Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Great Recession

CBO’s Funny Math

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, October 22, 2014:

National debt clock

National debt clock

The Congressional Budget Office’s August update to the federal budget and outlook for the next 10 years released last week was so filled with questionable assumptions as to make their conclusions completely unrealistic. As expected, the mainstream media focused only on the parts of the report that fed and supported their worldview. For instance, the CBO said that revenues were expected to increase by about 8% over last year to a world record $3 trillion, thanks to increases in individual income taxes, payroll taxes, and corporate income taxes.

This was understood by the White House and establishment economists to

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National Debt to be $27 Trillion in 10 Years, Says the CBO

This article was first published at TheNewAmerican.com on Thursday, October 16, 2014: 

English:

There was something for everyone in the release last week by the Congressional Budget Office of its August update and outlook. The federal government’s revenues are expected to top $3 trillion this year for the first time in history, thanks to individual income taxes rising by six percent, payroll taxes by eight percent, and corporate income taxes by 15 percent. Those infatuated with big government are celebrating the event as a reflection of an improving economy resuscitated by government spending and stimulus programs. Small government advocates, on the other hand,

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OPEC Continues to Unravel

This article first appeared at TheNewAmerican.com on Monday, October 13, 2014:

With oil production from the Bakken formation in North Dakota now exceeding one million barrels a day and the Eagle Ford and Permian Basin oil fields in Texas producing more than three million barrels per day, prices for crude are dropping worldwide and pushing gasoline prices down along with them.

Crude oil prices on the New York Mercantile Exchange hit a 52-week low of $83.59 a barrel last Friday, while Lundberg just reported average prices for gasoline across the country have dropped to $3.26 per gallon. As recently as May 2, gas in the United States cost $3.72 a gallon.

In response to these falling prices, Saudi Arabia, the largest producer in OPEC, earlier this summer

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China’s Economy Now Number One? Not Quite

This article first appeared at TheNewAmerican.com on Friday, October 10, 2014: 

English: Roadside billboard of Deng Xiaoping a...

English: Roadside billboard of Deng Xiaoping at the entrance of the Lychee Park in Shenzhen (Photo credit: Wikipedia)

Following the announcement by the International Monetary Fund (IMF) that China’s economy has just surpassed that of the United States, headline writers and establishment economists had a field day. According to the Wall Street Journal’s Business Insider, “China Just Overtook the US as the World’s Largest Economy,” while London’s Daily Mail chortled, “America Usurped: China Becomes World’s Largest Economy — Putting USA in Second Place for the First Time in 142 Years.”

A cursory glance at the charts and graphs provided by these worthies shows the size of the U.S. economy at $17.4 trillion by the end of this year compared to China’s, which is predicted to be $17.6 trillion. The IMF estimated that as recently as 2005 China’s economy was less than half that of the United States, and forecast that

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Saudi Arabia Capitulates, Cuts Oil Prices

This article first appeared at The McAlvany Intelligence Advisor on Monday, October 65, 2014:

Saudi Arabia’s announcement last week that it was cutting prices to its Asian, European, and US customers by between $.40 and $1.00 a barrel represents a major capitulation and recognition of reality. It also represents a major departure in its role as the leading member of the OPEC cartel, proving once again that every cartel eventually blows up as its members seek their own interests over those of the cartel.

For decades, the role of the OPEC cartel has been to protect the cash flow of its members by manipulating oil prices through changes in production levels. If prices got too high and demand started falling as a result, the cartel would increase the supply of crude to the world markets. If prices got too low, on the other hand, it would gladly restrict those supplies to bring prices back up to a level acceptable to the cartel.

Those days now appear to be over.

By bringing its prices down below prices charged by OPEC member Qatar and non-OPEC member Oman, Saudi Arabia is setting the stage for an international oil price war. Futures traders, who have gotten hammered as crude oil prices have dropped almost 20% since June, are holding their collective breath to see if Qatar and Oman jump ship and reduce their prices as well. Energy analysts like John Kilduff with Again Capital are estimating that crude oil prices will consequently drop to the low $80s, while Fadal Gheit at Oppenheimer is predicting prices dropping into the low $70s. Gheit explained:

It’s both supply and demand. It’s basically the perfect storm that brought all these prices down. You have plenty of supply, which you never thought possible, and all of a sudden demand is shrinking: China is slowing down [and] Europe never recovered.

