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[VIDEO] Full Measure with Sharyl Attkisson: July 23, 2017

In the wake of the 2008 financial crisis, big banks paid tens of billions of dollars to settle state and federal fraud investigations, yet not one top bank executive was prosecuted. Plus, the eye doctor who first uncovered possible links between erectile dysfunction drugs and permanent blindness. Also, the surprising reason why the federal government is missing-out on some of the best and brightest talent, as it recruits to fight online cyber battles.

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[VIDEO] Rand Paul’s ‘Audit the Fed’ Bill May Have Friend in New Administration 

Picture illustration of people silhouetted against a backdrop projected with the picture of various currencies of money

Kentucky senator explains controversial proposed legislation that would subject Federal Reserve‘s monetary policy powers to outside scrutiny as it gets new life under a new administration – and may stand its best chance at becoming law.


To Problems With China’s Financial System, Add the Bond Market

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SHANGHAI — Keith Bradsher Chinese officials cheered on the country’s stock market when it reached heady new highs, offering hope that it could become a new source of money to fix China’s economic problems. Then, last year, the market crashed.

“China is struggling with its own balancing act. The Chinese bond slump also stems from Beijing’s efforts to wring excess money from its financial system and to stop potential bubbles that may lurk in shadowy, hard-to-track corners of its economy. Should it continue with those efforts, bonds could fall further.”

Now another fast-growing part of China’s vast and increasingly complicated financial market is showing signs of distress: its $9 trillion bond market.

Prices for government and corporate bonds have tumbled over the past week, a sell-off that continued on Tuesday. The situation has spooked investors, prompting the government to temporarily restrain some trading and to make emergency loans to struggling financial institutions.

“The adjustment has not yet finished. It will continue and normalize until money is put where the government can see it.”

— Miao Zuoxing, a partner at the FXM Brothers Fund

The price drops have resulted in higher borrowing costs at a time when more Chinese companies need the money to cope with slowing economic growth. Yields reached new highs again on Tuesday.

In part, China is reacting to financial shifts across the globe. With the Federal Reserve raising short-term interest rates and many expecting the presidency of Donald J. Trump to lead to heavier government spending, investors worldwide are selling bonds.

“Due to recent, relatively large market fluctuations, our company decided to cancel the issue of the current bond, and will reissue it at a chosen time.”

— Jiangsu Sumec Group

But China is struggling with its own balancing act. The Chinese bond slump also stems from Beijing’s efforts to wring excess money from its financial system and to stop potential bubbles that may lurk in shadowy, hard-to-track corners of its economy. Should it continue with those efforts, bonds could fall further.

“The adjustment has not yet finished,” said Miao Zuoxing, a partner at the FXM Brothers Fund, a Shanghai-based investment fund that trades stocks, bonds and futures. “It will continue and normalize until money is put where the government can see it.”

At least 40 companies have said they would postpone or cancel bond offerings rather than risk being forced to pay high interest rates to sell the bonds — or being unable to sell them at all. Among them was the Jiangsu Sumec Group Corporation, an industrial trading house that exports items as varied as gardening tools and auto parts; the company said on Thursday that it would not go through with the sale of $130 million in short-term bonds.

“Due to recent, relatively large market fluctuations, our company decided to cancel the issue of the current bond,” Jiangsu Sumec Group said in a statement, “and will reissue it at a chosen time.”

China has particular reason to worry. As the world’s second-largest economy, after the United States, it relies on a rickety financial system that is mired in debt and susceptible to hidden stresses. Higher overseas interest rates could also prompt more Chinese investors to move their money out of the country, either to chase higher returns elsewhere or to avoid what some see as China’s growing problems.
Read the rest of this entry »


As Yuan Weakens, Chinese Households Rush to Open Foreign Currency Accounts

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Since October, the government has acted to slow outflows by tightening existing measures, such as approvals for foreign currency transfers, and has leant on banks to be stricter, making it harder for companies and individuals to change money and transfer money abroad.

SHANGHAI: Zhang Yuting lives and works in Shanghai, has only visited the United States once, and rarely needs to use foreign currency. But that hasn’t stopped the 29-year-old accountant from putting a slice of her bank savings into the greenback.

“Expectations of capital flight are clear. I might exchange more yuan early next year, as long as I’ve got money.”

She is not alone. In the first 11 months of 2016, official figures show that foreign currency bank deposits owned by Chinese households rose by almost 32 per cent, propelled by the yuan’s recent fall to eight-year lows against the dollar.

The rapid rise – almost four times the growth rate for total deposits in the yuan and other currencies as recorded in central bank data – comes at a time when the yuan is under intense pressure from capital outflows.

The outflows are partially a result of concerns that the yuan is going to weaken further as US interest rates rise, and because of lingering concerns about the health of the Chinese economy.

US President-elect Donald Trump’s threats to declare China a currency manipulator and to impose punitive tariffs on Chinese imports into the US, as well as tensions over Taiwan and the South China Sea, have only added to the fears.

“Expectations of capital flight are clear,” said Zhang, who used her yuan savings to buy US$10,000 this year. “I might exchange more yuan early next year, as long as I’ve got money.”

Household foreign currency deposits in China are not huge compared to the money that companies, banks and wealthy individuals have been directing into foreign currency accounts and other assets offshore.

All up, households had US$118.72 billion of foreign money in their bank accounts at the end of November, while total foreign currency deposits were US$702.56 billion.

But the high growth rate in the household forex holdings are symbolic of a growing headache for the government as it struggles to counter the yuan’s weakness.

Since October, the government has acted to slow outflows by tightening existing measures, such as approvals for foreign currency transfers, and has leant on banks to be stricter, making it harder for companies and individuals to change money and transfer money abroad. Read the rest of this entry »


Hong Kong and China Stocks Decline in Monday Morning Trading 

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The Hang Seng Index was down 0.77 per cent or 168.87 points to 21,851.88 on Monday morning session close.

Shares in Hong Kong and mainland China declined at the mi-day trading pause, following retreats in most Asian equity markets as rate increases announced last week by the US Federal Reserve and Hong Kong Monetary Authority lead to capital outflow back to American shores.

The Hang Seng Index fell 168.87 points, or by 0.8 per cent, to 21,851.88, while the Hang Seng China Enterprises Index dropped 1 per cent to 9,374.09. The CSI 300 Index fell 0.2 per cent to 3,339.42.

“With the higher rates in US,Hong Kong stocks could be under pressure as capital could flow out of Hong Kong ,” said Ben Kwong Man-bun, executive director of KGI Asia.

China bond-market selloff shows risks of Beijing’s efforts to restrain credit

China bond-market selloff shows risks of Beijing’s efforts to restrain credit

Insurers led losses among Chinese companies on the Hang Seng China Enterprises Index, amid concerns that mainland regulators will further place their market investments under scrutiny.

Ping An Insurance Group Co. fell 1.7 per cent to a four-month low of HK$39.75 while AIA Group Ltd fell 1.5 per cent to HK$43.75.

China Vanke Co. fell in Shenzhen and Hong Kong after the country’s largest property developer scrapped a white knight rescue plan involving Shenzhen Metro, which was intended to help defend it from a hostile takeover.

[Read the full story here, at South China Morning Post]

Vanke shares fell by as much as 6.3 per cent, closing 4.5 per cent lower at HK$18.48 during the lunch pause. In Shenzhen, Vanke’s shares fell as much as 5.3 per cent, dropping 4.7 per cent to 21.40 yuan.

