0
Stop Worrying About the Financial Crisis
Stop Worrying About the Financial Crisis
Taipei, Taiwan – When will the de-leveraging bust resume?
When we stop worrying about it.
This afternoon, we realized that deep down, our feelings had changed: we had stopped worrying about a resumption of the bear market.
Not that we’ve stopped thinking about it. We think about it every day. And we’re sure it’s coming. But we have stopped worrying. No matter what we think, we feel that somehow this will work out okay…we’ll be all right. We’ll stumble along…
Thinking and worrying are two very different things.
Thinking is purely superficial. It’s the worrying that counts. When you’re worried about a financial crisis, you sell out your risky positions and hunker down with cash. When you’re not worried, you’re happy to float along… You’ll change course when the danger becomes more imminent, you tell yourself.
But don’t forget:
This is a Great Correction. It began almost exactly three years ago, when New Century Financial – the second largest subprime mortgage company in the US – filed for bankruptcy. It will continue until debt levels in the private sector have worked themselves down to more reasonable levels.
How long will that take? Maybe 5 years. Maybe 20.
Meanwhile, you can’t expect much from this economy. Businesses are not going to add jobs. Consumers are not going to shop.
Is that all there is to it? No, there’s a lot more. That’s why it’s a Great Correction and not just an ordinary run-of-the-mill correction.
…there’s the correction of the huge the expansion of credit
…there’s also the correction of the stock market
…and the correction of the real estate bubble
…and the correction of the world economy and its dollar-based monetary system
Here’s what to expect:
…US stocks will begin falling again
…foreclosures, already running at twice their normal level, will increase
…bankruptcies, now at record levels, will go up too
…bonds will eventually collapse (but may turn out to be decent investments for a while longer…as the de-leveraging continues)
…the dollar too could go up when the crisis feeling returns; over the longer run it will be dangerous to hold it
…China will go through a financial crisis (potentially ‘Dubai times 1,000.’ As Jim Chanos puts it)
…states, cities, and entire countries will declare bankruptcy…
Those things don’t seem like threats to you? Well, they don’t feel like threats to us either. But that’s what makes them so dangerous…
…we’ve stopped worrying about them.
Alan Greenspan Shows Results
Alan Greenspan Shows Results That Speak for Themselves
04/14/10 Stockholm, Sweden – William Tell’s precision archery and noble fighting spirit served him well in his efforts to fend off the Austrians and to help him found the Swiss Confederacy that would give birth to the nation of Switzerland.
Alan Greenspan’s interest rate targeting… not quite so accurate.
Finally, the facts are seeping their way into the minds of a broader audience. A recent poll shows 39 percent of CNBC readers blame Greenspan for the nation’s economic breakdown, 39 percent partly blame him, and only 22 percent are willing to let him off the hook. It’ll be interesting to see where his speaking circuit tour goes from here.
US Deficit Spending
US Deficit Spending: A Tough Pill to Swallow
04/14/10 Tampa, Florida – Most people know me as the peachy kind of wonderful guy who, when you are piteously beaten down by a cruel and unforgiving world, and you tearfully reach out for a little helping hand, will tell you to quit that whining crap, get your stupid butt up off the ground, and go out to buy more gold, silver and oil to keep from getting destroyed by the coming-and-unstoppable inflation in prices that is caused by the horrifying inflation in the amount of money that the corrupt, intellectual-pygmies at the Federal Reserve are creating to satisfy the outrageous, unbelievable, unthinkable deficit-spending by the despicable, kamikaze-like Marxists in control of the Obama administration and the traitorous Congress (except Ron Paul), as they frantically spend, spend, spend to try, try, try to forestall the disgusting, diseased collapse (“the bust!”) that always, always, always comes after a long, incestuous, bodily-fluid-exchanging, monetary-and-fiscal orgy (“the boom!”) of irresponsible, dimwitted behavior.
Well, any fool can tell that I am obviously working myself into a Mogambo Fit Of Outrage (MFOO), if not judging by my words, dripping with venom as they are, then by my actions, which is to twist and squirm to prevent pills from being shoved down my throat, or the actions of my wife and family, who are the ones trying to shove the aforementioned pills down my throat because they mistakenly think that if I take the damned things, like I am supposed to, then maybe I won’t be such a weirdo about the amount of money being created by the loathsome Federal Reserve.
And then maybe I will be normal, and then maybe we can have a normal family, and then maybe they can have a normal life and invite their friends over to visit without me meeting them at the front door and asking them, “So, have you been buying gold, silver and oil as the only rational response to the criminally-incompetent Federal Reserve creating so much excess money and credit? Huh? Have you? If you aren’t, then you are stupid! And I don’t want my wife and/or kids hanging around with somebody as stupid as you because they might end up more stupid than they already are, so go away!”, which everybody thinks is embarrassing for some reason, even though I am obviously exercising my fatherly duties trying to protect them!
So I explain, “So don’t invite your friends over, which Suits Me Fine (SMF), if you really want to know how I feel about it. Or, better yet, get smarter friends! And better-looking ones, too! Hahaha!”
Well, I am sure that there are no pills big enough to prevent being terrified of such enormous increases in the money supply, judging by the last 4,500 years of history when other morons tried this silly crap.
And I think that Bill Bonner here at The Daily Reckoning is with me on this one, too, which is what I gather from him saying that the federal government “greatly increased its spending – adding $4.11 billion of deficit spending every single day since September 2007.”
Yikes! Borrowing spending $4.11 billion Every Freaking Day (EFD)! Gaaahhhh!
Despite my teeth-gritting determination to stop the pharmaceutical tyranny of medications being forced upon me, my mouth involuntarily gaped open when I realized that there are only 100 million of us non-taxpayer-paid workers in this Whole Freaking Country (WFC), and that this means that the government is borrowing and spending, for each one of us, $41.10 per day! This comes to the Obama idiots borrowing an incredible $287.70 a week for each non-taxpayer-paid worker, that we non-taxpayer-paid workers will have to pay back!
As I involuntarily gulped in horror at this revelation, somebody managed to get a few pills down my throat, which made me choke, and which, despite my discomfort, suddenly seemed like the perfect metaphor for the government jamming debt down my throat!
I instantly decided to show them how it feels, and perhaps understand my horror! I suddenly break free of their grasp, spring to my feet and shout, “You don’t care if debt and ruinous inflation in prices is being shoved down your throats? Maybe that’s because you don’t know how it feels to have something shoved down your throats, you morons!”
With the awesome agility of a powerful jungle cat, I suddenly pounce upon a handful of pills, grab one of the kids by the neck and start trying to jam pills down his throat! Hahaha! “You want to know,” I yell, “how debt and price inflation feels being rammed down your throats, terrors that such an outrageous expansion of the money supply necessitates? Then eat these pills! Eat them, damn it! Eat them!”
Instantly, the kids and wife are all running frantically around, crying in terror, screaming “Dial 9-1-1! Dial 9-1-1!” at each other, which I am gratified to note shows that my efforts were worth it: I was successful in my Mogambo Teachable Moment (MTM), and now they understood the horror of the government deficit spending, per day, $41.10 for each of them, too!