Gheit is a realist. He stated what every observer already knows: the OPEC cartel “is held together by scotch tape. They hate each other.” Now that the leader of the pack has decided to leave the pack, it’s going to be much easier for other OPEC members to join the fray and drive prices down even further.

Part of that perfect storm is the shale oil fracking revolution that has driven crude oil production in the United States to levels not seen in 50 years. Part of it is Russia’s increase in crude oil production to nearly post-Soviet era records as well. In addition, production from Kurdistan over the next 15 months is expected to more than provide China’s increased demands for energy, thus assuring that world supply will continue, in the short run at least, to outpace world demand.

Saudi Arabia’s admission of reality is already having welcome impacts. Gas prices in the United States have fallen to $3.32 a gallon on average, with more than half the states having at least one gas station selling gas for less than $3 a gallon. It’s also pulling the legs out from under the foreign policy justification of adventurism abroad in order to protect the supply of energy which America is now almost capable of providing all by herself.

As prices decline, consumers are able to redirect spending into other areas, helping along the modest economic recovery from the Great Recession. It may also prove to skeptics that, once again, Warren Buffett is right. His much ballyhooed announcement of his purchase of Van Tuyl Group, the nation’s largest US auto dealership chain, should help his company, Berkshire Hathaway, ride the wave of cheaper gas and the consequent willingness of customers to replace their aging fleet of vehicles with new ones.

It is possible, however, that prices may drop too far, causing capital that is currently flooding into the energy exploration business to go elsewhere where it will be treated better in the years to come. As Stephen Leeb, a writer at Forbes, put it: “It takes energy to get energy.” In the early 1950s, it took the energy from one barrel of oil to harvest five barrels. Today, because of improvements in technology, it takes about one barrel to produce nine in conventional fields.

But in unconventional fields – i.e., shale oil fracking – it takes the energy of one barrel of oil to discover, develop, and lift just four barrels, which, according to State University of New York Professor Charles Hall, isn’t enough to keep America’s modern industrial society operating at peak efficiency. The proper ratio, according to Hall, is that one barrel of energy must generate at least five barrels of new production, preferably more.

If the Old Farmers Almanac’s prognostications are correct, the US should enjoy another relatively mild winter, reducing chances of a spike in demand that would drive crude oil prices higher. For the time being then, Saudi Arabia’s capitulation and potential blowing up of OPEC will be enjoyed by American drivers and consumers. In the longer run, however, capital may be redirected away from the oil patch to more profitable areas if the price of crude stays too low, too long. In the meantime, America will once again enjoy the view from the catbird seat.

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Sources:

Commerzbank: ‘OPEC Appears to Be Gearing Up for Price War’

CNBC: Saudi signals price skirmish as oil heads to bear market

Bloomberg: Brent Oil Falls to Lowest Since June 2012 on Ample Supply

The Old Farmers Almanac: 2014–2015 Winter Weather Forecast Map (U.S.)

Forbes: Dangerous Times As Energy Sources Get Costlier To Extract

Auto Blog: Warren Buffet buys largest private US car dealership chain

Saudi Arabia Cuts Oil Prices, Could Spark Price War

This article first appeared at TheNewAmerican.com on Friday, October 3, 2014:

In a surprise move this week, Saudi Arabia cut the price of its flagship Arab light oil, which it sells mostly to its Asian customers, by one dollar a barrel. It also cut prices to its customers in the United States and Europe by $.40 a barrel. This brings Saudi Arabia’s prices below those offered by OPEC member Qatar and non-OPEC member Oman. Oil futures traders are holding their breaths, waiting for Qatar and Oman to cut their prices in response, setting off a full-scale oil price war.

The simple economics of supply and demand have already driven the price of oil down by almost 20 percent since June, and a number of traders and other observers are suggesting those prices have

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Stockton Bankruptcy Judge Hammers CalPERS

This article first appeared at The McAlvany Intelligence Advisor on Friday, October 3, 2014:

English: CalPERS headquarters at Lincoln Plaza...

CalPERS headquarters at Lincoln Plaza in Sacramento

All Franklin Templeton Investments wanted was a fair shake. All CalPERS wanted is what it already has: exemption from bankruptcy laws. As attorneys for CalPERS – the California Public Employees Retirement System – tried to defend the country’s largest pension plan from contentions that it was getting off scot-free in the Stockton bankruptcy reorganization plan while other creditors were getting hammered, they sounded rather silly.

