I had to reprint this in full because of all the fluffery economists which are telling us both we need to spend and we spent too much and get out of debt.
My sentiments exactly.
By Jeff Harding via Minyanville:
In George Orwell’s brilliant novel Nineteen Eighty-Four, one of the characters, Syme, in discussing the nature of Newspeak, says “It’s a beautiful thing, the destruction of words.” Newspeak was a systematic attempt by the dictators of Oceania, a totalitarian society eerily similar to North Korea, to control thought by eliminating words that gave rise to ideas they disapproved. What Syme and Orwell are talking about is that the destruction of words is the destruction of ideas.
There is a parallel to this in contemporary economic thought. Mainstream economists, Keynesians, Neo-Keynesians, and Neoclassicists, would have you believe that what common sense would call “good” is now “bad.” Conversely, “bad” is the new “good.” I don’t mean to suggest that the US is heading toward becoming a North Korea. My point is that that the experts seem to abandon common sense and yet most people instinctively understand that good is good.
France's Roma in Pictures
No this is not from South America, or some third world countries. These are squatter settlements. These squatter settlements typically lack running water, their kids are not enrolled in school and have a host of other problems.
We call them Gypsies in typical American English, Gitanos in Spanish or Roma elsewhere.
When Europe tries to go holier than thou about US immigration policies, we go to think, things are not so benevolent over their either.
From around the web. From across Europe
We call them Gypsies in typical American English, Gitanos in Spanish or Roma elsewhere.
When Europe tries to go holier than thou about US immigration policies, we go to think, things are not so benevolent over their either.
From around the web. From across Europe
Size of wheel symbol represents total population by country (Romania 1.85 million). Shade of each country's background colour represents percentage of Romani with respect to total population (Romania 8.5%).
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| Roma families Lyon |
France expulses 'illegal" Roma, after Sarkozy accuses them of attacking police
Via EU Observer:
Via NY Times,
France's measures are also being scrutinised against similar moves targeting other ethnics or nationalities. A team of legal experts from French ministries are due to meet their counterparts in the commission on Friday, to give further explanations after the respective ministers met justice and human rights commissioner Viviane Reding on Tuesday (31 August).
The expulsions started last month following a speech in which French President Nicolas Sarkozy linked the "illegal" Roma camps to a hike in criminality and vowed to dismantle them without delay. By the end of August, the French authorities said they had evacuated 128 settlements and sent back 979 Romanian and Bulgarian citizens with irregular status.
The governments in Bucharest and Sofia, along with human right groups, the Pope and politicians from within Mr Sarkozy's own centre-right grouping have publicly condemned the move as sparking racism and xenophobia, a fear given weight by a deadly shooting against Roma in Slovakia last week.
Although not officially made public, the report appears to be an attempt by the commission to repair its dented image as guardian of the EU law, after having continuously said it was "analysing" the situation during the month of August.
Via NY Times,
It deported 283 Roma last week, bringing the total number of Romanian and Bulgarian Roma expelled this year to 8,313, compared with 7,875 sent home last year. Those who leave voluntarily are given a small cash payment.
Fed's Fisher: Fiscal Ball is in Congress's court
Fisher right on the money. He is the same guy that says that we are screwed because of unfunded liabilities, via Reuters:
Sounding a theme he has expanded on before, Fisher said businesses are holding back on investments because of uncertainty over the cost of future regulation, such as that mandated by U.S. healthcare reform, and over the country's fiscal direction and future taxes.
"For me, the ball is in the fiscal court for now," he said. "Any further action by the Fed must be subject to the kind of rigorous cost-benefit analysis that Ben Bernanke cited in Jackson Hole. One of the variables that must be taken into account is whether fiscal and regulatory policies are conducive to growth."
Bernanke still clueless: Blames Lehman failure for market turmoil, and tries to wrap his bald head around TBTF
Bernanke is just as guilty. He is out defending his response to Lehman Bros, but in the process is destroying his own credibility. He agrees in his response that the Lehman Bros caused the market turmoil. Prominent economists and market participants blame Lehman's failure with causing market problems, included the siezure of the credit market and the drop in the stock market.
Lehman's failure didn't cause the bubble to burst. The damage had already been done before. No one can really know if the government had come to rescue Lehman if the stock market wouldn't still have dropped and the credit markets wouldn't have siezed. It is all speculation.
Lehman was the canary in the coal mine adverting investors that there were some real problems. To say that we should have nationalized them like AIG is foolish. As it is we are never going to get our money back from AIG, GMAC, Fannie or Freddie.
For those of you who think that we should have bailed out Lehman, I have two questions:
How much did we spend on Lehman Brother's bankruptcy?
How many of Lehman's counterparts went bankrupt?
The answer to both questions is zero. But let's blame the canary.
