From P. J. O’Rourke at the Weekly Standard online:
"The liberals’ dirty little secret."
... elites who denounce poverty despise the poor.
Their every high-minded, right-thinking “poverty program” proves this detestation—from the bulldozing of vibrant tenement communities to the drug law policing policies that send poor kids to prison and rich kids to rehab to the humiliation of food stamps and free school lunches to the loathsome inner-city public schools where those free lunches are slopped onto cafeteria trays.
The federal government has some 50 different “poverty programs.” Nearly half a trillion dollars is spent on them each year.
That’s about $11,000 per man, woman, and child under the poverty line, enough to lift each and every one of them out of poverty. (U.S. Department of Health and Human Services 2011 poverty guideline for a family of three: $18,530.)
We call them “poverty programs” for a reason. If ordinary people with down-to-earth common sense were spending that half trillion, we’d call them “modest prosperity programs.”
Have progressive elites always hated the poor?
Teddy Roosevelt did some rough riding with them. But once Teddy got all high-minded and right-thinking you didn’t see him hanging around with poor people who weren’t cooking or cleaning for him. William Jennings Bryan was in favor of prohibition, the bastard.
These days we’ve got Michael Moore. You wouldn’t think he’d hate poor people, having once been one. On the other hand, in dress and deportment, Moore shows every sign of self-loathing. So he’s a hater too.
Why do elites hate the poor? It’s xenophobia. They don’t know any poor people—except their off-the-books Brazilian nanny and illegal immigrant cleaning lady from Upper Revolta who don’t speak English.
Modern elites live in bubbles of liberal affluence like Ann Arbor, Brookline, the Upper West Side, Palo Alto, or Chevy Chase. These places used to have impoverished neighborhoods nearby, but the poor people got chased out by young singles living in group homes, hipsters, and urban homesteading gay couples.
When elites see a homeless person in the gutter, they assume he’s saving a parking place. And the elites have never been poor themselves. Although there was that time in graduate school, between research grants, when they had to go without sushi for a week.
Elites are irked at the charity they have to give to the poor. Not that elites, personally, give charity to the poor. They get the IRS to do it for them.
Which is the way elites like it and why they’re in favor of higher taxes. It’s worth the price not to come into any actual contact and risk getting poverty cooties. But elites are human like the rest of us, and paying higher taxes irks them....
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Link: http://www.weeklystandard.com/articles/they-hate-poor-people_617428.html
Monday, January 23, 2012
Egypt Faces a Disaster
From the Asia Times online:
Yields on Egyptian government debt maturing in nine months jumped to nearly 16%, but the government could not place its local-currency debt to Egyptian investors, even at that exorbitant rate.
This is a new and ominous decline in the financial position of the most populous Arab country...
Egypt faces a disaster of biblical proportions, and the world will do nothing about it. Officially, Egypt's foreign exchange reserves fell by half during 2011 ... or about four months of imports.
But the situation almost certainly is worse than that. More than $4 billion left the country during December, estimates Royal Bank of Scotland economist Raza Agha, noting that the December drop in reserves was cushioned by a $1 billion loan from the Egyptian army and a $1 billion sale of dollar-denominated treasury bills.
The rush out of the Egyptian pound is so rapid that Egyptian investors refuse to hold debt in their own national currency, even at a 16% yield. After Islamist parties won more three-quarters of the seats in recent parliamentary elections - 47% for the Muslim Brotherhood and 25% for the even more extreme al-Nour Party - the business elite that prospered under military rule is counting the days before exile.
The first reports of actual hunger in provincial Egyptian towns, meanwhile, are starting to trickle in through Arab-language press and blog reports. A shortage of gasoline accompanied by long queues at filling stations and panic buying was widely reported last week....
Anything that can be sold for hard currency - wheat, rice, butane, diesel fuel and sugar - has disappeared from government warehouses during the past year, according to a multitude of reports in local Arab-language media summarized in my 2011 essays. (See When will Egypt go broke? Asia Times Online, July 12, 2011.)
It is not clear whether the localized shortages of food and the nationwide shortage of gasoline reflect a buyers' panic, or large-scale theft, or an effort by the central bank to conserve foreign exchange by slowing essential purchases - or all of the above.
Nearly half of Egyptians are functionally illiterate.
Nine-tenths of adult women have suffered genital mutilation.
Almost a third of Egyptians marry first or second cousins, the fail-safe indicator of a clan-based society.
Half of Egyptians live on less than $2 a day, and must spend half of that on food.
Under duress, and after the collapse of the secular military dictatorship that ruled Egypt since the Free Officers coup six decades ago, Egyptians naturally revert to traditional institutions: mosque, tribe and clan.
