I actually thought Mr. Bernanke performed OK this time around.
But....................Representative Maxine Waters (D-CA) wounded him at the end with two questions:
1) Asking him why Mrs. John Mack of JP Morgan fame was able to, along with her connected girlfriend, put up $20 Million to obtain a $220 million non-recourse loan through TALF when qualified minorities cannot get a dime. A very symbolic question about why a lot of this stuff supposedly to improve the economy is actually still back door shoveling of money to banker types.
Bernanke claimed not to have read the Rolling Stone article, although he termed it wrong. When Waters pressed him further about details as to who did or did not have access to the funding, he essentially said that couldn't really be done. So he couldn't address her question about minority participation.
2). She asked him whether the Fed had a conflict of interest regarding the BAC settlement negotiations as BAC is partly owned by the Fed. Bernanke said that is incorrect as it is partly owned not by the Fed, but by the Richmond Reserve.
Well - " The Richmond Reserve is one of 12 reserve banks that, together with the Board of Governors, MAKE UP the Federal Reserve System ". Mr Bernanke was far less than accurate.
.............................................................................................
Finally (for now), none of the congressional questioners asked the OBVIOUS QUESTION.
- Given that all but 4 states must enact balanced budgets by July 1, someone should have asked the chairman about the impact of this on jobs/the economy GOING FORWARD. Many of them mentioned cuts having already occurred. But the vast majority of teacher, state and local layoffs haven't shown up yet. They are not presently accounted for in new claims statistics. These only now go through the week ending 7/2/11. But they will be shortly - resulting in my oft-stated opinion that the four week moving average of new claims will exceed 500k by Labor Day.
Wednesday, July 13, 2011
Friday, July 8, 2011
Unemployment as a Lagging Indicator - A Mistake
The continuing (mis)perception of unemployment rates as a lagging indicator persists among economists. By treating it as such, they continue to pervert the already "dismal science".
In a 70 percent consumer driven economy it is ludicrous not to assign unemployment as a forward looking indicator. DOES IT NOT OCCUR TO ECONOMISTS THAT SPENDING PRACTICES AND BEHAVIOR GOING FORWARD WILL BE IMPACTED BY NEW OR CONTINUING UNEMPLOYMENT. Let me repeat that, families or individuals without jobs just cannot continue their former spending habits. For the economist asleep in the back row - the rate of unemployment and new claims filed will to a great extent determine the direction of a 70 percent consumer driven economy IN THE FUTURE.
With new claims remaining well above 400k a week (and in my estimation soon to increase with local, state and federal budget cutting layoffs yet to hit) and those already unemployed facing minimal new job creation as confirmed by the June pathetic 18k addition to payrolls - the forthcoming direction of the economy should be quite clear.
Consumer spending will dive and small retail businesses will in turn be shuttered. Restaurants will close, foreclosures will rise, the typical homeowner will continue to see their main asset deteriorate in value. Large businesses will continue to hoard cash and layoff workers to address decreasing demand.
Our government has completely failed us by shoveling trillions to the financial industry through TARP, emergency loans, the discount window, QE2, bailouts of AIG-type monstrosities, foreign banks and the financial arms of multi-national corporations. NONE of this has filtered down to the normal citizenry. NONE of this spending has helped the average American citizen. Trickle down economics has been exposed as a dangerous hoax - a thoroughly discredited fallacy.
Instead, the President's commission on jobs features Jeffrey Inmelt - the prototypical shredder of jobs. This person - surrounded by similar thinking types, defective economists and financial "stalwarts" - will not formulate anything of true value. Just read their preliminary report and see if you can detect any inspirational feature whatsoever. It is a rehash of nothingness - a travesty of wasted dollars of wining and dining.
When one properly focuses on unemployment trends as a FUTURE INDICATOR, it becomes clear that our future will be in a downtrend as our government chose to indiscriminantly fund those who will not contribute to a true recovery, while defunding those who could (government support agencies). This to occur at the same time as more of our citizens will turn to the defunded parties to help them survive a crisis to which they did not contribute. The "oh so important" FUTURE INDICATOR is signalling very lean times coming up. But we discount it at our peril by failing to properly account for it - instead consigning it to the utterly wrong status of lagging indicator.
In a 70 percent consumer driven economy it is ludicrous not to assign unemployment as a forward looking indicator. DOES IT NOT OCCUR TO ECONOMISTS THAT SPENDING PRACTICES AND BEHAVIOR GOING FORWARD WILL BE IMPACTED BY NEW OR CONTINUING UNEMPLOYMENT. Let me repeat that, families or individuals without jobs just cannot continue their former spending habits. For the economist asleep in the back row - the rate of unemployment and new claims filed will to a great extent determine the direction of a 70 percent consumer driven economy IN THE FUTURE.
With new claims remaining well above 400k a week (and in my estimation soon to increase with local, state and federal budget cutting layoffs yet to hit) and those already unemployed facing minimal new job creation as confirmed by the June pathetic 18k addition to payrolls - the forthcoming direction of the economy should be quite clear.