The Shanghai Composite Index dropped 0.1 per cent to 3,119.65. The Shenzhen Component index dropped 0.26 to 10,307.48, while the Shenzhen Composite Index declined 0.21 per cent to 1,987.49.

The Nasdaq style ChiNext closed 0.60 per cent lower at 1,986.22.

China’s monetary policy will be pursued in a “neutral” manner in the coming year, a departure from last year’s “flexible” stance, according to an analysis by Macquarie Capital’s Larry Hu, parsing the Communist Party’s Central Economic Work Conference last Friday. Read the rest of this entry »


James Grant Explains ‘The Forgotten Depression’

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Mr. Grant confronts the subjectivity of economic measurement head-on in his book in an enlightening discussion of whether the 1921 depression was, in fact, a depression at all.

The Forgotten Depression: 1921 — The Crash That Cured Itself, by James Grant, Simon & Schuster, 2014.

Joseph Calandro Jr. writes: To better understand the current economic environment, financial analyst, historian, journalist, and value investor James forgottendepressionGrant, who is informed by both Austrian economics and the value investing theory of the late Benjamin Graham, analyzes the Depression of 1920–1921 in his latest work, The Forgotten Depression: 1921 — The Crash That Cured Itself.

[Order James Grant’s book “The Forgotten Depression: 1921: The Crash That Cured Itself from Amazon.com]

Grant understands that despite the pseudo-natural science veneer of mainstream economics the fact remains that economic value is inherently subjective and thus economic measurement is also subjective. Mr. Grant confronts the subjectivity of economic measurement head-on in his book in an enlightening discussion of whether the 1921 depression was, in fact, a depression at all.

Was It a Depression?

Grant concludes it was a depression, but mainstream economist Christine Romer, for example, concludes it was not a depression. As Grant observes, Ms. “Romer, a former chairman of the Council of Economic Advisors, presented her research, titled ‘World War I and the Postwar Depression,’ in a 1988 essay in the Journal of Monetary EconomicsThe case she made for discarding one set of GNP estimates for another is highly technical. But the lay reader may be struck by the fact that neither the GNP data she rejected, nor the ones she preferred, were compiled in the moment. Rather, each set was constructed some 30 to 40 years after the events it was intended to document” (p. 68).

In contrast, Mr. Grant surveys economic activity as it existed prior to and during 1920–21 and as it was evaluated during those times. Therefore, five pages into chapter 5 of his book, which is titled “A Depression in Fact,” we read that:

A 1920 recession turned into a 1921 depression, according to [Wesley Clair] Mitchell, whose judgment, as a historian, business-cycle theorist and contemporary observer, is probably as reliable as anyone’s. This was no mere American dislocation but a global depression ensnaring nearly all the former Allied Powers (the defeated Central Powers suffered a slump of their own in 1919). “Though the boom of 1919, the crisis of 1920 and the depression of 1921 followed the patterns of earlier cycles,” wrote Mitchell, “we have seen how much this cycle was influenced by economic conditions resulting from the war and its sudden ending. … If American business men were betrayed by postwar demands into unwise courses, so were all business men in all countries similarly situated.”

So depression it was … (p. 71)

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Interestingly, there are a variety of similarities between “The Forgotten Depression” of 1921 and “The Great Recession” of 2007–2008. For example:

  • War finance (the currency debasement and credit expansion associated with funding war) has long been associated with economic distortion including World War I, which preceded “The Forgotten Depression.” Such distortions unfortunately continue to the present day.
  • Scandal is also associated with booms and busts; for example, the boom preceding “The Forgotten Depression” had Charles Ponzi while the boom preceding “The Great Recession” had Bernie Madoff.
  • The booms preceding both financial disruptions also saw governmental banking regulators not doing a very good job of regulating the banks under their supervision.
  • Citibank famously fell under significant distress in both events.
  • Both eras had former professors of Princeton University in high-ranking governmental positions: Woodrow Wilson was president of the United States at the beginning of “The Forgotten Depression” while Ben Bernanke was chairman of the Fed during “The Great Recession.”
  • On the practitioner-side, value investor Benjamin Graham profited handsomely from the distressed investments that he made during “The Forgotten Depression” while his best known student, Warren Buffett, profited from the distressed investments that he made during “The Great Recession.”

The Crash That Cured Itself

Despite similarities, there are noteworthy differences between these two financial events. Foremost among the differences is the reason why “The Forgotten Depression” has, in fact, been forgotten: the government did nothing to stop it. Not only were interest rates not lowered and public money not spent, but interest rates were actually raised and debt paid down. The context behind these actions is fascinating and superbly told and analyzed by Mr. Grant. Read the rest of this entry »


Fear & Loathing: S&P 500’s 9-Day Losing Streak Longest Since December 1980

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The S&P 500 index finished lower on Friday for the ninth-straight session, its longest stretch of declines since December 1980. Stocks rose after the open as investors digested a strong report on October jobs growth. But they soon erased their gains as uncertainty surrounding next week’s presidential election rattled markets.

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The S&P 500 SPX, -0.17% fell 3.44 points, or 0.2%, to 2,085.22, with consumer staples shares seeing the largest drop. The Dow Jones Industrial Average shed 41.84 points, or 0.2%, to 17,888.83, with Procter & Gamble Company PG, -1.76% and Travelers Companies Inc. TRV, -0.99% emerging as the biggest losers on the blue-chip gauge. Read the rest of this entry »


[VIDEO] Why Do American Companies Leave America?

America is the world’s largest economy, and yet many American companies are moving jobs and factories overseas.

Why do large companies based in the U.S. often move jobs and new factories overseas? Because our current tax system often makes doing business in America a losing proposition compared to expanding internationally. So, just how much more expensive is it to build that next factory or hire that next worker in America?

The American Dream has long evoked the idea that the next generation will have a better life than the previous one. Today, many Americans feel that dream is in jeopardy.

Source: PragerU


Tighter Monetary Policy Signal Spooks Markets, Global Stock Selloff Continues

Loose Money Party Peaks, Hangover Anticipation Looms.

Rica Gold reports: Global stocks started the week sharply lower amid concerns about tighter monetary policy, resuming declines that have halted two months of calm summer trading.
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“Central banks get most of the credit for the calm and upward-moving market over the summer, but I don’t think we can depend on that going forward.”

— Jeff Layman, chief investment officer at BKD Wealth Advisors

Markets in Europe and Asia retreated Monday amid signs the world’s central banks will be less accommodative than previously expected.APPROVED-non-stop-panic

“Bourses in Asia closed with steep declines, with shares in Hong Kong off around 3.3%, Shanghai down 1.9%, Japan down 1.7% and Australia down 2.2%.”

“Central banks get most of the credit for the calm and upward-moving market over the summer, but I don’t think we can depend on that going forward,” said Jeff Layman, chief investment officer at BKD Wealth Advisors.

The Stoxx Europe 600 shed 1.9% early in the session, while futures pointed to a 0.6% opening loss for the S&P 500 after its biggest daily drop since the U.K.’s EU referendum.

Bourses in Asia closed with steep declines, with shares in Hong Kong off around 3.3%, Shanghai down 1.9%, Japan down 1.7% and Australia down 2.2%.

The Federal Reserve Building in Washington, U.S. There are heightened expectations for an interest rate rise by the Fed later this year.

