Saturday, July 30, 2011

GDP 2nd Quarter 2011: 1.3%

In the “advance” estimate for the second quarter, the Commerce Department reported that real economic growth in the U.S. increased at an annual rate of 1.3 percent, far below consensus estimates of a two percent rate, and, as part of the annual data revisions, growth in the first quarter was revised downward, from a 1.8 percent rate to just 0.4 percent.


$1,000,000,000,000 Dollars ($1 trillion)


Friedman v Rothbard

How can you tell if a person truly advocates a free market economy? Simple. He prefers Rothbard to Friedman.

Here are a few excerpts from a recent exchange sparked by this article. Missing Milton Friedman.

Tim Lee writes:
If only the free-market right still had such a powerfully persuasive "technician advising the state how to be more efficient", our economy might now be slightly less screwed. Maybe it would help were "advising the state to be more efficient" less widely considered "evil work".

Gary North responds:

We need less efficient government. Friedman never grasped this. Rothbard did. The few Establishment economists and columnists who have read Rothbard have never forgiven him for this...

Friedman was the main apologist for fiat money in the free market camp. He believed in free market liberty, but not where it is really important: education (vouchers based on state-confiscated money) and money itself (central banking based on a grant of state power: a monopoly). Murray Rothbard challenged both ideas. He therefore remains a pariah to the Establishment.

George Selgin and Donald Boudreaux have also weighed in. Robert Wenzel details most of the debate here.

Tax Rates by Income


Who Owns Treasury Debt?


Great Recession: The "Recovery" Continues

According to the Bureau of EconomicAnalysis (BEA), real GDP is still below the pre-recession peak. The estimate for real GDP in Q2 (2005 dollars) is $13,270.1 billion, still 0.4% below the $13,326 billion in Q4 2007...

At the worst point, real GDP was off 5.1% from the 2007 peak. Since the most common definition of a depression is a 10%+ decline in real GDP, the 2007 recession was not a depression. Note: There is no formal definition of a depression. Some people use other definitions such as the duration below the previous peak. By that definition, using both GDP and employment, this seems like the "Lesser depression", but not by the common definition.


GDP Revisions: Recession Worse than Originally Believed

GDP: Not only has growth slowed, but the recession was significantly worse than earlier estimates suggested. Real GDP is still not back to the pre-recession peak.


Monday, July 25, 2011

Gold Standard Advantages

Under a gold standard, money regains its primary purpose as a vital tool of free markets instead of serving as a corrupted instrument of government policy. Genuine economic growth​—​as opposed to the money illusion of artificial wealth reflected in bloated equities or housing prices​—​is no longer sacrificed to monetary policy encumbered by the fiscal failures of government.

Judy Shelton

Leading Economic Indicators



"No politician ever gained power by not interfering in the market, and no special interest ever sponged off the rest of society by competing in the free market. That's all the analysis you need to understand mercantilism."


Who Pays the Taxes?


Bank Failures


2nd Quarter GDP Estimates

This graph shows the quarterly GDP growth (at an annual rate) for the last 30 years.

The consensus is that real GDP increased 1.8% annualized in Q2. The estimate for Q2 is in blue.

Back-to-back weak quarters and a sluggish and choppy recovery ...


Chicago Fed Economic Activity

The Chicago Fed National Activity Index increased to –0.46 in June from –0.55 in May; however, the index remained negative for the third consecutive month. Three of the four broad categories of indicators that make up the index improved in June, but only one made a positive contribution to the index.


Saturday, July 23, 2011

Debt Ceiling


Debt Default

Bill Bonner writes:

And here we find a political movement The Daily Reckoning can stand…far…behind... the part that actually wants the US government to default.

Whoa! We know what you’re thinking. A default would be dangerous. Suicidal. Unthinkable. Ben Bernanke. Tim Geithner. Larry Summers. They all said so! The old folks wouldn’t get their medicine. The soldiers wouldn’t get their ammunition. Tops would go back onto honey pots all over the Washington DC area. The whole system would fall into anarchy and pandemonium. There would be riots. Revolution. Bourbon would disappear from the liquor store shelves. The dead would rise from their graves and the living would fall into the open holes. A man would be happy to see his dead wife alive again. Another would be even happier to see his living wife dead!

