Year: 2008

Economics Update

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Federal Reserve Vice Chairman Donald Kohn is now giving some pretty strong signals that there will be no further rate cuts, which indicates that the Fed might be a bit concerned about inflation now.

The currency markets are most definitely concerned about inflation (which is another word for currency devaluation), and so the dollar has dropped. It’s near a month low.

Oil just smashed the $130 barrier, settling at $133.17/bbl, and retail gasoline hit another record.

Real estate continues to face downward pressures, with Mortgage applications falling 7.8%last week. So even though we are in buying season, people are not looking to buy.

Finally, we have what appears to be the collapse of a monoliner insurer with CIFG Guaranty having its rating cut to junk status. They were downgraded from AAA in March, and Moodys just downgraded them further from A1 to Ba2, 7 levels at one swoop.

The business for monoliners is dependent on having an AAA rating. Put a fork in them, they are done.

Zimbabwe Update

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There are now allegations of assassination plans against Morgan Tsvangirai though he is planning to return. It has been put off a couple of times now, but he needs to start campaigning soon, as the date for the presidential runoff is set at June 27.

In the department of Kafka, we have Mugabe accusing the MDC of political violence and arresting newly elected MDC MPs.

In related news, violence against refugees, particularly those from Zimbabwe is spreading across South Africa.

With unemployment among the poor in excess of 30%, and the use of refugee labor to keep down native wages as an unofficial policy of the government, this was foreseeable.

However, a part of this may very be a result fact that the refugee flows have been driven by Thabo Mbeki’s unqualified support of Robert Mugabe, and so some element of rage against him, particularly now that he is a lame duck, may be a contributing factor.

Finally, the International Crisis Group is warning of the possibility of a military coup. I agree.

I could see them deposing Mugabe before the elections, as really believes that he cannot be defeated in the election, and senior officials in the state security apparatus harbor no such delusions. They stole the first round.

They realize that investigations into human rights violations over the years would be a personal threat to them.

Bush had the US Army Torture People for the Chinese

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Just when I can’t imagine it get any worse, we have a report that U.S. Soldiers did the ‘Dirty Work’ for Chinese interrogators.

I believe that I have said on a number of occasions that Bush and His Evil Minions™ are objectively pro torture. By this, I mean that the want to torture.

They don’t care if it gives good information. They don’t care if the blowback creates more terrorists. They don’t care if it exposes Americans to torture.

They simply want to torture for some sick psycho-sexual gratification. How else can you explain them telling soldiers to torture prisoners on behalf of the totalitarian communist regime of the People’s Republic of China?

U.S. military personnel at Guantanamo Bay allegedly softened up detainees at the request of Chinese intelligence officials who had come to the island facility to interrogate the men — or they allowed the Chinese to dole out the treatment themselves, according to claims in a new government report.

Buried in a Department of Justice report released Tuesday are new allegations about a 2002 arrangement between the United States and China, which allowed Chinese intelligence to visit Guantanamo and interrogate Chinese Uighurs held there.

According to the report by Justice Department Inspector General Glenn Fine, an FBI agent reported a detainee belonging to China’s ethnic Uighur minority and a Uighur translator told him Uighur detainees were kept awake for long periods, deprived of food and forced to endure cold for hours on end, just prior to questioning by Chinese interrogators.

This leaves me stunned. This is evil on a level that I would have thought beyond even them.

I was misinformed.

Russia Protests Outside Military Aid to Georgia

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The back story is in 2002, the US started suppling military aid to Georgia to fight “al Queida backed forces”, but these forces never existed, and the aid continues.

The Russians, quite reasonably, see this as a provocation directed at them. (see here and here)

The arming of Georgia, like the westward expansion of NATO, is seen by the Russian government as a real threat to their own security, particularly given the guarantees made in the early 1990s that there would be no westward expansion of NATO.

As I’ve said before, I think that part of this agenda is a desire by Republicans to recreate the Slavic menace for political advantage.

What are the Leading Economic Indicators?

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Barry Ritholtz does a very good job of taking us through what is actually in the LEI, and he notes changes that might render it less accurate.

In terms of the recent numbers, which have been surprisingly upbeat, he notes that, “The 0.1% LEI reading was marginally positive primarily due to 3 factors: 1) increasing stock prices (.16); 2) Positive yield curve (.14); 3) An unfathomable 0.13% increase in building permits.”

I don’t place much stock in the stock market as a predictor, and the yield curve going positive is an artifact of the Fed dropping rates like a pole axed steer.

As to the increase in building permits, I gotta figure that there is just something wrong here.

In terms of the changes in the LEI, Ritholtz notes:

Recall that a few years ago, the LEI was reconfigured — mostly to include more financial factors, and less real world economic data. Inthat way, its a bit more like government data. The reconfigurations seem to be avoid showing negatives.

And I am inclined to agree.

Here is a question though: what happens when the statistics can no longer be fudged?

Go read it.

The New Hooverville is a Parking Lot

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And many of the people in America are a job loss away from it:

Harvey now works part time for $8 an hour, and she draws Social Security to help make ends meet. But she still cannot afford an apartment, and so every night she pulls into a gated parking lot to sleep in her car, along with other women who find themselves in a similar predicament.

There are 12 parking lots across Santa Barbara that have been set up to accommodate the growing middle-class homelessness. These lots are believed to be part of the first program of its kind in the United States, according to organizers.