The Federal Reserve Building in Washington, U.S. There are heightened expectations for an interest rate rise by the Fed later this year. Photo: Reuters

Stocks and long-dated government bonds sold off on Friday after comments from Federal Reserve Bank of Boston President Eric Rosengren heightened expectations for an interest rate rise later this year. Read the rest of this entry »


[VIDEO] Cruz’s CNBC Economy Interview

Cruz just had a very interesting hour-long interview on CNBC this morning with Joe Kernen, Becky Quick and Andrew Ross Sorkin on the Squawkbox financial program. The CNBC gang hit Cruz with everything from Japanese and German basis points, to negative global interest rates, to bank bailout policies, tax reform, economic effects of climate change proposals, opposition to various kinds of VAT taxing, instability of commodity prices, Fed monetary policy, etc.

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Reagan administration economist Arthur Laffer, one of the architects of Cruz’s tax plan, weighs in for an extra helping of tax and quantitative easing wonkishness.

…This is a much more in-depth discussion than the stump speech snippets we’ve all heard many times…(more)

Source: RedState


GLOBAL PANIC UPDATE: China Halts Stock Trading After 7% Rout Triggers Circuit Breaker

Chinese stock exchanges closed early for the second time this week after the CSI 300 Index plunged more than 7 percent.panic-betty

Chinese stock exchanges closed early for the second time this week after the CSI 300 Index plunged more than 7 percent.

Trading of shares and index futures was halted by automatic circuit breakers from about 9:59 a.m. local time. Stocks fell after China’s central bank weakened the currency’s daily reference rate by the most since August.

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“The yuan’s depreciation has exceeded investors’ expectations,” said Wang Zheng, Shanghai-based chief investment officer at Jingxi Investment Management Co. “Investors are getting spooked by the declines, which will spur capital outflows.”

Under the mechanism which became effective Monday, a move of 5 percent in the CSI 300 triggers…(read more)

Source: Bloomberg Business


Circuit Breaker! China Halts Stock Market Fall 

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Yifan Xie and Shen Hong report: China’s stock market regulator announced last month that come the New Year it would introduce a circuit breaker–a forced pause to trading–if shares fell too precipitously. On the first trading day of the year, officials had to reach for the newly installed system, twice.

 “The U.S. adopted the circuit breaker system in 1988, and it was only triggered once. The history of China’s circuit breaker is one day, and we’ve triggered it twice.”

An index of the 300 biggest stocks listed in Shanghai and Shenzhen plunged Monday, triggering the circuit breaker and leading first to one 15-minute pause in trading and then a second halt, which closed the markets for the remainder of the day 80 minutes earlier than scheduled.

“Excessive interference with trading will affect market efficiency and become counter-productive.”

— Chief economist Lin Caiyi

The markets opened in negative territory and stayed there as a flurry of bad news arrived: a weaker-than-expected gauge of manufacturing activity and a further slide in the value of the country’s currency. Adding to the bearish mood are worries among investors about the lapse this Friday of a six-month ban on selling shares by major shareholders–those holding 5% stakes or larger in a listed company. The ban was imposed in July last year to stem a meltdown in the stock markets, and its end may lead to more selling.

An investor at a brokerage firm in the Chinese city of Heifi on Wednesday. Individual investors who began selling in mid-June helped unleash a downward spiral of more selling. Photo: Reuters

Markets turned critical 12 minutes into the afternoon session, as the CSI 300 Index fell 5%, prompting the 15-minute suspension. Six minutes after trading resumed, at 1:27 p.m.,the hemorrhaging continued. The CSI 300 index dived further, hitting a 7% limit and bringing the trading day to an end.

[Read the full story here, at China Real Time Report – WSJ]

At the close at 1:34 p.m, the Shanghai Composite Index slumped by 6.9% at 3296.66, and the smaller Shenzhen Composite Index shed 8.2% at 2119.90.

Caught off guard by the plunge, traders speculated that the securities regulator was conducting a test of the new circuit breaker mechanism. Read the rest of this entry »


Debt Distress Level at Highest Since Recession

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The number of companies with the lowest credit ratings and negative outlooks jumped to 195 in December, the highest level since March 2010, says Standard & Poor’s.

Matt Krantz reports: Nomura Head of U.S. Rates Strategy George Gonclaves discusses Fed policy and the U.S. economy. He speaks on “Bloomberg Surveillance.” Bloomberg

Higher interest rates are about to hit companies – just when many are ill prepared to handle them.

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The Federal Reserve this month took interest rates up for the first time in nearly a decade – ending the days of free money. It might take a few years for higher rates to hit companies – as they look to refinance debt. But the troubling part is many companies aren’t in great shape to eat the higher costs.

The number of companies with the lowest credit ratings and negative outlooks jumped to 195 in December, the highest level since March 2010, says Standard & Poor’s. The biggest culprit for the jump in these so-called “weakest links” is the oil and gas sector, which accounts for 34 of them. But financial companies are close behind, representing 33 of the weakest links, says S&P….(read more)

Source: USAToday


Dallas Fed says U.S. Has Lost 70,000 Oil Jobs in the Past Year 

Andrew Burton / Getty Images

HOUSTON – Collin Eaton writes: For American drillers, the New Year will likely bring more of the same – financial pressure and mass layoffs.

The U.S. petroleum industry hasn’t seen this many bankruptcies in one quarter since the Great Recession, the Federal Reserve Bank of Dallas says, counting nine Chapter 11 court filings in the year’s final three-month period. And that’s just a third of the year’s domestic casualty count.

The Dallas Fed also estimates in a new report on Thursday the nation has lost about 70,000 oil and gas jobs since October 2014, a 14.5 percent drop in the 14 months after the domestic shale drilling boom that drew thousands to Houston’s oil hub began a steep decline.

But the sacrifice of dozens of U.S. oil producers, thousands of oil field workers and more than 1,200 drilling rigs still hasn’t stalled U.S. crude production enough to shrink the global oil glut that has sent oil prices below $40 a barrel.

Global crude supplies, the Fed said, could outpace demand by 600,000 barrels a day, and the world’s crude storage tanks may not start to decline until 2017.

That’s in part because increased production from Iran has come on earlier than anticipated and the Organization of the Petroleum Exporting Countries is expected to continue pumping crude at current levels. Read the rest of this entry »


Well, That Explains It

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One can only wonder why the president continues to overlook the American businessmen and women who build the healthy economy that enables workers to find jobs and careers.

Andy Puzder writes: In his remarks at a White House event last week called the Summit on Worker Voice, President Obama said that people who work hard “should be able to get ahead” but went on to acknowledge that workers are “seeing their wages and their incomes flatlining.”

“Here’s the reality: Wages and incomes for workers are stagnant because there aren’t enough jobs…When the job market is strong and businesses must compete for employees, wages and benefits improve. The solution, then, is more jobs. This isn’t rocket science.”

The reason, according to Mr. Obama, is dwindling union membership. “Union membership today is as low as it’s been in about 80 years, since the ’30s,” he said. “And I believe that when folks attack unions, they’re attacking the middle class.” Thus he recommends “making it easier, not harder, for folks join a union.”

“Businesses create jobs; labor unions do not. To the contrary, labor unions often discourage businesses from creating jobs, particularly entry-level ones, by increasing the cost of labor without increasing its value.”

Here’s the reality: Wages and incomes for workers are stagnant because there aren’t enough jobs. It’s a matter of supply and demand. When jobs are scarce and people are unemployed, wages and benefits decline. When the job market is strong and businesses must compete for employees, wages and benefits improve. The solution, then, is more jobs. This isn’t rocket science. One can only wonder why the president continues to overlook the American businessmen and women who build the healthy economy that enables workers to find jobs and careers.