They claimed that a combination of state laws and statutes dating back into history protected the $300 billion that CalPERS manages from sharing the pain with other creditors in bankruptcy proceedings. They referred to something called

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California Retirement System Loses Big in Stockton Bankruptcy Ruling

This article first appeared at TheNewAmerican.com on Thursday, October 2, 2014:

On Tuesday, U.S. Bankruptcy Judge Christopher Klein surprised nearly everyone with his ruling that Stockton could cancel its contract with the California Public Employees Retirement System (CalPERS) as part of its plan for reorganization after filing for Chapter 9 bankruptcy two years ago. CalPERS immediately issued a statement claiming that Klein’s decision was not legally binding:

This ruling is not legally binding on any of the parties in the Stockton case or as precedent in any other bankruptcy proceeding and is unnecessary to the decision on confirmation of the city of Stockton’s plan of [reorganization].

CalPERS is certainly hoping so. It manages $300 billion of funds for municipal employees across the state and has been spearheading a drive to negate a similar decision by a bankruptcy judge in the Detroit bankruptcy case. These two similar rulings could open the door

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Stock Market Gains Failing to Bail Out Pension Plans

This article first appeared at The McAlvany Intelligence Advisor on Friday, September 26, 2014: 

Pension managers’ hopes that investment returns – i.e., pixie dust – would bail them out from their bad assumptions, and keep their plans solvent and fully funded so that they would be able to keep every promise made, have finally crashed on the rocks of reality. Just three months ago, the Center for Retirement Research at Boston College released a study showing that the shortfall between promises and assets to pay them for 25 of the largest public defined-benefit pension plans in the country amounted to more than

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Despite Stock Market Gains, Public Pension Plans Fall Further Behind

This article first appeared at TheNewAmerican.com on Thursday, September 25, 2014:

 

In its latest report on public pension plans, Moody’s announced on Thursday that, despite recent historic gains in the stock market, those plans’ liabilities are increasing even more quickly. Reporting on the 25 largest public defined benefit pension plans in the country, Moody’s Global Credit Research estimates that those plans are now $2 trillion short of where they need to be to pay out all the benefits promised to their beneficiaries. This has occurred despite record gains in the stock market, which,

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California Governor Being Challenged by Republican Upstart in November

This article first appeared at TheNewAmerican.com on Tuesday, September 23, 2014:

English: Photo of California Attorney General ...

California Governor Jerry Brown

In response to a challenge posed by his Republican opponent for the governorship in November, California Governor Jerry Brown said:

A lot of people forget the mess that California was in just four years ago. There were 1 million jobs that had been lost. Our budget deficit was astronomical: 27 billion. We hadn’t had a budget on time in probably 10 years.

Brown’s challenger is Republican Neel Kashkari, a practicing Hindu born of Indian parents with a background as a Bush appointee and a former executive with Goldman Sachs. While his political positions on key issues qualify him as a RINO — Republican in Name Only — he is already closing the gap on the once-invincible California governor.

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The Kansas Referendum on Reagan’s Tax Cut Policies

This article was published at The McAlvany Intelligence Advisor on Wednesday, September 24, 2014:

Big government liberals and high spending politicians have converged on Kansas, seeing an opportunity to discredit not only Ronald Reagan’s tax policies but to get even with the Tea Party, which took out a number of “moderate” Republicans in the state Senate over the last two election cycles.

Gov. Sam Brownback (pictured above), a supporter of less government and lower taxes, was able to ride the conservative wave that resulted in tax reform that not only increased an individual taxpayer’s standard deduction from $4,500 to $5,500 but also

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Homeschoolers Outnumber Private-school Students in North Carolina

This article first appeared at TheNewAmerican.com on Tuesday, September 9, 2014:

Homeschooled children in the kitchen

Homeschooled children in the kitchen (Photo credit: Wikipedia)

News from North Carolina marks another milestone toward developing an informed, politically active citizenry familiar with the basic fundamentals of the American Republic.

Homeschooled students now outnumber private-school students in North Carolina. This represents an increase of more than 14 percent from the year before, and a 27 percent increase from just two years ago. The state estimates that there are nearly 100,000 homeschoolers in North Carolina, while private school enrollments have been dropping ever since the beginning of the Great Recession. According to the Charlotte News Observer, this extraordinary growth is due to parental concerns about school violence, the lack of a religious focus in public schools, and the large classroom size.

But it also has to do with the accelerating pushback against the Common Core nationalized curriculum.