Well, maybe they’re right. It would probably be a catastrophe. A disaster. But let’s take the chance anyway!

Because the real problem is debt. The quicker it is eliminated…the faster the economy can get back to work.

So, don’t raise the debt ceiling. Let the feds figure out how to get by like everyone else – spending no more than they take in as income. Is that really so tough?

Cartoon: National Debt

Cartoon: Debt Ceiling

Cartoon: Balanced Budget Amendment

Cartoon: It is a Spending Problem

Cartoon: The Natioanl Debt

Thursday, July 21, 2011

The Crony-Capitalist Triumph

Nita Ghei writes:

Beware politicians whose legislation bears a grandiose title. You can be certain their schemes will accomplish the opposite of their purported intent. Such is the case with the Wall Street Reform and Consumer Protection Act signed into law one year ago today. The massive 2,300-page tome - commonly known as Dodd-Frank - promised to fix the financial system, streamline regulation and end bailouts. Like so much of President Obama’s legislative achievements, this bill promised much, delivered little and cost a great deal.

By the Government Accountability Office’s reckoning, implementation will require $1.25 billion in new spending. It’s not cheap marshaling an army of 2,800 newly minted federal bureaucrats wielding fresh power over the private sector. Over the next decade, businesses will shell out $27 billion in fees, assessments and tithes to their new regulatory masters, according to Congressional Budget Office estimates.

The enterprise was a knee-jerk reaction to the financial crisis of 2008, where the feds had just bailed out the investment bankers at Bear Stearns and elsewhere. Rep. Barney Frank, Massachusetts Democrat, and then-Sen. Christopher J. Dodd, Connecticut Democrat, insisted creation of agencies like the Financial Stability Oversight Council and the Bureau of Consumer Financial Protection would crack down on Wall Street and end the ingrained idea that some firms are “too big to fail.”

The actual result has been a mountain of red tape. At least 400 new federal rules will be layered on top of existing regulations. New bureaucracies will have overlapping jurisdiction with existing regulatory bodies...

Far from getting rid of bailouts, Dodd-Frank institutionalized them. Title II empowered the Federal Deposit Insurance Corporation with “orderly liquidation” authority, giving the agency discretion to intervene between a financial institution and its creditors in any way it sees fit... That means the “too big too fail” ethic still applies.

Dodd-Frank has largely severed the relationship between risk and return, which is the necessary discipline imposed by a free market. Now, the big banks get to keep the rewards, but American taxpayers bear the risk...

Dodd-Frank has been an expensive exercise in command and control by the federal government. It encourages crony capitalism while undermining free markets and limiting competition. A year later, the folly of this legislation has only grown more apparent.

read the entire essay


In 2010, American consumers bought almost as much merchandise at low-priced Walmart ($307.7 billion in U.S. retail sales) as they purchased from the next five largest U.S. retailers combined ($324.5 billion): Kroger ($78.3 billion), Target ($65.8 billion), Walgreen ($61.2 billion), Home Depot ($60.1 billion) and Costco ($58.9 billion).


Tuesday, July 19, 2011

New Construction

The Commerce Department reported(.pdf) that U.S. housing starts jumped 14.6 percent to an annual rate of 629,000 and that permits for new construction rose 2.5 percent to a 624,000 rate. As noted here many times over the last couple years, despite what you’ll read today, this really isn’t a big deal since the housing market is extremely depressed, homebuilder stocks now the equivalent of 2002-era stocks for reasons made clear below.


Monday, July 18, 2011

Consumer Price Index: 3.6% Annual

The Labor Department reported that consumer prices fell in June for the first time in a year, down 0.2 percent last month due to tumbling gasoline and heating oil prices, but annual inflation rose from 3.4 percent to 3.6 percent.


