Tag Archives: recovery

America Needs a New Sheriff

The American labor market showed few signs of new life in the latest jobs report.   First time filings for unemployment benefits rose again last week to a one-month high.  Claims rose for a second week, by 4,000 for the period ended Aug. 18.  After economists had predicted 365,000 new claims, the number climbed to 372,000.

The administration continues to cite the European debt crisis and economic slowdowns in Asia as deterrents to investment.

http://www.bloomberg.com/news/2012-08-23/jobless-claims-in-u-s-climb-for-second-week-to-one-month-high.html

It is far easier to blame the global economy than to admit that this administration’s energy policies are killing jobs in America.  That this administration poked their thumbs into the eyes of millions of unemployed Americans when they laughed about “shovel-ready” projects not being as “shovel-ready” as advertised.  It is not the least bit funny to Americans when they discover that this administration does not know what they are doing, especially after they spent trillions of taxpayer dollars on plans that did not work and redistributed hundreds of billions of the taxpayer’s wealth to rich “progressive” bundlers for the administration’s campaign machine.

Across the country, Americans have had enough of this administration’s policies, starting with those that kill jobs; like the healthcare reform law that levies huge tax hikes on all Americans and imposes additional burdens on businesses.  Americans are done with the policies that are killing America’s energy industry, like stifling EPA regulations that make it impossible to build new petroleum refineries or use coal powered energy.  Americans can no longer tolerate a lack of policy; a lack that precludes any hope for recovery in the housing market.  Many small businesses will find it difficult if not impossible to exist, much less expand and hire while banking regulations imposed during this administration make it virtually impossible for banks to loan them money.

Why does America continue to spend hundreds of billions of dollars a year on foreign energy rather than developing the abundant energy in its own country? Why not keep those hundreds of billions of dollars at home in its own sluggish, cash strapped economy?

At a time when tens of millions of Americans are struggling to find work and its economy is starving for liquid capital, why does this administration refuse to take advantage of America’s wealth of natural resources? Why does this administration continue to prevent drilling for oil and natural gas or mining for coal? Why not put Americans back to work building refineries and power plants? Why not have Americans delivering gas, coal and natural gas to American consumers?

How many peripheral jobs will be created by that process?

For every new oil well, power plant, refinery or mine there will be new roads built, followed by restaurants, stores, housing, schools and places of worship. All generated by the only force capable of powering America’s economic recovery: the private sector.

The key to economic recovery in America is a shift in policy.  The only way for that shift to happen is to alter the governing philosophy.  For that alteration to take place, America must elect a new sheriff and new deputies.

http://mjfellright.wordpress.com/2012/08/23/america-needs-a-new-sheriff/

The President’s Gift

President Obama has decided to bow down and concede to the cries and the gnashing of teeth of his liberal base. He must have already forgotten the fact that the countries credit rating was just downgraded by the S&P to AA+. How else can you possibly explain that in just a few short months that he has reduced his savings promise from the already to low $650 billion to a pathetic $320 billion? One explanation is that Obama is stuck in what I like to call “people-are-actually-listening-to-what-I-say land.” In other words, when President Obama was candidate Obama he was able to say and do pretty much what he pleased with little or no repercussions.

First, he is a gifted orator; when he speaks people listen. Second, he never really said anything of substance. While he was great at marketing his hope and change movement he never really committed to anything except not being George W. Bush. He allowed his loyal followers to fill in the blanks. Fast forward a few years to an economy in absolute shambles, a lot more gray hair and his audience has changed. He is stuck between Candidate and President Obama. On one hand Candidate Obama wants to go out and look moderate by talking about Medicare and Medicaid reform. On the other hand President Obama wants to be sure that his base does not think that he has actually changed his position so he softens his reform promises and goes back to where he is really comfortable- class warfare. He proposes to eliminate the Bush tax cuts and to increase taxes on those that already are a majority of the tax base.

My question is: Should we look a gift horse in the mouth?

Far more people are paying attention to the substance or lack of substance than were listening during his candidacy. The job outlook is dismal and he has no real plan to push our country to recovery. We are in need of an intervention. It is going to be rough. Our country needs to be cut off cold turkey. We need a President that is not concerned about re-election but with doing whatever it takes to bring our country back to greatness. We need a President that is willing to cut us off from the rest of the world until we are detoxified. We need a President that knows that while we are going through recovery we cannot offer help to others, as we must focus on ourselves. We need a President that understands that he must teach people to once again support themselves and not depend on the government for their present and future sustainability.

