Whoops

The U.S. economy posted a stunning drop of 0.1 percent in the fourth quarter, defying expectations for slow growth and possibly providing incentive for more Federal Reserve stimulus. The economy shrank from October through December for the first time since the recession ended, hurt by the biggest cut in defense spending in 40 years, fewer exports and sluggish growth in company stockpiles. The Commerce Department said Wednesday that the economy contracted at an annual rate of 0.1 percent in the fourth quarter. That's a sharp slowdown from the 3.1 percent growth rate in the July-September quarter. CNBC

The economy must be like Fresno, CA; devoid of skills.

Evolution in progress

Egypt’s defense chief warned that political unrest could bring about the “collapse” of the state, increasing pressure on President Mohamed Mursi after almost a week of street battles in which dozens of Egyptians have died. Protesters in the Suez Canal province of Port Said -- one of three areas the president has placed under emergency rule -- vowed a second night of defiance of the overnight curfew. The unrest built on a refusal by Mursi’s secular opponents to join in talks to ease the situation. The conflict between the political forces “and their disagreement on running the country may lead to the collapse of the state,” Defense Minister Abdelfatah Al-Seesi was quoted as saying in a statement posted on the armed forces’ official Facebook page. The political instability and economic challenges “represent a real threat to Egypt’s security.”

Egyptians are like citizens of Fresno, devoid of any useful skills.

Why am I not surprised?

The financial screws have suddenly tightened by a couple of turns at Fresno City Hall. Moody's Investors Service has lowered by one notch its rating on most of the city's high-profile bond deals of the past 15 years. These deals include the pension obligation bonds, the Convention Center bonds and the No Neighborhood Left Behind bonds. In the world of credit-worthiness, the downgrade knocks Fresno's bonds from average (Baa2) to below average (Ba1 and Ba2, depending on the bond deal). Wall Street, skeptical for months that Fresno can get its financial act together, is turning pessimistic. The Moody's downgrade comes as Fresno County Clerk Brandi Orth predicts her review of residential trash petitions almost certainly will go into March. If so, City Manager Mark Scott may have no choice but to begin substantial layoffs and service cuts. Read more here: http://www.fresnobee.com/2013/01/29/3151660/fresno-budget-woes-mount.html#storylink=cpy

I am not worried, the professors at UC tell me multipliers are always greater than one, so this must be fiction. Here is the problem:

But the gloom overwhelms everything: A huge general fund deficit, a general fund consumed by high fixed costs such as salaries, no reserves and a weak Valley economy made worse by the limited skills of much of the population. Read more here: http://www.fresnobee.com/2013/01/29/3151660/fresno-budget-woes-mount.html#storylink=cpy

All my fault, my limited skill set.

Al Gore: Idiot

"I think that the influence of television over the last half century has been harmful to the operations of our democracy," said Gore. "In the age of our founding, and for much of the history of the republic, crucial. Individuals could gain easy access to information and could express their own views. They can't do that on television." BF Politics

Undemocrats have to be embeciles not to get these mistakes. Let me remind the mathematically challenged ex-VP, California has 1/5 the Senate vote as the medium American citizen. Really, can folks please excercise a little long division before mis-speaking about democracy in America.

Obamacare meets defined benefits

Fresno County lags most of California in embracing President Barack Obama's health-care reform, meaning thousands of uninsured residents could face delays in getting new federally funded medical care next year. County leaders say they can't afford to participate in a state program that already has begun integrating federal health care policy and signing people up for coverage. While many counties will be ready to put their uninsured residents on federal rolls and assure them services come Jan. 1 -- when the Affordable Care Act starts in earnest -- Fresno County is yet to figure out its transition. "The folks who need health care are just not going to get it," said former executive director of Fresno Metro Ministry Richard Yanes, who has been following federal reform efforts in Fresno County. "The process of taking an individual applicant through the system so that the individual is getting benefits is not easy to set up. And we're so far behind." Read more here: http://www.fresnobee.com/2013/01/19/3140293/fresno-county-ill-prepared-for.html#storylink=cpy

Fresno County devotes about 30% of its budget to defined benefits. Another 10% is designated to pay off a retirement bond. This all comes to light now because the bond vigilantes are in town making the county budget honest. Negative multipliers across California on Obamacare for another four years.