[Read the full text here, at WSJ]

Businesses create jobs; labor unions do not. To the contrary, labor unions often discourage businesses from creating jobs, particularly entry-level ones, by increasing the cost of labor without increasing its value. Even if labor unions could magically lift wages for those lucky enough to have a job in this economy, what about the unemployed?

In September the labor-force participation rate—the percentage of Americans employed or actively looking for work—continued its decline under Mr. Obama, hitting 62.4%, a low last seen 38 years ago during the Carter administration. Read the rest of this entry »


Apple is Having its Worst Year Since the Financial Crisis

APPL is still on track to log its worst performance in six years.

 reports: Apple has done better than the broader market this year, rising 1.5 percent while the S&P 500 has fallen more than 2 percent.

“Some of the bloom is off the rose. I think that’s a little bit unfair. We still think it’s a great story, we still think its going to have a good six months, but some of the excitement and momentum traders have backed off, probably in part because of a risk-off general attitude in the markets.”

However, the stock is still on track to log its worst performance in six years.

In 2008, Apple shares fell more than 50 percent. Since then, the stock has consistently risen 5 percent or more.

“We tend to see a little bit of a trail down in Apple going into earnings, we tend to see people be worried. And then we see the shares strengthen after the earnings are reported.”

Max Wolff, chief economist at Manhattan Venture Partners, said the stock’s lackluster performance this year is likely due to concern about the completion of the Apple car, sales of the new Apple watch and more risk-averse investors.

“Some of the bloom is off the rose,” Wolff said Friday on CNBC’s “Trading Nation.” “I think that’s a little bit unfair. We still think it’s a great story, we still think its going to have a good six months, but some of the excitement and momentum traders have backed off, probably in part because of a risk-off general attitude in the markets.”

However, Wolff said Apple’s third-quarter earnings report, which is scheduled for Oct. 27, could bring some of that excitement back. Read the rest of this entry »


Americans Have More than They Realize

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Chelsea German writes: According to Gallup, more Americans think of themselves as “have-nots” today than at any point since Gallup began posing the question almost thirty years ago, while fewer Americans see themselves as “haves.” (Please see Emily Ekins’s earlier post for an in-depth analysis from a different angle). But do Americans actually have less in 2015 than in 1988? Let’s dig into the data to see whether Americans might have more than they realize.

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2015 is the first year when Americans spent more money dining out than they spent on groceries. Let’s examine why that might be. In 2015, U.S. GDP per person (adjusted for inflation) reached an all-time high. At the same time that average personal wealth is rising, many necessities like food are going down in price. As a result, spending on the basics takes up a smaller and smaller share of an American’s personal disposable income—dropping from 39% in 1988 to 32% in 2013. This means that Americans have more money left at the end of the day, which they can then choose to save, invest, or spend on luxuries like dining out.

Not only are Americans wealthier on average, but they are also working less. The average American worker in 2015 works 30 fewer hours in a year than her counterpart in 1988, and yet is almost $18,000 dollars richer in real terms.

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HumanProgress.org advisory board member Mark Perry recently pointed out that today’s young Americans may actually be the luckiest generation in history, based on what they can buy with earnings from a summer job….(read more)

Source: Cato @ Liberty


[VIDEO] Operation Choke Point Was Meant to Stop Fraud. So Why is the Program Going After Legitimate Business?

The Government’s Secret War on Small Business

Banks are sending notices of account closure out to small businesses across the country, to clients they’ve done business with for years, even decades. The reason? They often don’t provide one.

But a growing number of business owners believe they know why they’re being cut off from the financial system. It’s Operation Choke Point, ostensibly an attempt to crack down on fraudulent businesses, but in reality a dragnet that has ensnared innocent entrepreneurs unfairly classified as “high-risk” players.

social-justice

Earlier this year, Federal Deposit Insurance Corporation (FDIC) chairman Martin Gruenberg told Congress that Choke Point was over, but many business owners believe the FDIC and the Department of Justice have passed enforcement duties along to a newly created independent agency: the Consumer Financial Protection Bureau (CFPB), the brainchild of progressive senator Elizabeth Warren (D-Mass.). The CFPB operates under the guidance of the Federal Reserve and doesn’t rely on Congress for funding, which critics say allows it to operate without any meaningful checks on its power.

[Read the full story here, at Reason]

Reason TV profiled two business owners who believe they’ve been targets of Choke Point and its legacy: a payday lender in Southern California and a hookah seller in North Carolina. Brian Wise of the U.S. Consumer Coalition, an organization that’s been compiling Choke Point stories from across the nation, also appears in the video. Read the rest of this entry »


Dow, Nasdaq Plunge 3% into Correction

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U.S. stocks closed deep in the red on Friday as global growth concerns accelerated selling pressure to push the Dow and Nasdaq into correction territory.
The major averages had their biggest trade volume day of the year and posted their worst week in four years.

The Dow Jones industrial average closed at session lows, off nearly 531 points and in correction territory for the first time since 2011 as all blue chips declined. The last time the index closed more than 500 points lower was on Aug. 10, 2011. In the last five years, the index has only had four instances with closing losses of more than 400 points.

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“For investors the momentum and the drive of the market is now lower (than) it used to be because there’s no place to hide,” said Lance Roberts, general partner at STA Wealth Management. “Every time we hit the major technical points we kept selling.”

A trader noted that investors stopped looking at technicals and were plowing through them.

“It’s an expiration day and it looks like they’re to have for sale on the close maybe as much as a billion dollars,” said Art Cashin, director of floor trading for UBS.

The Nasdaq Composite lost 3.5 percent, also closing in correction territory and joining the other major averages in negative territory for the year.

Apple declined 6 percent, in bear market territory, and the iShares Nasdaq Biotechnology ETF (IBB) plunged 3.1 percent.

“Right now there is a feeling of fear in the marketplace and all news is interpreted negatively and it’s interpreted indiscriminately,” said Tom Digenan, head of U.S. equities as UBS Global Asset Management…(read more)

Read the rest of this entry »


U.S. Stocks Drop on Media Meltdown

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Fears of ‘cord-cutting’  jolt stocks of traditional media firms.

Austen Hufford And Saumya Vaishampayan report: Stocks slumped on Thursday in a selloff led by shares of media companies, which have reported a flurry of disappointing earnings amid concerns about the shift away from traditional television.

“Media stocks are getting slaughtered. It’s been the long-running fear that we would eventually see cord-cutting. Everyone thought it would be a slow-moving train wreck, but Disney’s comment woke people up.”

— Aaron Clark, a portfolio manager at GW&K Investment Management

A 15% decline in Viacom Inc. dragged down the Nasdaq Composite Index, which was 1.9% lower at 5044. Before the opening bell, the media giant reported a decline in second-quarter profit and revenue, fueling worries that more consumers are cutting the cable cord and turning to the Internet for their viewing.

Kitchen-Planet

Shares of Walt Disney Co. tumbled for a second day after Chief Executive Robert Iger late Tuesday noted subscriber losses at ESPN.

That again weighed on the Dow Jones Industrial Average, which declined 154 points, or 0.9%, to 17386.77. The S&P 500 fell 1% to 2079.

Disney was down 4.8% on Thursday after falling 8.4% Wednesday. 21st Century Fox Inc. declined 11% after lowering its expectations for full-year profit for fiscal 2016.

Picture showing the logo of the NBC Tele

“Media stocks are getting slaughtered,” said Aaron Clark, a portfolio manager at GW&K Investment Management, which manages $25 billion in assets. “It’s been the long-running fear that we would eventually see cord-cutting. Everyone thought it would be a slow-moving train wreck, but Disney’s comment woke people up.”