The other thing Bernanke is trying to wrap his hairless head around is the Too Big Too Fail (TBTF). He blames regulators for not shutting down firms who had began to pose systemic risk. While he tries to overthink this problem, the rest of the world is not so perplexed.
The solution is easy: let them fail.
RDQ Weekly economic update
Via RDQ:
The early reports for August support our view that concerns about the economy falling back into recession are overblown.
Manufacturing activity, which has been the primary driver of the recovery, picked up steam in August according to the ISM and the employment report suggests that the Fed’s industrial production data will show a solid gain in manufactured output in the month.
Private-sector employment growth was not as anemic as expected in August and the moderate upward revisions to payrolls in June and July suggest that the job creation did not weaken as much as previously thought over the summer.
Despite the backup in jobless claims, our probit model puts the probability that the economy was in recession in August at a mere 2%.
Although GDP growth slowed in the second quarter, this reflected a surge in imports and a maturing of the inventory cycle. Final demand growth from domestic consumers and businesses grew at the fastest rate since early 2006. We expect growth to run around 3% in the second half of the year as the baton is handed from inventories to capital spending and as import growth slows.
Given our outlook on growth, we expect bond yields to back up over the balance of the year to around 3½% on ten-year Treasuries. We also look for a rally in stocks as concerns over the outlook for the economy diminish and we are sticking to our view that fair value for the S&P 500 at year-end is around 1,250.
The early reports for August support our view that concerns about the economy falling back into recession are overblown.
Manufacturing activity, which has been the primary driver of the recovery, picked up steam in August according to the ISM and the employment report suggests that the Fed’s industrial production data will show a solid gain in manufactured output in the month.
Private-sector employment growth was not as anemic as expected in August and the moderate upward revisions to payrolls in June and July suggest that the job creation did not weaken as much as previously thought over the summer.
Despite the backup in jobless claims, our probit model puts the probability that the economy was in recession in August at a mere 2%.
Although GDP growth slowed in the second quarter, this reflected a surge in imports and a maturing of the inventory cycle. Final demand growth from domestic consumers and businesses grew at the fastest rate since early 2006. We expect growth to run around 3% in the second half of the year as the baton is handed from inventories to capital spending and as import growth slows.
Given our outlook on growth, we expect bond yields to back up over the balance of the year to around 3½% on ten-year Treasuries. We also look for a rally in stocks as concerns over the outlook for the economy diminish and we are sticking to our view that fair value for the S&P 500 at year-end is around 1,250.
Burton: China should support a military coup in North Korea
Interesting read about the Jekyll/Hyde Koreas. There were a couple of things which stand out. First, the Kim dynasty could continue if China does nothing. Kim Jong-il is getting his son groomed to take over for him were he to become fertilizer. That is the worst possible of all outcomes. We know from sad experience that corrupt and murderous dictators seldom give up power voluntarily. It almost always comes in the form of a military coup.
No matter how important we think South Korea is to moderating North Korea's reckless behaviour, no one is more important than China. Charles Burton of Canada's Globe and Mail, calls for China to support a military coup in North Korea. Via Globe and Mail:
No matter how important we think South Korea is to moderating North Korea's reckless behaviour, no one is more important than China. Charles Burton of Canada's Globe and Mail, calls for China to support a military coup in North Korea. Via Globe and Mail:
Kim Jong-il is in poor health and wants to see his 28-year-old son installed as his successor at a party congress in a few weeks. But the young man – referred to in the North Korean press as Beloved Comrade Kim Jong-un – has no military or party credentials. Becoming supreme leader is evidently to be his first real job. “This kid may have his finger on the button before we know it,” said one U.S. diplomat. The sinking of a South Korean warship in March could well be the consequence of Beloved Comrade’s trying out his newly acquired authority.
Kim Jong-il, the Dear Leader, is regarded as a pale reflection of his father, Kim Il-sung, the Great Leader. In fact, it has been widely reported that China’s leader at the time, Deng Xiaoping, was appalled when Kim Il-sung told him that Kim Jong-il would be his successor.
In the case of Kim Jong-un, then, the Chinese response must have been even more disparaging. It also will be a very hard sell in North Korea. Indeed, when Kim Jong-un went with his ailing father to meet China’s President, his name was left off the list of Korean officials reported in the Dear Leader’s entourage by the Chinese media.
Beijing would do well to take action to stop this Kim family dynastic succession in the interests of North Korea’s political stability.
Even though South Korea, with a per capita income 37 times that of its northern neighbour, recently proposed a “unification tax” to cover the anticipated cost of eventual reunification, the key player in resolving the Korean crisis has to be China.
The Korean nation has been separated for 65 years already, and only China has the ability to inspire a military coup in Pyongyang and install a pro-China regime that will implement a Chinese-style program of “opening and economic reform.” Only China has the resources to make the high levels of investment necessary to reconstruct North Korea’s economic infrastructure.
