This article appeared online at TheNewAmerican.com on Monday, March 14, 2016:
President Ronald Reagan’s former budget director David Stockman (middle, left) has been negative on the economy for months, noting in early February that
This article appeared online at TheNewAmerican.com on Wednesday, November 11, 2015:
A more orderly and respectful atmosphere surrounded the fourth Republican debate on Tuesday night, a sharp contrast to last month’s debate where the moderators became the issue. That didn’t mean there were no fireworks, or disagreements, just that the tone was more serious, as the candidates tried to shore up their positions and their poll numbers as they approached the final debate in December.
The topics included questions on
This article appeared online at TheNewAmerican.com on Friday, October 16, 2015:
On Thursday the Treasury Department announced that the federal deficit for the 2015 fiscal year, which ended September 30, fell to an eight-year low — $439 billion — thanks to tax revenues that grew at a rate faster than government spending. Revenues, according to the department, grew by eight percent over last year while government spending grew by five percent.
Treasury Secretary Jacob Lew celebrated:
This article was published by The McAlvany Intelligence Advisor on Monday, September 28, 2015:
Like flies attracted to honey, Brazilian politicians saw their opportunities and took them. Initially a money laundering investigation in Brazil focused on just one company, a manufacturer of electronic components that was being used by a criminal ring to hide and whitewash its illegal gains. The owner, Hermes Magnus, apparently discovered the activity back in 2008 and notified local police.
By March 2014 the investigation had spread to more than 230 individuals, including
This was article was published by The McAlvany Intelligence Advisor on Wednesday, September 16, 2015:
John B. Taylor, economics professor at Stanford University (where he got his PhD), thinks the massive, highly complex U.S. economy, generating nearly $20 trillion of goods and services every year, can be fine-tuned with rules and policies. Further, if those rules can be implemented clearly, the economy will do even better. He thinks of the economy as one gigantic organism with a mind and purpose of its own. That’s why he likes Fed Chair Janet Yellen:
This article appeared online at TheNewAmerican.com on Tuesday, September 15, 2015:
Series 1934 $5,000 Federal Reserve Note, Obverse
With every eye focused on the Board of Governors’ meeting of the Federal Reserve System on Thursday, expecting the earth-shaking announcement that it will, or won’t, raise interest rates for the first time since January of 2008, few are considering the global implications if it does.
Expectations in the very short run are modest. The debate centers on whether rates should be increased by a tenth of a percent, or a quarter of a percent. In the real world it isn’t likely to matter: New car loans will be adjusted upward by a couple of dollars a month and new home loans will increase by perhaps as much as $50 a month, probably less. This is likely to galvanize some fence-sitters into action, drawing future purchases into the present.
The real impact in the long run, however, is several-fold:
This article was published by The McAlvany Intelligence Advisor on Monday, September 14, 2015:
Collection of Chinese renminbi yuan banknotes.
In his 2001 paper “Building Better Global Economic BRICs,” chairman of Goldman Sachs Asset Management Jim O’Neill developed the acronym for Brazil, Russia, India and China. He made the case that the BRICs symbolized the shift of global economic power away from developed nations, estimating that they might overtake the G7 nations – Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States – as early as 2027.
Modifications were necessary to dampen O’Neill’s enthusiasm, with GS recalculating that it wouldn’t happen before 2050. By December 2012 the Council on Foreign Relations, in itsForeign Affairs publication, was forced to refute even that modest projection:
This article appeared online at TheNewAmerican.com on Monday, September 14, 2015:
News that China has offloaded more than $100 billion of U.S. Treasuries in August to support its currency and its cratering stock market caused many observers to raise concerns about China waging an “economic war” against the United States. It’s a threat the Chinese last expressed during the 2012 presidential election, that Beijing would “use its financial weapon to teach the U.S. a lesson” if it insisted on flouting Chinese interests, i.e., by selling arms to Taiwan, for example.
It now appears that the shoe is on the other foot. The Asian tiger is now a pussy cat, as its economy continues to crater and the Chinese central bank moves to weaken its currency and shore up its stock markets.
