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

Category Archives: Economics

So Much for King Hubbard’s “Peak Oil” Theory

This article was published by The McAlvany Intelligence Advisor on Monday, November 5, 2018: 

When M. King Hubbard concluded in 1956 that the world would shortly run out of oil, his theory was adopted by environmentalists and government meddlers as the basis for interference in the energy business.

Hubbard’s theory initially predicted that U.S. crude oil production would peak at around 1970. Revisions to the theory pushed the peak date out to 2000 when U.S. crude would hit 12.5 billion barrels per year and then start its inevitable and irreversible decline.

For 2018, U.S. crude oil production will hit 30 billion barrels. So much for Hubbard’s “peak oil” predictions.

But, as Eric Peters (who blogs at EricPetersAutos.com) laments, government interference based on the discredited “peak oil” theory remains firmly in place:

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Jobs Report So Strong Even Democrats Can’t Find Anything Wrong With It

This article appeared online at TheNewAmerican.com on Friday, November 2, 2018:

Friday’s jobs report from the Bureau of Labor Statistics (BLS) was so strong that even Democrats could find nothing in it to criticize. And they were looking, especially as the midterms are just days away.

Tweeted Jason Furman, who headed President Obama’s Council of Economic Advisors: “I’m not seeing anything bad in this jobs report. Strong hourly wage growth, even stronger weekly wage growth, higher labor force participation, lower broader underemployment, while job growth bounced back from last month and the unemployment remained low.”

Jared Bernstein, former Vice President Joe Biden’s economic advisor, couldn’t find anything wrong with Friday’s jobs report either:

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Stocks Bounce Higher on Better-than-expected Jobs Report

This article appeared online at TheNewAmerican.com on Wednesday, October 31, 2018: 

Stocks bounced higher on Wednesday following Tuesday’s relief rally, responding to another positive employment report from ADP/Moody’s.

October has been awful for stocks: Even after Tuesday’s rally, the Dow Jones Industrial Average (DJIA) was down 5.9 percent for the month, while the S&P 500 Index was off by 7.9 percent. But the report from ADP/Moody’s dispelled some of the gloom and possibly portends more light on Friday when the U.S. Department of Labor issues its own employment report.

Economic forecasters once again underperformed the American economy. Those polled by Econoday had expected 178,000 new jobs in October while those polled by Refinitiv expected 189,000. The economy, defying both outlooks, notched a gain of 227,000 new jobs in October.

And those gains were all across the economy. Remarkably,

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Gurus at Treasury Jiggering Its Offerings

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 31, 2018:

The announcement from the U.S. Treasury was terse:

Total net marketable securities issued in the fourth quarter will be a projected $425 billion.

 

That will bring total debt issued in 2018 to $1.34 trillion, the highest since $1.59 trillion was issued in 2010.

 

2018 debt issuance also jumped 146% from 2017, when just $546 billion was issued.

It took Liz McCormick at Bloomberg to explain just how Treasury was going to manage all of that: stay short and provide inflation protection. Specifically, Treasury’s latest offerings will focus on five-year maturities or less, and brush the dust off its TIPS – Treasury Inflation-Protected Securities.

But of course that hardly addresses the underlying problem: a government continuing to spend beyond its (taxpayers’) means. The numbers are ugly: The national debt of the United States Government jumped by $1.3 trillion during its fiscal year that ended on September 30. The gap between the government’s spending and its income for that fiscal year was $779 billion, a jump of $113 billion over the year before.

At some point, the question will be raised: Who will buy? That was the question raised back in 2011 when Standard & Poor’s cut the government’s credit rating and put it on its “negative” watch list. Said S&P at the time:

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U.S. Treasury’s Massive Problem: How to Fund Increasing Deficits

This article appeared online at TheNewAmerican.com on Tuesday, October 30, 2018:  

The national debt of the United States government jumped by $1.3 trillion during the fiscal year ending September 30. The gap between the government’s spending and its income for that fiscal year was $779 billion, a jump of $113 billion over the year before. And now, the U.S. Treasury has announced how it’s going to manage all this: It’s going to issue new debt in the amount of $1.34 trillion, a 146 percent increase from 2017 and the highest amount of new debt issued since 2010.

Said the Treasury:

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What if the Fed Cancels Its December Rate Hike?