We should allow the President to continue to try and be everything to everyone. He does not have the ability to truly balance his stance. He will not do what President Clinton did and move to the center on substance. He will promise more hope and change but will continue to bow to the left with tax increases and possibly even more entitlement spending.

My advice is for us to take advantage of this gift. We must take this opportunity to point out each and every time that Obama is giving speeches with a moderate slant while proposing bills and pushing his far left ideology. After all, an intervention is not successful without a strong support group. We can be that support and we can help usher TRUE recovery.

High Inflation and Low Investment Hampers Recovery

LONDON, July 27, 2011/PRNewswire/ —  Rising inflation and flat investment have kept the world’s economic recovery stuck in reverse, the latest Global Economic Conditions survey from ACCA (the Association of Chartered Certified Accountants) has shown.

Of the 2,186 ACCA members surveyed between 16 May and 6 June 2011, only 26% reported increased confidence, down from 28% three months ago, with 57% saying that economic conditions are either deteriorating or stagnating, up from 51% only three months ago.

While the rocketing inflation of the first quarter of 2011 was not repeated in the second three months, a greater proportion of those surveyed, 54% – up from 51% in the last quarter – reported an increase in operating costs. This is double the number of respondents who mentioned inflation two years ago.

The survey shows that rising costs are not just confined to the fastest-growing economies.

While best performing markets Malaysia and Pakistan are leading the inflation league table, rising costs were also cited by 45% of respondents in Western Europe, which has been affected by the continent’s debt crisis, still sits at the bottom of the ranking in terms of business confidence and economic optimism.

The survey shows that businesses are becoming increasingly unable to respond to the inflationary challenge through cost-cutting.

Around 30% of respondents expect their governments to get spending decisions right in the medium-term, but 16.5% expect dangerous levels of over- or under-spending and this group has been growing every quarter since late 2009.

Access to finance has been tightening globally for the past six months, and this appears to be the case for both growth capital and short-term liquidity. This, combined with rising costs, now appears to be leading to an increase in the number of respondents who fear that customers (31%) or suppliers (15%) might go out of business, as well as those reporting problems with late payment (31%).

Despite these worrying trends, confidence figures among finance professionals have not yet dipped to a situation where they believe there will be a renewed downturn.

For the past two years, professionals in Africa and the Asia-Pacific region have been consistently more optimistic than their colleagues elsewhere about the state of the economic recovery, and this resulted in high levels of confidence in their own organisations.

In this survey, however, confidence is surprisingly low in both regions, with Asia-Pacific recording a net loss of confidence for the first time in two years. Hong Kong and Malaysia seem to be particularly affected, while Singapore has bucked the trend by recording further confidence gains.

While the gloom in the Far East reflects the fallout from the disaster in Japan, flagging confidence in Africa is mostly a lagged effect of the slowdown elsewhere. The GECS results show that the impact of a drop in activity in OECD countries has for the last few months been trickling down the supply chain, first to the Asia-Pacific region and then to Africa.

However, unlike the previous quarter, most of the pressure on access to finance appears to be concentrated on Asia-Pacific and the Middle East.

Under these challenging conditions, profitable value-added opportunities of most types have become scarcer and the investment environment has deteriorated slightly, especially in terms of financing and business support. Still, investment itself has remained flat and the outlook for employment and investment in staff has even improved slightly. This is almost certainly related to the slow recovery in new orders.

Report author Manos Schizas, senior policy adviser with ACCA, said: “There are a number of concerns in the latest report, including that the loss of momentum in Asia and Africa has become particularly pronounced in the last few months. The limits of austerity are also being explored in Western Europe and a renewed tightening of credit and cashflow conditions could be on the cards, even as new orders and employment are beginning to recover.

“If these new trends – coupled with high inflation and low investment – persist we would expect to see further instability in the near future, which will present more challenges for all sectors professional accountants whether they work in practice or industry in the second half of 2011.”

Central and Eastern Europe buoyed by stable fundamentals as the rest of Europe deteriorates

For the time being, the region appears to be riding out the storm of the European fiscal crisis, even though respondents’ confidence in their own organisations and their faith in the global recovery are slowly being eroded. About 45% of respondents in the region (down from 50%) feel that global economic conditions are improving or about to do so, but only 26% reported confidence gains (virtually unchanged from 27% in the last quarter).

Business revenues, access to finance and cashflow conditions are now increasingly stable, which has prompted a rise in capital spending in the region. That said, the outlook for employment and investment in staff is still negative. Respondents are reporting more opportunities to profit from innovation and customer insights and fewer opportunities to cut costs or encourage efficiencies through the supply chain.

