Category Archives: Economics

08.04.13
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Forbes: Bernanke Tells Congress: I Don’t Really Understand Gold

While Ron Paul is no longer part of  the Congressional committees that grill Ben Bernanke twice a year, the Fed Chairman was forced to answer questions about gold on Thursday again.  Asked about the falling price of gold, which is down nearly 25% this year, Bernanke admitted he doesn’t understand the yellow metal.

“No one really understands gold prices,” Bernanke told the Senate Banking Committee, adding he doesn’t get it either.

Gold prices, which have been under intense pressure since at least last September, were actually up on the day, gaining 0.5% to $1,284.20 an ounce by 12:47 PM in New York.

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Click below for the full article.

http://www.forbes.com/sites/afontevecchia/2013/07/18/bernanke-tells-congress-i-dont-understand-gold/

08.02.13
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BBC News: US economic growth at 1.7% in second quarter

The US economy grew at an annualised pace of 1.7% in the second quarter of the year, the Commerce Department has said.

That was a faster pace than expected by economists.

It was also up from the growth rate for the first three months of 2013, which was revised lower to 1.1% from 1.8%.

A slowdown was widely expected due to the impact of federal spending cuts, but also from the continuing weakness in the global economy.

In March, $85bn (£56bn) of public spending was cut as a result of a deal between Democrat and Republican politicians.

But the Commerce Department said that the federal government cut spending by only 1.5% in the April-to-June period, compared with a sharp drop of 8.4% in the first quarter.

The US economy grew by 0.4% in the second quarter compared with the previous three months. That compares to 0.6% growth in the UK in the same period.

The eurozone’s GDP figures are released on 14 August. The 18-member region shrank 0.2% in the first quarter – the sixth quarter of decline in a row.

‘Recovery’

“We have an upside surprise in the GDP, which speaks volumes for the job recovery that we’re putting together,” said Andre Bakhos, a market analyst at Lek Securities in New York.

“The recovery in the economy is starting to take root. This will be an interesting development given the fact that we’ll have a Fed announcement today.”

The Federal Reserve meets on Wednesday to make its latest statement on its massive bond-buying programme to stimulate the economy.

Consumer spending accounts for about 70% of US GDP. Official figures showed that consumers spent less in the second quarter than in the first, with personal consumption expenditure up 1.8%, compared with 2.3% previously.

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Click below for the full article.

http://www.bbc.co.uk/news/business-23513887

07.31.13
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OpenMarket.org: Detroit Bankruptcy Focuses Attention on Public Pensions

For people watching it from afar, the bankruptcy of Detroit — the biggest municipal bankruptcy in American history — may have brought a sense of relief in the fact that they live somewhere else. But it’s also brought needed public attention to the state of city finances around the nation. While Detroit is an egregious case of municipal incompetence, corruption, and mismanagement, its problems are not unique.

In fact, one of the drivers of debt that brought the Motor City to its knees is common among states and cities: defined benefit pension plans, which guarantee payments independently of the level of the plan’s funding. This week’s cover story in The Economist brings some needed attention to the problem:

Most public-sector workers can expect a pension linked to their final salary. Only 20% of private-sector workers benefit from such a promise. Companies have almost entirely stopped offering such benefits, because they have proved too expensive. In the public sector, however, the full cost of final-salary pensions has been disguised by iffy accounting.

Pension accounting is complicated. What is the cost today of a promise to pay a benefit in 2020 or 2030? The states have been allowed to discount that future liability at an annual rate of 7.5%-8% on the assumption that they can earn such returns on their investment portfolios. The higher the discount rate, the lower the liability appears to be and the less the states have to contribute upfront.

Even when this dubious approach is used, the Centre for Retirement Research (CRR) at Boston College reckons that states’ pensions are 27% underfunded. That adds up to a shortfall of $1 trillion. What is more, they are paying only about four-fifths of their required annual contribution.

On a more realistic discount rate of 5%, the CRR reckons the shortfall may be $2.7 trillion. A similar calculation by Moody’s, a ratings agency, reckons that schemes are 52% underfunded.

This is a huge problem. But to effectively address it requires knowing how big it actually is. That is easier said than done, given that much of the underfunding is the result of fuzzy math that has resulted in discount rates based on overly optimistic investment return projections.

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Click below for the full article.

http://www.openmarket.org/2013/07/31/detroit-bankruptcy-focuses-attention-on-public-pensions/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+Openmarketorg+%28OpenMarket.org%29

07.29.13
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The Daily Beast: Paul Krugman’s Nasty and Inane Attack on ‘Libertarian Populism’

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It’s got to be a pretty good gig to be Paul Krugman. He’s rich enough to bitch to The New Yorker about not being able to afford a home in St. John so, sigh, St. Croix has to do. He’s got tenure at the second-best college in New Jersey, an equally secure gig at the second-best newspaper in New York, and he’s even copped a Nobel Prize (economics, but still). He’s asked for his opinion on pop bands in a way that I’m pretty sure Milton Friedman or John Kenneth Galbraith never experienced (thank god for small favors). “The New Pornographers are probably technically better than Arcade Fire,” he’s solemnly sworn to Playboy. “But what the hell? It’s all good.”