Too bad they don’t also see the horror of not buying gold, silver and oil when their own government is deficit-spending them into the poor house and the Federal Reserve is creating the excess money and credit to make it all possible.
Fortunately, I still have a handful of pills in case any of them gets close enough for me to teach them a lesson about that, too!
The Mogambo GuruWhy Republicans Are Winning on the Tax Issue
Americans understand what Obama spending means for their pocketbooks.
By KARL ROVE
Today's last-minute trip to the post office to mail in your return is a reminder of one of life's unpleasant realities: paying taxes. Always important in politics, the tax issue is likely to play a larger role this year than in any midterm election since 1994.
A recent Rasmussen survey reported that 66% of Americans believe the nation is over-taxed. There's a reason. Under President Barack Obama taxes are going up—a lot.
House Ways and Means Committee Republicans have issued a summary of the 25 tax increases signed into law by Mr. Obama so far. They total $670 billion over the next 10 years, including 14 tax hikes (including an annual tax on every insurance policy and an annual tax on brand-name drugs) that break Mr. Obama's solemn 2008 campaign pledge never to raise taxes on families making less than $250,000 a year.
Many of these taxes are part of the ObamaCare monstrosity. New levies on investment, drugs, medical devices and insurance policies eventually will hit ordinary Americans, and the public knows it. A late March Fox News poll asked, "If major health care reform legislation is passed, do you think your taxes will increase, decrease or stay about the same?" Seventy-five percent think their taxes will increase.
Tax concerns will hurt congressional Democrats. In rural areas, their opposition to repeal of the death tax antagonizes farmers and ranchers. Then there are America's 32 million small-business owners, who feel put upon by the administration's tax everyone-and-everything philosophy.
Families, especially in the suburbs, are pressed by rising property, sales and state income taxes in addition to the federal tax increases. And don't forget the 53 million investors whose battered accounts are only now recovering. There's a new 3.8% surtax on certain kinds of investment income for high earners, but it is not indexed for inflation, so it will bite an increasing number of people over time.
Between the March 2009 CNN poll and the March 2010 Associated Press survey, Mr. Obama's approval rating on taxes dropped to 44% from 62% while his disapproval rating rose to 43% from 37%. Similarly, the Rasmussen poll of March 31-April 1 found 46% of voters believe today their taxes will increase under Mr. Obama, compared to 36% who think they will stay the same and 8% who think they will decrease.
It's somewhat unusual that so many believe themselves over-taxed when half of all Americans don't pay federal income taxes. But many of them shell out for payroll and property taxes, and virtually everyone pays sales taxes. Plenty of Americans understand higher business taxes are eventually paid by those who buy goods and services.
Politicians would be wise to remember that high taxes also are a matter of principle. The Rasmussen poll of March 31-April 1 found three-quarters of Americans believe that no one should pay more than 20% of their income in taxes—a figure we are well beyond. This makes taxation a moral issue as well as an economic one.
The public isn't stupid. They understand, like night follows day, that Mr. Obama's blizzard of spending is generating a much larger national debt, and that debt, in turn, will create enormous pressure to raise taxes.
Mr. Obama will use more spending and bigger deficits as justification for additional taxes—perhaps even a European-style value-added tax (VAT), an idea already floated by House Speaker Nancy Pelosi and Obama economic adviser Paul Volcker. At the heart of Mr. Obama's agenda is the further empowerment of Washington, which Americans will not easily accept.
About Karl Rove
Karl Rove served as Senior Advisor to President George W. Bush from 2000–2007 and Deputy Chief of Staff from 2004–2007. At the White House he oversaw the Offices of Strategic Initiatives, Political Affairs, Public Liaison, and Intergovernmental Affairs and was Deputy Chief of Staff for Policy, coordinating the White House policy-making process.
Before Karl became known as "The Architect" of President Bush's 2000 and 2004 campaigns, he was president of Karl Rove + Company, an Austin-based public affairs firm that worked for Republican candidates, nonpartisan causes, and nonprofit groups. His clients included over 75 Republican U.S. Senate, Congressional and gubernatorial candidates in 24 states, as well as the Moderate Party of Sweden.
Karl writes a weekly op-ed for the Wall Street Journal, is a Newsweek columnist and is the author of the forthcoming book "Courage and Consequence" (Threshold Editions).
Email the author atKarl@Rove.comor visit him on the web atRove.com. Or, you can send a Tweet to @karlrove.
Jobs remain the No. 1 political issue, understandable when unemployment presses near double digits. Taxation as a stand-alone issue falls way below that according to most polls. But some issues are connected, and I'm convinced that Americans increasingly understand that rising spending and deficits and large tax increases will hurt the nation's ability to create jobs. This will help the GOP and hurt Democrats.
In this week's George Washington University Battleground Poll, for example, congressional Republicans lead their Democratic counterparts on which party is better able to hold down taxes (56% to 28%), control wasteful spending (44% to 32%), and control the deficit (45% to 36%). This puts the GOP within striking distance of catching the Democrats on who can turn the economy around (currently 41% to 47%) and create jobs (38% to 46%)—both issues that Democrats dominated not long ago. Historically, Republicans win—and win big—when they are within six points or less of the Democrats on the economy and jobs.
Things look bleak for Democrats right now. And if Republicans connect the dots among record spending, skyrocketing deficits, rising taxes and a weak recovery, Democrats will suffer a midterm loss from which the Obama presidency may never fully recover.
Mr. Rove, the former senior adviser and deputy chief of staff to President George W. Bush, is the author of "Courage and Consequence" (Threshold Editions, 2010).
Has The State Of California Become The Epicenter Of The Economic Collapse......
Has The State Of California Become The Epicenter Of The Economic Collapse Of America?
Once upon a time, California was the state that everyone wanted to move to. The endless sunshine, the gorgeous weather, the beaches, the lure of Hollywood and a booming economy made it extremely attractive to millions of Americans who wanted to fulfill their "California dreams". But those days are long gone. Now, the state of California has become an economic nightmare. In fact, many would argue that California has now become the epicenter of the economic collapse of the United States. Everything that once made California great is now being swamped by a tidal wave of unemployment, foreclosures, crime, budget cuts, traffic, taxes and natural disasters. There is a reason why every year now many more people leave the state of California than move into it. The state of California is suffering a slow economic death, and if something is not done it could end up being one of the biggest financial disasters in history.
The economic crisis of the past several years has hit California so incredibly hard that it is hard to describe. According to the U.S. Labor Department, the unemployment picture in the state continues to deteriorate, with an overall unemployment rate of 12.5 percent in January.
12.5 percent may not sound that bad, but the truth is that the situation in many of the urban areas is much worse. There are now 8 counties in the state of California that have unemployment rates of over 20 percent.
In this economic environment, not even teachers are safe. Just last week, the state of California handed pink slips to nearly 22,000 teachers across the state.
It is hard to even convey how bad things are in California right now. California has always been a "boom or bust" state, but what is happening now is really unprecedented.