What to make of the unemployment data: unemployment rate rises to 9.6%, no wait, companies are hiring, but the government is laying off census workers
Nonfarm payrolls fell 54,000 in August as temporary Census workers declined 114,000. Private payrolls increased 67,000 in August, which was above expectations. Also, private payrolls in the prior two months were upwardly revised by 66,000.
The unemployment rate rose to 9.6% in August from 9.5% in July, however, this came as labor force participation rose to 64.7% from 64.6%. Household employment rose 290,000 in August.
BOTTOM LINE
The intelligencia have no idea what to make of this data. On one hand the unemployment rate increased. One the other hand, private payrolls see an increase in hiring.
To show the split personality that is the media, have a look at a sample of the headlines. They have no idea what to make of the news
Washington Post: Unemployment rate rises, in sign of weak growth
Romer: Unemployment data shows recovery continues
WSJ: Jobs report: Stronger than Expected, Yes; Strong No
NY Daily News: Unemployment rate rises to 9.6%, first increase in four months as economy struggles
The higher-than-expected increase in private payrolls, combined with a net 66,000 upward revision to private payroll growth in June and July (the total payroll revision was +123,000), does not support the view that the economy is sliding into a double-dip recession. Taken with the manufacturing ISM report, it appears that the performance of the U.S. economy in August is outperforming expectations and we think it unlikely that the Fed will expand its QE program at its September 21st meeting.
Looking to other releases for August, this report points to a fairly solid gain in manufactured output in the industrial production report since factory hours increased 0.1% (despite the 27,000 decline in manufacturing employment, which, given the strength of the ISM employment index looks suspicious to us—the job losses were concentrated in motor vehicles and parts and thus may be related to the changed seasonal pattern of auto shutdowns this Summer) and a moderate increase in labor incomes in the personal income report given the 0.3% gain in average hourly earnings. Our best guess is that the Summer slowdown in growth is beginning to fade and we still expect growth to average close to 3% in the second half of the year.
The unemployment rate rose to 9.6% in August from 9.5% in July, however, this came as labor force participation rose to 64.7% from 64.6%. Household employment rose 290,000 in August.
BOTTOM LINE
The intelligencia have no idea what to make of this data. On one hand the unemployment rate increased. One the other hand, private payrolls see an increase in hiring.
To show the split personality that is the media, have a look at a sample of the headlines. They have no idea what to make of the news
Washington Post: Unemployment rate rises, in sign of weak growth
Romer: Unemployment data shows recovery continues
WSJ: Jobs report: Stronger than Expected, Yes; Strong No
NY Daily News: Unemployment rate rises to 9.6%, first increase in four months as economy struggles
The higher-than-expected increase in private payrolls, combined with a net 66,000 upward revision to private payroll growth in June and July (the total payroll revision was +123,000), does not support the view that the economy is sliding into a double-dip recession. Taken with the manufacturing ISM report, it appears that the performance of the U.S. economy in August is outperforming expectations and we think it unlikely that the Fed will expand its QE program at its September 21st meeting.
Looking to other releases for August, this report points to a fairly solid gain in manufactured output in the industrial production report since factory hours increased 0.1% (despite the 27,000 decline in manufacturing employment, which, given the strength of the ISM employment index looks suspicious to us—the job losses were concentrated in motor vehicles and parts and thus may be related to the changed seasonal pattern of auto shutdowns this Summer) and a moderate increase in labor incomes in the personal income report given the 0.3% gain in average hourly earnings. Our best guess is that the Summer slowdown in growth is beginning to fade and we still expect growth to average close to 3% in the second half of the year.
Kabul Bank siezed: How US Taxpayer money gets circulated into Dubai real estate.
- If order to get anything done you have to know someone in politics.
- People are making money hand over fist there.
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| Our Taxpayer money hard at work |
Exhibit 1 for corruption. Hamid Karzai is president of Afghanistan and directs US government money to Kabul Bank, where his brother is 7% shareholder. Kabul Bank takes US taxpayer money and pays the soldiers in Afghanistan where most of the soldiers keep their money. Then the bank uses that money to speculate in Dubai real estate and make dubious loans to well connected friends. Of course, Kabul Bank runs into trouble because their loans aren't getting paid back. The bank is bailed out and assets are seized.
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| Mohmoud Karzai |
Pending home sales reboud
Pending home sales rebounded by 5.2% in July, a stronger result than expectations, following a 2.8% decline in June. Over the last 12 months, pending home sales have fallen 20.1% versus a 20.3% year-over-year drop in June (based on the not seasonally adjusted data).
BOTTOM LINE
It is too soon to say if home sales are bottoming out following the tax-credit-driven volatility of the Spring and early Summer and it will be some time before we can assess underlying sales trends. Homebuilder sentiment on current sales and the six-month outlook weakened further in early August.