California gas prices stable

Ycharts Bouncing around $3.75. A positive indicator for California. Conflicting data still.

Clinton Smart, Obama stupid

Real median household income soared to $54,932 in 1999 from $50,661 in 1996 based on constant 2011 dollars, an all-time high since the U.S. Census began reporting the data in 1967. By contrast, median household income in November was $51,310 -- $3,850 lower than when Obama took office in January 2009, according to an analysis of census data by Sentier Research, an economic-consulting firm in Annapolis, Maryland. In Clinton’s second term, gross domestic product grew at an average 4.3 percent rate and the unemployment rate averaged 4.4 percent. That created a tight labor market that provided workers leverage to press for higher wages. Bloomberg

Clinton, growth policy good for middle class. Clinton policies adopted by House, Senate and Obama in 2012. Obama, at the urging of the numbskulls in California, reverses the Clinton choice and adopts negative growth policy, specifically to destroy the middle class. I calculate the Obama has wipeed out another 5% of America's middle class. I guess stupidity is the plan of the Undemocratic Party.

Evolved squirrels solve oil problem

U.S. oil production grew more in 2012 than in any year in the history of the domestic industry, which began in 1859, and is set to surge even more in 2013. Daily crude output averaged 6.4 million barrels a day last year, up a record 779,000 barrels a day from 2011 and hitting a 15-year high, according to the American Petroleum Institute (API), a trade group. It is the biggest annual jump in production since Edwin Drake drilled the first commercial oil well in Titusville, Pa., two years before the Civil War began (see chart above).
The U.S. Energy Information Administration predicts 2013 will be an even bigger year, with average daily production expected to jump by 900,000 barrels a day. The surge comes thanks to a relatively recent combination of technologies—horizontal drilling and hydraulic fracturing, or fracking, which involves pumping water, chemicals and sand at high pressures to break apart underground rock formations.
Together, they have unlocked deposits of oil and gas trapped in formations previously thought to be unreachable.
That has meant a resurgence of activity in well-established oil regions, such as West Texas’s Permian basin, as well as huge expansions in areas that had been lightly tapped in the past, such as North Dakota’s Bakken shale region. The Bakken has gone from producing just 125,000 barrels of oil a day five years ago to nearly 750,000 barrels a day today.
The benefits of the surge in domestic energy production include improving employment in some regions and a rebound in U.S.-based manufacturing. WSJ

I am not saying oil shortages are gone, but I am ready to say the problem is known and contained.

Arnold Kling's new blog

Ask Blog Kling and his theory of sustainable and specialized trade is in line with the Shannon view of the economy, he has always been a favorite.

Shoelace industry praises Obama Arab policy

WASHINGTON – Leading medical groups quickly applauded President Obama’s moves Wednesday to ban military-style assault weapons and high-capacity ammunition magazines, expand mental health services and take other steps to reduce gun violence in the wake of last month’s deadly shootings at Sandy Hook Elementary School in Newtown, Conn. LA Crimes against logic

I guess it was a slow day at the Times. I also hear that the ice cream industry praises Obama's FEMA policy.

Data in the mud

The economy is down so far it cannot get lower without breaking the dollar zone.   Dunno how long before anything interesting happens, a bad time for rubber neckers like myself. However, we are testing one part of theory.  When data is in the mud, how does the economy set up the quants for optimal flow?

Dunno, I feel like this is the eye of a storm.

Are we back to the housing bubble?

Mark Perry is looking at a CoreLogic summary of housing, up 7.4% for the year!
We are edging into that contradictory period, what is up?  My guess, this is a California crash while most of the remaining states do much better.  But, heck, at this point I am guessing.

California in recession?