In fact, the number of people now unemployed in California is equivalent to the populations of Nevada, New Hampshire and Vermont combined.
Businesses are shutting down at an alarming rate. For example, in the area around Sacramento, California there is one closed business for every six that are still open.
Just think about that.
One out of every seven businesses has already shut down.
And unfortunately things are going to get even worse.
But that is the last thing that people in California want to hear about now.
All of these economic problems are playing havoc with the state budget as well. At this point the state of California is essentially dead broke. Yet they have to keep borrowing more and more money because revenues have fallen off so sharply. Basically what California is doing is they are piling up the biggest mountain of debt that any U.S. state has ever accumulated, and there is no hope that they will be able to do anything about it any time soon.
The following is how Ralph E. Stone of the Fog City Journal recently described the California government's colossal financial problems....
How bad is the problem? Consider that California has a $20.7 billion deficit in the general fund budget over the next 16 months. California owes $8.8 billion in short-term loans that have to be paid off by June, and over $120 billion in outstanding bonds and interest that will be paid over decades. The state’s pension fund, CalPers, has $16.3 billion more in liabilities than assets, plus California also faces a $51.8 billion expense for the health and dental benefits of state retirees and future retirees.
So what can the state of California do? Well, they can either raise taxes or they can cut spending. Considering the fact that taxes are already at an incredibly oppressive level in the state, that is not a great option. Not that they won't try to suck more money out of the taxpayers anyway.
What California should be trying to do is to cut spending, but the very deep cuts that have been made already have not made that much progress.
Bob Herbert of the New York Times recently described California's massive budget problems this way....
California has cut billions of dollars from its education system, including its renowned network of public colleges and universities. Many thousands of teachers have been let go. Budget officials travel the state with a glazed look in their eyes, having tried everything they can think of to balance the state budget. And still the deficits persist.
But it is not just California's government that is experiencing a financial crisis of unprecedented magnitude.
California's overstretched health care system is also on the verge of collapse. Dozens of California hospitals and emergency rooms have shut down over the last decade.
Why?
The reality is that many hospitals and emergency rooms simply could not afford to stay open as they were endlessly swamped with immigrants and poor and homeless who were not able to pay for the services they were getting.
As a result of these hospital and emergency room closings, the remainder of the health care system in the state of California is now beyond overloaded. This had led to brutally long waits, diverted ambulances and even unnecessary patient deaths.
And the number of Californians who are unable to pay for their emergency care is only increasing.
According to one new study, approximately 1 in 4 Californians under the age 65 had absolutely no health insurance last year.
But perhaps now that Barack Obama's health care scheme has passed, maybe the cost of caring for everyone in California will be taken care of by the American taxpayers.
Thanks Obama.
The high unemployment rate and the cuts to the budget in California have also created an environment where crime and gang activity can flourish. Not that crime and gangs were not gigantic problems before. But now thousands upon thousands of young men who can't or won't find jobs have nothing better to do than sell drugs and terrorize entire neighborhoods.
In fact, there are many areas of California where you just do not go out of your home at night.
Then there are the devastating droughts, the thousands of wildfires, the endless earthquakes, and the crippling mudslides which California now experiences almost every single year.
No wonder so many people are flocking to leave the state.
But what happens in California eventually spreads to the rest of the United States.
Keep in mind that 13 percent of the U.S. gross domestic product comes from the state of California.
Counted by itself, California would be the 5th largest economy in the entire world.
So to think that these problems can be isolated to California is complete fantasy.
In fact, there are some areas in the United States, such as Detroit, that are just as bad as anything that is going on in California.
So the reality is that this is a national economic cancer that is spreading rapidly.
The economic nightmare that people in California and Michigan are experiencing will be coming to your area sooner or later.
Are you ready for that?
If The Money Supply Is Exploding.......
If The Money Supply Is Exploding Why Are We Not Seeing Rampant Inflation?
The U.S. money supply has been expanding at an absolutely unprecedented rate. So why are we not experiencing rampant inflation? Why is the U.S. dollar not falling through the floor? Well, the truth is that all of this new money has gotten into the U.S. financial system but it is not getting into the hands of U.S. businesses and consumers. In fact, even though the money supply is exploding, U.S. banks have dramatically decreased lending. This has brought us to a very bizarre financial situation as a nation.
What we have seen is the U.S. government shovel massive amounts of cash into the U.S. financial system and then watch as the big banks sit on that cash and refuse to lend it. The biggest banks in the U.S. reduced their collective small business lending balance by another 1 billion dollars in November 2009. That drop was the seventh monthly decline in a row. In fact, in 2009 as a whole U.S. banks posted their sharpest decline in lending since 1942.
So all of this money that the U.S. government pumped into the financial system has been doing American businesses and consumers very little good. That is why we can have a vastly increased money supply (as you can see from the chart below) and very little inflation.
So if the banks are not lending the money to the American people, what are they doing with it? One of the things they are doing with it is buying U.S. government debt. As you can see from the chart below, U.S. banks have cut business lending by approximately 350 billion dollars since early 2009 and they have purchased approximately 300 billion dollars worth of U.S. Treasury securities.
So instead of loaning money to American businesses and consumers who desperately need it, a ton of this new money is being used to pump up yet another bubble. This time the bubble is in U.S. Treasuries. Asia Times recently described how this trillion-dollar carry trade in U.S. government securities works....
Remarkably, the most aggressive buyers of US government debt during the past several months have been global banks domiciled in London and the Cayman Islands. They borrow at 20 basis points (a fifth of a percentage point) and buy Treasury securities paying 1% to 3%, depending on maturity.
This is the famous "carry trade", by which banks or hedge funds borrow short-term at a very low rate and lend medium- or long-term at a higher rate. This works as long as short-tem rates remain extremely low. The moment that borrowing costs begin to rise, the trillion-dollar carry trade in US government securities will collapse.
So what happens when this bubble collapses?
Nobody knows for sure. But anyone who has dealt with carry trades in the past knows that when carry trades unwind they can do so very, very quickly and the results can be nightmarish.
The truth is that the U.S. financial system is a house of cards that could fall at any time. A lot of economic pain is on the horizon - it is only a matter of when it comes and how bad it is going to get. Trends forecaster Gerald Celente is predicting that it could be as soon as this year....
The Massive Tidal Wave Of Illegal Immigration
The Massive Tidal Wave Of Illegal Immigration That Threatens To Destroy The United States Economy
According to some estimates, there are as many as 30 million illegal aliens in the United States today. The vast majority of them pay absolutely no federal or state income taxes. And yet they seem more than happy to take advantage of the free social services and benefits offered to them. In fact, stories of how "good" life in America is just encourages more and more immigrants to come to the United States illegally. Not that all immigration is bad. The United States will always be able to use immigrants who come in the "front door" legally. In fact, my wife is originally from Canada. But those who would break the law by entering the U.S. illegally also are the same kind of people who are serial criminals, join gangs, deal drugs, bring diseases and are economic parasites. So can the U.S. economy ever fully recover if we continue to carry tens of millions of illegal aliens on our backs? If Barack Obama and the U.S. Congress open the door for illegal aliens even further, will it create a social and economic nightmare that none of us would even dare to imagine?