Respondents in the region expect government spending to grow moderately over the next five years, a prospect that now appears more sustainable than when the question was posed in previous surveys. Only about 8% expect their national governments to over-spend dangerously in the medium term, down from 14% in the previous quarter.

Study Reveals Impact of Real Estate ‘Shadow Inventory’ on Recovery

ATLANTA, June 30, 2011 /PRNewswire/ — Despite steady gains in key industry sectors, the nation’s housing market continues to exert pressure on the overall rate of economic recovery. While financial conditions across multiple financial sectors suggest economic stabilization and growth, delinquencies still exceed pre-recession levels due to continued turbulence in the mortgage marketplace, according to Equifax (NYSE: EFX) national credit trend research for May 2011.

Slowing today’s economic recovery are the challenges posed by high shadow inventory levels, which are contributing to the continued rise of severe mortgage delinquencies and write-offs. According to Equifax research, write-off dollars for home finance, which includes first mortgage and home equity installment loans as well as home equity revolving accounts, are still climbing and have yet to show signs of peaking. In fact, home finance write-offs reached $304.6 billion in 2010 compared to a combined total of $126.7 billion for 2006 and 2007.

Equifax data shows that severe delinquencies among these loan vintages have remained nearly constant since the first quarter of 2010. Further analysis reveals that as of May 2011 there are approximately$319.7 billion in 2006 and 2007 first mortgage vintages that are in the initial foreclosure process – many of which may be written off.

Real estate owned (REO) properties represent another roadblock to recovery. According to Equifax, first mortgage REO rates remain high as lenders struggle to divest of properties unsuccessfully sold through a short sale or foreclosure auction. While various factors over the last few years have led to fluctuations in the number of REO properties, REO rates since March 2011 are on the rise and causing continued economic strain. Equifax data shows that in May 2011:

  • Three percent of all U.S. first mortgages representing $21.8 billion were REO properties.
  • Foreclosure complete rates of 1.45 percent were almost in lock step with bankruptcy rates of 1.6 percent – suggesting that the majority of REO properties are the result of bankruptcy proceedings.

 

“Shadow inventory and real estate owned properties are still playing a dominant role in today’s mortgage market and slowing the pace of economic recovery. While we are seeing stabilization across multiple sectors of lending, there remains a significant volume of delinquent first mortgage loans, which has slowed the foreclosure process. Until these foreclosures are processed, the mortgage market will continue to impact economic growth,” said Craig Crabtree, senior vice president and general manager, Equifax Mortgage Services.

Economic Forecasts Too Rosy?

The last few weeks have been ripe with claims that the U.S. economy is recovering. Pointing primarily at consumer sentiment and holiday spending, analysts expected that the outlook for America could only improve from here.

Unfortunately, the numbers don’t add up:

  • Gallup’s economic confidence index is at -31, well below its 52 week low
  • February orders for U.S. durable goods dropped almost a full percentage point just after having risen an adjusted 3.6% in January
  • February existing home sales dropped to the lowest rate in decades which drove housing prices even lower.
  • Oil is still on the rise. Crude for May delivery was touching $106.00 per barrel and going up.

While the most recent report on first time unemployment filings dropped to 382,000, it is unknown how much of this is due to actual increases in hiring or job seekers just giving up.

So while the Federal Reserve may be talking up an improving economy, take it with a grain of salt – Bernanke was saying even rosier things all the way back in 2009.

“Consumer spending, which dropped sharply in the second half of last year, grew in the first quarter,” Bernanke said in congressional testimony May 5. “In coming months, households’ spending power will be boosted by the fiscal stimulus program, and we have seen some improvement in consumer sentiment.”

Who would have thought that by “months” he meant like 26 or 30 of them?

 

 

Years of Stimulus Fails to Create Jobs; 8 Weeks of Tax Cuts Gets it Done

Stimulus after stimulus program has been put in place by the Obama administration. Cash for clunkers, the GM/Chrysler/Union bail-outs, the actual 2009 economic stimulus bill, and on and on and on. As the  New American posted, it didn’t create much of anything in the private sector.

Thomas Smith at Emory University, supported the stimulus package but he now finds that although the funds may have resulted in some people being employed, the stimulus spending in the construction area has not resulted in creating jobs. Another economist compared the impact of federal stimulus funds to employment in the construction industry to trying to move the Empire State Building by pushing it.