It should have been no surprise that the Islamists swept the parliamentary elections, given the desperation of the people and the cupidity of the political system. The Wafd Party, Egypt's oldest secular political entity, polled just 9% of the vote.
Delusional as it was to expect Egyptians to support secular liberal parties that never existed and offered no solution to their desperation, it is all the more delusional to expect the Islamists to stabilize Egypt. The Islamist victory in the first round of voting last year almost certainly prompted the jump in capital flight in December, and the consolidation of Islamist power.
Egypt's middle class will leave and tourism, down by a third over the past year, will virtually disappear in response to Salafist restrictions. The Barack Obama administration in Washington will try to appease the new Islamist government whenever it takes power, but will succeed no better than the Jimmy Carter administration did when the Ayatollah Ruhollah Khomeini took power in Iran in 1979.
The European Council set the tone for the international community's response to the Egyptian crisis, with a statement on January 22 that it would avoid "formal dialogue" with Egypt until a democratic government is formed. There is no point talking to the generals, who are about to leave, let alone giving them money, for they would simply steal it....
The Obama administration, despite the president's enormous personal investment in the notion of Egyptian democracy, will do nothing until November, by which time it will be too late to do anything: the last thing the incumbent president wants during an election year is to defend an increase in foreign aid (the least popular line item in the US budget) to Egyptian Islamists (the least popular people as far as American voters are concerned).
By protesting the harassment of Egyptian human-rights groups in a call to the military leadership on January 20, Obama distanced himself from the mess he helped create by forcing the resignation of president Hosni Mubarak early last year.
The Republican establishment, to be sure, waxed just as enthusiastic about Egyptian democracy as did Obama, but under the circumstances, Republican pundits will insist they never said it.
It is sad enough for Egyptians to stumble into a long night of hunger, repression and anarchy; it is doubly sad that Democrats and Republicans will do their best to ensure that Americans learn nothing from Egypt's failure. Not often does a great and ancient country go to its ruin in the full light of day, observable in real time.
What passes for optimism - the notion that Americans can teach their political system to everyone else as if it were simply another technology - too often turns into adoration of our own cleverness. Millions of Egyptians will die before this is through. It would be a shame if this great sacrifice taught us nothing.
------------------
Link: http://www.atimes.com/atimes/Middle_East/NA24Ak02.html
Yields on Egyptian government debt maturing in nine months jumped to nearly 16%, but the government could not place its local-currency debt to Egyptian investors, even at that exorbitant rate.
This is a new and ominous decline in the financial position of the most populous Arab country...
Egypt faces a disaster of biblical proportions, and the world will do nothing about it. Officially, Egypt's foreign exchange reserves fell by half during 2011 ... or about four months of imports.
But the situation almost certainly is worse than that. More than $4 billion left the country during December, estimates Royal Bank of Scotland economist Raza Agha, noting that the December drop in reserves was cushioned by a $1 billion loan from the Egyptian army and a $1 billion sale of dollar-denominated treasury bills.
The rush out of the Egyptian pound is so rapid that Egyptian investors refuse to hold debt in their own national currency, even at a 16% yield. After Islamist parties won more three-quarters of the seats in recent parliamentary elections - 47% for the Muslim Brotherhood and 25% for the even more extreme al-Nour Party - the business elite that prospered under military rule is counting the days before exile.
The first reports of actual hunger in provincial Egyptian towns, meanwhile, are starting to trickle in through Arab-language press and blog reports. A shortage of gasoline accompanied by long queues at filling stations and panic buying was widely reported last week....
Anything that can be sold for hard currency - wheat, rice, butane, diesel fuel and sugar - has disappeared from government warehouses during the past year, according to a multitude of reports in local Arab-language media summarized in my 2011 essays. (See When will Egypt go broke? Asia Times Online, July 12, 2011.)
It is not clear whether the localized shortages of food and the nationwide shortage of gasoline reflect a buyers' panic, or large-scale theft, or an effort by the central bank to conserve foreign exchange by slowing essential purchases - or all of the above.
Nearly half of Egyptians are functionally illiterate.
Nine-tenths of adult women have suffered genital mutilation.
Almost a third of Egyptians marry first or second cousins, the fail-safe indicator of a clan-based society.
Half of Egyptians live on less than $2 a day, and must spend half of that on food.
Under duress, and after the collapse of the secular military dictatorship that ruled Egypt since the Free Officers coup six decades ago, Egyptians naturally revert to traditional institutions: mosque, tribe and clan.
It should have been no surprise that the Islamists swept the parliamentary elections, given the desperation of the people and the cupidity of the political system. The Wafd Party, Egypt's oldest secular political entity, polled just 9% of the vote.
