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"Standup Economics" This economy is a what? |
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Short of a Lifetime at Hand? The action in the markets yesterday seemed, at least superficially, to be easily explained by a few headlines. Of course, there was the news about Bear Stearns was planning to bail out a hedge fund, reports that yes - maybe that general strike in Nigeria might have some impact on oil prices, and the talk about changing private equity tax rules.
But to be sure, it could be argued that there was some good news, too. For instance, the Blackstone IPO was a home run for the market, and to hear some forecasts, even better times are ahead later in the year, at least if you listen to the International Monetary Fund's outlook.
My view continues to be that much of the appearance of "good times" is just the effect of inflation, which disguises reality by making it seem like we're on an ever-upward trajectory with better times always just ahead. A chart from the research Department of the St. Louis branch of the (not really) Federal Reserve (it's private bankers that run things) which cites Commerce Department data looks just dandy:
(The Fed chart referenced just sort of "disappeared" after we linked to it...)
However, I would draw your attention to the point where the data line passes through the 5 trillion line. It looks to me like that occurred somewhere around 1987. Using the Minneapolis Fed's inflation calculator, we see that $5 trillion in 1987 would be like $9.045 trillion today. Thus, I conclude that while it seems like GDP has increased from $5-trillion to roughly $13 trillion in 20-years, a gain of 260%, on an inflation adjusted basis, GDP has gained only about $4-trillion on an inflation-adjusted basis, which would put the 20-year return at 180%.
This 180% gain (or just under doubling) in 20-years is seemingly impressive, until you start considering other factors. How about population, for one. With an estimated 10% of Mexico now living in the US (just for openers) population has increased dramatically since 1987. US population was about 242.2 million, compared with today's 302.2 million - a gain of 27.7% - which tones down our 20-year view a tad.
UPDATE: A reader with more coffee sends this...
uh...yeah...
And where has all this marvelous growth been? In debt.
The Office of the Comptroller of the Currency has a report out for Q4 2006 with some really snazzy facts which most investors don't even think about:
With the Chinese stock market bubble in danger of collapsing any day I find myself asking "How much of the apparently 'strong' markets that we're seeing is based on the creation of just more paper debt and how much of the $131-trillion of notional value of derivatives (10-years worth of USA GDP at current rates) is buried in the GDP calculations?" If you've got a definitive answer, I'd sure like to hear it.
In the meantime, I'll just continue to stare in shock at economic data that show without doubt that we are at once both the richest nation in the history of the world and the most addicted ever to the paper chase of unsound (constantly depreciating) money as we race to keep the deck chairs arranged just so on this Titanic ship of debt.
The Friday action in the market might seem a little frightening, but I don't think so - at least not yet. The market's merely dropping in advance of next week's Fed meeting - so we can have a last-gasp rally into the Fourth of July week before things I expect things to turn seriously south for the fall.
Mudstock? Great pictures from a muddy rock concert. The more things change, the more they stay the same, eh?
Peoplenomics: Summer of '29, Watching the World Shake As a student of long wave economics, I would have expected the markets to have crashed long ago, and the nation to be in the midst of a massive recovery effort which would transform work and life as we know it into something a little less tense, a lot less resource depleting, and with a lot more emphasis on human values over the size of paychecks and bonuses. All the factors have been there, including and especially the debasement of the dollar - which thanks to government spending now buys about what a nickel did in 1913. I've underestimated the ability of corpgov to invent bubble after bubble to keep things going. What should have been a crash in 1987 was quickly papered over and we've seen a grand succession of bubbles based on Gulf War One, stock funds in the early 1990's, the internet bubble, and now we're seeing the end of the housing bubble. So is there anything left to "bubble", or is this really the summer of 1929? And what about all those earthquake swarms? Let's find out...