As recent as December of 2010, the employment outlook was gloomy which finally forced Obama to sign the extension of the Bush Tax Cuts into law on December 17th. In addition to extending the current tax rates, Democrats further cut taxes by slashing the Social Security tax by 2%. Obama and the Congressional liberals had found a new religion and it’s already proving fruitful.

Today, the unemployment report dropped to 8.9%, the lowest since 2009. It didn’t stay at 8.8% throughout the stimulus. It didn’t drop when Obama took over GM. It didn’t drop each time the government tried to be the solution to the problem. Only once the government removed some of it’s burdensome taxes did the economy react and it reacted within weeks, not years.

Let citizens keep their money and they will spend it. That creates true economic stimulus as businesses hire and expand to handle the increased demand. Demand which only consumers can drive. Capitalism 101 liberals, are they finally learning?

Economy Nearing Carter-Era Catastrophe – Volcker Present Again

Jobless RecoveryInterpreting the latest unemployment report could make one’s head spin, but there is valuable information in it other than the tragic 10.2% unemployment rate and the fact that the economy has shed an additional 190,000 jobs in the last month.  Yahoo news points at a separate survey that shows 558,000 more people were unemployed in October than September.  This discrepancy is due to the fact that once someone gives up looking for a job or runs out of benefits, they are not longer technically “unemployed”.

Paul Volcker, the President’s chief economic adviser, and others are pointing to the idea that perhaps this is a jobless recovery.  To be a jobless recovery – first, one would expect a recovery.  If the economy were recovering, credit wouldn’t be shrinking, banks would be mending, and consumers would be spending.  In direct contradiction to a jobless recovery:

5 banks failed this week, 121 for this year alone:

United Commercial Bank, San Francisco, CA
Gateway Bank of St. Louis, St. Louis, MO
Prosperan Bank, Oakdale, MN
Home Federal Savings Bank, Detroit, MI
United Security Bank, Sparta, GA

Consumer spending dropped by the largest amount in nine months:
Consumer Spending Falls In September, Biggest Drop In Nine Months

Consumer confidence drops in October:
Consumer Confidence Survey

Real incomes flat and spending drops relative to inflation:

Income Flat, Spending Falls as Consumers Stay Wary

The sources vary, but are consistent.  We are not experiencing a jobless recovery, we are heading into a jobless stagnation.  This is exactly where we were during the Carter years, we are following the same actions under some of the same people, and are expecting a different result.

Many credit Volcker’s fed for ending inflation during the Reagan era by invoking a recession to reign-in out-of-control inflation.  The problem being, we don’t have any inflation.  With real-incomes dropping, consumption dissipating and credit drying-up, there is not way for producers to raise prices and expect anyone to buy much of anything.  So is the recent push of massive government spending an attempt to re-ignite inflation so that Bernanke and Volcker can work together to end it and save us all?

Carter era gas lines

Carter era gas lines

During the early 80’s, Volcker created a recession on purpose by tightening monetary policy.  His Keynesian theory then was that it was more important to reign-in inflation than save jobs.  This measure was actually needed only because of  failed Keynesian thought that continuing inflation was good for the economy.  Using monetarist policies, he corrected what Keynesian thought had brought about.

The problem now is that we don’t have job growth and we don’t have inflation.  The massive amounts of cash being poured into the economy by the Fed are not inducing price increases, it’s just watering down the money supply.  Money is being dumped into the stock market at alarming rates, mainly because there’s nowhere else for it to go.  Buying bonds is self-defeating considering the Treasury rates, investing in business at this time is suicidal.. Bernanke is using failed tactics probably at the behest of Obama’s chief adviser on the economy.  Monetary deflation with no corresponding economic inflation.

This looks like an orchestrated attempt to cause inflation so that we can do the same things that we did before.  Dump trillions into the economy and eventually producers will raise prices… well..  what if they don’t?   What if we just end up with a dept to income ratios (debt-to-GDP) rate of 70%+ (we’re at 66% by the way)?  We could easily end up spending everything that comes into this country to just service debt.  The Japanese have lost a decade of growth to thinking like this.

It’s time to cut spending, quit dumping money into the economy, let the pain correct the bubble that exists and move forward.  The Fed created the near hyper-inflationary mess that cost Carter his Presidency, made a mess during Bush’s stay, and is trying to put us in a place where they have any clue of what to do.  I am fairly certain that they don’t know how to get us to that place or a healthy economy.

While Obama is busy blaming bush, he has kept on the one person probably the most-responsible for the mess we have – Bernanke.  The President has also brought Carter’s Volcker back into the mix and Barack is egging them both on.  One can hope this is more due to nativity than purpose.