BOTTOM LINE
It is too soon to say if home sales are bottoming out following the tax-credit-driven volatility of the Spring and early Summer and it will be some time before we can assess underlying sales trends. Homebuilder sentiment on current sales and the six-month outlook weakened further in early August.
Factory orders rise in July
Factory orders rose 0.1% in July, about in line with forecasts. Durable goods orders saw a slight upward revision to 0.4% from 0.3% in July, while nondurable goods orders were unchanged in the month.
BOTTOM LINE
This report has, in a sense, already been superseded by the more up-to-date (and more upbeat) ISM report for manufacturing activity. However, there is a divergence between the recent data on orders from the ISM (continued but moderating growth) and this report (factory orders falling at an annualized rate of 8.8% over the last three months). Part of the discrepancy is likely related to the factory orders data being in current dollars (i.e., not adjusted for price changes) since factory orders fell $9.6 billion from April to June as shipments of petroleum and coal products sank by $7.0 billion (and the average price of WTI crude dropped 9.6% over the same period). However, even adjusting for this, the ISM report paints a more upbeat picture of manufacturing than the factory orders data. Our view is that manufacturing is adjusting to the shift in the inventory cycle that gave a very significant thrust to manufacturing orders and activity earlier in the recovery and that the sector will expand at a solid but slower rate than it has done over the last year.
BOTTOM LINE
This report has, in a sense, already been superseded by the more up-to-date (and more upbeat) ISM report for manufacturing activity. However, there is a divergence between the recent data on orders from the ISM (continued but moderating growth) and this report (factory orders falling at an annualized rate of 8.8% over the last three months). Part of the discrepancy is likely related to the factory orders data being in current dollars (i.e., not adjusted for price changes) since factory orders fell $9.6 billion from April to June as shipments of petroleum and coal products sank by $7.0 billion (and the average price of WTI crude dropped 9.6% over the same period). However, even adjusting for this, the ISM report paints a more upbeat picture of manufacturing than the factory orders data. Our view is that manufacturing is adjusting to the shift in the inventory cycle that gave a very significant thrust to manufacturing orders and activity earlier in the recovery and that the sector will expand at a solid but slower rate than it has done over the last year.
Small Businesses keep laying off, Large businesses have slowed down layoffs
Challenger reported that layoff announcements fell to 34,768 in August from 41,676 in July. Layoff announcements in August 2010 were 54.5% below August 2009’s level (the data are not seasonally adjusted).
Layoff announcements remained very low in August and in the first eight months of 2010 have totaled 374,121, a 65.1% decline from the first eight months of 2009. The disparity between low layoff announcements and weak ADP employment likely reflects divergent conditions for large and small businesses (since job cut announcements mainly capture large business layoffs and ADP employment is probably more heavily influenced by small business hiring). We continue to look for a slowing in private payrolls to 25,000 in August and we see total nonfarm payrolls down 100,000 in the month.
What this means is that small businessess are not hiring, and big businesses have slowed down on the layoffs. Given that small businesses created the majority of jobs in the United States, this data cannot be seen as positive.
Some more information about small business from the SBA.
Small firms:
ADP employment fell 10,000 in August, weaker than expected and the first decline since January. July ADP employment saw a slight downward revision to 37,000 from an initially reported 42,000.
Service-producing employment rose 30,000 in August, while employment in the goods-producing sector dropped 40,000 with manufacturing employment down 6,000 and construction employment down 33,000. Financial services jobs fell 5,000 in August.
BOTTOM LINE
Layoff announcements remained very low in August and in the first eight months of 2010 have totaled 374,121, a 65.1% decline from the first eight months of 2009. The disparity between low layoff announcements and weak ADP employment likely reflects divergent conditions for large and small businesses (since job cut announcements mainly capture large business layoffs and ADP employment is probably more heavily influenced by small business hiring). We continue to look for a slowing in private payrolls to 25,000 in August and we see total nonfarm payrolls down 100,000 in the month.
What this means is that small businessess are not hiring, and big businesses have slowed down on the layoffs. Given that small businesses created the majority of jobs in the United States, this data cannot be seen as positive.
Some more information about small business from the SBA.
Small firms:
- Represent 99.7 percent of all employer firms.
- Employ just over half of all private sector employees.
- Pay 44 percent of total U.S. private payroll.
- Have generated 64 percent of net new jobs over the past 15 years.
- Create more than half of the nonfarm private gross domestic product (GDP).
- Hire 40 percent of high tech workers (such as scientists, engineers, and computer programmers).
- Are 52 percent home-based and 2 percent franchises.
- Made up 97.3 percent of all identified exporters and produced 30.2 percent of the known export value in FY 2007.
- Produce 13 times more patents per employee than large patenting firms; these patents are twice as likely as large firm patents to be among the one percent most cited.
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