Wednesday, February 29, 2012

2011 4th Quarter GDP: 3.0%

The Commerce Department reported that higher levels of spending by consumers and businesses resulted in an upward revision to U.S. economic growth during the fourth quarter of 2011, the annualized rate of 2.8 percent that was reported a month ago revised up to 3.0 percent in the second of three estimates for the period.

Capitalism or Corporatism?

But what really matters is that corporatism is morally and economically odious, regardless of the party. That’s why the TARP bailout was reprehensible. It’s why Fannie Mae and Freddie Mac subsidies are disgusting. And it’s why industrial policy in the tax code is corrupt.

Tuesday, February 28, 2012

Performance By Asset Class


Central Banking

"Give me control over a nation's currency, and I care not who makes its laws."

– Baron M.A. Rothschild


Central banking is a curse. You can't "get it right" with monopoly fiat. You can have a free market in every facet of the economy but if the money itself is controlled, forget about it. You're doomed to recession, depression, inflation and, ultimately, social chaos and resurgent ruin. Some understand it better than others.


Election Year Economics

Largest Companies by Market Capitalization


Monday, February 27, 2012

Housing Market

Even with the upward revisions to new home sales in October, November and December, 2011 was the worst year for new home sales since the Census Bureau started tracking sales in 1963. The three worst years were 2011, 2010, and 2009 with sales of 304, 323 and 375 thousand respectively.

Sales will probably increase in 2012, and sales will also probably be higher than the 323 thousand in 2010. But I expect this year will still be the third worst on record.

Wednesday, February 22, 2012

Alan Meltzer’s Three Laws of Regulation:

1. Lawyers and bureaucrats regulate, but markets circumvent regulation.
2. Regulations are static. Markets are dynamic.
3. Regulation is most effective when it changes the incentives of the regulated.

Meltzer's new book: Why Capitalism?

A review of the headlines of the past decade seems to show that disasters are often part of capitalist systems: the high-tech bubble, the Enron fraud, the Madoff Ponzi scheme, the great housing bubble, massive lay-offs, and a widening income gap. Disenchantment with the market economy has reached the point that many even question capitalism itself.

Allan H. Meltzer disagrees, passionately and persuasively. Drawing on deep expertise as a financial historian and authority on economic theory, he provides a resounding answer to the question, "why capitalism?" Only capitalism, he writes, maximizes both growth and individual freedom. Unlike socialism, capitalism is adaptive, not rigid--private ownership of the means of production flourishes wherever it takes root, regardless of culture. Laws intended to tamper with its fundamental dynamics, such as those that redistribute wealth, fail. European countries boasting extensive welfare programs have not surpassed the more market-oriented United States. Capitalism does require a strong legal framework, Meltzer writes, and it does not solve all problems efficiently. But he finds that its problems stem from universal human weaknesses--such as dishonesty, venality, and expediency--which are not specific to capitalism. Along the way, he systematically analyzes the role of government, positing that regulations are static, but markets are dynamic, usually seeking ways to skirt the rules. Regulation is socially useful if it brings private costs into line with social costs (for example, the cost of taxes to hire policemen compared to that of the impact of rampant crime); if it doesn't, regulation simply invites circumvention.

Friday, February 17, 2012

Consumer Price Index: 2.9% Annual Rate

The Labor Department reported that the consumer price index rose 0.2 percent in January, paced by a surge in apparel costs, and the official measure of U.S. inflation now stands at an annual rate of 2.9 percent, down from a 3.0 percent rate in December.

The so-called “core rate” of inflation – excluding food and energy – also rose 0.2 percent in January and now sports a 2.3 percent year-over-year gain, its largest 12-month increase since September 2008.

Thursday, February 16, 2012

Creating Jobs?

Starbucks has distributed more than 500,000 red, white and blue wristbands in the last three months, and, no, it's not just because the coffee giant is feeling patriotic.

The wristbands, sold for $5 each, are intended to fund loans to small businesses, nonprofits and other organizations that will create American jobs.

New figures released by the company on Thursday, show the ongoing Create Jobs for USA program has so far raised more than $2 million. Coupled with $5 million in seed money already donated by Starbucks, the company expects the program to create at least 2,300 jobs.

That said, the money takes time to trickle down to business owners and heads of nonprofits. To get from the Starbucks cash register to a small business or agency, the donations first pass through the Opportunity Finance Network, which then gives grants to community development financial institutions, or CDFIs. Those lenders are tasked with doling out low-interest loans to small businesses and nonprofits in need.

So far, 278 loans have been made in 31 states across the country.


Monday, February 13, 2012

National Debt

Back in the old days, the only time the nation would rack up debt was when they were at war and then they’d pay it down...All that changed not long after the last vestiges of a gold standard were abandoned in the 1970s and it’s been a three-decade long climb up debt mountain ever since. Moreover, since the graphic above includes only public debt, the picture is significantly worse when including intergovernmental liabilities such as social security.

Trade at All Time High

Total U.S. international trade (exports + imports) set a new record of $4.76 trillion in 2011 (see chart above), as both annual exports ($2.1 trillion) and imports ($2.66 trillion) reached record high levels last year, according to today's BEA report.

Friday, February 3, 2012

Jan Unemployment Rate: 8.3%

The Labor Department reported that nonfarm payrolls rose by 243,000 from December to January and the jobless rate fell from 8.5 percent to 8.3 percent. Private sector job gains of 257,000 were broad based with professional and business services leading the way and the unemployment rate fell to its lowest level since February 2009.

Thursday, February 2, 2012

Bernanke the Keynesian

He answered that clearly during his testimony today, when he said:

As is often the case, the ability and willingness of households to spend will be
an important determinant of the pace at which the economy expands in coming

Only a Keynesian believes that consumption drives the economy rather than production.

Consumers are buying iPhones ONLY because Steve Jobs and his team designed and manufactured them. No production, no consumption.

Leading Indicators Revised

Wednesday, February 1, 2012

US Manufacturing

The true economic measure of the success of any company or industry is not the number of workers, the amount of output, or the level of sales revenue, it's the level of profitability. Based on that measure, American manufacturing is alive and well, and doing better than ever before.