Delusional as it was to expect Egyptians to support secular liberal parties that never existed and offered no solution to their desperation, it is all the more delusional to expect the Islamists to stabilize Egypt. The Islamist victory in the first round of voting last year almost certainly prompted the jump in capital flight in December, and the consolidation of Islamist power.
Egypt's middle class will leave and tourism, down by a third over the past year, will virtually disappear in response to Salafist restrictions. The Barack Obama administration in Washington will try to appease the new Islamist government whenever it takes power, but will succeed no better than the Jimmy Carter administration did when the Ayatollah Ruhollah Khomeini took power in Iran in 1979.
The European Council set the tone for the international community's response to the Egyptian crisis, with a statement on January 22 that it would avoid "formal dialogue" with Egypt until a democratic government is formed. There is no point talking to the generals, who are about to leave, let alone giving them money, for they would simply steal it....
The Obama administration, despite the president's enormous personal investment in the notion of Egyptian democracy, will do nothing until November, by which time it will be too late to do anything: the last thing the incumbent president wants during an election year is to defend an increase in foreign aid (the least popular line item in the US budget) to Egyptian Islamists (the least popular people as far as American voters are concerned).
By protesting the harassment of Egyptian human-rights groups in a call to the military leadership on January 20, Obama distanced himself from the mess he helped create by forcing the resignation of president Hosni Mubarak early last year.
The Republican establishment, to be sure, waxed just as enthusiastic about Egyptian democracy as did Obama, but under the circumstances, Republican pundits will insist they never said it.
It is sad enough for Egyptians to stumble into a long night of hunger, repression and anarchy; it is doubly sad that Democrats and Republicans will do their best to ensure that Americans learn nothing from Egypt's failure. Not often does a great and ancient country go to its ruin in the full light of day, observable in real time.
What passes for optimism - the notion that Americans can teach their political system to everyone else as if it were simply another technology - too often turns into adoration of our own cleverness. Millions of Egyptians will die before this is through. It would be a shame if this great sacrifice taught us nothing.
------------------
Link: http://www.atimes.com/atimes/Middle_East/NA24Ak02.html
Wednesday, January 18, 2012
"The current outlook for the nation’s finances may be even grimmer than many now expect"
From the Wall Street Journal online:
A new paper by the Federal Reserve Bank of St. Louis argues the Congressional Budget Office has for some time consistently underestimated how much the government would need to borrow.
According to bank researchers Kevin Kliesen and Daniel Thornton, “if past behavior is a guide to the future, our analysis suggests that projected future deficits will likely be larger than those currently projected.”
...According to the St. Louis Fed paper, the CBO has long struggled to project deficits correctly across any time horizon. When it comes to year-ahead projections, the paper says the CBO estimates are little better than just looking at what happened with the budget the year before....
According to bank researchers Kevin Kliesen and Daniel Thornton, “if past behavior is a guide to the future, our analysis suggests that projected future deficits will likely be larger than those currently projected.”
...According to the St. Louis Fed paper, the CBO has long struggled to project deficits correctly across any time horizon. When it comes to year-ahead projections, the paper says the CBO estimates are little better than just looking at what happened with the budget the year before....
Whatever it is that drives the CBO to forecast deficits incorrectly, the paper notes “the average under projection of the deficit in the recent decade is 1.30 percent of GDP.”
The CBO’s bias “suggests that deficit reduction programs that are projected to reduce the federal deficit by 1 percent of GDP over the next five years relative to the CBO’s projections may miss their mark by more than 1 percent of GDP.”
The CBO’s bias “suggests that deficit reduction programs that are projected to reduce the federal deficit by 1 percent of GDP over the next five years relative to the CBO’s projections may miss their mark by more than 1 percent of GDP.”
---------------------
Link: http://blogs.wsj.com/economics/2012/01/18/st-louis-fed-says-cbo-doesnt-forecast-deficits-well
---------------------
1%? That means a $152 Billion error. ($15.176 TRILLION GDP x 1% = $152 Billion error.) You say potato, I say....let's just call it a rounding error.
....
Tuesday, January 17, 2012
Jobless Recovery: U.S. Companies Are Spending to Upgrade Factories -- but Hiring Lags
From the Wall Street Journal online:
In no other U.S. recovery since World War II have companies been simultaneously faster to boost spending on machines and software, while slower to add people to run them.
Part of this is the old story of substituting capital for labor. But a combination of temporary tax breaks that allowed companies in 2011 to write off 100% of investments in the first year and historically low short- and long-term interest rates have pushed that process into overdrive.
Hiring, meanwhile, is too slow to bring the unemployment rate down rapidly. Employers have added workers at a monthly rate of 142,000 for the past six months, half the pace needed to significantly reduce unemployment, which is now at 8.5%.
Billy Cyr, chief executive of a Cincinnati-based beverage company, says he is buying new machinery partly because it is a bargain.