Today, there are approximately 20 million American workers who are unemployed or who are underemployed. More than 36 million Americans are on food stamps and that number continues to increase each month. Over 13 million American children now live in poverty. We cannot provide for the people that are already here, and yet the U.S. government is making virtually no effort to stem the flood of illegal immigrants that are streaming into this nation.
In fact, it is projected that the United States will add another 100 million people over the next 25 years. Where in the world will they get jobs? How in the world will we take care of them all?
With the U.S. economy already on the verge of complete and total collapse, can we afford to continue to allow the problem citizens of other nations to pour into ours? Already, drug violence has turned many areas of northern Mexico into absolute war zones. Juarez, Mexico (which is just across the U.S. border) has become the murder capital of the western hemisphere. Much of that violence has begun to spill over into areas of the southwestern United States.
For example, NPR recently described one incident in the Juarez Valley that involved American citizens....
A couple of weeks ago, gunmen in the Juarez Valley killed the Mexican relative of a Fort Hancock high school student. When the student's family in Fort Hancock heard about it, they crossed the border at 10 a.m. to see the body, and took the student with them.
"By 10:30, they had stabbed the relatives that went with him, which included his grandparents, with an ice pick," says school superintendent Jose Franco. "My understanding is that the gentleman is like 90 years old, and they poked his eyes out with an ice pick. I believe those people are still in intensive care here in a hospital in the U.S."
Is this how we want to live?
To illustrate how draining illegal immigration is on the U.S. economy, an anonymous piece that has been floating around the Internet entitled "Joe versus Jose" is reproduced below. Try not to get too angry as you read this....
*****
Here is an example of why hiring illegal aliens is not economically
productive for the State of California...or any other state for that matter.
You have 2 families..."Joe Legal" and "Jose Illegal". Both families have
2 parents, 2 children and live in California . "Joe Legal" works in
construction, has a Social Security Number, and makes $25.00 per hour
with payroll taxes deducted.... "Jose Illegal" also works in construction,
has "NO" Social Security Number, and gets paid $15.00 cash per hour
"under the table".
Joe Legal...
$25.00 per hour x 40 hours $1000.00 per week, $52,000 per year...
Now take 30% away for state & federal tax...
Joe Legal now has $31,231.00
Jose Illegal...
$15.00 per hour x 40 hours $600.00 per week, $31,200.00 per year...
Jose Illegal pays no taxes...
Jose Illegal now has $31,200.00
Joe Legal pays Medical and Dental Insurance with limited coverage
$1000.00 per month $12,000.00 per year
Joe Legal now has $19,231.00
Jose Illegal has full Medical and Dental coverage through the state and local clinics at a cost of $0.00 per year
Jose Illegal still has $31,200.00
Joe Legal makes too much money to be eligible for Food Stamps or welfare - Joe Legal pays for food $1,000.00 per month $12,000.00
per year - Joe Legal now has $ 7,231.00
Jose Illegal has no documented income, so he is eligible for Food Stamps and Welfare - Jose Illegal still has $31,200.00
Joe Legal pays rent $1,000.00 per month - $12,000.00 per year
Joe Legal is now in the hole minus (-) $4,769.00
Jose Illegal receives a $500 per month Federal rent subsidy...
Jose Illegal pays rent $500.00 per month (section 8 housing)
$6,000.00 per year - Jose Illegal still has $25,200.00
Joe Legal now works overtime on Saturdays or gets a part time job
after work or his wife must work. Jose Illegal has nights and
weekends off to enjoy with his family (and eat out!).
Joe Legal's and Jose Illegal's children both attend the same school.
Joe Legal pays for his children's lunches
Jose Illegal's children get a government sponsored breakfast & lunch,
and they also qualify to be bused to school at taxpayer expense.
Jose Illegal's children have an after school ESL program.
Joe Legal's children have to find a way to get to school and go home
after school as, "latch-key kids" with no adult supervision.
Joe Legal and Jose Illegal both enjoy the same police and fire services,
but Joe paid for them and Jose did not pay.
Jose Illegal can send most of his money back home to Mexico to build a
new home for retirement, and have money to buy a new truck
(and still have Medi-Cal benefits while living in a foreign country;
until someone turns him in to authorities....if they ever find out)
Joe Legal is still in the hole.
Any questions?
*****
But an even bigger problem may be the rampant lawlessness that many of these illegal aliens bring. Crime, gangs and drug dealing are dramatically exploding all the way from Texas to southern California.
There are fewer and fewer areas that you can call "safe" in the southwestern United States.
But now Barack Obama and the U.S. Congress want to give illegal aliens amnesty.
If Barack Obama's amnesty for illegal aliens gets passed, will more ranchers like Rob Krentz get murdered?
Trying to make an honest and safe living anywhere near the Mexican border is becoming a very difficult thing to do.
In fact, one sheriff recently told the residents of one Texas border town that they better "arm themselves". As he warned them of the dangers that they are now facing, he delivered this sobering warning....
"As they say the old story is, it's better to be tried by 12 than carried by six. Damn it, I don't want to see six people carrying you."
Immigrants that are going to be productive members of society are going to come in legally. But we have made the legal process for immigrating extremely complex and very expensive. So we have actually discouraged legal immigration while at the same time highly rewarding those who come in illegally. What kind of sense does that make?
Of course it seems like very little of what our political leaders do these days makes sense. As the number of illegal aliens increases to 40 million or even 50 million, what in the world is that going to do to America?
And once the damage is done, is there any chance that it can ever be reversed?
$4.00 A Gallon Gasoline By The End Of 2010?
$4.00 A Gallon Gasoline By The End Of 2010? How In The World Are Average Americans Going To Make Ends Meet If This Keeps Up?
Gas prices are on the rise again. In many areas of the U.S. gas prices are already hovering around $3.00 a gallon. In fact there are some areas where people are paying as much as $3.50 a gallon, and many experts are predicting that gasoline could hit $4.00 a gallon by the end of 2010. If this nonsense keeps up, how in the world is the average American family supposed to make ends meet? Not only is filling up our tanks going to cost a lot more, but the price of gasoline factors into so many other things. The U.S. economy just cannot handle a major increase in transportation costs at this point. These increasing gasoline prices come at a time when U.S. consumers are already stretched to the max.
But it isn't just gasoline prices that are going up. The price of food is really starting to rise as well. Rising demand and reduced supply drove supermarket prices for 16 basic foods up 6.2% in the first quarter of 2010.
Now, for those Americans who are independently wealthy, a large increase in gasoline and food prices might not mean much.
But for the rest of us who are trying to get our incomes to stretch as far as possible each month, it means a whole lot.
In fact, a record number of working Americans are finding that their paychecks are just not making it and are turning to government assistance programs such as food stamps just to make it.
According to the U.S. Department of Agriculture, approximately 39.4 million Americans, a new all-time record, received food stamps in January. This was up 22% from a year earlier. In fact, the number of Americans on food stamps has hit all-time records for 14 consecutive months.
