Food prices falling faster than official figures show
And prices are falling, we are in a deflationary epoch.
More after the jump!
This Is Where America's Runaway Inflation Is Hiding
. . . an event which deeply hurts the poor, and lower middle class.
Don't worry, our local governments are not going to change course just to help keep our poor out of the poor house, No siree!
Our local governments will stick to their destructive zoning, growth, and services boundary laws regardless of the consequences for the poor, the lower class, and even the middle class. Just take a look at San Francisco where you will see anyone earning less than $200,000 is pretty much boxed out of the home ownership racket.
Rental inflation is driven by a lack of developable land proximate to where people would like to live. This is commonly a false problem driven primarily by zoning and land use laws.
Boomer versus Millennial Wrestling World Smackdown, Portland is out ahead, but Seattle is running a close second!
Increasingly most of our economic problems are driven by economically incompetent government policies. Perhaps it is time for a change?
U.S. Economy Expands to 0.5% Pace, Weakest in Two Years
. . . no matter what the economy bulls say, it's no boom, and closer to recession than they want to admit.
"The U.S. economy expanded in the first quarter at the slowest pace in two years as American consumers reined in spending and companies tightened their belts in response to weak global financial conditions and a plunge in oil prices.
Gross domestic product rose at a 0.5 percent annualized rate after a 1.4 percent fourth-quarter advance, Commerce Department data showed Thursday. The increase was less than the 0.7 percent median projection in a Bloomberg survey and marked the third straight disappointing start to a year."
That 4th quarter 1.4% "boom" was driven by subprime auto loans, and another housing flight. While you might not want to reprise the Great Recession, the federal government does, and is trying its best to get us there. Thanks, Bammy!
"Spending, while slightly better than the 1.7 percent median forecast, was a disappointment in light of the consumer-friendly fundamentals including low gasoline prices, cheap borrowing costs, increased hiring and warmer-than-usual winter weather.
“The first quarter is going to be the worst quarter for consumption for all of 2016,” said Jacob Oubina, a senior U.S. economist at RBC Capital Markets LLC in New York. “With financial markets calming down and retracing all of their losses, the fundamental factors that have driven consumption will continue to do so.'"
This is more prayer than reality. The wankers have been wrong for the past, well, forever. The chances they are getting it right now are minimal. But perhaps Oubina is correct, or we are diving into a new recession. I still can go either way on this.
The GDPNow is banging about at 0.6%, so there is confirmation.
GDPNow Forecast Rises to 0.6% as Trade Deficit Narrows | MishTalk
It looks like consumer demand is tanking.
"Subtracting from GDP vs Last Quarter
Nonresidential fixed investment
Private inventory investment
Federal government spending
Adding to GDP
Personal consumption expenditures (PCE)
Residential fixed investment
State and local government spending
PCE (consumer spending) added to GDP but is decelerating.
Economists’ Estimate 0.7%
The Bloomberg Economy consensus estimate was 0.7% in a range of 0.1% to 1.1%."
I am sorry but the Economic consensus has been wrong on the high side for a while now. We are faced with a decelerating economy, especially consumers. The auto situation has collapsed, and we are left with housing being the only thing between a flat dead economy at zero growth, and recession. I get the feeling we are slowly backing into a new recession after 7-1/2 exhausting years of fighting against the Obama Administration's attempts to regulate businesses out of existence.
Cross you fingers, and hope the dithering dunce from Chicago is too distracted by the good weather, and the golf game to muck about in the economy, or do more damage to business. Otherwise we are probably in for a European Sucking Recession. And that would be bad indeed.
Dead Wrong with Johan Norberg - Stagnant Middle Class
Johan Norberg makes excellent points that first when benefits are included, real wages have risen, and second it is not the wage, but how much the wage can purchase that matters.
I have written about this often. The wage stagnation issue is a canard which is designed to throw readers off the correct trail. American's are far wealthier today than we were in the 1970s. Much of this has come from the continuous decline in prices since then. It is also due to the decline in energy, and food as a components of daily living. The decline in the price of food has been dramatic, from about 25% of average daily budget at about the turn of the 20th century, to about 6% of the average daily budget today. Essentially, while wages rose only a little, prices collapsed, quality improved, and energy costs plummeted (both the actual cost of energy, and the amount of energy necessary to operate an appliance.
This year we will hear much about wage stagnation, ignore these complaints, they are voiced by either duplicitous agitators, or the uninformed.
Jack Lew’s Political Economy
. . . unfortunately it is a mid-1930s Great Depression sweet spot!