"When the cost of capital goes up, it is harder to justify an equipment purchase and may, instead, result in higher employment using existing equipment," he says, such as by adding shifts or overtime for existing workers.
Today, the opposite is happening.
Instead of hiring, companies such as Sunny Delight and chain-saw maker Stihl Holding AG are investing in technology or other ways to make existing operations faster and more productive.
History suggests that investment that increases productivity eventually will create jobs and raise living standards. The mechanization of the farm and the automation of the factory both raised fears of permanent unemployment that were unrealized, as efficiencies in production of basic commodities created jobs in all sorts of services.
Most economists say today's surge in productivity will have the same beneficial effect—in the long run. In the short-term, however, this burst of efficiency allows companies to delay hiring....
-----------------
Link: http://online.wsj.com/article/SB10001424052970204468004577164710231081398.html?
Part of this is the old story of substituting capital for labor. But a combination of temporary tax breaks that allowed companies in 2011 to write off 100% of investments in the first year and historically low short- and long-term interest rates have pushed that process into overdrive.
Hiring, meanwhile, is too slow to bring the unemployment rate down rapidly. Employers have added workers at a monthly rate of 142,000 for the past six months, half the pace needed to significantly reduce unemployment, which is now at 8.5%.
Billy Cyr, chief executive of a Cincinnati-based beverage company, says he is buying new machinery partly because it is a bargain.
"When the cost of capital goes up, it is harder to justify an equipment purchase and may, instead, result in higher employment using existing equipment," he says, such as by adding shifts or overtime for existing workers.
Today, the opposite is happening.
Instead of hiring, companies such as Sunny Delight and chain-saw maker Stihl Holding AG are investing in technology or other ways to make existing operations faster and more productive.
History suggests that investment that increases productivity eventually will create jobs and raise living standards. The mechanization of the farm and the automation of the factory both raised fears of permanent unemployment that were unrealized, as efficiencies in production of basic commodities created jobs in all sorts of services.
Most economists say today's surge in productivity will have the same beneficial effect—in the long run. In the short-term, however, this burst of efficiency allows companies to delay hiring....
-----------------
Link: http://online.wsj.com/article/SB10001424052970204468004577164710231081398.html?
Thursday, January 12, 2012
Economy: Largest U.S. maker of generic over-the-counter drugs expanding its business
From Bloomberg:
Perrigo Co. (PRGO), the largest U.S. maker of generic over-the-counter drugs, aims to top last year’s record sales by expanding its store brand business and offering new products, Chief Executive Officer Joseph Papa said...
The company ... is benefiting as consumers switch from more expensive brand names amid sluggish economic growth.
Data showed today that sales at U.S. retailers in December rose less than analysts predicted and more Americans than forecast filed applications for unemployment benefits last week.
“It’s still a very challenging economy,” said Papa, who is a pharmacist by training. “Consumers have to cut back and they get between 25 percent to 30 percent in savings.”
--------------------
Link: http://www.bloomberg.com/news/2012-01-12/perrigo-store-brands-to-boost-sales-after-record-year-ceo-says.html
Perrigo Co. (PRGO), the largest U.S. maker of generic over-the-counter drugs, aims to top last year’s record sales by expanding its store brand business and offering new products, Chief Executive Officer Joseph Papa said...
The company ... is benefiting as consumers switch from more expensive brand names amid sluggish economic growth.
Data showed today that sales at U.S. retailers in December rose less than analysts predicted and more Americans than forecast filed applications for unemployment benefits last week.
“It’s still a very challenging economy,” said Papa, who is a pharmacist by training. “Consumers have to cut back and they get between 25 percent to 30 percent in savings.”
--------------------
Link: http://www.bloomberg.com/news/2012-01-12/perrigo-store-brands-to-boost-sales-after-record-year-ceo-says.html
Jobless Claims in U.S. Rose More Than Forecast
From Bloomberg:
More Americans than forecast filed applications for unemployment benefits last week, raising the possibility that a greater-than-usual increase in temporary holiday hiring boosted December payrolls.
Jobless claims climbed by 24,000 to 399,000 in the week ended Jan. 7, Labor Department figures showed today in Washington. The median forecast of 46 economists in a Bloomberg News survey projected 375,000. The number of people on unemployment benefit rolls rose, while those receiving extended payments decreased.
Hiring by package delivery companies and retailers during the holidays to meet demand for gifts may now be giving way to an increase in dismissals....
Employers created 1.64 million jobs in 2011, the best year for the American worker since 2006. Even with the gains, much needs to be done toward recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.