Consumer spending will dive and small retail businesses will in turn be shuttered. Restaurants will close, foreclosures will rise, the typical homeowner will continue to see their main asset deteriorate in value. Large businesses will continue to hoard cash and layoff workers to address decreasing demand.
Our government has completely failed us by shoveling trillions to the financial industry through TARP, emergency loans, the discount window, QE2, bailouts of AIG-type monstrosities, foreign banks and the financial arms of multi-national corporations. NONE of this has filtered down to the normal citizenry. NONE of this spending has helped the average American citizen. Trickle down economics has been exposed as a dangerous hoax - a thoroughly discredited fallacy.
Instead, the President's commission on jobs features Jeffrey Inmelt - the prototypical shredder of jobs. This person - surrounded by similar thinking types, defective economists and financial "stalwarts" - will not formulate anything of true value. Just read their preliminary report and see if you can detect any inspirational feature whatsoever. It is a rehash of nothingness - a travesty of wasted dollars of wining and dining.
When one properly focuses on unemployment trends as a FUTURE INDICATOR, it becomes clear that our future will be in a downtrend as our government chose to indiscriminantly fund those who will not contribute to a true recovery, while defunding those who could (government support agencies). This to occur at the same time as more of our citizens will turn to the defunded parties to help them survive a crisis to which they did not contribute. The "oh so important" FUTURE INDICATOR is signalling very lean times coming up. But we discount it at our peril by failing to properly account for it - instead consigning it to the utterly wrong status of lagging indicator.
The Great Recession Never Ended
First off, economists - who have never yet been right about anything this decade - need to change the definition of recession to reflect an economy which is 70 percent consumer driven. And the revised definition must include unemployment, which should also no longer be perceived as a lagging indicator but as a forward indicator. This is basic stuff.
These economist clowns were just today again caught with yet another misread on the economy. After a bunch of them had just RAISED their jobs outlook - the June 2011 figures came in with a miniscule 18,000 new jobs created and a rise in the unemployment rate to 9.2%. Once again revealing that these great minds are completely clueless about the reality surrounding them.
I'll also take this opportunity to restate my prediction that the forthcoming massive layoffs of teachers and public employees due to severe budget cuts will bring the four week moving average of new claims to above 500k by Labor Day.
If nothing else, citizens should learn to trust their own thoughts and opinions about the state of things. Because common sense has once again been shown to be a heckuva lot more accurate than the utterances of a group of people practicing a science based on faulty assumptions, outdated definitions and incompetence.
These economist clowns were just today again caught with yet another misread on the economy. After a bunch of them had just RAISED their jobs outlook - the June 2011 figures came in with a miniscule 18,000 new jobs created and a rise in the unemployment rate to 9.2%. Once again revealing that these great minds are completely clueless about the reality surrounding them.
I'll also take this opportunity to restate my prediction that the forthcoming massive layoffs of teachers and public employees due to severe budget cuts will bring the four week moving average of new claims to above 500k by Labor Day.
If nothing else, citizens should learn to trust their own thoughts and opinions about the state of things. Because common sense has once again been shown to be a heckuva lot more accurate than the utterances of a group of people practicing a science based on faulty assumptions, outdated definitions and incompetence.
Wednesday, July 6, 2011
The Upcoming Crisis !!!!!
I have forwarded this information to numerous news organizations, financial sites, budget planners and everyone I can think of with no reaction or interest whatsoever. So any reader of this blog can reflect on this upcoming situation without having to wade through anyone else's take on the matter.
School districts, cities, towns and all municipalities are fast approaching the time for establishing their budgets going forward. It is well established that this will involve substantial cutbacks. The major result of which will be layoffs. Many have read articles about cities such as Philadelphia, Providence, R.I. and others being compelled to greatly reduce the level of teachers. Other headlines address all kinds of city and town employee cutbacks.
Employers of teachers and city & town workers do not pay an unemployment tax on their payroll as the typical employer does. Rather, they reimburse the state Unemployment Division dollar for dollar for benefits paid out to eligible individuals. This will result in direct charges to the employers for up to 26 weeks of benefits per laid off person This so-called "Reimbursing Employer" arrangement is beneficial during times of low, stable unemployment - but can really clobber budgets when layoffs are high.
So what does this really mean? Well, normal employers have seen their "contribution rate" increase since their accounts have generally paid out more in benefits than they have contributed in taxes to the unemployment fund during the Great Recession.. Actually, this has already caused some states to limit the longevity of benefits to make their states more "business friendly". Basically, to try to cut the burden of unemployment payroll taxes to make it appear that business costs are less compared to other states that have not done so.
But the hit on school districts, cities and towns has not really even occurred yet. This will come in July and August of 2011 when the layoffs occur and the claims are filed. A teacher without a contract for the upcoming school year will not have "reasonable assurance" of returning to their position and therefore will be eligible for unemployment benefits. A laid off city, town or municipal employee will also be immediately eligible.
Just contemplate the impact. If these thousands upon thousands of individuals collect unemployment - with the former employers being charged dollar for dollar for benefits paid - we are talking very, very large sums. Huge expenditures.
