Posts Tagged ‘deficit spending’

Economic Nonsense from Ezra Klein at the Washington Post

Economic Nonsense from Ezra Klein at the Washington Post

jobsCourtesy of Mish

The only genuinely good news in Friday’s jobs report was the much needed shedding of 159,000 government workers of which only 77,000 were temporary census workers.

Shed another million government workers and you have a small start as to what needs to happen. Some don’t see it that way, including Erza Klein at the Washington Post.

Assuming you are able to stomach still more Keynesian claptrap please consider Welcome to the anti-stimulus

The good news: The private sector gained 64,000 jobs in September. The bad news? The public sector lost 159,000.

The government is now impeding an economic recovery. But it’s not for the reasons you often hear. It’s not because of debt or because of taxes. Nor has it scared the private sector into timidity. It’s because, at the state and local level, it’s firing people. There are more than 14 million Americans looking for work right now — to say nothing of the 9.5 million who have been forced into part-time jobs when they want, and need, full-time work — and the government just added 159,000 more to the pool. Consider this: If we only counted private-sector jobs, we’d have had positive jobs reports for the last nine months. As it is, public-sector losses have wiped out private-sector gains for the past four months.

Because the federal government has decided against backing up state and local governments, the bleeding continues, and that scares businesses away from investing in recovery. We create the stimulus that helped the economy survive 2008 and 2009, and we’ve created the anti-stimulus that’s keeping it from recovering in 2010.

Keynesian Claptrap At Its Finest

printing moneyGee, if only the government would hire everyone, there would be no unemployment.

Then again, countless cities, counties, municipalities and states are bankrupt because of absurd levels of spending.

Isn’t that what wrecked Greece?

Non-Solution #1- Raising taxes

Raising taxes burdens ordinary taxpayers for the sole benefit of government bureaucrats who like most of the rest of the population ought to be thankful they have a job at all.

Non-Solution #2 – Printing money and giving it away 

Ezra is clearly a fan of printing money and giving it away to government bureaucrats so the unemployment rate does not drop.

However, printing money and giving it away cheapens the US dollar, making goods and services…
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Paul Farrell Explains Why The Fed-Wall Street Complex Will Self Destruct By 2012

Paul Farrell Explains Why The Fed-Wall Street Complex Will Self Destruct By 2012

Courtesy of Zero Hedge 

Some rather scary predictions out of Paul Farrell today: "It’s inevitable: Wall Street banks control the Federal Reserve system, it’s their personal piggy bank. They’ve already done so much damage, yet have more control than ever.Warning: That’s a set-up. They will eventually destroy capitalism, democracy, and the dollar’s global reserve-currency status. They will self-destruct before 2035 … maybe as early as 2012 … most likely by 2020. Last week we cheered the Tea Party for starting the countdown to the Second American Revolution. Our timeline is crucial to understanding the historic implications of Taleb’s prediction that the Fed is dying, that it’s only a matter of time before a revolution triggers class warfare forcing America to dump capitalism, eliminate our corrupt system of lobbying, come up with a new workable form of government, and create a new economy without a banking system ruled by Wall Street." And just like in the Hangover, where the guy is funny because he’s fat, Farrell is scary cause he is spot on correct.

Handily, Farrell provides a projected timeline of events:

Stage 1: The Democrats just put the nail in their coffin confirming they’re wimps when they refused to force the GOP to filibuster Bush tax cuts for billionaires.

Stage 2: In the elections the GOP takes over the House, expanding its strategic war to destroy Obama with its policy of “complete gridlock” and “shutting down government.”

Stage 3: Post-election Obama goes lame-duck, buried in subpoenas and vetoes.

Stage 4: In 2012, the GOP wins back the White House and Senate. Health care returns to insurers. Free-market financial deregulation returns. Lobbyists intensify their anarchy.

Stage 5: Before the end of the second term of the new GOP president, Washington is totally corrupted by unlimited, anonymous donations from billionaires and lobbyists. Wall Street’s Happy Conspiracy triggers the third catastrophic meltdown of the 21st century that Robert Shiller of “Irrational Exuberance” fame predicts, resulting in defaults of dollar-denominated debt and the dollar’s demise as the world’s reserve currency.

Stage 6: The Second American Revolution explodes into a brutal full-scale class war with the middle class leading a widespread rebellion against the out-of-touch, out-of-control Happy Conspiracy sabotaging America from within.