-------------
Link: http://www.bloomberg.com/news/2012-01-12/first-time-jobless-claims-in-u-s-increased-more-than-forecast-last-week.html
More Americans than forecast filed applications for unemployment benefits last week, raising the possibility that a greater-than-usual increase in temporary holiday hiring boosted December payrolls.
Jobless claims climbed by 24,000 to 399,000 in the week ended Jan. 7, Labor Department figures showed today in Washington. The median forecast of 46 economists in a Bloomberg News survey projected 375,000. The number of people on unemployment benefit rolls rose, while those receiving extended payments decreased.
Hiring by package delivery companies and retailers during the holidays to meet demand for gifts may now be giving way to an increase in dismissals....
Employers created 1.64 million jobs in 2011, the best year for the American worker since 2006. Even with the gains, much needs to be done toward recovering the 8.75 million jobs lost as a result of the recession that ended in June 2009.
-------------
Link: http://www.bloomberg.com/news/2012-01-12/first-time-jobless-claims-in-u-s-increased-more-than-forecast-last-week.html
Monday, January 9, 2012
Money Market Funds: Broken Forever?
From Barron's online:
What's the difference between a piggy bank and a money-market fund?
Not much. Neither is insured, and the returns are basically the same: nothing. The average money fund these days pays just two basis points, or 0.02%. A third of them pay nothing at all....
IF SAFETY IS YOUR CONCERN, you're better off in an account insured by the Federal Deposit Insurance Corp. Checking, savings and money-market deposit accounts -- unlike money funds -- are insured by the FDIC up to $250,000 per account holder per institution. ...
And today's low-rate environment is perversely beneficial for some bank accounts -- non-interest-bearing accounts have unlimited protection through 2012, and there's talk of extending that guarantee. That means giving up a basis point or two in return, but that's a small price to pay for insurance....
In sum, money-market funds, which were created in the 1970s to give investors a better shake than non-interest-bearing bank accounts, look badly broken.
And they are likely to stay that way as long as the no-yield environment persists. But that won't last forever. Until then, the riskiest funds are those with assets of $1 billion or less that are not part of a larger institution. If your cash is in one of them, consider moving it now, while you still can....
------------------------
Link: http://online.barrons.com/article/barrons_cover.html
What's the difference between a piggy bank and a money-market fund?
Not much. Neither is insured, and the returns are basically the same: nothing. The average money fund these days pays just two basis points, or 0.02%. A third of them pay nothing at all....
IF SAFETY IS YOUR CONCERN, you're better off in an account insured by the Federal Deposit Insurance Corp. Checking, savings and money-market deposit accounts -- unlike money funds -- are insured by the FDIC up to $250,000 per account holder per institution. ...
And today's low-rate environment is perversely beneficial for some bank accounts -- non-interest-bearing accounts have unlimited protection through 2012, and there's talk of extending that guarantee. That means giving up a basis point or two in return, but that's a small price to pay for insurance....
In sum, money-market funds, which were created in the 1970s to give investors a better shake than non-interest-bearing bank accounts, look badly broken.
And they are likely to stay that way as long as the no-yield environment persists. But that won't last forever. Until then, the riskiest funds are those with assets of $1 billion or less that are not part of a larger institution. If your cash is in one of them, consider moving it now, while you still can....
------------------------
Link: http://online.barrons.com/article/barrons_cover.html
Friday, January 6, 2012
Unemployment 8.5% .... Really?
From CNBC:
The U.S. unemployment rate unexpectedly fell to 8.5 percent last month as job creation was more robust than expected, providing continued signs that the nation's labor market is improving gradually.....
The so-called U-6 number, more encompassing than the headline number the government publicizes ... 15.2 percent ....
There are still 1.4 million fewer Americans employed from when the president took office in January 2009, a labor force participation rate at a record low and average unemployment duration double what it was then. The level of discouraged workers has surged 34 percent.
"Today’s report holds promise, but the dual realities of deeply entrenched long-term unemployment and job creation still heavily concentrated in lower-wage sectors like retail and food services threaten our ability to achieve the kind of economy we need,” Christine Owens, executive director of the National Employment Law Project, said in a statement.
--------------
Link: http://www.cnbc.com/id/45898349
==============================================
From the WSJ Real Time Economics Blog:
"42,000 of the job gains were in the couriers and messengers sector, which normally never adds or subtracts more than 1,000 jobs in any single month." –Paul Ashworth, Capital Economics
"The good news ... employment is up. The bad news is that the higher paying jobs have yet to return… " –Steven Blitz, ITG Investment Research
"...it is important to note the context: the jobs deficit left from losses in 2008/2009 remains well over 10 million jobs....
