Tuesday, February 9, 2016

Debt cycles

Like this chart.  Debt rising faster than growth.

What's the math?
Firms, households and governments have high interest costs, and that squeezes new investment, so growth slows, and interest costs become more difficult, leading to a correction.

Why have we no correction yet?
Federal government, Congress takes on much of the liability during recessions, and the Swamp can  do that for one whole generation, then we correct.

The problem is not the correction, the problem is having them once every forty years. The finance bots can take gains and losses on  a cycle of three days, judging by the bitcoin congestion.  So, we are getting new money technology, we can bypass  the Swamp.

Omigod! Its SandyRuzRumpAsich

Our new president, and no Bush in the crowd, according to CBS

CalSTRS has legal immunity

Dave Crane, the Pro, complains about the absolute fraudulent financial report from the CalSTRS CEO:
Dave  Crane: These are not inconsequential distortions. Because CalSTRS’s unfunded liabilities accrue expensive interest, every $1 of additional liability will translate into roughly $3 of additional pension cost diverted from classrooms and others. Worse, every day of delay in revealing and addressing true sizes of unfunded liabilities boosts the cost. Truthiness already led to one bailout costing tens of billions more than would’ve been necessary had the truth been revealed and addressed earlier. And even that bailout — which boosted pension costs 100 percent, 60 percent and 28 percent for school districts, taxpayers and active teachers — employed truthiness to obscure the fact that even greater boosts are needed. More truthiness means even more delay and cost.
Here is the problem. CalSTRS has the legal authority to lie about the pension issue, this is California.  in fact, Jertry Brown just signed into law another pwer for CalSTRS, the ability to raise taxes on local government, by edict.   So, it matters not, California will not work much longer under this dictatorship, iots economy cannot function with the massive loss of voting power.

The Steinem/Albright thing

NY Times: Days after two of Hillary Clinton’s most prominent female surrogates, Madeleine K. Albright and Gloria Steinem, drew fire for their comments about young women supporting Senator Bernie Sanders, another Clinton surrogate proposed that the two women be pulled from campaigning for Mrs. Clinton.

OK, two intellectuals of our time come out as sexist pigs, claiming the Sanders girls just like to hang with the Sanders boys.   I am not one to denigrate sexist pigs, to each his own.  But at least be logical sounding sexist pig.   What they really mean is that the young kids in this Sanders campaign should send less time screwing and more time on policy.

But I have a question.  Why do these two dingbats give a damn, I would think a little romance among the young ain't all that bad, good policy.

Magic Walrus in action

Mark complains that the middle class has ;kttle reason to elect the populist.  They are doing just fine:
Mark Thoma: Looking at this another way, the CBPP also finds that middle class households are 60 percent of the US population, and they receive 58 percent of the benefits from entitlement programs. There is some redistribution, but it is from the top 20 percent of households to the bottom 20 percent.

The last sentence first.  Government payments and receipts are distributed in effects across all income classes, eventually.  Investment patterns change for everyone as government in DC manage more of the economic flow.  

But the first sentence is doom for the middle class, their long term losses from government over-reach is 2% of income!  Compound that over the four decades since the Nixon monetary regime change.  The middle class is losing in the Swamp, and Obamacare implicit middle class taxes have put the American consumer to sleep.

Its the Magic Walrus assumption that  government edict causes no side effects, and prices adjust immediately to accommodate the Swamp.

By the way, New Hampshire is number seven for median income, but they went for Bernie.

President Sandrump, according to some small, snowbound state

MANCHESTER, N.H. (AP) -- Donald Trump and Bernie Sanders looked to emerge from Tuesday's New Hampshire primary with their first victories of the 2016 presidential election, while rivals hoped a state famous for political surprises would give their own White House bids a needed boost.

The Swamp dunnit says Kocherlakota

Negative Rates: A Gigantic Fiscal Policy Failure
Since October 2015, I’ve argued that the Federal Open Market Committee (FOMC) should reduce the target range for the fed funds rate below zero. Such a move would be appropriate for three reasons:
  • It would facilitate a more rapid return of inflation to target.
  • It would help reduce labor market slack more rapidly.
  • It would slow and hopefully reverse the ongoing and dangerous slide in inflation expectations.
So, going negative is daring but appropriate monetary policy. But it is a sign of a terrible policy failure by fiscal policymakers.

His argument is that the Swamps should fix social problems, and you can be certain he means stuff the public sector pensions with Federal tax payer money.  His idea that negative rates are required is simply a result of his assumption that the Swamp controls rates. Yet we know that fiscal stimulus means stuff the pensions, and that does not make for more growth, that makes for more obligations in the Swamps and less discretionary spending. As it is, interest payments consume as much as the defense budget, and they cannot go higher as Congress would not function.

Better idea, dump the Swamp, dissolve the union.

California is short of refinery capacity

The ongoing issue about California's high gas rices is resurfacing.  Regulations prohibiting new refinery capacity is one of the issues,supply controls imposed by Sacramento. The other issue is California's new gas tax hike.
California's stubbornly high gasoline prices in 2015 resulted from state regulations, trouble with imports and an outage at a major refinery, the oil refining industry told regulators Wednesday.
Speaking to the state Petroleum Market Advisory Committee for the first time since expensive California gasoline brought huge profits to oil refineries this year, the Western States Petroleum Assn. said the unusually large gap between the state's average price for a gallon of regular gas and the national average involved matters out of the oil refinery industry's control.
“Clearly, there is a regulatory component for the situation that occurred this year,” said Tupper Hull, vice president of the petroleum group. “As this committee looks at the continuing differential in prices, that's an area we would recommend you look at.”
In addition, Skip York of research firm Wood Mackenzie, speaking on behalf of the oil refining industry, said that as gas prices in California peaked in July, foreign and domestic sources had trouble delivering product to the state.
No tankers were available in the Gulf Coast to bring fuel to California. Better deals were available to suppliers such as India, as global demand for gasoline this year has soared.
“It's not going to be economic,” York said suppliers ultimately determined. “It was now more attractive for me to sell into a closer market than California.”

US economy crashing

Oil consumption takes a plunge. I was watching miles driven, which has been up, a good sign.  But it is not holding up and the economy is in  recesion mode.

Monday, February 8, 2016

California gone full. spiral

Breitbart: The bipartisan Legislative Analysts’ Office has announced that California’s 2015-16 personal income tax collection has fallen from a huge surplus to a $147 million deficit. The cause appears to be plummeting Silicon Valley capital gains and weakening tech employment.

The quick reversal of fortunes for the state budget is disturbing, since the California State Controller reported that personal income tax collections through December had been at a $1.276 billion surplus.
With a hot tech stock market through June of last year, California realized about $4 billion in “extra” one-time capital gains tax revenues for the 2014-15 fiscal year.
California politicians used to spend windfalls on the middle class. But since Brown was elected in 2010, the state’s middle class has shrunk from 46.7 to 43.5 percent of the population. Average incomes by 2013 had fallen by $5,255, and those spending at least 30 percent of income on housing leaped by 20 percent to 44 percent of state residents.
Pension costs are rising and will consume 38% of the education budget.   Pension costs rise too fast and local governments will be laying off.