Stage 7: The domestic class warfare is exaggerated as the Pentagon’s global warnings play out: That by 2020


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AUSTERITY VS DEFICIT SPENDING – A CATCH 22

AUSTERITY VS DEFICIT SPENDING – A CATCH 22

Courtesy of The Pragmatic Capitalist 

Courtesy of Hannes Kunz, Ph.D., President of Institute for Integrated Economic Research

A vivid debate is currently going between two groups of economists, politicians and financial analysts. One camp argues that government deficits have to be kept within reasonable limits or avoided altogether, because fast-increasing public debt will become unmanageable in the foreseeable future. We wholeheartedly agree.

The other group advocates a continuation of stimulus spending and credit driven investment by governments. In a New York Times op-ed piece published on June 17, 2010, Paul Krugman explained why slamming the breaks on government spending would throw us back into recession. On June 28, he doubled up, now arguing that with reduced government stimulus, we’re headed straight towards a new depression. We fully agree with his assessment.

How come IIER is simultaneously able to agree with two camps which are ready to turn to fists when making their argument? It’s quite simple: both have a point. But equally, both have no real answer.

Golden Gate Bridge at sunset

The Keynesian bridge to nowhere

Let’s begin with Mr. Krugman, whom one might locate in the deficit-spending, or Keynesian camp. Keynes, in the part that is mostly quoted by the people advocating stimulating consumption and investment by governments, suggests two things. By keeping demand for goods and services high during a recession, the government is able to keep people employed and stimulate further demand by implying a multiplier effect from its spending. At the same time, valuable industrial infrstructure utilization is guaranteed, which ensures that past capital investment is preserved during a downturn, making the conversion to a growing economy smoother, preventing a situation where future growth would be limited by capacity constraints.

We have to say that we fully agree with all the assumptions about those direct implications, in fact, the Post-Keynesian concept of the “multiplier effect” extra government dollars have is very much in line with our own view of the impact growing credit levels have on an economy.  But wait. When the concept was introduced in the 1930s, the world stood at the beginning of exploring a bounty of natural resources, first and foremost oil, and what was missing was infrastructure to make good use of those gifts from mother nature. Thus, building cars, roads, machinery and other things made a lot of sense, and…
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Austerity is stupid, stimulus is dangerous, lying is optimal, economic choices are not scalar

As usual, Steve presents a very balanced view of economic matters.  Always worth reading. – Ilene  

Austerity is stupid, stimulus is dangerous, lying is optimal, economic choices are not scalar

Courtesy of Steve Randy Waldman at Interfluidity

Globes Floating Against Red and Purple Sky

I’ve been on whatever planet I go to when I’m not writing. Don’t ask, your guess is as good as mine.

When I checked out out a few weeks ago, there was a debate raging on “fiscal austerity”. Checking back in, it continues to rage. In the course of about a half an hour, I’ve read about ten posts on the subject. See e.g. Martin Wolf and Yves SmithMike Konczal, and just about everything Paul Krugman has written lately. While I’ve been writing, Tyler Cowen has a new post, which is fantastic. Mark Thoma has delightfully named one side of the debate the “austerians”. Surely someone can come up with a cleverly risqué coinage for those in favor of stimulus?

Here are some obvious points:

Austerity is stupid. Austerity is first-order stupid whenever there are people to whom the opportunity cost of providing goods and services that others desire is negative. To some economists, that sentence is a non sequitur. After all, nothing prevents people from providing goods and services for free, if doing the work is more beneficial to them than alternative uses of their time right? Economists who make this argument need to get out more. Doing paid work has social meaning beyond the fact of the activity, and doing what is ordinarily paid work for free has a very different social meaning. It is perfectly possible, and perfectly common, that a person’s gains from doing work are greater than their total pay, so that in theory you could confiscate their wages or pay them nothing and they would still do the job. But in practice, you can’t do that, because if you don’t actually pay them, it is no longer paid work. The nonmonetary benefits of work are inconveniently bundled with a paycheck. Under this circumstance, having the government pay for the work is welfare improving unless the second-order costs of government spending exceed both the benefits to the worker in excess of pay and the benefit to consumers or users of the goods and services purchased.

Stimulus is dangerous. The second-order costs of government spending are real, and we are very far…
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EFA Euro Zone Notes

EFA Euro Zone Notes

Courtesy of Karl Denninger of The Market Ticker 

I’m listening real-time to the "conference" this evening… these are "first blush" comments…

They’re throwing the kitchen sink at this, but it’s not real money for the most part – it’s "guarantees."  Exactly how they get the rest of the €600 billion is open to question.  Only €60 billion is "real money."

