Thursday, August 27, 2015

SAR #15239

We are facing  a predicament that doesn’t have a real solution.” Gail Tverberg
Memorization: Repeat after me: There is no direct correlation between the stock market and the country's GDP. Despite the story told kiddies about the stock market where industry gets its funding (which isn't true, shares are mostly issued so early investors can cash out) the market is mainly a place where people bet on the potential companies have for future profits. Other than a mild bit of monkey-see monkey-do, the Chinese market crash has little to do with Wall Street. The lack of consumer demand due to stagnant wages and high (real) unemployment is far more important, as is the fear the investor class has for losing access to the Fed's free money. Wait until the Fed screws the pooch and raises rates, for as the NYT reported, “the Federal Reserve has said that it expects to raise interest rates sometime soon, given evidence over the last year that economic growth is picking up." What evidence?
Debate Point: Mr. Candidate, nearly one out of three children in the US live in poverty in this, the richest nation on earth. What do you propose to do about this shameful situation?
Obsession: Since early 2008 ,Serious People have demanded the Fed raise interest rates to prevent hyperinflation. Seven years later it ain't here yet. A couple of years ago rising commodity prices made the same folks demand the Fed raise rates . For the same reason – inflation. Then it was wage increases, but the wage increase never happened and commodities are in the tank so, of course, we must raise interest rates. They say.
Code Talkers: ‘Family values’ is Republican code for ‘let’s control women’s bodies’.
The Ayes Man Cometh: Yes, they love him, the knee-jerk religious right, even though he is far from being a poster boy for their professed values. They love him because their drivel about family values, the free markets and Constitutional purity was simply a camouflage. What they really want is someone to put women and workers in their place, to say their truths about immigration and welfare and defense, to be the bully, to be the boss. And that's Trump.
Capitalism: When the US was filling up Guantánamo it did not have enough decent intelligence in Afghanistan to identify “the worst of the worst”, so large rewards were offered for those who would turn in people alleged to be bad guys. What a deal, get paid to get rid of your competitor. Worked, too. Only 3 of the remaining 116 Guantánamo detainees were captured by US forces. The rest we bought on the open market.
By Gosh: The Pentagon has contracted to buy 55,000of the new Joint Light Tactical Vehicle, for $30 billion - that's about $547,000 each. Makes the HumVee look cheap at only $220,000 each. Of course they wouldn't need so many replacements if they hadn't lost a billion dollars worth to ISIS – 2600 in Mosul in one day.
Clear and Present Danger: Continually increasing debt and the inflation created with it has been a good thing. It has allowed us to afford an ever increasing range of goods and services. But once the pace of debt creation slows, prices throughout the system begin to fall. That's where we are now. Once the decline in debt becomes self-reinforcing, deflation sets in and the system fails to deliver promised goods and services. That's the next step. It's a big one.
Bad News: The new, Republican-appointed director of the Congressional Budget Office reports that “the evidence is that tax cuts do not pay for themselves.” Hope he hasn't settled into the office yet.
Big Wheel Keeps On Turning: H&R Block has paid successfully lobbied the Republican controlled Senate Appropriations Committee to require the IRS to at least quadruple the length of the Earned Income Tax Credit form so that more poor people will turn to H&R Block out of frustration.
Behind The Curtain: Former Fed Chair Bernanke slipped the other day and warned that reducing US defense spending could harm the nation's economy. This is not news, but Ben should know we don't talk about it in front of the children.
Logging In: At the current rate the Earth will lose an India-sized chunk of tropical forest by 2050. In the process, about 169 gigatons of CO2 – think of it as another 44,000 coal-fired power plants puffing away, killing us. Sure, we should do something about it. But we won't.
Porn O'Graph: How low can you sink?


Jesse said...

Dean Baker has it wrong.

The stock market is the economy, or at least at the heart of it, thanks to an oversized financial sector, and the financialization of nearly everything.

The stock market is ideally a capital allocation and transfer system, moving money from those who have it in surplus to growing concerns that can utilize it and provide an equitable return. Unfortunately it has been turned into a wealth transfer system, taking from those who have to those who have the most and want it all.

Everyone is in it, whether they realize it or not, because the dividing line between speculation and the savings of the public has been blurred, from pensions to deposits.

It is an indicator of what is wrong, what went wrong, wrong with our economy.

Very few people actually owned stocks in 1929 in the US. But everyone owned the outcome. We fixed that, but over time people forgot, and so we are going to get to do it all over again. And again.

You don't have to even own stocks to be a designated victim for their abuses.

TulsaTime said...

I love me some Gail Tverberg, have been reading her pieces since way back in the day. She has gotten the mechanics of this economic situation summarized very well. The comment about no real solution is as pithy as it gets. We get to see the culmination of the capitalist/financialist system at work in the coming time. As we have all observed before, these are the features of the system, not bugs but design flaws. And to divert the public from this boredom, we have the sideshows of Trump, Sea Level, and Fukushima. I tell you, a regular 4 ring circus at work here....