This article was published by The McAlvany Intelligence Advisor on Monday, October 29, 2018:  

Instead of asking “Is the sell-off in stocks likely to continue?” or “If so, how far and how fast?” or “Is it a precursor to the economy peaking?,” a better question might be: Just how far, how high, and how fast might both stocks and the economy move if the Federal Reserve were to step aside?

It could happen. It’s already on the table. In a brief comment made by the No. 2 man at the Fed, the newly-arrived Richard Clarida, at the insider-controlled Peterson Institute for International Economics last week, said not only is the U.S. economy “very, very solid,” he added that “I believe that some further gradual adjustment in the federal funds rate will be appropriate.” This is code-speak for possibly taking the December rate hike out of consideration. As The Wall Street Journal noted, the “some further” description is a “subtle phrase” used in the past “to signal that officials are debating an end to such rate increases.”

At the moment, there are two “camps” on the Fed’s Board of Governors:

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Bear Market in Stocks Not Likely

This article appeared online at TheNewAmerican.com on Monday, October 29, 2018:  

The selloff in stocks, which has taken more than 2,000 points and nearly eight percent off the Dow since October 3, has triggered much angst among market watchers and among some investors. Is the sell-off likely to continue? Is this a precursor to a decline in the economy? Has the economy peaked? Is the stock market telling investors there’s no place to go but lower?

Not according to managers of millions of investors’ funds, including Bruce Bittles, Robert W. Baird’s chief investment strategist: “The economic fundamentals remain favorable. Given the strength in the labor markets and confidence levels among small businesses, the odds of a business downturn are unlikely. We remain bullish on the U.S. economy.”

John Mallen, chief investment officer at Helios Quantitative Research, said,

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Ron Paul Is Right: It’s Long Past Time to End the Fed

This article was published by The McAlvany Intelligence Advisor on Friday, October 26, 2018: 

Most people think of the Fed as an indispensable institution without which the country’s economy could not properly function. What most people don’t realize is that the Fed – created by the Morgans and the Rockefellers at a private club off the coast of Georgia – is actually working against their own personal interests.

Want proof? Try the multiple selloffs on Wall Street since the beginning of October. Some people blame them on October. After all, it’s the month when sell-offs happen. It’s in the tides. It’s in the moon’s cycles. It’s a spooky month. Etc., etc.

Others, looking slightly deeper at possible causes, blame them on trade “disputes,” China’s intransigence, the murder in Saudi Arabia, the rise in oil and gas prices, the “caravan” of dissidents headed for the U.S.’s southern border, the rash of fake bomb attacks, fill in the blank.

They came closer to the truth when they considered

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White House Issues Attack on Socialism in Response to Sanders’ “Medicare for All”

This article appeared online at TheNewAmerican.com on Friday, October 26, 2018: 

It’s highly unlikely that Harvard-trained economist Justin Wolfers has ever been to Caracas, Venezuela. It’s also unlikely that he took the time to read the 72-page report “The Opportunity Costs of Socialism” issued by President Trump’s Council of Economic Advisers (CEA) explaining the dangers in enacting Bernie Sanders’ socialist healthcare takeover called “Medicare for All.” But he has an opinion, nevertheless: he called it “dreck” in his tweet: “For several generations the CEA harnessed the best and brightest to serve their country, ensuring White House policy was informed by modern [i.e., Keynesian] economic thinking. It’s sad to see [the present Trump CEA] debase that tradition, spending their time on this dreck.”

Merriam-Webster offers various synonyms for “dreck,” including chaff, deadwood, debris, dross, dust, garbage, junk, litter, offal, refuse, riffraff, rubbish, scrap, trash, truck, and waste. In other words, Wolfer doesn’t think much of the CEA’s effort.

On the other hand,

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Fed to Blame for Stock Market Selloff?

This article appeared online at TheNewAmerican.com on Thursday, October 25, 2018: 

Wednesday’s selloff on Wall Street took away all the gains stocks had made since the first of the year, turning the major stock averages — the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite — negative for the year.

Stock watchers blamed everyone and everything except the real culprit for the selloff: trade “disputes,” China’s intransigence, the murder in Saudi Arabia, the rise in oil and gas prices, the “migrant caravan” headed for the southern border, the rash of fake bomb attacks, fill in the blank.