[Read the full text here, at WSJ]

Thursday’s losses come against the backdrop of tepid growth in the U.S. and around the world. Many investors are also concerned that elevated valuations on some stocks aren’t supported by earnings growth.

As well, investors are skittish ahead of the July U.S. jobs report, due out Friday, as they try to gauge the path of interest rates in the U.S. Read the rest of this entry »


The Worst Economic Expansion Since World War II Was Even Worse Than You Thought

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Since the recession ended in June 2009, the economy has advanced at a 2.2% annual pace through the end of last year. That’s more than a half-percentage point worse than the next-weakest expansion of the past 70 years, the one from 2001 through 2007.

Eric Morath reports: The economic expansion—already the worst on record since World War II—is weaker than previously thought, according to newly revised data.

From 2012 through 2014, the economy grew at an all-too-familiar rate of 2% annually, according to three years of revised figures the Commerce Department released Thursday. That’s a 0.3 percentage point downgrade from prior estimates.

The revisions were released concurrently with the government’s first estimate of second-quarter output.

navy-getty

“While there have been highs and lows in individual quarters, overall the economy has failed to break out of its roughly 2% pattern for six years.”

Since the recession ended in June 2009, the economy has advanced at a 2.2% annual pace through the end of last year. That’s more than a half-percentage point worse than the next-weakest expansion of the past 70 years, the one from 2001 through 2007. While there have been highs and lows in individual quarters, overall the economy has failed to break out of its roughly 2% pattern for six years.

 BN-JP847_Revise_G_20150729124033

The latest revision, however, did significantly upgrade what was seen as a historically wretched winter of 2014.

The output reading for the first quarter of last year was recast to a 0.9% contraction instead of a 2.1% annualized drop. The prior figure represented the worst contraction on record outside of a recession. The new number isn’t even the worst quarterly contraction of the expansion. GDP declined at a 1.5% annual pace in the first quarter of 2011. Read the rest of this entry »


After Five Years, Dodd-Frank Is a Failure

obama-signs-dodd-frank

Before Dodd-Frank’s passage, former Sen. Chris Dodd said that ‘no one will know until this is actually in place how it works.’ Today we know. 

House Financial Services Committee Chairman Jeb Hensarling writes: Tuesday will mark five years since President Obama’s signing of the Dodd-Frank law, the most sweeping rewrite of the country’s financial laws since the New Deal. Mr. Obama told the country that the bankerlegislation would “lift our economy.” The statute itself declared that it would “end too big to fail” and “promote financial stability.”

“What is most disturbing about Dodd-Frank is the authority it gives bureaucrats to control huge swaths of the economy.”

None of that has come to pass. Too-big-to-fail institutions have not disappeared. Big banks are bigger, small banks are fewer, and the financial system is less stable. Meanwhile, the economy remains in the doldrums.

Dodd-Frank was based on the premise that the financial crisis was the result of deregulation. Yet George Mason University’s Mercatus Center reports that regulatory restrictions on financial services grew every year between 1999-2008. It wasn’t deregulation that caused the crisis, it was dumb regulation.

Photo by Mark Wilson/Getty Images

Photo by Mark Wilson/Getty Images

The law has crushed small banks, restricted access to credit, and planted the seeds of financial instability. 

“Oversight? CFPB funding is not subject to congressional appropriations, and Dodd-Frank requires courts to grant the bureau deference regarding its interpretation of federal consumer-financial law.”

Among the dumbest were Washington’s affordable-housing mandates, beginning in 1977, that led to a loosening of underwriting standards and put people into homes they couldn’t afford. The Federal Reserve played its part in the 2008 financial crisis by keeping interest rates too low for too long, inflating the housing bubble. Washington not only failed to prevent the crisis, it led us into it.

“Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s ‘Durbin amendment,’ which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans.”

Dodd-Frank was supposedly aimed at Wall Street, but it hit Main Street hard. Community financial institutions, which make the bulk of small business loans, are overwhelmed by the law’s complexity. Government figures indicate that the country is losing on average one community bank or credit union a day.

“Because of Dodd-Frank, financial markets will have less capacity to deal with shocks and are more likely to seize up in a panic. Many economists believe this could be the source of the next financial crisis.”

Before Dodd-Frank, 75% of banks offered free checking. Two years after it passed, only 39% did so—a trend various scholars have attributed to Dodd-Frank’s “Durbin amendment,” which imposed price controls on the fee paid by retailers when consumers use a debit card. Bank fees have also increased due to Dodd-Frank, leading to a rise of the unbanked and underbanked among low- and moderate-income Americans. Read the rest of this entry »


BREAKING: U.S. Officials: Massive Breach of Federal Personnel Data

Shutterstock

WASHINGTON — The Obama administration is scrambling to assess the impact of a massive data breach involving the agency that handles security clearances and employee records, U.S. officials said Thursday. STAMP-panic-red-250

A congressional aide familiar with the situation, who declined to be named because he was not authorized to discuss it, said the Office of Personnel Management and the Interior Department were hacked. A second U.S. official who also declined to be identified said the data breach could potentially affect every federal agency.

The White House was considering a public announcement of the breach Thursday night or Friday morning, the second official said.

The Office of Personnel Management is the human resources department for the federal government, and issues security clearances….(developing)

StarTribune.com


‘Not the Only Gorilla in the Jungle’: Japan Overtakes China as Largest U.S. Bondholder

japan-stock-WSJ

Japan’s purchases will help soothe lingering concerns that U.S. bond prices could decline as China slows its buying. 

Min Zeng in New York, Lingling Wei in Beijing and Eleanor Warnock in Tokyo report: Japan dethroned China as the top foreign holder of U.S. Treasurys for the first time since the financial crisis, following a wave of purchases by buyers shifting money to the U.S. as Japan’s economic policies push down interest rates there.

“China is currently the 800-pound gorilla in the U.S. Treasury market. However, it is not the only gorilla in the jungle.”

–James Sarni, a managing principal at investment manager Payden & Rygel, which oversees $90 billion of assets

In reclaiming its status as the largest foreign creditor to America in U.S. official data, Japan is japan-chart-WSJreasserting itself as Beijing holds its Treasury portfolio steady amid a weakening Chinese economy.

“U.S. debt bears higher yields than government bonds offered in other rich nations, thanks to the perception of stronger U.S. growth prospects and to central-bank bond purchases that have driven yields near zero across Europe and in Japan.”

Private investors and official institutions in Japan owned $1.2244 trillion of U.S. government securities at the end of February, compared with $1.2386 trillion at the end of January, according to the latest monthly data released by the Treasury on Wednesday.

China held $1.2237 trillion of Treasury debt at the end of February, compared with $1.2391 trillion a month earlier.

Over the past year, Japan has boosted its holdings by a net $13.6 billion, while China’s holdings dropped by $49.2 billion.

“The single largest holder of U.S. long-term debt is the Federal Reserve, with more than $2 trillion. The amount has surged from $755 billion at the end of 2007, fueled by Fed purchases of long-term securities in response to the financial crisis”.

The Treasury data, released with a two-month lag, don’t capture all of the Treasury-bond holdings China may have parked at middlemen in places such as the U.K. and Belgium. Many analysts and investors believe China has considerable holdings bought through such intermediaries. The Treasury notes on its website that “it is difficult to draw precise conclusions about changes in the foreign holdings of U.S. financial assets by individual countries” from the capital-flow data.