California exported goods valued at $13.33 billion in November, down 5.3 percent from $14.07 billion in November 2011, according to an analysis of Friday's U.S. Commerce Department trade figures by Beacon Economics, a consulting firm with offices in the Bay Area and Los Angeles. Read more here: http://www.sacbee.com/2013/01/12/5109173/california-exports-fell-in-november.html#storylink=cpy

I am not calling it yet. I have CoAmerica and the activity indicators down, Ceridian has California down; but let's give Jerry and the Jim Crows another week to lie about the economy. How's the pension fund? Last I look, San Diego had a surprise $40 million union pension charge, they will lay off 250 union workers. The pension fund is not even earning 1% and they need 7% to fund their fraud. Sacramento 'discovered' a $450 million pension charge, likely requiring the lay offs of another 250 union workers over the next ten years. Likely, losses in the pension fund will cost something like 1500 public sector jobs this year. Boy, it must be fun to be an idiotic union member.

But some good news on pensions:

California's massive public employee pension system gained more than 13% in investment returns last year, most of it from stocks and real estate, the agency said. It was the best year for the California Public Employees' Retirement System since 2006, when the fund gained 15.7%. CalPERS investments were up 1.1% in 2011 as it struggled to regain its footing after the Great Recession.

Not bad in a difficult investment environment, but stocks and real estate will take a bit of a plunge during the national recession. When is the national recession coming? Dunno yet.

Jerry Brown is not alone

The fiscal outlook for many states is unsustainable. This eventually may influence the politics of the national budget, both directly (through battles over federal measures to help troubled states) and indirectly (through voters’ attitudes toward government).
It may take a decade or more for this dynamic to take hold, but as leaders of both parties bargain over the debt ceiling and assess their strategies for deficit talks during Obama’s second term, they should also think about the path of state finances. The prospects should unnerve Democrats, in particular: The 26 states that Obama carried in November tended overwhelmingly to have lower credit ratings than the 24 where he lost.  Bloomberg

Jerry Brown and the unsustainable state budget, one in the same. There is simply not enough middle class wealth left to cover the costs of Jerry Brown and his Jim Crow pals in Sacramento.

California: A national disaster

California is responsible for a ten year slide in output capacity

 

We are now discovering that the large/small state problem is likely responsible for the 35 year string of multipliers less than one. The chart above shows the 35 year slide in output capacity, starting with the tax revolt in California and ending with the string of municipal bankruptcies. The problem, quite simply, is the value added chain from DC to my hometown of Fresno is very skewed, due to California's failure to ensure a fair Senate vote. The result is 17 Trillion in debt and a national disaster.

The nation has few choices, the most responsible one being to bankrupt California until it agrees to Senate democracy.

Data is hard to come by

Economic data, that is, about California. Mainly we have the holiday effect, things have not settled. Then we have the regime change effect, it takes a quarter for things to settle. I would think that finding out how California fared after the fiscal non-crash is a bit of a hunt, and a banana to those who find the outcome first. Brown is predicting a state budget surplus, but who believes Brown?

California: Whites Need Not Apply

The county would add a seventh community garden to six already in operation at a cost of about $40,000. The garden would serve the Punjabi community. The other gardens serve the Hmong/Southeast Asian, Slavic/Russian, African-American and Hispanic populations. Fresno Bee

Read more here: http://www.fresnobee.com/2013/01/06/3124110/fresno-county-mental-health-projects.html#storylink=cpy

Here the report is about a subsidy from the State Capital for mental health facilities (garden spots for therapy). But the rule is always the same, Minotiries means no whites, even though whites are a minority. The Democratic party says Jim Crow is perfectly fine because they are morally superior. This is Perez and Steinberg of the legislature, as fine a bunch of racists as the Demcoratic Party ever produced in the south.

Jerry Brown cannot count

With a minimum price tag of at least $68 billion, coupled with a total state deficit of more than $600 billion, and the fact that California does not need a high-speed rail system, the state can ill-afford to build a new rail system. But the staggering deficit and lack of public interest hasn’t stopped the governor. Cal Watch

He commits the state to $100 billion in debt and fails to reform the pension system!!! Jerry has lost about 100 points of IQ in his old age.