In the days following Beijing’s surprise announcement on August 11 that it was devaluing its currency by two percent, the yield on the U.S. 10-year Treasury note jumped 10 percent, from
This article appeared online at TheNewAmerican.com on Wednesday, September 9, 2015:
With financial talking heads now convinced that the Federal Reserve will finally increase interest rates as a result of the record-setting job openings report, few are asking about the “ripple effect” those increases might mean for individuals, for the auto and the housing industry, for companies and corporations, and, most importantly, for the debt-laden federal government.
If and when the fed announces upcoming interest-rate increases, in the short run, individuals might be tempted to accelerate their buying decision on cars and houses to take advantage of low rates before increases start flowing through to lenders in those sectors. In the longer run,
This article was published at The McAlvany Intelligence Advisor on Friday, July 31, 2015:
China has its own Plunge Protection Team. Its efforts were in evidence last Wednesday as the Shanghai and the Shenzhen indexes, both of which had been flat most of the day, leaped up three percent and four percent, respectively, in the last 30 minutes of the trading session.
Jacky Zhang, an analyst at BOC International, a wholly owned subsidiary of the Bank of China, exclaimed:
This article appeared online at TheNewAmerican.com on Thursday, July 30, 2015:
A graph of the Shanghai Index showing the first bubble in 2006-2008
In the last 30 minutes of trading on Wednesday, the Shanghai Composite Index jumped more than three percent, while the smaller Shenzhen Composite (equivalent to the U.S. Nasdaq index) leaped more than four percent. That this was the result of actions taken by China’s unofficial “plunge protection team” was obvious to Jacky Zhang, an analyst at BOC International: “Clearly it is government intervention again.”
China’s plunge protection team (PPT), equivalent to the U.S. stock market’s “Working Group on Financial Markets” set up under President Reagan following Black Monday in October 1987, has moved heaven and earth to keep its stock markets from collapsing. The team, made up of China’s Securities Finance Corporation and the China Securities Regulatory Commission, along with top officials from the country’s 21 largest brokerages and the Chinese central bank, has implemented an entire panoply of measures to stem the tide, including:
This article appeared online at TheNewAmerican.com on Wednesday, July 29, 2015:
According to the Census Bureau, home ownership in the United States has now dropped to the lowest level since 1967, and estimates are that the decline will continue to the lowest level ever recorded. The rate for the second quarter of 2015 was 63.4 percent, the lowest rate since Lyndon Johnson was president. The rate stands a good chance of reaching the all-time low, 63 percent, set in 1965 when the U.S. government began keeping track of such a statistic.
It wasn’t supposed to happen. In 1995 after the rate dipped to a breath-taking, eye-popping 64.7 percent from the previous 50-year average of 65.3 percent, according to the Census Bureau, the Clinton administration issued a call to arms! The government must do something!
When then-President Bill Clinton announced his “National Homeownership Strategy” in May 1995, he said,
This article appeared online at TheNewAmerican.com on Friday, July 3, 2015:
Since June 12 the Shanghai Index of Chinese stocks has lost 30 percent, thanks to losses on Friday of nearly six percent, and 12 percent for the week. That index, reflective of the Chinese stock market in general, exploded between November and June thanks to some 90 million newly minted Chinese investors entering the market for the first time, many of them with borrowed money, hoping to cash in on the rise.
Brokerage houses were only too glad to oblige, with many of them allowing new investors to borrow up to six times their initial equity position. As the market went almost vertical, commentators have been calling it a bubble, with prognosticators predicting its end sometime before 2016.
That may have been too hopeful:
This article first appeared online at TheNewAmerican.com on Wednesday, June 17, 2015:
This graph is outdated but revealing
In its just-released report “The 2015 Long-Term Budget Outlook,” the Congressional Budget Office stated bluntly:
The long-term outlook for the federal budget has worsened dramatically over the past several years, in the wake of the 2007-2009 recession and slow recovery…. If current law remained generally unchanged in the future … growing budget deficits … would push [the national] debt above its current high level.
It’s all about government spending that’s baked into the cake:
This article first appeared online at TheNewAmerican.com on Monday, May 4, 2015:
Last Thursday the London Daily Telegraph’s assistant editor, Jeremy Warner, reported an astonishing statistic: Almost a third of all government debt in the eurozone is paying negative interest rates. That’s more than $2 trillion in government bonds, and, it appears, investors are happy that they aren’t paying even more.