“The shift also reflects changes sweeping China. The world’s most-populous nation has in recent months largely held its Treasury portfolio in place, reflecting a slowdown in the growth of its $3.73 trillion foreign-exchange reserve, the world’s largest, and an effort to shift those reserves toward higher-yielding assets.”

The Japanese purchases have helped drive long-term U.S. bond yields near record lows despite an economic expansion that averaged 2.7% annually over 2013-14. Those low yields have, in turn, helped keep down interest rates for Americans on everything from home loans to credit cards. Read the rest of this entry »


Occupy Hong Kong: Six Months Later

isabella-HK

One of the most memorable sights of the Admiralty site during Occupy was the study room, built of wood and decked out with furniture, lights and Wi-Fi.

Isabella Steger writes: Six months have passed since the outbreak of the pro-democracy Occupy protests in Hong Kong, and a small but determined group of activists wants to make sure their struggle isn’t forgotten.

On the sidewalks by the legislative chamber and government offices in Admiralty, a collection of tents has remained since police cleared the site in December. It was here on Sep. 26 that students scaled a wall to try to enter Civic Square, a place that had been sealed off by the government. Two days later, tens of thousands poured into the main roads, prompting police to use tear gas, on a day now remembered as “928” by activists.

[Read the full text here, at the Wall Street Journal]

Over the weekend, crowds turned out at the encampment, and to a second protest site in Mong Kok, to observe the anniversary of the protests. There were seminars on democracy and photo and art exhibitions to commemorate the date.

Students gather at a recreated version of the study room that was one of the highlights of the Occupy Hong Kong protests. Isabella Steger/The Wall Street Journal

Students gather at a recreated version of the study room that was one of the highlights of the Occupy Hong Kong protests. Isabella Steger/The Wall Street Journal

The tents have been growing in number, from about 70 in December to over a hundred now, stretching back out on to the side of the main thoroughfare on Harcourt Road. Some of the more permanent occupants are familiar faces to the protesters, such as Bob Kraft, an American pastor. Others drop in and out.

One of the most memorable sights of the Admiralty site during Occupy was the study room, built of wood and decked out with furniture, lights and Wi-Fi. Even that has been reconstructed in recent days at the new encampment, albeit much smaller and away from its previous location the middle of the road.

New York-based artist Miso stands in front of some of his paintings near the Occupy protest site in Hong Kong’s Admiralty neighborhood. Isabella Steger/The Wall Street Journal

New York-based artist Miso stands in front of some of his paintings near the Occupy protest site in Hong Kong’s Admiralty neighborhood. Isabella Steger/The Wall Street Journal

On Sunday evening, a group of students sat studying for their university entrance examinations, nibbling on Japanese snacks and breaking out into occasional discussions over Occupy-related family strife and a proposed third runway at Hong Kong’s airport, which some have criticized for cost and environmental reasons.

“We want to recreate the feeling of being at the study room,” said Joyce Lo, 18 years old, who was set to take an exam in Chinese reading and writing on Monday. “It’s that feeling when people walked past us in the study room and they fed us and told us they support us, even though the food wasn’t always great, like sometimes the dessert was a bit watery.” Read the rest of this entry »


Landmark Legal Case: Unemployed Gender Studies Major Sues ‘The Patriarchy’

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The suit seeks $2 million in compensation and $139 million in punitive damages, which together equal $1 from every adult man in America.

An unemployed gender studies major from Eugene, Ore. sued “The Patriarchy” today in federal court for refusing to give her a job.

In a 25-page brief, attorneys for Sarah Miller-Jones, 24, argue that gender discrimination from the patriarchy has prevented their client from finding gainful employment since she graduated from university three years ago.

“It is outrageous that the patriarchy refuses to offer our client a decent career. She has applied for over 20 positions in the recording, publishing and television industries and has been rejected every single time.”

The suit seeks $2 million in compensation and $139 million in punitive damages, which together equal $1 from every adult man in America.

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“Despite the fact that Ms. Miller-Jones graduated with a 2.8 GPA from the prestigious University of Oregon, she has been unable to find a job fitting her qualifications,” the document reads.

“We all know that terms like ‘no experience’ and ‘lack of relevant education’ are codewords the patriarchy uses to keep keep women in their place. But Ms. Miller-Jones refuses to be a housewife or a nurse. She deserves a real job.”

“Ms. Miller-Jones has been on unemployment benefits for 18 months. And despite extensive coursework in Zambian feminist hip-hop she has only received six job offers — all of which were for entry-level call center and health care positions.

“It is outrageous that the patriarchy refuses to offer our client a decent career. She has applied for over 20 positions in the recording, publishing and television industries and has been rejected every single time.

“Despite extensive coursework in Zambian feminist hip-hop she has only received six job offers — all of which were for entry-level call center and health care positions.”

“We all know that terms like ‘no experience’ and ‘lack of relevant education’ are codewords the patriarchy uses to keep keep women in their place. But Ms. Miller-Jones refuses to be a housewife or a nurse. She deserves a real job.”

Millions of young Americans who recently graduated from university are finding themselves working in jobs below their educational level. Read the rest of this entry »


Wall Street Firm Develops New High-Speed Algorithm Capable Of Performing Over 10,000 Ethical Violations Per Second

Wall-street-onion

NEW YORK—Calling it a major breakthrough that will significantly expedite and streamline its daily operations, Wall Street financial firm Goldman Sachs revealed Thursday it has developed a new high-speed algorithm that is capable of performing more than 10,000 ethical violations per second.

“With this new automated program, we’ll be able to systematically deceive investors, engage in conflicts of interest, and execute thousands of other blatantly unethical dealings in the time it takes to press a button.”

…said John Waldron, co-head of Goldman Sachs’ investment banking division, who added that the high-frequency impropriety system will be able to break more rules in a minute than an entire floor of morally suspect securities traders, financial analysts, and portfolio managers could over the course of a week.

Wall Street

“In the past, if one of our brokers wanted to exploit a questionably legal regulatory loophole or breach the covenant of good faith with an investment client, that would require hours of manually contravening the basic principles of professional integrity. But this innovative system will allow millions of such transgressions to go through every single day. Going forward, I expect this revolutionary program to be the cornerstone of our business.”

— John Waldron, co-head of Goldman Sachs’ investment banking division

Read the rest of this entry »


China: Julia Leung, ‘The Tides of Capital’

Julia-Leung

Edited from an interview with William Kazer

Julia Leung has spent two decades engaged in financial policy work for the Hong Kong government. During her time as an official, she’s seen the city’s economy whiplashed by the 1997-1998 Asian financial crisis and again by the global crisis a decade later. She has also tides-of-capitalwitnessed the territory’s increasing economic links to mainland China.

[Check out Julia Leung’s book “The Tides of Capital: How Asia surmounted financial crisis and is guiding world recovery” at Amazon]

In her new book The Tides of Capital, Ms. Leung examines the origins and response to financial crises of the 1990s and 2008 that shook economies across Asia and the world. The former Hong Kong Monetary Authority official and ex-undersecretary for financial services and the treasury (who also had a decade-long stint with the Asian Wall Street Journal) contends that emerging economies need a greater voice in global financial governance. China Real Time caught up with the reporter-turned-policy maker to talk about the financial challenges facing emerging nations, as well as China’s own financial and economic reforms.

Edited excerpts (read the full text of this edited excerpt here)

In your book you conclude that the IMF and the U.S. offered up the wrong prescriptions in the Asian crisis of 1997-1998. Where do you see policy leadership headed in the future?