Those watchers came closer to placing the blame more accurately, however, when

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The Economy and the Caravan Giving Trump a Boost in the Midterms

This article appeared online at TheNewAmerican.com on Tuesday, October 23, 2018: 

Donald Trump, the President of the United States, has been given two gifts: one of his own making; the other from pro-open-borders leftists. Together they bode well for Republicans in the November midterm elections.

The first is the booming and relentless U.S. economy. As Shobhana Chandra of Bloomberg noted on Tuesday, “The U.S. economy is poised for its best back-to-back quarters of growth since 2014, handing President Donald Trump a $20 billion talking point just in time for the midterm elections.” The report from the Commerce Department due out Friday, according to economists surveyed by Bloomberg, is likely to show that

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Jobless Claims Fall Again; Impact on Midterms?

This article appeared online at TheNewAmerican.com on Monday, October 22, 2018:  

In covering the latest report on initial jobless claims, showing not only a decline for the week ending October 13 but the lowest four-week average in 50 years, MarketWatch’s Jeffry Bartash said, “It just can’t get a whole lot better in the U.S. job market. Openings just hit a record high, the U.S. unemployment rate has fallen to a 49-year low of 3.7 percent, and hiring remains robust. The demand for labor is so strong it’s pushing up the cost of worker compensation — wages and benefits — and giving an economic growth cycle that’s now more than nine years old the staying power to become the longest expansion ever.”

Initial unemployment claims were 210,000 for the week, down 5,000 from the previous week, meeting forecasters’ estimates.

The only people hurting are

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Chinese Economy Slowing Down, Government Denies It

This article appeared online at TheNewAmerican.com on Friday, October 19, 2018: 

Thanks to efforts by the Chinese communist government to rein in the country’s horrendous national debt (300 percent of the country’s total annual output of goods and services), the Chinese economy was already slowing. According to “official” numbers released earlier this week (always questionable if not outright false), the economy grew by 6.5 percent in the third quarter on an annualized basis, down from 6.7 percent in the second quarter, and down from 12.2 percent just eight years ago.

The panic among top Chinese communist officials is palpable:

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Think Amazon’s “Fulfillment Centers” are High Tech? Try Blimps and Drones!

This article was published by The McAlvany Intelligence Advisor on Friday, October 19, 2018: 

Over the last two or three years, tens of thousands of people have watched YouTube videos (see Sources) of the unbelievable technology that companies like Amazon and British online grocery company Ocado are using to cut delivery costs and times for their customers. Each of Amazon’s “fulfillment centers” ships upwards of a million orders every single day, with nary a human in sight.

Give Amazon credit. It saw the technology it would need as far back as 2012 when they bought Kiva Systems, the developer of the little Kiva robots that look like oversized Roombas. Kiva was leasing their robots and their technology to companies like The Gap, Walgreens, Staples, Office Depot, Crate & Barrel, and Saks 5th Avenue. But when those leases ended, Amazon didn’t renew them. It wanted the Kiva technology for itself.

Today, in its more than 100 massive distribution or “fulfillment” centers, there are hundreds of thousands of Kiva robots doing the work humans used to do just a few years ago.

The million-square-foot fulfillment center in Baltimore is typical, as Christopher Mims explained in The Wall Street Journal:

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Amazon Robotics Is Automating Everything

This article appeared online at TheNewAmerican.com on Thursday, October 18, 2018:  

When Amazon, the largest Internet retailer in the world, purchased Kiva Systems in 2012, it paid almost a billion dollars for it; and it transformed, and continues to transform, the company. Amazon wanted the technology behind the Kiva robots that were previously being used by The Gap, Walgreens, Staples, Office Depot, Crate & Barrel, and Saks 5th Avenue. When the contracts with those companies ran out Amazon didn’t renew them.

It wanted Kiva’s technology for itself.

Today, in its more than 100 massive distribution or “fulfillment” centers, there are hundreds of thousands of Kiva robots doing the work humans used to do just a few years ago. There are YouTube videos depicting this transformation from human “pickers” to robotic pickers.

The million-square-foot fulfillment center in Baltimore is typical, as Christopher Mims explained in the Wall Street Journal:

Keep reading…

The US Economy is No Eric Liddell

This article was published by The McAlvany Intelligence Advisor on Wednesday, October 17, 2018: 

There was a moment in the 1981 film Chariots of Fire when Eric Liddell was bumped onto the grassy infield during a quarter mile race. Once he recovered, he was 30 yards behind the pack of runners. Let Simon Burnton of The Guardian tell the story:

In Stoke on Trent in July 1923, in a race run over a quarter of a mile, England saw just how true this was. At the first bend he tripped over the legs of the English runner JJ Gillies, falling off the track. By the time he was back on his feet, the last of the other runners was 30 yards away and moving fast, but Liddell attacked them with such pace that he finally overtook Gillies three yards from the line to win before collapsing, spent, to the ground.