New all-time records for 14 months in a row?
How in the world can anyone claim that the U.S. economy is in good shape?
And it is just not people who are out of work or who are lazy who are applying for food stamps. The truth is that a lot of hard working Americans who are doing everything they can to better themselves find themselves out of alternatives these days.
Some of those hard working Americans are readers of this site. One of them recently left a comment that is very timely....
There are people on food stamps now, that you would never think they were. For example myself, I just went on food stamps last month. I am not a welfare mom, unemployed or declaring bankruptcy, I am educated and working as hard as I can to make ends meet.
I hold a Masters degree, and a part time job. I make minimum wage and if I were scheduled 40 hours a week my pay would just cover my expenses. Problem is, with retail the number of hours changes from week to week, and it hasn’t been near 40 since Christmas. Luckily I planned ahead and put money aside if I couldn’t find a job right out of school, or if I found one and lost it with today’s economy. I have been able to cover the bills my paycheck doesn’t, but the thing is, my savings has gotten low to that.
I honestly really didn’t want to go on food stamps, I just can’t find another job. Let that be a full time position, or even another part time one. I’m applying to everything I’m qualified for, remotely qualified for, and even over qualified for. But there really are that few of jobs out there.
I haven’t really told anyone I’m on food stamps, a good portion of my old friends are still in school and don’t understand why I can’t find a “real” job. Luckily at my new job there’s a whole store of people who know exactly what I’m going through and would never think of judging me for how much I make or where I live.
There are other people too. Once at work a mother with three kids came in, she had never used food stamps before and had no idea what to do at the register. She almost came to tears trying to explain she really didn’t want to use them, but her husband lost his job, and all that was left for the family was her part time job, and she was so ashamed they had them.
People really have no idea how many of their neighbors are on food stamps.
----
Millions of Americans have done everything that the system has told them to do, and now the system is letting them down.
Why?
Because the system is failing.
The middle class is slowly being squeezed out of existence, and the years ahead are going to be very painful.
Already, it is getting extremely hard to live a middle class lifestyle.
If you haven't read "It’s Impossible to Get By In the US" by Graham Summers of Phoenix Capital Research, you really need to. In his article, Summers analyzes the expenses of a typical family making the median U.S. household income of $50,300 (he was using 2008 figures). According to Summers, if a family making that much did everything right financially, they would maybe have a couple hundred bucks at the end of the month for discretionary spending. But if they overpaid for their house or had any consumer debt then according to his calculations the typical American family would be operating in the red.
The truth is that the day is fast approaching when it will not be possible for the average American family to make it from month to month.
Even now record numbers of American families are failing financially.
In March 2010, there were 158,000 bankruptcy filings. That was up 19% from March 2009's number, and it was also up 35% from February 2010's number.
Things are getting scary out there.
But if all of that wasn't bad enough, now state and local governments across the United States are either implementing or are considering substantial tax increases. State and local governments all over the U.S. are facing unprecedented shortfalls, and they are looking for new sources of revenue. But you just can't get blood out of a stone. Unfortunately, they are likely to keep finding ways to impose new taxes on us anyway.
So is there any good news?
No, not really.
The United States is heading for a complete economic collapse and everyone is going to feel the pain one way or another.
Just make sure that you and your family are as prepared as possible for the years ahead.
"The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation."
-Vladimir Lenin
They want to bankrupt the world in order to bring a World Government
They want to bankrupt the world in order to bring a World Government - Bob Chapman
Bob Chapman : Get your cash out of the Banks and The Stock Market - we will have Bank Holiday and the Stock market will crash by the end of this year
Mr. Chapman also known as The International Forecaster is a 74 years old. He was born in Boston, MA and attended Northeastern University majoring in business management. He spent three years in the U. S. Army Counterintelligence, mostly in Europe. He speaks German and French and is conversant in Spanish. He lived in Europe for six years, off and on, three years in Africa, a year in Canada and a year in the Bahamas.
Mr. Chapman became a stockbroker in 1960 and retired in 1988. For 18 of those years he owned his own brokerage firm. He was probably the largest gold and silver stockbroker in the world during that period. When he retired he had over 6,000 clients.
Bob Chapman : you got to remove these people from the government
Starting in 1967 Mr. Chapman began writing articles on business, finance, economics and politics having been printed and reprinted over the years in over 200 publications. He owned and wrote the Gary Allen Report, which had 30,000 subscribers. He currently is owner and editor of The International Forecaster, a compendium of information on business, finance, economics and social and political issues worldwide, which reaches 10,000 investors and brokers monthly directly, and parts of his publication are picked up by 60 different websites weekly exposing his ideas to over 10 million investors a week.
In June of 1991, at the request of business associates, and due to retirement boredom, he began writing the International Forecaster.
Bob Chapman : do not expect the government to guarantee your bank account , it is bankrupt
Chris Christie takes on the situation
Chris Christie takes on the situation
Gene Healy
 |
| Republican New Jersey Gov. Chris Christie (AP Photo/Mel Evans, File) (AP) |
| |
My native New Jersey has long been a national punchline, a status recently reinforced by MTV's hit show "Jersey Shore," featuring Mike Sorrentino, the guido extraordinaire nicknamed for his impressive abs (they're a "Situation," apparently).
Recently, though, I've been holding my head high, thanks to Jersey's new governor, Republican Chris Christie, a man who hasn't seen his abs since the "Born to Run" tour -- if ever. In the 2009 race, our last governor, Jon Corzine, ridiculed Christie's weight, then left him with the gruesome political challenge of closing an $11 billion deficit, the largest gap per taxpayer in the United States.
As Sorrentino put it in another context, "This situation is indescribable. You can't even describe the situation that you're about to get in."
But Christie seems up for it, facing down Jersey's political bosses with a budget that would force them to spend $3 billion less than in 2009.
In their 2008 book "Soprano State," reporters Bob Ingle and Sandy McClure paint a darkly hilarious picture of a Garden State kleptocracy in which no-show jobs and no-bid contracts abound for the politically connected, and where "at least 4,755 of the more civic-minded corpses voted in the November 2003 election."
Christie, U.S. attorney for New Jersey from 2002 to 2008, is the closest thing the book has to a hero: "A man determined to change the way Jersey pols do business." By 2007, he'd "nabbed more than a hundred people in public corruption cases," and more than a quarter of the state Senate announced they wouldn't seek re-election that year.
Shortly after his inauguration, Gov. Christie used the office's broad powers to slash $560 million in education spending. In a February speech to New Jersey mayors, he scorned that "old, tired song" about fixing things with imaginary cuts in "waste and abuse." Referencing the classic scene in "Butch Cassidy and the Sundance Kid," Christie asked them to hold hands with him and "jump off the cliff."
I can think of more diplomatic metaphors. But Christie's right that the state's in deep trouble, with unsustainable pension growth and a property tax burden that averages more than $7,000 a family.
That's why he's now calling for laying off 1,300 state workers and cutting an additional $820 million in aid to public schools.
"Is it wrong to love another man?" Rush Limbaugh asked recently, "because I love Chris Christie."