No kidding!!!

State legislators are locked in last minute negotiations to reform the impoverished pension system before the end of the legislative session. (January 7, 2013) – Full funding should not be the goal of an overhaul of Illinois’ public retirement system, which is one of the worst funded in the United States. “One-hundred-percent funding is impossible,” state Senator Pam Althoff told Fox. “As much as anyone would like to fully fund the pension systems, it is just not practical and impossible to implement.” Illinois Governor Pat Quinn has made pension reform lawmakers’ highest priority as they enter the final stretch of a lame-duck legislative session. A report from the state’s Auditor General, released on January 31, 2012, recommends that based on “generally accepted actuarial standards, the funding method [for Illinois’ pensions] should be based as a minimum on achieving 100% funding within 30 years.” CIO Mag

Dunno how financial managers in government become so stupid. Any fixed payment system with an infinite time horizon requires occasional updates. Only Keynesians and the stupid fail to realize this.

Henderson on taxes

Had the Republicans held out for anything like the reforms that Sumner and Landsburg wanted, the bill would have been Dead on Arrival in Harry Reid's Senate. You don't even need to bring Obama into the picture. End of story. So then taxes would have gone up dramatically for people at every income level. So what could Speaker John Boehner and Minority Leader Mitch McConnell do?
What they could do is try to raise as high as possible the threshold beyond which marginal tax rates rose. Boehner first tried that with a $1 million annual income threshold before Christmas but couldn't pass that through the House with just Republican votes. If Republicans regret that, they probably shouldn't. Harry Reid would have killed that bill also. But, with the New Year's eve agreement between Vice-President Biden and Mitch McConnell, those large increases in tax rates apply only to singles with income of over $400K and married couples with income over $450,000. That's bad, but look at what the Republicans got in return.  Henderson talking about the latest tax hike

Not quite but close. Behind the scenes was the California lobby trying to protect the taxable wage levels they recently voted for. This was a Big State insurrection on taxes, mainly California. Now, the small and median states are untaxed at in these wage slots, meaning they will angle for more deficit spending while California wants less; a switharoo if ever there was one.

California economic indicator

“Our California Economic Activity Index declined for the third straight month, even though payrolls continue to grow at a moderate pace,” said Robert Dye, Chief Economist at Comerica Bank. “October’s decline can be mostly attributed to a weakening drilling rig count and a reset in construction activity after a September surge. Overall, housing markets look firmer, particularly in Northern California, providing broad-based support for the California economy.” Coamerica Bank

My indicator says the downturn is worse and started two quarters ago. So here we have a test, did I get it right or did Coamerica? If I win, then do I get this guys job?

Jeffrey Sachs gets it wrong

There is, of course, no government in the US. We have a President and 535 members of Congress, nominally members of two parties (with a sprinkling of independents), but in fact 535 geographic fiefdoms each representing local interests and vested corporate interests.. Jeff Sachs

How on earth do economists still get this problem so screwed up?
This is a big state vs median state problem. What we just witnessed were two budget deals, one acceptable to median states and acceptable to big states. A huge multiplier less than one problem staring Sachs in the face and he fails to see it.

Big states have economies of scale that are completely disrupted by federal intervention. The socialist public sector unions in California have been complaining about federal intervention for a decade, from NCLB, High Speed Rail, and now Obamacare. In a balanced flow of government goods in California, all federal funding needs to go through the state capital in block grants, otherwise multipliers drop into the mud out here.

Median states have a very adaptable short chain of government operations. They simply convene the legislature and adapt to changes in federal spending. Big state vs small state, quit trying to hide the problem.

Oil on the upswing

About $92, and has climbed from $85 almost steadily. This is a whoops, and the commodity supercycle is trying to re-establish. Hopefully it goes back down, but do not count on it as oil traders are keeping a close eye on the DC fiasco.