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Friday June 22, 2007 Field Day Weekend! "What weekend?" you're thinking as the coffee hasn't quite kicked in yet. Glad you asked. Field Day is the weekend each year when ham radio operators literally have their take to 'the field' contest and mess around with their radio gear. It's part simulated emergency, with contest, part camp out, part barbeque, and 100% fun.
There's a complex set of rules, including one (Rule 3.3, FD 2007 rules) that says participants can't even start setting up their stations until 4-hours from now [18:00 UTC] (if you're reading this at 14:00 UTC/Zulu - that's coordinated universal time) if you're not a ham, current or ex-military).
Let me give you two very personal experiences about how ham radio has been useful in emergency situations. First, when I was a newly licensed ham (circa Good Friday, 1964) I watched for hours as my neighbor, a silent key by the name of Norb, W7IMF ran hours of phone patches for folks with ham radios in Alaska following the big quake. Having worked on the ACS (Alaska Communications System) he had many friends and ran a lot of phone patches - where people at the other end of a high frequency radio set up in Alaska could be connected to a telephone line in the Lower 48 and health and welfare calls made to reassure worried relatives. To this day, a phone patch (to tie the radio into the phone lines) has been a must-have piece of gear for me.
A more recent experience was in the 2000 (or so...) Seattle earthquake - the 6.2 that knocked down some building fronts on Pioneer Square. The ham radio (as well as police scanner) in the car allowed me to get a few messages around for co-workers, but more important, I was able to know exactly how to proceed to get from my office back out to the sailboat at Shilshole. Which bridges were open, and so forth. Elaine didn't have a license then - she does now - but it would have been dandy if she'd had one then so I could keep in touch with her.
So, forgive me if there's not much in today's report - my mind is elsewhere - I've got a ton of projects to do around the ranch this weekend, but for several hours Sunday, I plan to be parked in front of my ham radios (Icom 746, a 718, and a 735, not to mention the old Yaesu 400 line) and running on generator see how many points I can rack up in a four hour period or so. That's AC7X and usually around the bottom end of the 20 meter CW band.
Field Day comes but once a year, but as hams in hurricane, flood, earthquake hit areas know, emergencies can pop up any time. If you live in Tornado Alley, in the nation's midsection, you probably already know a little something about ham radio and Skywarn.
When terra intrudes, even if you don't get a ham radio license, the importance of at least some minimal communications set up, even if it's just a hand cranked generator-powered radio, can't be underestimated.
What's He Hiding? Dick Cheney wants to keep secrets - so he's not cooperating with the National Archives. Hell, who's needs Congress - or event Presidential Executive Orders - when Dick's around? The administration can be trusted, right? --- Well, then again... Comes testimony on Thursday about how deeply divided the administration was over some of the Bush clan eavesdropping plans. My copy of the Constitution doesn't include massive government operating without warrants...but maybe the folks in the District of Corruption can't read.
Heads in the Ozone In the "I'm not getting it" department: We read frequently about ozone depletion and 'holes in the ozone layer' yet the EPA is about to get significantly tougher on ozone in north Texas. The one thing that jumps out of the proposed regs: "Limiting hours for motorists to gas up". Can you say "restrictions on travel"?
China Protests Remember that report earlier this week that China had overtaken the US in CO2 emissions? The experts are now arguing about it. Figures. Rather than revise the corporate/consumptive/excess debt/profiteering mindset, corpgov will play out the blame-game endlessly. Like doctors arguing about a patient while the patient bleeds to death. Leadership? What's that?
Surgery as Child's Play Speaking of the medical profession: A 15-year old boy has done a c-section to get into the Guinness Book of World Records.
Fed Week Coming You can read up on mortgage rates rising five weeks and taking a down tick and a somewhat healthy economic outlook if you want. I'm thinking the Fed might raise rates sooner than later at their meeting next week. Just a guess. Thursday June 21, 2007 Summer, But for How Long? The arrival of summer came and went peacefully at places like Stonehenge today. Peacefully, that is, if you weren't in Iraq where a suicide bomber killed 13 or Afghanistan where the battle with the Taliban continues.