...even at December’s growth rate, it would still take about seven more years — until around 2019 — to fill the gap and get back to the pre-recession unemployment rate. We need reports this strong and stronger for many years to come to bring our labor market back to health." –Heidi Shierholz, Economic Policy Institute
-------------------
Link: http://blogs.wsj.com/economics/2012/01/06/economists-react-step-in-the-right-direction-for-jobs/
The U.S. unemployment rate unexpectedly fell to 8.5 percent last month as job creation was more robust than expected, providing continued signs that the nation's labor market is improving gradually.....
The so-called U-6 number, more encompassing than the headline number the government publicizes ... 15.2 percent ....
There are still 1.4 million fewer Americans employed from when the president took office in January 2009, a labor force participation rate at a record low and average unemployment duration double what it was then. The level of discouraged workers has surged 34 percent.
"Today’s report holds promise, but the dual realities of deeply entrenched long-term unemployment and job creation still heavily concentrated in lower-wage sectors like retail and food services threaten our ability to achieve the kind of economy we need,” Christine Owens, executive director of the National Employment Law Project, said in a statement.
--------------
Link: http://www.cnbc.com/id/45898349
==============================================
From the WSJ Real Time Economics Blog:
"42,000 of the job gains were in the couriers and messengers sector, which normally never adds or subtracts more than 1,000 jobs in any single month." –Paul Ashworth, Capital Economics
"The good news ... employment is up. The bad news is that the higher paying jobs have yet to return… " –Steven Blitz, ITG Investment Research
"...it is important to note the context: the jobs deficit left from losses in 2008/2009 remains well over 10 million jobs....
...even at December’s growth rate, it would still take about seven more years — until around 2019 — to fill the gap and get back to the pre-recession unemployment rate. We need reports this strong and stronger for many years to come to bring our labor market back to health." –Heidi Shierholz, Economic Policy Institute
-------------------
Link: http://blogs.wsj.com/economics/2012/01/06/economists-react-step-in-the-right-direction-for-jobs/
Thursday, January 5, 2012
Strong ADP Jobs Gain Needs Grain of Salt
From the Wall Street Journal Real Time Economics Blog:
A strong gain in a preliminary measure of private payrolls has raised hopes for the official Labor Department employment report to be released this Friday, but the numbers may be inflated by seasonal issues.
The U.S. added 325,000 private-sector jobs in December, according to a report by payroll giant Automatic Data Processing and consultancy firm Macroeconomic Advisers. The number was much better than economists were expecting, and added to hopes of a strong official Labor Department report on Friday.
But ADP has a mixed track record compared to the official Labor Department numbers, partly because of different methods for collecting data.
Last month, ADP reported that the private sector added 206,000 jobs, but the official number from the Labor Department was a more subdued 140,000.
And back in early July, ADP announced June payrolls had soared by 157,000 ... but the Labor Department reported ... 57,000 private jobs.
----------------------
Link: http://blogs.wsj.com/economics/2012/01/05/strong-adp-gain-needs-grain-of-salt/
A strong gain in a preliminary measure of private payrolls has raised hopes for the official Labor Department employment report to be released this Friday, but the numbers may be inflated by seasonal issues.
The U.S. added 325,000 private-sector jobs in December, according to a report by payroll giant Automatic Data Processing and consultancy firm Macroeconomic Advisers. The number was much better than economists were expecting, and added to hopes of a strong official Labor Department report on Friday.
But ADP has a mixed track record compared to the official Labor Department numbers, partly because of different methods for collecting data.
Last month, ADP reported that the private sector added 206,000 jobs, but the official number from the Labor Department was a more subdued 140,000.
And back in early July, ADP announced June payrolls had soared by 157,000 ... but the Labor Department reported ... 57,000 private jobs.
----------------------
Link: http://blogs.wsj.com/economics/2012/01/05/strong-adp-gain-needs-grain-of-salt/
Bill Gross: The ugly side of ultra-cheap money
By Bill Gross, founder and co-chief investment officer of Pimco:
Gresham’s law needs a corollary.
Not only does “bad money drive out good,” but “cheap” money may as well. Ultra low, zero-bounded central bank policy rates might in fact de-lever instead of re-lever the financial system, creating contraction instead of expansion in the real economy....
Near zero policy rates and a series of “quantitative easings” have temporarily succeeded in keeping asset markets and real economies afloat in the US, Europe, and even Japan.
Now, with policy rates at or approaching zero yields and QE facing political limits in almost all developed economies, it is appropriate to question not only the effectiveness of historical conceptual models but entertain the possibility that they may, counterintuitively, be hazardous to an economy’s health....
Will Rogers once fondly said in the Depression that he was more concerned about the return of his money than the return on his money. But from a system wide perspective, when the return on money becomes close to zero in nominal terms and substantially negative in real terms, then normal functionality may breakdown.