 

“The circumstances in which Liddell won the event made it a performance bordering on the miraculous,” wrote The Scotsman. “Veterans, whose memories take them back 35 years, and in some cases even longer, in the history of athletics, were unanimous in the opinion that Liddell’s win in the quarter-mile was the greatest ever track performance that they had ever seen.”

The U.S. economy, as astonishing as its performance is, is no Eric Liddell. JJ Gillies [the federal government] is just too far ahead.

On Monday, the White House officially announced

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Growing U.S. Economy Unable to Keep Up With Growing Government Spending

This article appeared online at TheNewAmerican.com on Tuesday, October 16, 2018:  

The White House just officially announced the final numbers for Fiscal Year 2018, which ended September 30. They are ugly: The gap between revenues and spending widened to $779 billion over the previous year, a jump of $113 billion (or 17 percent), despite increased revenues. This is the third consecutive year of rising deficits, with no apparent end in sight.

The White House blamed the usual suspects: the rising costs of “entitlement” benefits (i.e., Social Security, Medicare, Medicaid, and others) and increasing interest costs to service the rising national debt.

Those interest costs increased by one-quarter this year over last, from $263 billion in 2017 to $325 billion in 2018. By 2020, the Congressional Budget Office (CBO) estimates that interest costs will increase by another 50 percent, to nearly $500 billion.

There is no more talk of how the expanding economy will throw off revenues sufficient to start shrinking the national debt. Now, according to Office of Management and Budget (OMB) Director Mick Mulvaney, the best that can be hoped for is some eventual shrinking of the government’s annual deficits:

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Is the Fed Trying to Kill the Trump Economy?

This article appeared online at TheNewAmerican.com on Friday, October 12, 2018:

William McChesney Martin, the ninth and longest running Chairman of the Federal Reserve, said “The Federal Reserve … is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.” Rudi Dornbusch, the German economist who worked for most of his career in the United States, was more blunt: “None of the U.S. [economic] expansions of the past 40 years died in bed of old age; every one was murdered by the Federal Reserve.”

Is the sharp selloff in stocks following the sharp rise in interest rates last week signaling the death throes of the longest-running bull market in history, to be followed by similar expiration of the 112-month long economic expansion? On Tuesday, October 2, the key financial instrument followed by most observers — the U.S. 10 Year Treasury Note — was yielding

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IMF Lowers Global Economic Growth Estimates, Blames Trump Tariffs

This article appeared online at TheNewAmerican.com on Tuesday, October 9, 2018: 

The International Monetary Fund (IMF), in its latest World Economic Outlook (WEO) released on Tuesday, fell into the same trap as so many other forecasters have: ignoring both the temporary nature of Trump’s tariff strategy and the incoming wave of repatriated funds that have been languishing overseas for years.

The chief apologist for the IMF, Maurice Obstfeld (on loan from the University of California, Berkeley, and a former member of President Obama’s Council of Economic Advisors), in a note accompanying the WEO, said that world growth has “plateaued”:

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Investors Remember William McChesney Martin, and Sell

This article was published by The McAlvany Intelligence Advisor on Monday, October 8, 2018:  

William McChesney Martin served as the ninth and the longest-running chairman of the Federal Reserve, from April 1951 to January 1970. He served under five presidents. But when people think of him, they remember him saying that:

Our purpose [at the Fed] is to lean against the winds of deflation or inflation, whichever way they are blowing.

 

The Federal Reserve … is in the position of the chaperone who has ordered the punch bowl removed just when the party was really warming up.

It’s not known if he was trying to be funny or merely ironic. But history records that the last 12 economic U.S. expansions were doused when the Fed raised interest rates, ending the parties.

The current Fed chair, Jerome Powell, is in full party mode. Last week he made an astonishing four public appearances, serving as the Number One (well, Number Two) cheerleader for the Trump economy. He called the economy “remarkably positive,” “extraordinary,” and its outlook “particularly bright.”

Added Powell on Tuesday:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.
Copyright © 2018 Bob Adelmann