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Foreign Affairs: Give Away Free Money!

This article first appeared at the McAlvany Intelligence Advisor on Friday, August 29, 2014:

Foreign Affairs

Foreign Affairs

What happens when a college professor meets up with a graduate student from Oxford University, intending to solve the world’s economic problems? What happens when they consider that the previous attempts to revive the economy have failed and their recommendation is to do more of the same?

The title of their resultant article in Foreign Affairs – the premier publication of the Council on Foreign Relations – explains it all:

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Article in CFR Magazine: Give Away Money to Stimulate Economy

This article first appeared at TheNewAmerican.com on Thursday, August 28, 2014:

 

Los Angeles Police Department (LAPD) Bell 206 ...

Mark Blythe, a professor at Brown University, and Eric Lonergan, a hedge fund manager living in London, have conjured the ultimate solution to a stagnant economy: Central banks should give away free money.

These two authors of a lengthy and allegedly erudite article in the September/October 2014 issue of Foreign Affairs, published by the Council on Foreign Relations (CFR), appear to be living in an alternate universe, as their suggestion, if it were fully implemented, would push the world’s economy back to the Dark Ages.

The article, entitled “Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People,” rests on the false assumption that

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July BLS Jobs Report: The Sound of One Hand Clapping?

This article was first published at TheNewAmerican.com on Monday, August 4, 2014:

MarketWatch

To Jeffry Bartash, writing for the Wall Street Journal’s MarketWatch, Friday’s jobs report looked awfully good: 209,000 new jobs were added in July and in all the right places: mining, construction, manufacturing, transportation, and warehousing. In addition, there was almost no growth whatsoever in the “government” sector: just 11,000 new jobs were created there last month. This, according to Bartash, means that the economy is on a hot streak, having generated more than 200,000 new jobs every month for the last six months — the first time that has happened since 1997.

Added Bartash:

In the first seven months of 2014 the economy has gained an average of 230,000 jobs. That’s the best stretch of job creation since the [Great Recession] ended in mid-2009 and 19% faster than the pace of hiring in 2013.

End of story? Not quite.

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Friday’s Underwhelming jobs Report

This article first appeared at the McAlvany Intelligence Advisor on Monday, August 4, 2014:

Liar

Criss Jami, the lead singer of the rock band Venus in Arms, may reasonably be accused of having given the president lessons in deceit, especially as they both live in the city where truth-telling is a lost art. Said Jami:

Just because something isn’t a lie does not mean that it isn’t deceptive. A liar knows that he is a liar, but one who speaks mere portions of truth in order to deceive is a craftsman of destruction.

When Friday’s jobs report came out from the Bureau of Labor Statistics (BLS), President Obama spoke “mere portions” of its truth:

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Sage Foundation: Wealth “Inequality” Will Continue to Worsen

This article first appeared at TheNewAmerican.com on Tuesday, July 29, 2014: 

LaSalle Mansion

LaSalle Mansion

In another so-called research study about wealth inequality, the liberal think-tank Sage Foundation said in June that while the super-rich have fully recovered from the Great Recession, the vast majority of Americans have not. Specifically their report shows that median household net worth “was $32,000 lower in 2013 that [it was] 10 years earlier,” a decline of 36 percent. It concluded:

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Texas 7, California Nothing

This article was first published at TheNewAmerican.com on Wednesday, July 9, 2014:

Moving Day.

Moving to Texas from California

One would think the good doctor is running for Congress from Texas, but he’s not. He’s running to boot a hard-left Democrat who’s been representing the 24th District in California for 15 years by touting all the good things Texas has been doing compared to California. In a letter to the Wall Street Journal, Dr. Brad Allen, a pediatric heart surgeon from Paso Robles, wrote:

As a Californian, I am pained to say that three of the nation’s five fastest-growing cities – and seven of the top 15 – are in Texas.

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Texas Beats California: No Income Tax, Booming Economy, Friendly Folks

This article was first published at TheNewAmerican.com on Tuesday, July 8, 2014:

texas our texas

Texas, Our Texas!

Following Toyota’s announcement April 28 that it would be consolidating its three American business headquarters and moving them from California to a new $300-million campus in Plano, Texas, the debate over why has heated up once again. Toyota follows Occidental Petroleum (which is leaving Los Angeles for Houston, after being there for a hundred years), Raytheon (which is moving its El Segundo headquarters to McKinney, Texas), and Legal Zoom (the largest legal-issues website in the world, which has already moved from Los Angeles to Austin). In the past 18 months more than 50 companies have made the same decision to move from California to Texas.