Fifty percent of French bonds now trade with a negative yield, while 70 percent of Germany’s bonds trade at a negative yield. More remarkably, in Spain, which was on the verge of insolvency just a few years ago, 17 percent of its government bonds now trade with a negative yield.
This is counterintuitive, which explains why Keynesians, those who believe that “demand” in an economy can be artificially increased by manipulating taxes and the money supply, have no explanation for it. In theory,
This article first appeared at The McAlvany Intelligence Advisor on Monday, May 4, 2015:
There’s a corollary to the insanity rule. It’s called the Keynesian Corollary: When something doesn’t work, do more of it. When history is written about the coming Second Great Recession, historians will likely note July 2012 as the turning point. That was when Mario Draghi, head of the European Central Bank (ECB) said during a panel discussion that the ECB “is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Other historians might list that as one of the top ten “famous last words” ever issued by a human being. Since that moment bond yields across the world have dropped, and dropped, and dropped. On Thursday Jeremy Warner, the London Daily Telegraph’s assistant editor, announced that
This article first appeared at The McAlvany Intelligence Advisor on Wednesday, April 8, 2015:
In Tuesday’s mayoral runoff in Chicago, voters had only two choices: to vote for the venal Rahm Emanuel or the feckless Chuy Garcia. Four years ago Emanuel rode Barack Obama’s coattails to victory, winning in a walk with 55 percent of the vote. In February, Emanuel couldn’t squeeze out a majority, getting only 46 percent of the vote and forcing a runoff with a far-left progressive on the Cook County Board of Commissioners, Jesus “Chuy” Garcia.
With the help of an estimated 100 “friends of Rahm,” Emanuel buried Garcia, raising some $30 million for his campaign, eight times what Garcia was able to raise. On Monday Emanuel held an 18-point lead over Garcia.
Garcia was hoping for a miracle.
This article first appeared at The McAlvany Intelligence Advisor on Wednesday, March 4, 2015:
Downtown Chicago, Illinois at night.
Chicago is a microcosm of Illinois: it has a determined unwillingness to face reality. Even Moody’s, in its latest downgrade of Chicago debt, has failed to grasp the enormity of the shortfalls facing the city and the state.
Moody’s tried to be realistic, using unrealistic numbers:
[Our rating] incorporates expected growth in Chicago’s already highly-elevated unfunded pension liabilities and continued growth in costs to service those liabilities, even if recent pension reforms proceed and are not overturned….
The “expected growth” will likely surprise to the downside even the realists at Moody’s, as the real shortfall in the five pension plans the state is funding is vastly greater than even the $100+ billion the state faces. A “special pension briefing” performed back in November by the state’s Commission on Forecasting and Accountability showed the accrued liabilities on those plans to be
This article first appeared online at TheNewAmerican.com on Monday, February 9, 2015:
The China bubble is imploding at an accelerating rate and has caught Wall Street economists off guard, according to the Wall Street Journal on Sunday.
Why they should be surprised is hard to fathom, given the predictions offered for months on end about the ending of the great Chinese economic “miracle.” As recently as three weeks ago, Minxin Pei, professor at Claremont McKenna College and professional observer of the Chinese economy, said, “If the official Chinese data should be believed at all … China’s GDP growth at 7.4% in 2014 … could have been worse.”
Indeed, it probably was.
This article first appeared at The McAlvany Intelligence Advisor on Monday, February 9, 2015:
Nearly everyone has an opinion about forecasting and its dangers. Some, like Yogi Berra, will tell you, “It’s tough to make predictions, especially about the future.” Others, like John Kenneth Galbraith, will say, “The only function of economic forecasting is to make astrology look respectable.” Still others will warn about setting either the exact event, or its timing. Do either one, they say, but not both.
Apparently the forecasters enlisted by the Wall Street Journal last week to give their best estimates of growth in China weren’t listening, or didn’t care. Or perhaps they believe in Keynesian miracles alongside those of the Tooth Fairy.
Nevertheless, when asked about import and export growth in China for the month of January, they missed reality by a country mile. The Journal tallied up the results and their seers and prognosticators concluded that
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