Twenty years ago, the world was divided between the core and the outlying periphery….Financial crises only happened in the periphery, and the core dished out advice. In 2007, financial crisis erupted at the core and rippled to the periphery. Between 2008 and 2013, the size of China ’s economy doubled in dollar terms. The U.S. grew 14% during the same period, while Europe including the U.K. still falls short of the peak reached before the crisis. Combined GDP of emerging markets now make up more than 50% of global GDP, compared to one-third in 1990.

There will have to be considerable give-and-take between the country that is still the world’s leading economy and the other important players, especially China, that are assuming a progressively more important role. In view of the economic stagnation and political infighting besetting Europe, that continent will not be playing a full part in developing and policing a julia_leung_highresseries of better standards for world economic and financial governance. The world will rely ever more on a U.S.-Asian tandem for policy leadership.

You say the U.S. Congress is standing in the way of reforming International Monetary Fund quotas that would give more say to emerging markets. What will happen if there’s no reform?

The IMF is ideally positioned to provide policy leadership, particularly at times of crisis, but its effectiveness is undermined by its shareholding and governance structure, which has not kept pace with the shift in economic power to emerging markets. It is not surprising that developing countries have shown considerable frustration and exasperation with this imbalance, leading to new regional financing facilities, such as the Asian Infrastructure Bank and the New Development Bank.

When the core of the old world order continues to write rules that don’t take developing countries’ interests into account, the “peripheral” nations will use their own vast resources to start a new core…and write their own rules.

You say Asia needs to speak with a more coordinated voice. How much progress do you see here and what steps are still needed?

Even if Asia has a coordinated voice, it’s hard for it to be heard in the councils of the world power when the governance of these councils is slow to reflect shifting power. Read the rest of this entry »


Sacré Bleu! Socialism in France as Unpopular as ‘Progressivism’ is in U.S.: Hollande Approval Ratings Freeze Over in Midterm French Poll

 Hollande-fr

Half-way into his five-year mandate the popularity of French President Francois Hollande hit a new low on Thursday, hours before the Socialist leader addresses the nation to defend his shaky record on the economy.

“The absence of a clear vision and lack of coherence in economic policies is weighing on confidence and therefore investment and economic activity.” 

— CEO Jean-Paul Chifflet

In the worst score for a president in modern-day polling, Hollande received a 12 percent approval rating in the monthly survey by pollster YouGov, down 15 percent from the prior month. Other recent polls have put his popularity at 13 percent.

[Also see: François Hollande a Lying Socialist who ‘Doesn’t Like the Poor,’ says Ex-Girlfriend]

Earlier the chief executive of France’s third-largest bank, Credit Agricole, slammed Hollande’s government for its uncertain efforts to kickstart the eurozone’s second largest economy. Read the rest of this entry »


Federal Reserve Report Reveals: Under Obama, Only the Richest 10 Percent Saw Incomes Rise

obama-toast

Incomes fell for most families in past three years, while top 10 percent prospered

For the Washington TimesJennifer Pompi reports: Under President Obama, the richest 10 percent were the only income group of Americans to see their median incomes rise, according to a survey released this week by the Federal Reserve.

“The wealth share of the top 3 percent climbed from 44.8 percent in 1989 to 51.8 percent in 2007 and 54.4 percent in 2013. … The share of wealth held by the bottom 90 percent fell from 33.2 percent in 1989 to24.7 percent in 2013.”

The Fed data covered the years 2010-2013, during which period Mr. Obama constantly campaigned against income inequality and won re-election by painting his Republican rival as a tool of Wall Street plutocrats.

AFL-CIO

“One of our biggest concerns is who is the candidate’s economic team, because if the present economic team doesn’t change, you are going get the same results.”

— AFL-CIO President Richard Trumka

“Data from the 2013 [Survey of Consumer Finances] confirm that the shares of income and wealth held by affluent families are at modern historically high levels,” the report said in noting that the median income fell for every 10-percent grouping except the most affluent 10 percent.

Ask AP

“The 2013 SCF reveals substantial disparities in the evolution of income and net worth since the previous time the survey was conducted, in 2010,” the report stated. The SCF is conducted by the Federal reserve triennially and compiles information about family incomes, credit use, net worth and finances. Read the rest of this entry »


Progress: Government Workers Cost 45% More Than Private Sector Workers

 writes:  The United States Bureau of Labor Statistics (BLS) announced on March 12th that the total cost of employing a state or local government worker is 45% more than an equivalent worker in the private sector.

For the month of December 2013, employers in private industry spent an average of $29.63 per employee hour worked, but the equivalent cost for a government worker averaged $42.89 per hour. Not only do government employees average 33% higher pay than those in the private sector, their pension and retirement benefit costs are now an incredible 254% higher also. Given that compensation formulas for federal, state, and local government are comparable, it should come as no surprise that this year spending by the U.S. government will exceed revenue by an all-time high of $744.2 billion, and our gross national debt is a stunning $18.5 trillion.

“Not only do government employees average 33% higher pay than those in the private sector, their pension and retirement benefit costs are now an incredible 254% higher also.”

The BLS reported that private employers spent $20.76 on average for wages and salaries, plus $8.87 for benefits per hour worked. State and local government paid $27.66 for wages and salaries, plus $15.23 for benefits per hour worked. Government employees cost 33% more in wages and 71% more in benefits. The biggest difference is that government pension costs are 254% higher than the private sector.

Read the rest of this entry »


Wall Street adviser: Actual unemployment is 37.2%

labor-force-rate-x

‘Misery Index’ Worst in 40 Years

Paul Bedard  writes:  Don’t believe the happy talk coming out of the White House, Federal Reserve and Treasury Department when it comes to the real unemployment rate and the true “Misery Index.” Because, according to an influential Wall Street advisor, the figures are a fraud.

In a memo to clients provided to Secrets, David John Marotta calculates the actual unemployment rate of those not working at a sky-high 37.2 percent, not the 6.7 percent advertised by the Fed, and the Misery Index at over 14, not the 8 claimed by the government.

Read the rest of this entry »


Obama To Americans: You Don’t Deserve To Be Free

Photo by: Pablo Martinez Monsivais President Barack Obama talks about the the budget and the partial government shutdown, Tuesday, Oct. 8, 2013, in the Brady Press Room of the White House in Washington. The president said he told House Speaker John Boehner he's willing to negotiate with Republicans on their priorities, but not under the threat of "economic chaos." (AP Photo/Pablo Martinez Monsivais)

Photo by: Pablo Martinez Monsivais

Harry Binswanger  writes:  President Obama’s Kansas speech is a remarkable document. In calling for more government controls, more taxation, more collectivism, he has two paragraphs that give the show away. Take a look at them.

“…there is a certain crowd in Washington who, for the last few decades, have said, let’s respond to this economic challenge with the same old tune. “The market will take care of everything,” they tell us. If we just cut more regulations and cut more taxes–especially for the wealthy–our economy will grow stronger. Sure, they say, there will be winners and losers. But if the winners do really well, then jobs and prosperity will eventually trickle down to everybody else. And, they argue, even if prosperity doesn’t trickle down, well, that’s the price of liberty.

Now, it’s a simple theory. And we have to admit, it’s one that speaks to our rugged individualism and our healthy skepticism of too much government. That’s in America’s DNA. And that theory fits well on a bumper sticker. (Laughter.) But here’s the problem: It doesn’t work. It has never worked. (Applause.) It didn’t work when it was tried in the decade before the Great Depression. It’s not what led to the incredible postwar booms of the ’50s and ’60s. And it didn’t work when we tried it during the last decade. (Applause.) I mean, understand, it’s not as if we haven’t tried this theory.”