A good example [is] the money market fund business model where operating expenses make it perpetually unprofitable at current yields. As money market assets then decline, system wide leverage is reduced even if clients transfer holdings to banks, which themselves reinvest proceeds in Fed reserves as opposed to private market commercial paper.
Additionally, at the zero bound(ary), banks no longer aggressively pursue deposits because of the difficulty in profiting from their deployment. It is one thing to pursue deposits that can be reinvested risk free at a term premium spread – two/three/even five year Treasuries being good examples.
But when those front end Treasuries yield only 20 to 90 basis points, a bank’s expensive infrastructure reduces profit potential.
It is no coincidence that tens of thousands of layoffs are occurring in the banking industry, and that branch expansion is reversing industry wide.
In the case of low yielding Treasuries the Gresham’s corollary at first blush seems illogical. If a bank can borrow at near 0 per cent then theoretically it should have no problem making a profit.
What is important, however, is the flatness of the yield curve and its effect on lending across all credit markets. Capitalism would not work well if Fed funds and 30-year Treasuries co-existed at the same yield....
Conceptually, when the financial system can no longer find outlets for the credit it creates, then it de-levers....
The recent example of MF Global emphasizes the concept, as does the behavior of depositors in some struggling European economies.
If an investor has money on deposit with an investment bank/broker that not only appears to be at risk but returns nothing, then why maintain the deposit?
Perhaps an investor would be more comfortable with a $100 bill at home in a mattress than a $100 bill on deposit with a broker – Securities Investor Protection Corporation notwithstanding. If so, system wide delevering takes place as opposed to the credit extension historically necessary for an expanding economy....
Fed chairman Ben Bernanke blames policy rate increases in the midst of the 1930s for an economic relapse, and a lack of credit expansion for Japan’s lost decades 60 years later.
But all central banks should commonsensically question whether ultra-cheap money continually creates expansions as opposed to destroying liquidity, delevering and obstructing recovery. Gresham as opposed to Keynes may become the applicable economist of this new day.
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Link: http://www.pimco.com/EN/Insights/Pages/The-Ugly-Side-of-Ultra-cheap-Money.aspx
Gresham’s law needs a corollary.
Not only does “bad money drive out good,” but “cheap” money may as well. Ultra low, zero-bounded central bank policy rates might in fact de-lever instead of re-lever the financial system, creating contraction instead of expansion in the real economy....
Near zero policy rates and a series of “quantitative easings” have temporarily succeeded in keeping asset markets and real economies afloat in the US, Europe, and even Japan.
Now, with policy rates at or approaching zero yields and QE facing political limits in almost all developed economies, it is appropriate to question not only the effectiveness of historical conceptual models but entertain the possibility that they may, counterintuitively, be hazardous to an economy’s health....
Will Rogers once fondly said in the Depression that he was more concerned about the return of his money than the return on his money. But from a system wide perspective, when the return on money becomes close to zero in nominal terms and substantially negative in real terms, then normal functionality may breakdown.
A good example [is] the money market fund business model where operating expenses make it perpetually unprofitable at current yields. As money market assets then decline, system wide leverage is reduced even if clients transfer holdings to banks, which themselves reinvest proceeds in Fed reserves as opposed to private market commercial paper.
Additionally, at the zero bound(ary), banks no longer aggressively pursue deposits because of the difficulty in profiting from their deployment. It is one thing to pursue deposits that can be reinvested risk free at a term premium spread – two/three/even five year Treasuries being good examples.
But when those front end Treasuries yield only 20 to 90 basis points, a bank’s expensive infrastructure reduces profit potential.
It is no coincidence that tens of thousands of layoffs are occurring in the banking industry, and that branch expansion is reversing industry wide.
In the case of low yielding Treasuries the Gresham’s corollary at first blush seems illogical. If a bank can borrow at near 0 per cent then theoretically it should have no problem making a profit.
What is important, however, is the flatness of the yield curve and its effect on lending across all credit markets. Capitalism would not work well if Fed funds and 30-year Treasuries co-existed at the same yield....
Conceptually, when the financial system can no longer find outlets for the credit it creates, then it de-levers....
The recent example of MF Global emphasizes the concept, as does the behavior of depositors in some struggling European economies.
If an investor has money on deposit with an investment bank/broker that not only appears to be at risk but returns nothing, then why maintain the deposit?
Perhaps an investor would be more comfortable with a $100 bill at home in a mattress than a $100 bill on deposit with a broker – Securities Investor Protection Corporation notwithstanding. If so, system wide delevering takes place as opposed to the credit extension historically necessary for an expanding economy....
Fed chairman Ben Bernanke blames policy rate increases in the midst of the 1930s for an economic relapse, and a lack of credit expansion for Japan’s lost decades 60 years later.