"CEOs have learned to keep mum in the Obama era, lest their companies be punished like J.P. Morgan after Jamie Dimon criticized some parts of Dodd-Frank. So it’s worth noting the candid reaction after a new Treasury rule scuttled the merger between Pfizer Inc. and Allergan PLC.
The companies ended their $150 billion tie-up after Treasury Secretary Jack Lew issued new rules that made it harder for companies like Pfizer to move to Ireland to legally lower their taxes. Pfizer will have to pay Allergan a breakup fee of $150 million, though Allergan shares are still down more than $10 billion since the Treasury ambush.
Pfizer CEO Ian Read defends the company’s planned merger in an op-ed nearby, and his larger point about capricious political power helps explain the economic malaise of the last seven years. “If the rules can be changed arbitrarily and applied retroactively, how can any U.S. company engage in the long-term investment planning necessary to compete,” Mr. Read writes. “The new ‘rules’ show that there are no set rules. Political dogma is the only rule.”
He’s right, as every CEO we know will admit privately. This politicization has spread across most of the economy during the Obama years, as regulators rewrite longstanding interpretations of longstanding laws in order to achieve the policy goals they can’t or won’t negotiate with Congress. Telecoms, consumer finance, for-profit education, carbon energy, auto lending, auto-fuel economy, truck emissions, home mortgages, health care and so much more.
Capital investment in this recovery has been disappointingly low, and one major reason is political intrusion into every corner of business decision-making. To adapt Mr. Read, the only rule is that the rules are whatever the Obama Administration wants them to be. The results have been slow growth, small wage gains, and a growing sense that there is no legal restraint on the political class."
This ham handed economic tinkering is what transformed a recession in 1929 to a depression, under Hoover, and then to The Great Depression under Roosevelt.
Hoover the tinkerer engineer sought to keep consumer spending up by demanding employers not layoff workers in the recession claiming that would limit the length and depth of the recession, he also signed Smoot/Hawley. The results were disastrous with some employers going bankrupt after burning through cash to keep workers "employed." Smoot/Hawley triggered a deeply damaging protectionist trade war. Hoovers progressive tinkering moved the nation smartly from recession to depression.
Roosevelt was even worse, after running a campaign against Hoovers progressive ways, Roosevelt once elected doubled down on the progressivism creating agencies like the NRA which attempted to consolidate most economic powers in the administration, outlawing price discounting,among other things. Roosevelt also regulated what farmers could grow, and the gold standard. He and the Fed continually tinkered with the money supply.
The results of the Hoover and Roosevelt tinkering was a depression which they, with the active help of the Federal Reserve Bank, kept active and metastasizing from 1929 through the war years (the command and control economy of the WWII surpressed the depression but it was not until Congress legislated away much, but not all, of the depression era legislation, that the depression actually ended, in 1946. Yes, that is a heretical view.).
President Obama's administration is implementing policies which are similar to the disastrous policies of the Great Depression. Policies like Obamacare, Cash for Klunkers, Dodd/Frank, and the recent rules issued by Jack Lew all go along way to establish the Administration has a serious lack of faith in the free market system, and is willing to regulate, even after the fact, in an attempt to operate the economy like a remote controlled toy. The result is businesses unwilling to make decisions, unwilling to develop products, or research. The execution of a deal may be capriciously denied costing the parties hundreds of millions of dollars. So the economy slows, and if enough of this tinkering is done, it will stop, and even decline. This is the as yet unlearned lesson of the Great Depression.
"This week’s Treasury action interprets the tax laws in ways never done before. This ad hoc and arbitrary attempt to single out and damage the growth opportunities of companies operating within the current law is unprecedented, unproductive and harmful to the U.S. economy."
Treasury Is Wrong About Our Merger and Growth
Read is correct, this is harmful to the economy, and it explains much about what has been happening in the economy since President Obama took office. We used to call this tyranny, but seem more inclined to accept it today, regardless it is incredibly destructive.
This problem has been reinforced by the Fed's willingness to also tinker with the money supply with Quantitive Easing, balance sheet padding, among other gambits. Yet none have worked, we are mired in a pathetically weak, economy whose engine is barely able to turn over.
Obama and the Fed have not created a New Great Depression, yet. That may only be because they are simply too incompetent for the task. But the risk remains that they will be sufficiently competent to drive the economy into a new recession. You go girls!