The intent is to play "Bazooka" on the speculators, and the instant reaction in the futures here in the US was ridiculous – +2% immediately on the re-open in all three primary indices, (DOW/NAZ/S&P500) and a similar amount in the Russell.  While this sounds awfully good, it is in fact not even a 61.8% retrace of the plunge from Wednesday to the low on Thursday.  Yeah.

The move in the Euro, which is where this is aimed, is less amazing. 

Not even back to the middle of the channel.  Gee, that’s impressive – NOT.

They keep referring to "Article 122", which is intended to deal with WAR and similar things – that is, incidents beyond the control of a given nation-state.  But taking on too much debt (or lying about your debt) is not beyond one’s control – it’s a choice.  Doesn’t matter in this case, obviously.

What’s also interesting is the repeated references to "consolidation" of finances in member states.  This appears to be an oblique reference to a demandfor these nations to cut the crap with their budgets, which means an end of running huge deficits.  Again, as I said before in my earlier Ticker, if they truly force everyone to stop the "borrow-and-spend" the euphoria of the market will soon give way to some pretty simple math – subtraction, specifically, of whatever was being "supported" in GDP in each of these nations from their respective GDP forecasts. 

If is clear from the conference that this is EXACTLY what they are talking about being forced on all Euro members, beginning right now and to be completed – that is, back to no more than 3% fiscal deficits – within the next 2 years.

They’re also making repeated reference to setting this up as an SPV, which means there will be zero transparency or accountability.  Bullish?  I think not.  How long before the speculators figure that one out? 

Betcha it’s not long, and they start to probe this thing.

Second, the ECB is apparently going to intervene in the government security market.  This means…
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NBER: We’re Not Sure If Recession Is Over

NBER: We’re Not Sure If Recession Is Over

Courtesy of Karl Denninger at The Market Ticker

Well at least someone’s awake….

The committee of academic economists that dates the beginning and end of recessions said it isn’t ready to put an end date on the recession that started in December 2007.

I’ll go ahead and say it – there has been no end to anything.

"Recession" is defined as "a significant decline in economic activity spread across the economy."

Ok.  Is this a "significant decline"?

Just curious, of course….

Note that the so-called "recession" in 2001 coincided exactly with the fall from the peak in the real (government-adjusted) GDP in 2001; NBER says that recession began in March of 2001.  They also claim it technically ended in November of that year.  I’d dispute that, but the additional decline was very small, being only a fraction of 1%, bottoming around the end of 2002.  So while I’d say they called it over before it was, we’re quibbling over a small fraction of a percent, which is more of a technical disagreement than one of merit in the economy.

This much is certain however – the economy was absolutely on the mend in 2003.  It was a very weak recovery, but a recovery nonetheless.

Note, however, that REAL GDP growth never exceeded 2% all the way up until we crashed.  Also note that NBER says the current recession began in December 2007.  Close enough, by my figures (and due to the nutty monthly variation in Treasury activity, it is pretty much worthless to try to get granularity better than annual in my figures.  Such is reality when dealing with a jumpy and heavily-seasonal data set.)

But has there been an actual improvement in real GDP thus far in this alleged "recovery"?  Note that "turning up" of that line (which hasn’t happened either) isn’t an increase – it is merely an improvement in the rate of deterioration.  For GDP to actually be growing real GDP must cross over the 0% line, and it’s a hell a long way from there.

I have no idea if the NBER uses government-adjusted GDP numbers, but they damn well ought to, since their intent is to measure actual private business activity – not government "pumpfest" games. 


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Phil's Favorites

Does China Have A Secret Weapon In The US-China Trade War?

 

Does China Have A Secret Weapon In The US-China Trade War?

Courtesy of ValueWalk

geralt / Pixabay

Friday, US President Donald Trump said he would be willing to impose tariffs on all goods imported from China. Chinese government officials have been insisting US tariffs will have little impact on the Chinese economy, but President Trump&rsquo...



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ValueWalk

Does China Have A Secret Weapon In The US-China Trade War?

 

Does China Have A Secret Weapon In The US-China Trade War?

Courtesy of ValueWalk

geralt / Pixabay

Friday, US President Donald Trump said he would be willing to impose tariffs on all goods imported from China. Chinese government officials have been insisting US tariffs will have little impact on the Chinese economy, but President Trump&rsquo...