But all central banks should commonsensically question whether ultra-cheap money continually creates expansions as opposed to destroying liquidity, delevering and obstructing recovery. Gresham as opposed to Keynes may become the applicable economist of this new day.
------------
Link: http://www.pimco.com/EN/Insights/Pages/The-Ugly-Side-of-Ultra-cheap-Money.aspx
America the Generous? Not According to the Media
From the Media Research Center last month:
The media and liberals tend to portray Americans as selfish Scrooges, only interested in their own gain - why else would taxes be unpopular?
But America has shown its generosity time and again, and this [past] Christmas season, new proof of it has emerged. A report from the Charities Aid Foundation America, the World Giving Index 2011, finds that the United States is the most generous country in the world.
The World Giving Index 2011 measures generosity on three levels: giving money as a percentage of income, giving time, and helping strangers. Only the United States ranked in the top 10 nations of the world in each category...
But American generosity is rarely acknowledged by the media. Instead, America is usually attacked by the media as not being generous enough, and American donations of time, money, and effort to countries are ignored or even scorned by liberal journalists.
On May 22, 2011, former New York Times economic reporter Eduardo Porter complained in a New York Times editorial that America was the "least generous" of industrial nations - by which he meant Americans were not being taxed enough to fund extensive government social programs.
The networks refused to cover the extensive contributions of private faith-based charities when a tsunami devastated Japan in March 2011, and similarly ignored coverage of corporate donations when a destructive earthquake struck Haiti in Jan 2010.
This is because for the mainstream media, government social programs, fueled by taxation, are the only form of effective charity. At times, the media has even attacked private charity, because money given to private charity is not given to government programs. (This attack on private charity might be rooted in the fact that conservatives tend to be far more generous with their time and money than liberals.)
The New York Times' Stephanie Strom bizarrely blasted private charity in 2007 because it took money away from the government, declaring that "The rich are giving more to charity than ever, but people like Mr. Broad are not the only ones footing the bill for such generosity. For every three dollars they give away, the federal government typically gives up a dollar or more in tax revenue, because of the charitable tax deduction and by not collecting estate taxes."
In Nov. 2010, the Washington Post's Ezra Klein advocated giving to politically active think tanks as more effective than traditional gifts to charity.
Apparently, the "forced charity" of government social programs, fueled by higher taxes, is the only worthwhile form of charity, according to liberals. This is one explanation for the consistent media gripe that Americans are not generous, despite the mountain of evidence that suggests otherwise.
--------------------
Link: http://www.mrc.org/cmi/articles/2011/America_the_Generous_Not_According_to_the_Media.html
The media and liberals tend to portray Americans as selfish Scrooges, only interested in their own gain - why else would taxes be unpopular?
But America has shown its generosity time and again, and this [past] Christmas season, new proof of it has emerged. A report from the Charities Aid Foundation America, the World Giving Index 2011, finds that the United States is the most generous country in the world.
The World Giving Index 2011 measures generosity on three levels: giving money as a percentage of income, giving time, and helping strangers. Only the United States ranked in the top 10 nations of the world in each category...
But American generosity is rarely acknowledged by the media. Instead, America is usually attacked by the media as not being generous enough, and American donations of time, money, and effort to countries are ignored or even scorned by liberal journalists.
On May 22, 2011, former New York Times economic reporter Eduardo Porter complained in a New York Times editorial that America was the "least generous" of industrial nations - by which he meant Americans were not being taxed enough to fund extensive government social programs.
The networks refused to cover the extensive contributions of private faith-based charities when a tsunami devastated Japan in March 2011, and similarly ignored coverage of corporate donations when a destructive earthquake struck Haiti in Jan 2010.
This is because for the mainstream media, government social programs, fueled by taxation, are the only form of effective charity. At times, the media has even attacked private charity, because money given to private charity is not given to government programs. (This attack on private charity might be rooted in the fact that conservatives tend to be far more generous with their time and money than liberals.)
The New York Times' Stephanie Strom bizarrely blasted private charity in 2007 because it took money away from the government, declaring that "The rich are giving more to charity than ever, but people like Mr. Broad are not the only ones footing the bill for such generosity. For every three dollars they give away, the federal government typically gives up a dollar or more in tax revenue, because of the charitable tax deduction and by not collecting estate taxes."
In Nov. 2010, the Washington Post's Ezra Klein advocated giving to politically active think tanks as more effective than traditional gifts to charity.
Apparently, the "forced charity" of government social programs, fueled by higher taxes, is the only worthwhile form of charity, according to liberals. This is one explanation for the consistent media gripe that Americans are not generous, despite the mountain of evidence that suggests otherwise.
--------------------
Link: http://www.mrc.org/cmi/articles/2011/America_the_Generous_Not_According_to_the_Media.html
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