To understand this issue better I would suggest reading:
The Forgotten Man: A New History of the Great Depression Paperback – May 27, 2008 by Amity Shlaes
Good Ole Days Return: Nixonian Wage and Price Controls | MishTalk
"Californians longing for the “Good Ole Days” of wage and price controls under President Nixon may get their wish.
Wage controls in the form of a series of minimum wage hikes just passed the California legislature.
Price controls in the form of rent caps have spread to suburbia."
Apparently, no one in California is old enough to remember the wonders of stagflation! Some of us are, and do not want to repeat those dismal gray years.
The blue model may be collapsing, but it is not going quietly. It looks like it will only go down fighting each step of the way. This will cause much damage, mostly for the poorest, although the economic damage to Californians generally will be great as well.
FED KEEPS KEY RATES UNCHANGED; FORESEES FEWER HIKES IN 2016
Yellen foolishly made the error of raising rates at the end of last year.
"Since raising its key rate from a record low near zero in December, the Fed has held off on raising rates again in the face of market jitters and a sharp slowdown in China. Resuming its rate hikes too soon could slow growth or rattle investors again.
In her news conference, Yellen suggested that sluggish wage growth showed that many more Americans may be available and willing to work even though the unemployment rate has reached an eight-year low of 4.9 percent. If employers perceive many candidates for job openings, they don't need to offer much higher pay to attract job seekers.
"I'm somewhat surprised we're not seeing more of a pickup in wage growth," Yellen acknowledged."
Yellen comes by that silly dumbstruck look she sports honestly. Except as commentator fodder, Yellen is the worst Central banker we've had since I can remember. Perhaps she will find her feet, and pull it out, but I will believe it when I see it.
Keep it up Janet, I love your monthly humor column.
Economic policymakers are at sea on inflation
Here, let me fix that for you, "Economic policymakers are adrift on a sea of stupid." Better!
"Imagine that in a brief period, inflation expectations around the industrial world, as inferred from the indexed bond market or the inflation swaps market, rose by nearly 50 basis points to a level well above the 2 percent target, with larger increases foreseen at longer horizons. Imagine that at the same time, survey measures of inflation expectations such as those calculated by the University of Michigan and New York Fed in the United States were rising sharply. Imagine also that commodity prices were soaring and that the dollar experienced a once-every-15-years decline. Imagine that the market anticipated future monetary policy in the United States that was far tighter than the Fed’s own policy projections. Imagine that measures of gross domestic product growth were accelerating, with increasing signs of a worldwide boom. Imagine also that no serious efforts were underway to reduce budget deficits. Finally, suppose that policymakers were comfortable with current policy settings based on the argument that Phillips curve models predicted that inflation would revert over time to target due to the supposed relationship between unemployment and price increases.
I think it is fair to assert that in this hypothetical circumstance, there would be pervasive concern that policy was behind the curve — that much was at risk as inflation expectations were becoming unanchored and that a substantial set of policy adjustments were appropriate. The key point would be that allowing not just a temporary increase in inflation but also a shift to above target inflation expectations could be very costly.
We are living in a world that is the mirror image of the hypothetical one I just described. Market measures of inflation expectations have been collapsing and, on the Fed’s preferred inflation measure, are now in the range of 1 to 1.25 percent over the next decade. Inflation expectations are even lower in Europe and Japan. Survey measures have shown sharp declines in recent months. Commodity prices are at multi-decade lows, and the dollar has only risen as rapidly as it has in the past 18 months twice during the past 40 years when the value of the dollar has fluctuated freely. The Fed’s most recent forecasts call for short-term interest rates to rise almost 2 percent in the next two years, while the market foresees an increase of only about 0.5 percent. Consensus forecasts are for U.S. GDP growth of only about 1.5 percent for the six months from October to this month. And the Fed is forecasting a return to its 2 percent inflation target on the basis of models that are not convincing to most outside observers."
It's enough to give a Keynesian economist the vapors! And Larry is nothing, if not a card carrying Keynesian. The proposed solutions to all of our problems from these people is always the same, more debt, more government expenditure, more monetary pumping, and more Keynes. After decades of easy money, Keynesian policies, progressive governance, and fiscal irresponsibility, these yammerheads cannot believe their policies have failed. So, they double, or triple down. The last doubling down gave us the slowest recovery in US history. Do we really need another go at slow?
It is time to take economists like Summers unseriously, for they are unserious. It is time to return to sane, rational monetary policy, responsible fiscal policies, and frugal governance. But I expect none of this, instead, I expect more foolishness. The nation is being run by a clown college of fools, elected by us.
We truly get the government we richly deserve.