Some say it’s because of the lower cost of living in Texas. The cost of living in Plano is about a third lower than in the Los Angeles-Long Beach area where Toyota is currently located. As calculated by the Dallas-based conservative think tank National Center for Policy Analysis, “People of all incomes will save in Texas,” according to Pamela Villarreal, a senior fellow at the institute. Some will save a little; others will save a lot by moving to Texas to keep their jobs with Toyota. As Villarreal explained, the calculation takes into account property taxes “which are pretty high in Texas” — about twice what they are in California for equivalently priced homes. Once real estate taxes are factored in, a single woman in Texas making $75,000 a year will have about $14,000 more in discretionary income than she would if she lived in California, but married workers making $150,000 a year who move from California to Texas would not see as dramatic a jump in discretionary income.

The Manhattan Institute says it makes sense for California companies to make the move to Texas, owing to California’s high taxes, oppressive regulations, expensive electricity, union influence, and the high cost of labor. According to the U.S. Energy Information Administration (EIA), the cost per kilowatt-hour for commercial establishments in California is 13.11 cents while it’s only 8.2 cents in Texas — a saving of almost 40 percent. For industrial users, the savings are even greater: 10.72 cents per KWH in California versus just 5.86 cents in Texas. That cuts a heavy user’s energy bill in Texas nearly in half. Advantage: Texas

The advantage enjoyed by Texas is reflected in the states’ comparative economic growth rates: nearly four percent last year in Texas versus half that in California. In job growth, Texas regained the jobs it lost during the Great Recession by May of 2011 while California just made it back to even by May of this year — a three-year difference in favor of Texas. Since May 2011, Texas has added more than a million new jobs, while California has added barely 25,000 new jobs since this past May. Advantage: Texas

According to the blog 24/7 Wall Street, Texas ranks eighth among the country’s most quickly growing states with GDP growth jumping by $1.5 trillion in 2013. Its population continues to grow as well, with unemployment below the national average. California is well off the pace. Advantage: Texas

Bradley Allen, a pediatric heart surgeon in Paso Robles, just announced his candidacy for Congress in California’s 24th district, and in the process noted the difference between California and Texas in an opinion article at the Wall Street Journal: “Texas has no state income tax, while California’s 13.3% marginal rate is the highest in the country. Electricity rates are about 50%-88% higher compared to Texas due to the Golden State’s renewable-energy mandate, and its gas is 70-80 cents per gallon more expensive because of taxes.” Advantage: Texas

Allen’s opponent is incumbent Lois Capps, who sports a dismal Freedom Index rating of just 21 out of 100 on constitutional issues. Out of California’s 53 congressional districts, 18 of them have FI ratings of 20 or lower, while just one has an FI rating of 80 or higher. In Texas, by contrast, just three representatives have a rating of 20 or less out of the state’s 36 districts, with one, Rep. Steve Stockman, holding an FI rating of 95. Advantage: Texas

One of the best measures of the difference between the two states is just how much a Californian would have to pay to move his family to Texas. In November 2012, a Californian living in San Francisco would pay $1,693 to rent a 20-foot U-Haul truck and drive it San Antonio. On the other hand, a Texan in San Antonio moving to San Francisco would pay just $893 for the same truck. (Since then the numbers have become even more favorable: A Californian moving his family on August 1 from San Francisco to San Antonio would have to pay $1,890 for the same truck while a Texan moving the other way would pay only $737.) Advantage: Texas

However, David Horsey, writing for the Baltimore Sun, noted that Californians moving to Texas will leave an awful lot behind:

California has Silicon Valley and Hollywood. Texas has oil and gas.

California has Barbara Boxer and Nancy Pelosi. Texas has Ted Cruz and Louie Gohmert.

In California, billionaires get taxed more to pay for programs for the poor. In Texas, billionaires get to keep their money, and the poor go without health care.

[California Governor Jerry] Brown got voters to approve a tax hike to balance the budget and fund education. [Texas Governor Rick] Perry balanced the budget by slashing spending on education.

In lots of places in California, it’s tough to live on a middle class family budget. In lots of places in Texas, it’s hard to live outside a church-going, football-loving, white, heterosexual lifestyle.

Absence of snarky, politically correct, bitter liberals. Advantage: Texas.

 

Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.