Too Big to Fail

Friday, July 15, 2011

Peter Schiff on Bernanke's Gold Comments

Bernanke further disputes the facts by claiming that the only reason people are buying gold is to hedge against uncertainty, or "tail risks" as he calls them. My advice to the Chairman is to ask the people who are actually buying it. As someone who has been buying gold myself for a decade, I can assure him that my gold buying has nothing to do with "uncertainty." In fact, it's just the opposite. I am buying gold because of what is certain, not what is uncertain. I am certain that Mr. Bernanke's incompetence will destroy the value of the dollar and unleash runaway inflation.

read the essay

Gold or Cash?

Wednesday, July 13, 2011

Impact of the Great Recession

The Great Recession of 2007-2009, coming on the heels of a spending binge fueled by a housing bubble, so far has resulted in over $7,300 in foregone consumption per person, or about $175 per person per month. The recession has had many costs, including negative impacts on labor and housing markets, and lost government tax revenues. The extensive harm of this episode raises the question of whether policymakers could have done more to avoid the crisis.


The Economy

Monday, July 11, 2011

Economic Recovery, Plunder, and the End of an Empire?

Joel Bowman writes:

...Wrote the French libertarian philosopher in his 1850 classic, The Law:

“See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”

The obvious – and fallacious – rebuttal here is that Wall Street fat cats earn tens, hundreds, maybe even thousands of times the salary of government employees. And that’s true. But you don’t have to pay it. If you don’t agree with excessive executive compensation, don’t buy that company’s products. Don’t invest in its stock. Simple. Of course, that won’t stop the government gifting your tax dollars to its Wall Street buddies…but you can hardly blame the grafters on The Street for taking what’s offered. Call it corporatism. Call it crony capitalism. Call it whatever you like. Just don’t call it the free market.

But just because the state can avoid consequences in the short term, that doesn’t mean it can avoid them indefinitely. “Imperial suicide,” as Bill calls it, is nothing new. In 1917, the year of Russia’s October Revolution, Vladimir Ilyich Lenin offered a few predictions for the century ahead:

“Germany will militarize herself out of existence,
England will expand herself out of existence,
and America will spend herself out of existence.”

Had he known the inherent shortcomings of his own political ideology, Bolshevism’s bad boy might also have added, “And Russia…she will plan herself out of existence.”

As for the United States, it seems she is not content with simply spending more than she produces, foisting the unfunded obligations onto future generations; instead, she militarizes, expands, spends AND plans toward her own demise…as all once great empires eventually do.

Economic Recovery??

Bill Bonner writes:
The fight for recovery is over. The feds have waved the white flag. Maybe…

The Labor Department came out with the latest employment numbers last week. They were atrocious. Only about a fifth as many new jobs as economists expected. Which shows you three things.

First, economists can’t really predict levels of employment, growth, prices, or anything else. And they are especially bad at it when they have the wrong idea of how things work.

Second, the feds have failed. They have been completely unable to make any progress against the downturn.

Third, this is not a recovery. Widely reported in the media was the opinion that the employment numbers were ‘disappointing for the second year of a recovery.’ Well…yes. Because it’s not a recovery. It’s a Great Correction. And this is just what you’d expect.

For the last 4 years – since the beginning of the financial crisis in ’07 to today – economists, analysts, investors and policymakers have had the wrong idea. They thought they were dealing with an ordinary (though perhaps severe) recession, which they thought would be followed by an ordinary (though perhaps weak) recovery.

Not at all! It was not an ordinary post-war recession. So, the ordinary counter-cyclical policy measure – more credit! – didn’t work. This time, the economy already had too much credit. Which is to say, too much debt. It didn’t do any good to add more debt. Households were already drenched in it.

They couldn’t absorb any more. They couldn’t increase their spending by borrowing more money. So, spending couldn’t go up…

Instead, households are struggling to maintain their standards of living in the face of rising consumer prices and flat…or falling…incomes.

And now, the mainstream financial press is finally catching on. Heck, even the US Secretary of the Treasury, Tim Geithner, may be opening his eyes.