Rather than linger over that disturbing image, consider the clever move Christie made last week, offering to free up aid for school districts whose teachers agreed to wage freezes. It's all about the children, right? So far only a handful of districts have gone along.
A recent memo from New Jersey teachers union reps in Bergen County ends with a cutesy "prayer" for the governor's death.
Early polls showed a surprisingly favorable reaction to Christie's cuts. But the Newark Star-Ledger reported last week that Christie's rating has sunk 12 points since February, with voters opposed to his budget by a seven-point margin.
Christie's running a bold experiment: treating voters like adults, telling them what's needed to get out of their predicament. It's the right thing to do, and given where New Jersey stands, probably as wise a political choice as any (it's not like Corzine stayed popular by ducking the hard choices).
So maybe that cliff-jumping metaphor wasn't as bad as I thought. Remember the exchange: Redford (Sundance): "I can't swim!"; Newman (Cassidy): "You crazy? The fall will probably kill ya!"
As Christie puts it: "It should've been dealt with years ago. It wasn't. ... If people don't like it after four years, they can send me home."
More like this, please.
Gene Healy is a vice president of the Cato Institute and author of "The Cult of the Presidency."
It Is Not the Bomb, but Who Has It
It Is Not the Bomb, but Who Has It
It is fine and good for President Obama to assemble leaders to join forces to track down fissionable material that might get into the hands of terrorists and to encourage non-proliferation. Few presidents could have rounded them all up in one place. But the problems with his nuclear non-proliferation strategy is a certain failure to see that nuclear bombs are a means, albeit a horrific one, to an end.
The problem is not necessarily bombs per se (e.g., We don't lose sleep over a nuclear France or Britain), but who has them. Those nations who possess nuclear weapons — even if some are undemocratic, such as a prosperous exporter like China — and go to these sort of conferences are not those who are most likely to use them preemptively, in contrast to an Iran or North Korea or radical Islamic group. By directing efforts against the means, rather than those who employ them, we may well direct attention from the real problem — sort of like the distraught state regulator who goes after the head-nodding, law-abiding citizen for his misdemeanor because he knows well he can do nothing much about the felonies of the dangerous criminal.
We are currently engaged in a great but somewhat dangerous experiment in American foreign policy that has unfortunate antecedents from the 1930s and 1970s — a debate that reveals radically different views of human nature, pitting the tragic against the therapeutic. Obama believes that repeated emphasis on good intentions, outreach, concessions, and dialogue can convince a misunderstood or misguided Iran, North Korea, Syria, or Russia to more or less join the world of nations, follow the rules, and not take risks with world stability in pursuit of regional ambitions. Most past presidents, in contrast, acknowledge the value of such diplomatic niceties and respect, but differ radically in their view of autocratic, bellicose states and why they do what they do — believing instead that a calculating and quite savvy Syria or Iran stays within international norms depending only on the costs it knows that it will have to pay if it does not.
The problem with this most current difference of well-meaning opinion over human nature is that it is not a mere bull session in the Harvard faculty lounge, but involves the safety of hundreds of millions.
UPS Boosts 2010 Forecast
UPS Boosts 2010 Forecast as Profit Beats Estimates (Update1)
By Mary Jane Credeur
April 14 (Bloomberg) -- United Parcel Service Inc., the world’s largest package-delivery company, boosted its full-year forecast after rising demand for overseas shipments helped produce a first-quarter profit that beat analysts’ estimates.
Earnings excluding some items were 71 cents a share, Atlanta-based UPS said today in a statement that gave partial results. Analysts estimated 57 cents, the average of 19 projections compiled by Bloomberg. The shares rose in New York.
International shipments jumped 9 percent in the quarter, UPS said. An increase in domestic volumes of less than 1 percent marked the first advance in more than two years as businesses and consumers began sending more packages.
“A big part of the beat is from international, and that’s a sign that the worldwide economy is picking up,” said Helane Becker, an analyst at Jesup & Lamont Securities Corp. in New York. She recommends buying the shares. “That means Asia to India, India to Brazil, within Europe. Some of that is going to the U.S., but most of it is within and to other regions.”
UPS jumped $2.68, or 4.1 percent, to $68.13 at 4:57 p.m. in New York. The results were announced after regular New York Stock Exchange composite trading.
Earnings for all of 2010 will be in a range of $3.05 to $3.30 a share, UPS said, exceeding the range of $2.70 to $3.05 provided in February. The company didn’t give full quarterly results, and said that information would be released on April 27.
UPS benefited from increases in pricing, Chief Financial Officer Kurt Kuehn said in the statement.
Stocks, Commodities Gain
Stocks, Commodities Gain as Earnings, Data Boost Optimism
By Rita Nazareth and Gavin Serkin
April 14 (Bloomberg) -- Stocks and metals rallied and oil halted a five-day slide as better-than-estimated corporate earnings and U.S. retail sales fueled confidence in the global economic rebound. The Dollar Index fell to a four-week low.
The Standard & Poor’s 500 Index climbed the most in almost six weeks, rising 1.1 percent at 4 p.m. in New York. The MSCI Emerging Markets Index jumped 1.2 percent, led by a rally in Korea after Moody’s Investors Service raised the nation’s credit ratings. Nickel and zinc surged more 3 percent to lead industrial metals higher in London, while oil climbed to almost $86 a barrel. Treasury 10-year note yields advanced from near a three-week low, increasing five basis points to 3.86 percent.
JPMorgan Chase & Co., Intel Corp. and CSX Corp. posted earnings that topped analysts’ average estimates, while the government said U.S. retail sales climbed the most in four months in March and the Federal Reserve said the economy expanded across most of the nation. Korea reported its biggest drop in unemployment in a decade and economists predicted China will report its fastest growth in almost three years tomorrow.
“On the corporate front, we got good earnings reports from Intel and JPMorgan,” said Peter Jankovskis, who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “We had pretty good retail sales and CPI numbers. They tell us that the economy is growing without a significant threat of inflation. That gives the Fed room to keep its low interest-rate policy.”
Fed Outlook
Fed Chairman Ben S. Bernanke said the U.S. expansion will remain moderate as the economy contends with weak construction spending and high unemployment. The central bank’s Beige Book regional business survey said economic activity increased somewhat in all Fed districts except St. Louis. While labor markets remained weak, some hiring was evident, the Fed said.
The S&P 500 climbed above 1,200 for the first time since September 2008, the month of Lehman Brothers Inc.’s bankruptcy. Intel and JPMorgan rallied at least 3.3 percent for two of the top four gains in the Dow Jones Industrial Average. Combined first-quarter profit for S&P 500 companies increased 30 percent from a year earlier, according to analyst estimates compiled by Bloomberg.
The Dollar Index, which gauges the currency against six major trading partners, dropped 0.4 percent to 80.206 for a fourth day of losses and its lowest level since March 17. The U.S. currency weakened against 12 of 16 major counterparts, losing more than 1 percent versus the Singapore dollar and South Korean won.