The lots open at 7 p.m. and close at 7 a.m. and are run by New Beginnings Counseling Center, a homeless outreach organization.

Welcome to George W. Bush’s America.

Sick Old Man Now Pandering to Cuban Wackjob Community

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Ever since the Elian Gonzalez debacle, which revealed the right wing of the Cuban to be something akin to terrorists, US sentiment has increasingly turned against our cuba policy.

John McCain just slammed Obama for “being soft on Cuba”.

The problem is that “being soft on Cuba” this is exactly what most Americans want, it’s what dissident Cubans actually living in Cuba want, and it’s the best policy for both countries.

Our mindless anti-Castro foreign policy has harmed the US, the people of Cuba, and butressed the Castros hold on power in Cuba.

Obama should confront McCain on this. It’s old thinking from an old man.

What’s more, the old anti-Castro whack jobs won’t vote for him anyway. They would never vote for a negro.

More Proof of Cable Bandwidth Twiddling

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I would appreciate some information on just how F%$#ed up the cable broadband providers networks are, because we now have the results of a study on BitTorrent blocking, and it’s only the cable providers doing it, and they (Comcast, Cox, and Starhub, a cable/internet provider in Singapore)are doing it regardless of network load, and they are the only ISPs to do this in the world.

A brief technical rundown why the cable network architectures providers’ suck is here.

Basically, the technology is not there, but instead of being open with their customers regarding limits, they are engaging in stealth filtering, and not particularly good stealth filtering at that.

I’m surprised, given the sterling reputation for customer service of the cable companies.

GOP Retirements Crippling Fund Raising

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With changes to lobbying rules at the beginning of this yearmaking revolving door payoffs more difficult, the unpleasantness of being the minority party, and the prospect of losing a seat in what was once a safe election, Republican incumbents are retiring in droves, and now it’s reported that this is crippling their fund raising apparatus:

Of the 32 Republicans who have resigned or announced plans to retire, 26 have political action committees known as leadership PACs — which members of Congress typically use to make donations to colleagues facing tough campaigns. Those 26 PACs raised $17 million in the last campaign cycle, but only $5.3 million for this election, a USA TODAY analysis of the latest campaign reports filed in March and April shows.

The bigger picture is that when your fund raising is based on bribery and extortion, which is what Tom Delay’s “K Street Project” was, you can no longer raise money if you lack the power to deliver.

Fee for service also means no fee for no service.

Federal Court Rules US Paper Currency Violates the Rehabilitation Act of 1973

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Basically, there are no tactile differences between the bills, and U.S. Court of Appeals for the District of Columbia Circuit has ruled that this is in violation of the law.

Among other things, they said that the government did not shot that fixing this would be an undue burden.

When you consider the stuff that they’ve done lately, putting a bit of texture on the bills has got to be cheaper than the holographic inks, etc. that they are using/

The case is American Council of the Blind v. Paulson.

More Detail on What the PPI Numbers Mean

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Here is the more detail on the PPI that I promised in an earlier post:

I would note that of the news networks, I find that CNN is the most breathlessly optimistic, and their take on the PPI numbers is simply wrong, but even they got it a bit right about the seasonal adjustment for the end of the heating season:

The overall moderation in prices primarily reflected how the government adjusts its data to compensate for seasonal changes. Those adjustments showed gasoline prices falling last month even though motorists were seeing prices soar.

When CNN starts questioning official inflation numbers, it’s game over.

You will note that they scream to the high heavens that it’s down to 0.2%, of course the core rate is twice that, 0.4%, and the 0.2% is an artifact of already suspect seasonal adjustments.

When the total number is bad, they report core, when the core number is bad, they report total numbers, with a little caveat slipped in. CNN’s financial reporting sucked.

Barry Ritholtz puts this in some perspective:

Follow this if you will: Each year in the Spring, we get a fairly large seasonal adjustment. If memory serves, its about a ~7% increase in Energy for April. This year, however, energy prices are up so much in advance of April, that we only got a ‘modest’ one month energy increase of 5.2%. In other words, the market ran up in advance of the usual seasonal gains. Hence, a 5.2% increase looks like a reduction after seasonal adjustments. (Note: I need to double check the precise #s).

So does Dean Baker:

The core finished goods index rose by 0.4 percent in April. It has now risen at a 5.0 percent annual rate over the last quarter. The core intermediate goods index rose by 1.2 percent in April and has risen at a 12.4 percent annual rate over the last quarter. With productivity growth having slowed sharply, it is difficult to believe that these higher costs won’t be passed on at the consumer level. This is big news.

So we are looking at some very real, and very troubling inflation numbers. Barry Ritholtz has some nice graphs that I recommend.

Economics Update

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In inflation, it appears that producer prices may be a problem (also here), with the overall rate going up by .2%, and the core rate going up by 0.4%.

Of interest is that the first link, from Bloomberg, basically casts it as a “low inflation” story, and the second link casts it as a “high inflation” story. I’ll explain why the latter is wrong in a bit.

In any case, the market saw the rate as low, which drove the dollar down in expectation of further rate cuts in the US, and the expectation of rate hikes in the Euro zone.

In energy, we have crude hitting another record, above $129/bbl, and gas prices at the pump hitting a new record for the 13th straight day.