Misery Index


The Federal Budget



The number of jobs needed per month to keep up with population growth depends on the rate of population growth, and the participation rate. We also have to be clear on the time frame we are discussing. The CBO report is through 2021, and the CBO is projecting the participation rate to fall to 63% by 2021 due to an aging population.

If, instead, we asked how many jobs are needed over the next year to keep the unemployment rate steady using the CBO projection of the participation rate, the answer is very different. The CBO is projecting the participation rate will be at 64.6% in 2012 and the current participation rate is 64.1%...

It would take 187,000 jobs added per month over the next year to hold the unemployment rate steady if the participation rate rises to 64.6%. If the participation rate stays steady, it will take 95,000 jobs added per month.

I also included the number of jobs needed to lower the unemployment rate by one percentage point to 8.2%. If the participation rate rises, then it would take 316,000 jobs per month. If the participation rate stays steady, it would take 224,000 jobs per month to lower the unemployment rate to 8.2%.


Saturday, July 9, 2011

It is a Spending Problem

In the debate about raising the debt ceiling, the reality is often lost that the top 10 percent of income earners—those making more than $113,799 in 2008 (the latest year available from the IRS)—already pay 69.9 percent of the income taxes. The same top 10 percent, however, earn only 45.8 percent of the income.

The IRS also reports that in 2008, the top 25 percent of income earners—those earning $67,280 or more—pay 86.34 percent of the income taxes, yet earn only 67.38 percent of all income in the U.S.



Friday, July 8, 2011

Technology and Standards of Living

June Unemployment 9.2%

The only good news is that June is over.

There were few jobs created in June (only 18,000 total and 57,000 private sector). The unemployment rate increased from 9.1% to 9.2%, and the participation rate declined to 64.1%. Note: This is the percentage of the working age population in the labor force.

The employment population ratio fell to 58.2%, matching the lowest level during the current employment recession.

U-6, an alternate measure of labor underutilization that includes part time workers and marginally attached workers, increased to 16.2%, the highest level this year.


Thursday, July 7, 2011

Gold Predictions

Higher than $10,000

  1. Mike Maloney: $15,000
  2. Howard Katz: $14,000
  3. $7,000-$14,000
  4. Jim Rickards: $4,000 – $11,000
  5. Roland Watson: $10,800 (in our lifetime)

$5,001 – $10,000

  1. Bob Kirtley: $10,000 (by 2011)
  2. Arnold Bock: $10,000 (by 2012)
  3. Porter Stansberry: $10,000 (by 2012)
  4. Tom Fischer: $10,000
  5. Shayne McGuire: $10,000
  6. Eric Hommelberg: $10,000
  7. Gerald Celente: $6,000 – $10,000
  8. Peter Schiff: $5,000 – $10,000 (in 5 to 10 years)
  9. Egon von Greyerz: $5,000 – $10,000
  10. Patrick Kerr: $5,000 – $10,000 (by 2011)
  11. Peter Millar: $5,000 – $10,000
  12. Alf Field: $4,250 – $10,000
  13. Peter George: $3,500 (by 2011-13); $10,000 (by 2015)
  14. Jeff Nielson: $3,000 – $10,000
  15. Dennis van Ek: $9,000 (by 2015)
  16. James Turk: $8,000 (by 2015)
  17. Joseph Russo: $7,000 – $8,000
  18. David Petch: $6,000 – $$8,000
  19. Michael Rozeff: $2,865 – $7,151
  20. Martin Murenbeeld: $3,100 – $7,000
  21. Dylan Grice: $6,300
  22. Aubie Baltin: $6,000 (by 2017)
  23. Murray Sabrin: $6,153
  24. Harry Schultz: $6,000
  25. Paul van Edeen: $6,000
  26. Lawrence Hunt: $5,000 - $6,000 (by 2019)
  27. Paul Brodsky/Lee Quaintance: $3,000 – $6,000