Emerging Markets
The MSCI Emerging Markets Index rose to the highest level since July 2008. Korea’s benchmark climbed to the highest since June of that year as Shinhan Financial Group Co., the country’s third-biggest financial company, climbed 3.1 percent for the biggest gain in two months. Russia’s Micex Index jumped 1.8 percent as government officials meet with bondholders today for the country’s first Eurobond sale since 1998.
Brazil’s Bovespa equities index climbed 0.3 percent as Vale SA and Fibria Celulose SA and gained.
The MSCI World Index of 23 developed nations’ stocks rallied 1 percent, the most in almost six weeks, and the MSCI Asia Pacific Index climbed 0.7 percent.
Samsung Electronics Co., the world’s biggest chipmaker after Intel, gained 2.1 percent in Seoul. Tokyo Electron Ltd. advanced 3.6 percent in Tokyo after the company said orders rose. DBS Group Holdings Ltd., Southeast Asia’s biggest bank, climbed 4.6 percent in Singapore.
European Stocks
The Stoxx Europe 600 Index advanced 0.7 percent to an 18- month high as basic-resources and technology shares rallied. Rio Tinto Group gained 2.1 percent in London. Infineon Technologies AG, Europe’s second-largest chipmaker, climbed 2.8 percent in Frankfurt. STMicroelectronics NV gained 2.7 percent in Paris. Allied Irish Banks Plc surged 7.9 percent in Dublin after Goldman Sachs Group Inc. recommended the shares.
Greek bonds fell, with the yield on the nation’s benchmark two-year note rising 56 basis points to 6.66 percent, after Pacific Investment Management Co. and BlackRock Inc. said it’s too early to buy the securities after the European Union brokered the nation’s 45 billion-euro ($61 billion) aid package.
The premium investors demand to hold Greek 10-year debt instead of benchmark German bunds widened 28 basis points to 394. The spread has fallen from 427 basis points on April 8, which was the widest since the euro’s inception in 1999.
Greece still faces the danger of a “death spiral” because the cost of borrowing in the euro region’s rescue package is too expensive, billionaire investor George Soros said.
‘Question of Solvency’
“While it’s better than what the market is currently willing to offer, it’s still rather high,” Soros said at an event in London late yesterday organized by the Economist magazine. “It is a question of solvency. If you start charging very high rates as the market does in anticipation of solvency then that pushes you into insolvency.”
National Bank of Greece SA, the nation’s biggest lender, led Greek stocks lower, slipping 4 percent in Athens as the benchmark ASE Index lost 1.4 percent.
Greece and Portugal led an increase in the cost of insuring against default on sovereign debt. The European Union said Portugal may need additional budget measures this year to meet its deficit target, fueling concern the Greek debt crisis may worsen. Swaps on Greece surged 56 basis points to 436 and Portugal jumped 28 to 183, according to CMA DataVision.
Oil Jumps
Crude oil futures jumped after the U.S. Energy Department reported an unexpected decline in inventories and gains in equities signaled demand may improve with the economy. Oil for May delivery rose 2.1 percent to $85.84 a barrel in New York.
Gold rose as the dollar’s slide enhanced the appeal of the metal as an alternative investment, and signs of a global economic recovery boosted demand for commodities. Gold for June delivery rallied 0.3 percent to $1,156.60 an ounce in New York. Spot Palladium surged to a two-year high.
Aluminum for delivery in three months rose 1.1 percent to $2,462 a metric ton on the London Metal Exchange, the highest since September 2008. Nickel advanced 3.5 percent to $26,395 a ton. Zinc, tin and copper also appreciated.
Fed Says Economy Expanded
Fed Says Economy Expanded ‘Somewhat’ in Most of U.S. (Update1)
By Scott Lanman
April 14 (Bloomberg) -- The Federal Reserve said the economy expanded “somewhat” across most of the U.S. in March as consumer spending and manufacturing improved, signaling the recovery is broadening without gaining much speed.
“Overall economic activity increased somewhat since the last report across all Federal Reserve Districts except St. Louis, which reported ‘softened’ economic conditions,” the Fed said today in its Beige Book business survey, published two weeks before the Federal Open Market Committee meets to set monetary policy.
Fed Chairman Ben S. Bernanke and his colleagues are debating how and when to tighten credit, including whether to modify a pledge to keep interest rates very low for an “extended period.” Earlier today, Bernanke told lawmakers there are “significant restraints” on a recovery he said will be “moderate” over the coming quarters.
“While labor markets generally remained weak, some hiring activity was evident, particularly for temporary staff,” according to the Beige Book. Consumer prices “generally remained level,” and producers had difficulty passing along increases in some raw materials, the Fed said.
Today’s report reflects information collected on or before April 5 and summarized by staffers at the Minneapolis Fed. Fed policy makers next meet April 27-28. The prior report, released March 3, said the economy improved in nine of the Fed’s 12 regions, in most cases at a “modest” rate.
Stocks Rise
Stocks rose for a fifth day after a Labor Department report showed retail sales rose more than anticipated and results at Intel Corp. and JPMorgan Chase & Co. beat analysts’ estimates. The Standard & Poor’s 500 Index climbed 0.8 percent to 1,206.88 at 2:18 p.m. in New York.
The St. Louis Fed reported declines in manufacturing and service industries in its section of the Beige Book released today.
The economy expanded at a 5.6 percent annual rate in the final three months of 2009, led by inventory restocking. That pace probably slowed to 3 percent in the first quarter of 2010, according to the median estimate in a Bloomberg News survey of economists this month.
Consumer spending increased, with several Fed banks saying consumers were “somewhat more confident” and businesses “cautiously optimistic” about future sales.
A government report earlier today showed sales at U.S. retailers climbed in March by 1.6 percent, more than analysts anticipated and the most in four months. Gains for February and January were revised up.
Auto Dealers
Eleven of 13 major categories showed increases in sales last month, led by a 6.7 percent advance at auto dealers. Purchases of building materials jumped 3.1 percent, the most since November 2007, and receipts at clothing stores increased by the most in a year. Vehicle sales increased in recent weeks in eight Fed regions, the central bank said.
Reports earlier this month showed service industries expanded in March at the fastest pace since May 2006, while manufacturing grew at the quickest rate since July 2004.
“Business services were mixed, with some signs of economic recovery,” the Fed said today. Manufacturing increased since the last report in most of the U.S.
Four regions reported “strong demand” for temporary staffers, and in the Atlanta area, many companies kept increasing the number of hours for existing workers. U.S. employers added 162,000 jobs in March, the third gain in five months and the most in three years. The unemployment rate held at 9.7 percent, close to a 26-year high.
Consumer Prices
The Labor Department’s consumer price index, minus food and energy, rose 1.1 percent for the year ended in March, slowing from a 1.3 percent rate in February and 1.6 percent in January. Fed officials have a longer-run goal of 1.7 percent to 2 percent for a separate price index including all costs.
Last month, U.S. central bankers wrapped up $1.25 trillion in purchases of mortgage-backed securities aimed at keeping costs on home loans low. The purchases have expanded the central bank’s balance sheet to $2.31 trillion in total assets from $926 billion at the start of 2008.