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Zero Hedge

"Worst Case Scenario" Looms As Chinese Overwhelmingly Ready To Boycott US Goods In Trade War

Courtesy of Zero Hedge

Despite soaring trade policy uncertainty and a collapsing yuan, "the equity market has largely looked through the marginal risk from tariffs", according to Goldman's David Kostin who recently wrote:

No clear relationship exists between reliance on imports from China and recent industry performance. Among at-risk industries, Computer & Electronic Products, which include Semiconductors, have lagged the Russell 3000, while Electrical Equipment stocks have outperformed. As our Tech Hardware and Retail analysts have noted, trade headlines may overstate fundamental risk, as companies have many tools at th...



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Chart School

Weekly Market Recap Jul 22, 2018

Courtesy of Blain.

Generally a calm week for the indexes as most of the action was in individual stocks due to earnings.  President Trump did roil things a bit by criticizing the Federal Reserve – seen as a no no, but at this point nothing should surprise from that front.

In a stinging and historically rare criticism, President Donald Trump expressed frustration with the Federal Reserve and said the central bank could disrupt the economic recovery.  Presidents rarely intercede when it comes to the Fed, which sets the benchmark interest rate that flows through to many types of consumer debt.

Trump said he’s concerned that the timing may be poor and that it will...



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Members' Corner

There Are 3 Main Theories That Explain Trump's Approach to Putin and Russia-Which One Makes the Most Sense?

Theory Time - What do you think?

Thom Hartmann suggests that the "Manchurian Candidate theory" is the least likely explanation for Trump's pro-Russia behavior in "There Are 3 Main Theories That Explain Trump’s Approach to Putin and Russia—Which One Makes the Most Sense?" (below).  disagrees and suggests that Putin probably has "the goods" on Trump in "Trump’s Plot Against America". (To be fair, Hartmann acknowledges that his three theories are not mutually exclusive.) Jonathan Chait argues ...



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Insider Scoop

BofA Points To Yum China's Earnings Downside Risk In Downgrade

Courtesy of Benzinga.

Related 31 Stocks Moving In Friday's Mid-Day Session Benzinga's Top Upgrades, Downgrades For July 20, 2018 ...

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Digital Currencies

Citadel CEO Says Bitcoin Still A "Head Scratcher" But Billionaire Lasry Sees $40,000 Soon

Courtesy of ZeroHedge. View original post here.

Ken Griffin, the CEO and founder of the Citadel hedge fund, has reiterated his negative stance on Bitcoin (BTC) in an interview with CNBC this morning.

Speaking at the Delivering Alpha Conference in New York, ...



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Biotech

How summer and diet damage your DNA, and what you can do

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

 

How summer and diet damage your DNA, and what you can do

Bright sun and fatty foods are a bad recipe for your DNA. By Tish1/shutterstock.com

Courtesy of Adam Barsouk, University of Pittsburgh

Today, your body will accumulate quadrillions of new injuries in your DNA. The constant onslaught of many forms of damage, some of which permanently...



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Mapping The Market

Mistakes were Made. (And, Yes, by Me.)

Via Jean-Luc:

Famed investor reflecting on his mistakes:

Mistakes were Made. (And, Yes, by Me.)

One that stands out for me:

Instead of focusing on how value factors in general did in identifying attractive stocks, I rushed to proclaim price-to-sales the winner. That was, until it wasn’t. I guess there’s a reason for the proclamation “The king is dead, long live the king” when a monarchy changes hands. As we continued to update the book, price-to-sales was no longer the “best” single value factor, replaced by others, depending upon the time frames examined. I had also become a lot more sophisticated in my analysis—thanks to criticism of my earlier work—and realized that everything, including factors, moves in and out of favor, depending upon the market environment. I also realized...



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Kimble Charting Solutions

The Stock Bull Market Stops Here!

 

The Stock Bull Market Stops Here!

Courtesy of Kimble Charting

 

The definition of a bull market or bull trends widely vary. One of the more common criteria for bull markets is determined by the asset being above or below its 200 day moving average.

In my humble opinion, each index above remains in a bull trend, as triple support (200-day moving averages, 2-year rising support lines, and February lows) are still in play ...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

NewsWare: Watch Today's Webinar!

 

We have a great guest at today's webinar!

Bill Olsen from NewsWare will be giving us a fun and lively demonstration of the advantages that real-time news provides. NewsWare is a market intelligence tool for news. In today's data driven markets, it is truly beneficial to have a tool that delivers access to the professional sources where you can obtain the facts in real time.

Join our webinar, free, it's open to all. 

Just click here at 1 pm est and join in!

[For more information on NewsWare, click here. For a list of prices: NewsWar...



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All About Trends

Mid-Day Update

Reminder: Harlan is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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