  1. David Rosenberg: $5,000
  2. Martin Hutchinson: $5,000 (by end of 2010)
  3. Doug Casey: $5,000
  4. Peter Cooper: $5,000
  5. Robert McEwen: $5,000
  6. Martin Armstrong: $5,000 (by 2016)
  7. Peter Krauth: $5,000
  8. Tim Iacono: $5,000 (by 2017)
  9. Christopher Wyke: $5,000
  10. Frank Barbera: $5,000
  11. John Lee: $5,000
  12. Barry Dawes: $5,000

$2,500 – $5,000

  1. Pierre Lassonde: $4,000 – $5,000;
  2. Mary Anne and Pamela Aden: $3,000 – $5,000 (by February 2012)
  3. Bob Chapman: $3,000 (by 2011)
  4. Larry Edelson: $2300 – $5,000 (by 2012)
  5. Luke Burgess: $2,000- – $5,000
  6. Ian Gordon/Christopher Funston; $4,000
  7. D.P. Baker: $3,000 – $3750
  8. Christopher Wood: $3,500 (in 2010)
  9. Adam Hamilton: $3,500 (by 2010-11)
  10. Eric Roseman: $2,500 – $3,500 (by 2015)
  11. John Henderson: $3,000+ (by 2015-17)
  12. Hans Goetti: $3,000
  13. Michael Yorba: $3,000
  14. David Tice: $3,000 (by 2012)
  15. David Urban; $3,000
  16. Michael Lambert: $3,000
  17. Brett Arends: $3,000
  18. Ambrose Evans-Pritchard: $3,000
  19. Trader Mark: $3,000 (by mid-2011)
  20. John Williams: $3,000
  21. Byron King: $3,000
  22. $3,000
  23. Ian McAvity: $2,500 – $3,000 (by 2012)
  24. Jeff Nichols: $2,000 – $3,000
  25. Graham French: $2,000 – $3,000
  26. Sascha Opel: $2,500+
  27. Rick Rule: $2,500 (by 2013)
  28. Daniel Brebner: $2,500

Keynesianism Diagnosed

Researchers funded by the National Institutes of Health have found evidence that a retrovirus that has been linked to schizophrenia and multiple sclerosis may also cause Keynesianism. The discovery raises hopes that a cure may be found for this economy-destroying disease.

“The breakthrough was realizing that schizophrenia and Keynesianism have many of the same symptoms,” said Dr. Charles Rivers of the Harvard School of Medicine. “For example, both conditions cause delusions. A schizophrenic may think that the CIA is trying to kill him, while many Keynesians believe that government spending stimulates the economy.”

read the article

Wednesday, July 6, 2011

Stimulus Spending Equals More Debt, Not Economic Growth

Yet this was the recovery that was aided by the largest Keynesian-style big government “stimulus” since World War II. Since 2008, total federal “stimulus” has been $4.6 trillion, as shown in the chart. As a share of GDP, recent deficit spending has been far greater than during all other recessions since the war.

Biggest Keynesian Stimulus + Slowest Recovery = Time to Rethink Keynesian Theory.

Monday, July 4, 2011

Cartoon: Housing Market

Cartoon: Unemployment

Cartoon: Spending

Cartoon: Debt Ceiling

$2 Trillion in Spending Cuts


Economic Freedom and Quality of Life

Federal Revenues and Spending

The CBO report and many centrist budget wonks focus more on the problem of rising federal debt than on rising spending. As a result, many wonks clamor for a “balanced” package of spending cuts and tax increases to solve our fiscal problems. But CBO projections show that the long-term debt problem is not a balanced one—it is caused by historic increases in spending, not shortages of revenues.


GDP Growth

The obvious connection, as I’ve pointed out on many occasions, is that America is becoming a European-style welfare state and it is unavoidable that we will suffer from European-style economic malaise.

P.S. It should be noted that America’s anemic economic performance in recent years is not solely Obama’s fault. As the White House repeatedly points out, he inherited a downturn. That is completely accurate. My complaint, however, is that Obama promised hope and change but instead has exacerbated the big government policies of his predecessor.