Though not in Washington, I’m in that “certain crowd” that has been saying for decades that the market will take care of everything. It’s not really a crowd, it’s a tiny group of radicals–radicals for capitalism, in Ayn Rand’s well-turned phrase.

The only thing that the market doesn’t take care of is anti-market acts: acts that initiate physical force. That’s why we need government: to wield retaliatory force to defend individual rights.

Radicals for capitalism would, as the Declaration of Independence says, use government only “to secure these rights”–the rights to life, liberty, property, and the pursuit of happiness. (Yes, I added “property” in there–property rights are inseparable from the other three.)

That’s the political philosophy on which Obama is trying to hang the blame for the recent financial crisis and every other social ill. But ask yourself, are we few radical capitalists in charge? Have radical capitalists been in charge at any time in the last, oh, say 100 years?

Read the rest of this entry »


Why Americans Hate their Government

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 writes:  Washington is having one of its odd debates as to whether the Obama administration’s rollout of HealthCare.gov was worse than the Bush administration’s response to Hurricane Katrina. But whatever the answer, if there is one, the real story is that both are examples of a major, and depressing, trend: the declining competence of the federal government. Paul Volcker, former chairman of the Federal Reserve, has been saying for years that most Americans believe their government can no longer act effectively and that this erosion of competence, and hence confidence, is a profound problem.

“The federal service is suffering its greatest crisis since it was founded in the first moments of the republic,” scholar Paul Light writes in his book “A Government Ill Executed.”

Over the past decade, the federal government has had several major challenges: Iraq, Afghanistan, a new homeland security system, Katrina and Obamacare. In almost every case, its performance has been plagued with mismanagement, massive cost overruns and long delays. This was not always so. In the 1940s, ’50s and ’60s, federal agencies were often lean, well managed and surprisingly effective.Paul Hoffman, the administrator of the Marshall Plan, pointed out that his monumental project came in on time and under budget.

Some federal agencies still maintain a culture of high performance, including NASA, the Centers for Disease Control and Prevention, the Federal Reserve System and the Defense Department’s research arm, DARPA. But they are now islands in a sea of mediocrity.

Read the rest of this entry »


Father Fed Knows Best

"Trust Us"

Government force and fraud is for our own good.

The government thinks you’re stupid, or at least ignorant.

Jonah Goldberg writes:  This isn’t just an indictment of the current government or an indictment of government itself. It’s simply a statement of fact. At its core, the government exists to do certain things that people aren’t equipped to do on their own. The list of those things has gotten longer and longer over the years. In 1776, the federal government’s portfolio could have easily fit in a file folder: maintain an army and navy, a few federal courts, the post office, the patent office, and maybe a dozen or two other pretty obvious things.

Now, the file folder of things the federal government does is much bigger. To paraphrase Dr. Egon Spengler from Ghostbusters, let’s imagine that the federal government in 1776 was the size of this Twinkie (take my word for it, I’m holding a normal-sized Twinkie). Today that Twinkie would be 35 feet long, weighing approximately 600 pounds. Or, if that illustration doesn’t work for you, consider this: The number of civilians (i.e., not counting the military) who work for the executive branch alone is today nearly equal to the entire population of the United States in 1776. The Federal Register, the federal government’s fun-filled journal of new rules, regulations, and the like, was about 2,600 pages in 1936 (a year after it was created). Today it’s over 80,000 pages.

Read the rest of this entry »


Inflation Fixes Nothing

pic_giant_102813_SM_Inflation-Fixes-Nothing

But it’s easier than acting like responsible adults

I saw this article yesterday, and thought it looked suspicious. Rather than go blind with despair over the NYT’s familiar habit going into battle facing the wrong way, I hoped Kevin Williamson might be scanning skies above Gotham, see the Bat signal, and make an appearance. My wish is granted:

Kevin D. Williamson writes: The New York Times has published a very interesting article forwarding a number of familiar arguments that the Federal Reserve should try to increase inflation in order to encourage economic growth. Without going too deeply into the fallacies behind the idea that higher inflation is a means to strong and sustained economic growth, it is worthwhile to examine the wishful thinking and euphemisms that inform the Times’s account.

Item 1: “Rising prices help companies increase profits; rising wages help borrowers repay debts. Inflation also encourages people and businesses to borrow money and spend it more quickly.”

Let’s take a look at these claims in order. Read the rest of this entry »


Dollar Slips as Fed Worries Continue

Expectations that the Federal Reserve will have to keep its easy-money policies in place for longer following the partial U.S. government shutdown pushed the dollar close to its lowest point of the year against the euro and U.S. Treasury debt prices to their highest point since July.

Yields on the 10-year Treasury note, which move inversely to prices, were down to 2.55%, while the dollar continued its slide against the euro, which rose to $1.3695 from $1.3675 late Thursday in New York, edging closer to this year’s high of $1.3711 reached on Feb. 1. The dollar fell further against the pound, which traded just above the $1.62 level for the first time in two weeks, and resumed its drop against the yen, fetching ¥97.65 from ¥97.93.

About three hours before the start of trading, U.S. futures pointed to a relatively subdued open on Wall Street, where stocks staged a late-session comebackThursday that helped push the S&P 500 to a record close of 1733.15. The front-month contracts for the Dow Jones Industrial Average and the S&P 500 were both up 0.1%, at 15331.00 and 1729.80, respectively. Changes in futures don’t always accurately predict early market moves after the opening bell.

Read the rest of this entry »


The ‘most disturbing sentence uttered during the debt ceiling debate…’

obamaorwelldebt

JOHN HINDERAKER: As Tyler Durden notes, this is the “most disturbing sentence uttered during the debt ceiling debate/government shut down.” America is now going on $17 trillion in debt, a level of insolvency that would already be regarded as catastrophic if the Fed were not keeping interest rates close to zero.

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When Wealth Disappears

LONDON — As bad as things in Washington are — the federal government shutdown since Tuesday, the slim but real potential for a debt default, a political system that seems increasingly ungovernable — they are going to get much worse, for the United States and other advanced economies, in the years ahead.

From the end of World War II to the brief interlude of prosperity after the cold war, politicians could console themselves with the thought that rapid economic growth would eventually rescue them from short-term fiscal transgressions. The miracle of rising living standards encouraged rich countries increasingly to live beyond their means, happy in the belief that healthy returns on their real estate and investment portfolios would let them pay off debts, educate their children and pay for their medical care and retirement. This was, it seemed, the postwar generations’ collective destiny.

But the numbers no longer add up. Even before the Great Recession, rich countries were seeing their tax revenues weaken, social expenditures rise, government debts accumulate and creditors fret thanks to lower economic growth rates.

We are reaching end times for Western affluence. Read the rest of this entry »


Money — the crisis Washington’s ignoring

Ask AP

Seth Lipsky writes: One of the most amazing stories right now is the failure of either President Obama or Congress to address the monetary crisis. This is the crisis Joe Six-Pack feels when he fills his car with gas or fetches up at the supermarket checkout — or when he has a hard time finding a job.

Even as our money doesn’t seem to go as far as it used to just a few years ago, Federal Reserve Chairman Ben Bernanke keeps insisting that inflation is low. Yet the hottest story about Obama’s naming of a new Fed chief has been what a New York Times dispatch called the decision’s “gender undertones.” Read the rest of this entry »