The man also known as Krugtron the Invincible is able to utter such fallacious conventional deep thoughts as “the Great Depression ended largely thanks to a guy named Adolf Hitler” and that the 9/11 attacks were just the ticket to goose the soft early-’00s economy in lower Manhattan (“All of a sudden, we need some new office buildings,” he actually wrote in the Times on September 14, 2001) and still be taken seriously. He’s repeatedly called for a a bogus alien invasion that occasions even more super-stimulative spending than we’ve seen already in this awful 21st century—an idea presumably lifted, unacknowledged, from the Watchmen comic books.

 

Best of all, Krugman has attained that rare level of eminence where he doesn’t even have to engage the very opponents he dismisses as beneath contempt. Like Kurtz in Heart of Darkness and Apocalypse Now, he just needs to wave his hand, mumble vague abjurations, and rest assured his devoted minions will finish his work for him.

 

Krugman’s latest target is “libertarian populism,” which he summarizes thus: “The idea here is that there exists a pool of disaffected working-class white voters who failed to turn out last year but can be mobilized again with the right kind of conservative economic program—and that this remobilization can restore the Republican Party’s electoral fortunes.”

 

This ain’t gonna happen, chuffs Krugman, because … because … because … Rep. Paul Ryan (R-Wis.)! Despite the fact that the former Republican vice-presidential nominee and marathon-time amnesiac is nobody’s idea of a libertarian or a populist, Krugman insists that libertarian populism is doomed precisely because  to “the extent that there was any substance to the Ryan [budget] plan, it mainly involved savage cuts in aid to the poor. And while many nonwhite Americans depend on these safety-net programs, so do many less-well-off whites—the very voters libertarian populism is supposed to reach.”

 

Had Colonel Krugman ventured outside his ideological compound, he might have happened upon the writings of Tim Carney of The Washington Examiner. To the extent that libertarian populism has a policy agenda, it’s mostly thanks to Carney, who likes to write books attacking right- and left-wing crony capitalists. He’s libertarian in that he consistently believes that freer markets function more fairly and more efficiently, and he generally thinks people should be left alone when it comes to economic and personal freedom (he’s not an absolutist on most things). He’s populist in that he is basically obsessed with what he sees as concentrations of power and wealth among elites who rig markets, status, and more against the little guy.

 

Unsurprisingly, Carney’s libertarian-populist policy agenda has precious little to do with starving poor people to death or stoking white working-class resentment against dusky hordes (Carney is pro-immigration). Unless by dusky hordes, you mean Wall Street banksters and well-tanned pols such as Speaker John Boehner.

 

For better or for worse, it’s filled with prescriptions such as “cut or eliminate the payroll tax” (that’s the one that hurts low-wage earners the most); “break up the big banks and/or place stricter safety and soundness rules on them” (hmm, how does that help the Rothschilds again?); and “end corporate welfare” (Carney specifically name-checks the awful Export-Import Bank and subsidies to Big Sugar, which both receive bipartisan congressional support).

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Click below for the full article.

http://www.thedailybeast.com/articles/2013/07/19/paul-krugman-s-nasty-and-inane-attack-on-libertarian-populism.html

07.26.13
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1787 Network: Is Detroit Our Starnesville?

Detroit reminds me of a quote from the Grail Knight in Indiana Jones and the Last Crusade, “He chose poorly.”  In the movie the evil bastard who “chose poorly” shrivels up and turns to ancient ruins because of his “enlightened” choice, so too has Detroit. Indy who didn’t choose poorly did not suffer the same fate.  Just like in the movie those who “chose wisely” don’t suffer the same fate, nor should they.

Detroit is the manifestation of those who “chose wisely” going Galt. It is precisely the condition and outcome that result from the reality of implementing the utopian ideas of so called progressives.  Detroit mirrors Starnesville, a car-manufacturing city that became a ghost town after experimenting with socialism. You can read about it in Ayn Rand’s 1957 novel “Atlas Shrugged.”

The federal government and tax payers from the other 50 states should under no circumstances bail out Detroit. It should be allowed to go bankrupt.  The citizens of Detroit should be allowed to suffer the consequences of their choices: specifically their voting decisions.  It is the citizens of Detroit who are at fault for Detroit’s demise not the rest of the nation. Every single voter in Detroit who voted for politicians who expanded the government of Detroit is responsible.

Let’s hope Detroit isn’t the indicator that Starnesville was in the novel.  In Atlas Shrugged, the demise and failure of Starnesville was the harbinger of the collapse of the entire society.  Detroit and its current bankrupt condition is the direct result of who the people of Detroit elected.  Those who were disproportionately taxed and had to pay for the utopian ideas of the elected leaders, when it was obvious that their vote for responsible government and free enterprise were ineffective, voted with their feet; they moved.  The auto industry built plants in Kansas, Alabama, Georgia, Kentucky, etc. they quit building and expanding in Detroit. The empty wasteland of factories in Detroit is evidence of the reality of implementing enlightened ideas of the statist leftists.  The voters of these states, who elected people that created laws and an environment more inviting to auto manufactures than Detroit and Michigan did, are not responsible and should not have to bail out the voters who embraced the empty promises of Democrats.