Come to think of it, it doesn't sound too peaceful in Kosovo, either, as Russia is digging in its heels on independence, or in Nigeria where a general strike (with possible oil implications downstream) enters its second day. For that matter, with the number of world refugees hitting record numbers according to the UN High Commissioner for Refugees, visitors from another planet, looking at earth as an intergalactic ant farm, would have a tough time distinguishing our behavior from that of animals that we quite arrogantly consider lesser beasts. Every time I read the headlines, I wonder "Why would people think that?"
Still, it's a useful day to sort out, as the old joke goes, whether you're a 'lover' or a 'farmer'. If you're a 'lover' you'll bemoan the fact that it's the shortest night of the year. A 'farmer' quite pleased notes it's the longest day...
Beyond Winter I've mentioned several times that it's probably the output from the sun that has been driving the global warming of air, and today there's a report in the Financial Post (Canada) going to much the same idea - and that when we're done with this phase of solar activity, it'll be the Big Chill that comes next.
But what happens between now and then is problematic. Native Americans are getting into the climate debate and the headline "Mother Earth getting angry" pops out of a recent headline. Not only angry, but she's making lakes disappear in places like southern Chile.
So who's going to save us? Not China with it's loads of cheap products, but higher than the US greenhouse gas emissions. And the inconvenient truth may be that much of the global warming talk is a set-up to a new financial bubble-to-come in carbon trading credits. Even school kids are becoming rightfully skeptical of the claims and counter-claims.
We continue to take all this in with a skeptical eye, mindful that if we get sudden global cooling, all the additional water in the atmosphere is likely to settle out as more rain. Flash flooding in the Catskills, along with the north Texas damage, and reports that New Orleans is still at risk.
Passport & Citizenship? new passport rules for people visiting Mexico and Canada (and the Caribbean islands where a drivers license used to be enough) are causing come confusion it seems. Here's a simple answer: Get a passport.
The most troubling development of the whole War on Terror (part real, much provoked) has been the notion that at some point, we're going to all have to present the right papers to exit the USA. I may be off-base here, but that's a lot like putting the barbed wire up to keep us in and not illegals out. And that smacks of pre-WW II Germany, for sure. --- Meantime, the 'second government' of the US -0 namely the career bureaucrats that really run the country (sometimes as they wish and in defiance of Congress and the White House) have decided to actually do a little window-dressing on immigration law enforcement. I read that "81 illegals arrested in [the] Poconos." And lookie here: A "big raid" is underway in Nantucket.
Let me see if I've got this right: The 'second government' hype is 98 illegals arrested today. How frigging stoopid do they think the public is? Don't they 'get it' that the American people can see through the horse puckey of such BS headlines when a minimum of 11-million illegals have been allowed to enter America since the last so-called 'one time only' amnesty in 1986? One-tenth of Mexico lives illegally in the US and 98 arrests make headlines? God help us. The failure to enforce the law since 1986 is in my view nothing short of high treason and you might remember how that's punished.
Go watch the Newt Gingrich ad online. He's got this one presactly right. We don't new new bureaucratic nightmares (Like DHS telling you where you can work). What we need is existing laws enforced. Kennedy and McCain must be either deaf or pandering to people who support non-enforcement of the country's existing laws...
Real America Meantime, the financial instruments boom is not exactly making everyone rich. A reader in Vermont offers this assessment of 'How's things':
The facts of life for middle class America are washed over by the 'second government' which promotes such nonsense as "core rate inflation". Core rate would mean something if food and energy costs were anywhere near the core - but they're not and anyone dumb enough to take a raise for 'core rate' as opposed to real inflation I guess deserves what they get.
Ballsy Move OK, we're all reading headlines about real estate prices coming down. But here we read that Goldman Sachs is raising $4-billion for a new real estate fund. think they might have a forward guess on inflation? Well, that's one outlook, but here's another...
Faber on Bonds I've always liked the work of |