Bernanke said today that “weakness in both residential and nonresidential construction” is holding back economic growth.
The housing market gained, “albeit from low levels,” in 10 of 12 Fed regions, the central bank said. The commercial real estate market was “slow” across the U.S.
Lending demand was mixed in most areas, and credit standards were “generally unchanged” across the country, the Fed said.
Why Humanity Loves, and Needs, Cities
Why Humanity Loves, and Needs, Cities
By EDWARD L. GLAESER
Nicky Loh/Reuters Residents sit on the waterfront with a view of the Singapore skyline.
Edward L. Glaeser is an economics professor at Harvard.
For much of its early existence, our species spread out.
Many millennia ago, we left our primordial homes in search of places where fewer people were competing over nature’s abundance. In the 19th century, settlers extended across North America to get access to Iowa’s rich soil and Montana’s mines.
But now humanity is marked more by concentration than by spread. In 2007, one-half of the world’s population became officially urban. One-third of Americans inhabit just 16 large metropolitan areas, which collectively use only a tiny fraction of the country’s land mass.
Given the vastness of the globe, why do human beings choose to live so close to one another?
Understanding the appeal of proximity — the economic advantages of agglomeration — helps make sense of the past and future of cities. If people still clustered together primarily to reduce the costs of moving manufactured goods, then cities would become increasingly irrelevant as transportation costs continue to decline.
If cities serve, as I believe, primarily, to connect people and enable them to learn from one another, than an increasingly information-intensive economy will only make urban density more valuable.
About 30 months ago, the National Bureau of Economic Research convened a conference on the economics of agglomeration and the fruits of that conference were just published. As I edited the volume and strongly believe in the quality of its contents, I’m going to draw from it in a couple of blog posts.
Perhaps the clearest reason why people cluster together in cities is that wages and productivity rise with density.
Edward L. GlaeserThe figure shows the 25 percent correlation between the logarithms of population density and 2008 gross metropolitan product per capita (using 2000 Census population numbers). Per capita productivity increases by 4 percent as population density rises by 50 percent.
But why does productivity rise with density?
The first essay in the book, by Pierre-Philippe Combes, Gilles Duranton, Laurent Gobillon and Sébastian Roux, attacks this productivity puzzle using data on more than eight million French male workers. They are concerned with two potential sources of bias. First, it may be that productivity is causing density, instead of density causing productivity.
Here’s how the four co-authors try to deal with this potential problem. They argue that longstanding geological features of an area — like the quality of a city’s soil — should have little direct impact on productivity in a developed economy today. If they are right, then natural geographic attributes would affect current productivity only indirectly, by increasing population density over time. Researchers can therefore use historical data to try to correct for this reverse causality. They find that the productivity-density link drops little after making this correction.
A second problem is that more skilled people might choose to live in more dense areas.
Across American metropolitan areas, there is a modest (25 percent) correlation between area density and the share of the population with college degrees. To address this issue, the co-authors first control for other types of characteristics of workers and industries. Their more high-powered approach looks at people who migrate from one place to another, and then asks whether wages rise or fall when people move into different metropolitan areas.
By looking only at the wage changes that come with mobility, they are able to correct for aspects of workers’ skill sets and abilities that aren’t captured by years of education.
In their data, they find that about one-third of the connection between density and productivity disappears with this movers-based estimation, which suggests that workers’ ability (beyond what degree they’ve earned) is important.
I found an even larger change when I started using this approach more than 15 years ago, but interpreting these results is tricky.
If cities enable the accumulation of skills, then the movers’ data will understate the true effects of density. If cities are machines for learning, as suggested by the fact that wages rise more quickly in cities, then a young person who moves from rural India to Bangalore won’t become instantly more productive.
The result on the wage gains of movers suggest that some of the productivity differences across space may reflect the selection of more skilled people into cities. But in my opinion, they somewhat overcorrect, and eliminate the impact that cities have on learning. As such, they may be something of a lower bound on the true connection between productivity and density.
Other essays in the volume focus on the changing nature of agglomeration economies. Jed Kolko writes about services, which now dominate most United States urban areas.
Mr. Kolko highlights a fundamental difference between manufacturing and services. For manufacturing firms it doesn’t much matter if suppliers or customers are in the same ZIP code or the same state. Goods are cheap to move. But services seem tied to suppliers and customers that are in the same ZIP code. Since face-to-face contact is so much a part of service provision, they are drawn to the extreme densities of cities.
In the penultimate essay in the book, Giacomo Ponzetto and I ask, “Did the Death of Distance Hurt Detroit and Help New York?”
Improvements in transportation and communication costs made it cost-effective to manufacture in low-cost areas, which led to the decline of older industrial cities like Detroit. But those same changes also increased the returns to innovation, and the free flow of ideas in cities make them natural hubs of innovation. Since the death of distance increased the scope for new innovation, idea-intensive innovating cities were helped by the same forces that hurt goods-producing cities.
Humanity is a social species and our greatest gift is our ability to learn from one another. Cities thrive by enabling that learning, and they have become only more important as knowledge has become more valuable. Understanding what makes cities work is more important than ever.
Retail sales soared 1.6% in March
________________________________________
Retail sales soared 1.6% in March
Brian S. Wesbury - Chief Economist
Robert Stein, CFA - Senior Economist
Retail sales soared 1.6% in March while sales excluding autos gained 0.6%, both beating consensus expectations. Including upward revisions to January/February, retail sales increased 2.1% overall and 0.9% excluding autos.
In the past six months, retail sales are up at an 11.7% annual rate while sales ex-autos are up at an 8.4% rate.
Almost every major category of sales increased in March. The strongest increases were for autos, building materials, and clothing. The only one to show a decline was gas, a category usually driven by price changes, not volume.
Sales excluding autos, building materials, and gas were up 0.5% in March (0.9% with revisions) and up at a 6.7% annual rate in the past six months. This calculation is important for estimating GDP.
Implications: Today’s report should prove once and for all that the consumer is not dead, is not on life support, and certainly doesn’t need special government assistance. Including revisions to prior months, retail sales were up 2.1% in March. Some of the gain may be due to Easter, which floats from year to year, making it hard for the government to seasonally-adjust. But the underlying upward trend is unmistakable. Last summer, during cash-for-clunkers, many analysts said gains in retail were temporary. They thought consumption would slump once the incentive program ended. But retail sales are now up at an 11.7% annual rate in the past six months, after the program ended. Retail sales were up at a 7.9% annual rate in Q1 versus the Q4 average. These figures suggest “real” consumer spending, which means inflation-adjusted and including services, should be up at a 4%+ annual rate in Q1. Most importantly, the gains in sales are broadening out. For example, building materials are up in four of the last five months, a positive sign that home construction is picking up, perhaps leading to some hiring by residential builders. Consumer spending is growing for two major reasons. First, while debt is still declining, the pace of the reduction in debt is slowing. Second, incomes are growing and recovering while booming markets are boosting confidence about future income. The V-shaped recovery train has left the station. Now it’s time to sit back and watch other investors catch up.
No comments:
Post a Comment