children--and that they were going to "Lose THEIR SSI" money from their children. I really wish I had seen more of the pull yourself up by the bootstraps and use welfare as a temporary measure, but after 6+ years of working in that type of environment--I basically saw none of that--most of the people didn't make any attempt to find work, or became angry when SSI money was cut back when they did start making money, and then would quit the job.
Oil, Jobs, food, water, Phosphorous, massive state and national debts>> these are the things that concern me though, the welfare state is doomed to collapse--its already being strained as so many new people are needing services/food etc. No good deed goes unpunished eh?
-Meiyo
Two points;
You blame Medicare and other social programs but I think it is simply that the US has gone from an oil-exporting country to an oil-importing country. That explains 90% of the change in circumstances. The rest is detail.
Secondly, Greg point that all this bailout money isn't showing up in the real economy. That's because its gone through the banks into playing the markets. But the other side of that coin is this - imagine how deep into the negative GDP would be without all that borrowed money in the system!
Yeah Dona, I think your right. Many of the tea-party folks are angry that "leave it to beaver" USA has changed on them. The US became a larger welfare state as it lost its status as #1 Oil Producer in the 70's. Much of the American dream--at least in the sense that its attainable to the masses, rather then the few--is predicated upon cheap Oil.
Although the details in terms of Economics aren't minor, Medicare/SS/Military budget and National Debt to the Fed are HUGE and growing larger. People are rightly worried, since the "grow" your way out of debt isn't going to work this time. I think it was better when stocks used to pay dividends, rather than this casino timing "investment" which really isn't investing in a company, its just about getting on the bandwagon early, selling before it goes to shit.
GDP is a bullshit number and has been, since I can borrow 20k, spend it on tons of shit and then Add to the GDP. Debt based GDP numbers, are just as stupid as saying I'm richer this year if I go max out some credit cards--and then take out more credit cards to pay off the other credit cards--but I suppose I can't print my own money, otherwise its all gravy, eh? I mean, quantitative easing....
-Meiyo
Well, at least the interest on the national debt is shrinking. That's one of the side benefits of paying near zero percent interest rates ... for now anyway. :)
Donal:
In my "Its a Cold, Cruel World" posts I point out that Social Security was established at the time the U.S. was the equivalent of Saudi Arabia - and then added Medicare just a few years before Oil production peaked.
These programs had at their base the faulty reasoning that domestic Oil production would always be able to be increased. However you get to it, the assumptions involved have doomed the system.
Just watch that oil price drop like a rock!!!! Is that because of large amounts of oil that have been found/stored worldwide, or is it because of investing/speculation? In 2008, the peak oilers (like me) said it was massive demand and not enough supply. They/we were wrong. It was all speculation. Today, are the lower pump prices to come because of massive increases in oil production and supply? Hell no, it is investors/speculation all over again.
Hey Greg
I came across this chart:
http://www.cato-at-liberty.org/2010/02/01/five-decades-of-federal-spending/
I was surprised to see military spending is actually such a small portion of the GDP. Bur's comment on the interest rate got me to thinking about this chart when we see what the interest on the spending will be shortly if/when interest rates do rise.
Just thought it might add something to the discussion.
I think this Cata chart is a lousy statistic purposefully presented to support Cato's bias. First off GDP is again a pretty lousy statistic, given national debt and personal debt expands GDP artificially. So the country becomes "more productive and richer" in a sense by spending more money, even if its borrowed--or consumption pulled forward.
So are they trying to say, "hey look military spending is only 5% GDP its not that big." Well, if you look at the actual numbers it tells a different story. How about just look at Military spending as a line item in the actual budget/money spent, rather than the GDP number which people use all the time to promote "deficits don't matter ideas" and all the rest.
http://en.wikipedia.org/wiki/2010_United_States_federal_budget
As you can see, Military spending (on the books, not special spending, such as much of the Iraq war this past decade) is 2nd only to Social Security. Isn't the CATO institute supposedly a "libertarian" organization? A great book I read back in the die was called "lying with statistics" and whenever I hear talking heads on TV talking about how debt doesn't matter as a % of GDP my B*shit radar clicks on. So as it stands military spending is still far more than medicaid/medicare and the like.
Ron Paul got ripped on b/c most people that call themselves libertarians are really just republicans and still want big government/empires--thus he got booed repeatedly for saying in Republican primaries that to seriously cut our debt we had to get out of some (or all in his rhetoric I believe) of the 130 countries that we have our military.
-Meiyo
Meiyo
I can't really say one way or another about GDP effecting the stats. I just found it surprising that non-military spending was so much higher than military spending.
Just seemed to go against what so many others think I guess, even myself. Some how I had the impression from somewhere that military spending was like half of the US spending.
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