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Click below for the full article.

http://1787network.com/2013/07/is-detroit-our-starnesville/7203

07.25.13
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Motley Fool: Bernanke’s QE Magic Trick

In May of this year, Federal Reserve Chairman Ben Bernanke suggested to a congressional panel that the Fed could taper its policy of Quantitative Easing (QE). The obvious happened — the stock market took a quick hit, and interest rates spiked.

So Bernanke pulled a quick change, saying the Federal Reserve will continue an open-ended policy of QE, which artificially suppresses interest rates but immeasurably helps the housing, bond and stock markets. This was a calculated act to test the reaction of the markets.Their negative response validated what Bernanke already knew to be true, that the Fed is trapped in its magic policy of Quantitative Easing, and it’s going to be much harder to make it disappear than anticipated.

Bernanke will be exiting the Federal Reserve stage at the end of his term in January 2014, and returning to academia. I imagine he is glad to do so, leaving the possible tapering of QE to his successor. And, with only months left in his tenure as chairman of the Fed, it’s understandable that he would not want to show his hand and risk rocking the stock market.

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Click below for the full article.

http://beta.fool.com/oglove/2013/07/25/bernankes-qe-magic-trick/41523/?source=eogyholnk0000001

07.17.13
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Marketwatch: Bernanke says tapering not on ‘pre-set’ course

The Federal Reserve’s proposed timetable for tapering its bond-buying program is not set in stone, said Federal Reserve Chairman Ben Bernanke on Wednesday. “I emphasize that, because our asset purchases depend on economic and financial developments, they are by no means on a preset course,” Bernanke said in remarks prepared for delivery to the House Financial Services Committee. Bernanke repeated his guidance from mid-June that the Fed anticipates it will be appropriate to begin to moderate the pace of purchases “later this year,” and end them “around midyear.” The Fed chairman said the central bank would react to developments. If economic conditions were to improve faster that expected, the pace of asset purchases could be reduced “somewhat more quickly.” But if the outlook were to become relatively less favorable, or if financial conditions were seen as too tight, “the current pace of purchases  could be maintained for longer,” Bernanke said. The chairman’s prepared remarks were fairly dovish. He said the economy remained vulnerable to shocks and there was a risk that a dispute in Congress over the debt ceiling could hamper the recovery.

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Click below for the full article.

http://www.marketwatch.com/story/berrnanke-says-tapering-not-on-pre-set-course-2013-07-17?siteid=yhoof2

07.04.13
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Video: Fourth of July Reflection, What if we actually had a sound (and constitutional) foreign policy?

On the anniversary of the Declaration of Independence for the GREATEST country in the world, let us reflect as to what our foreign policy should be going forward. What would the founding fathers have wanted? Does our current foreign policy follow the constitution? What does our current foreign policy do to our national debt? Does our foreign policy actually make us safer? Please keep those questions in mind when watching this video…..

07.04.13
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CNN Money: Delay in Obamacare – what you need to know

The Obamacare employer mandate has been delayed by a year to 2015, meaning that many businesses can push back providing worker health insurance a bit longer.

When the Affordable Care Act was passed in 2010, it required that companies with 50-plus full-timers start providing them coverage in 2014 — or face penalties.

That changed on Tuesday. In a blog post, the U.S. Treasury Department explained that the government needs time to simplify reporting requirements, and businesses need breathing room to adapt to the changes.

“This provides vital breathing room. I think businesses are relieved there’s more time to get this right,” said James A. Klein, president of the American Benefits Council, an employer benefits advocacy group.

Here’s what businesses and workers need to know.

Who‘s affected?

A relatively small share of the country’s businesses fall under Obamacare’s employer rules, and most of those that do already provide insurance. That might sound surprising, because the biggest Obamacare myth spouted by opponents is that it will crush small business.

The vast majority of the nation’s businesses, 97% of them, are too small to be affected.

What’s more, most larger employers already provide insurance anyway. Of the nation’s 6.5 million workplaces, only about 70,000 — a little more than 1% — must actually start providing insurance.

Then why does this matter?

The mandate affects most of the nation’s workers. According to the latest Census data, close to 80 million people work at firms that must provide insurance. Though most of them are offered insurance, that still leaves millions who will have to wait another year.

Has the mandate already affected businesses?

It has impacted those businesses that intend to dodge Obamacare by cutting worker hours. The employer mandate kicks in at 50 full-timers, and the law counts anyone who works at least 30 hours a week as full-time.

That’s given rise to the “29ers” phenomenon, in which business owners reduce workers’ hours from full-time to 29 hours per week. This has been especially prevalent in the franchising and restaurant industries, where shift hours are frequently swapped.

There’s no telling whether the mandate has already impacted hiring, though.

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Click below for the full article.

http://money.cnn.com/2013/07/03/smallbusiness/obamacare-employer-mandate/index.html?iid=HP_LN