Just take an example of a laid off teacher receiving $300 a week for up to 26 weeks - all being billed to the school district. Multiply this by all the laid off school teachers nationwide. The total will be massive. And I'm just talking about the direct costs to the school districts. (Of course, a similar scenario exists for cities, towns and municipalities).
How does this impact payment of property taxes? Let's say a home-owning household is headed by two wage-earners, one of whom is a teacher or public employee. If one is laid off, how do they pay their property taxes? In a family with a single laid off teacher wage earner - how do they pay property taxes, mortgage or any other bills for that matter? With relentlessly increasing food and energy bills? Will they be in a position to contribute towards our 70% consumer spending driven economy? Or will they, by necessity, contribute unwillingly to our national debt?
Our government is not even close to even recognizing - much less answering these types of questions. Our elected officials are myopically preoccupied with matters that mean little. It's not a matter of "failing to see the forest for the trees", but rather being totally blind to the obvious. A state of complete and utter non-preparedness. When the government and the media that should make an attempt to make it accountable cannot comprehend a coming crisis - then the citizenry is left to bear the brunt of the results. I guess we learned nothing from Katrina and the financial crisis. We might as well go by the name FEMA and congratulate our leaders by saying "good job, Brownie".
School districts, cities, towns and all municipalities are fast approaching the time for establishing their budgets going forward. It is well established that this will involve substantial cutbacks. The major result of which will be layoffs. Many have read articles about cities such as Philadelphia, Providence, R.I. and others being compelled to greatly reduce the level of teachers. Other headlines address all kinds of city and town employee cutbacks.
Employers of teachers and city & town workers do not pay an unemployment tax on their payroll as the typical employer does. Rather, they reimburse the state Unemployment Division dollar for dollar for benefits paid out to eligible individuals. This will result in direct charges to the employers for up to 26 weeks of benefits per laid off person This so-called "Reimbursing Employer" arrangement is beneficial during times of low, stable unemployment - but can really clobber budgets when layoffs are high.
So what does this really mean? Well, normal employers have seen their "contribution rate" increase since their accounts have generally paid out more in benefits than they have contributed in taxes to the unemployment fund during the Great Recession.. Actually, this has already caused some states to limit the longevity of benefits to make their states more "business friendly". Basically, to try to cut the burden of unemployment payroll taxes to make it appear that business costs are less compared to other states that have not done so.
But the hit on school districts, cities and towns has not really even occurred yet. This will come in July and August of 2011 when the layoffs occur and the claims are filed. A teacher without a contract for the upcoming school year will not have "reasonable assurance" of returning to their position and therefore will be eligible for unemployment benefits. A laid off city, town or municipal employee will also be immediately eligible.
Just contemplate the impact. If these thousands upon thousands of individuals collect unemployment - with the former employers being charged dollar for dollar for benefits paid - we are talking very, very large sums. Huge expenditures.
Just take an example of a laid off teacher receiving $300 a week for up to 26 weeks - all being billed to the school district. Multiply this by all the laid off school teachers nationwide. The total will be massive. And I'm just talking about the direct costs to the school districts. (Of course, a similar scenario exists for cities, towns and municipalities).
How does this impact payment of property taxes? Let's say a home-owning household is headed by two wage-earners, one of whom is a teacher or public employee. If one is laid off, how do they pay their property taxes? In a family with a single laid off teacher wage earner - how do they pay property taxes, mortgage or any other bills for that matter? With relentlessly increasing food and energy bills? Will they be in a position to contribute towards our 70% consumer spending driven economy? Or will they, by necessity, contribute unwillingly to our national debt?
Our government is not even close to even recognizing - much less answering these types of questions. Our elected officials are myopically preoccupied with matters that mean little. It's not a matter of "failing to see the forest for the trees", but rather being totally blind to the obvious. A state of complete and utter non-preparedness. When the government and the media that should make an attempt to make it accountable cannot comprehend a coming crisis - then the citizenry is left to bear the brunt of the results. I guess we learned nothing from Katrina and the financial crisis. We might as well go by the name FEMA and congratulate our leaders by saying "good job, Brownie".
Friday, July 1, 2011
Eyes Wide Shut
I just read that Bill Clinton believes that unexpectedly strong job growth will bring Mr. Obama re-election.
Oh my. It is amazing just how wrong a respected figure can be. After July 1st, anyone who files a new claim for unemployment insurance will be limited to 26 weeks with no extensions unless Congress does an improbable about face. Some states are even reducing the basic 26 to save money.
(Actually, some states do continue to offer an additional 13 weeks under the long-standing Federal/State Extended benefits program if their unemployment rate is high enough).
This nicely corresponds with the now being finalized state and local budgets. You remember - the budgets resulting in the layoffs of thousands upon thousands of teachers, municipal and state employees.
Very, very cruel timing. Just when benefits duration will be restricted due to the (end) of the Great Recession, the initial claims figure will be jumping above the 500,000 level. The four week moving average will be substantially above 500k by Labor Day.
Far from propelling Obama to another term, the unemployment mess coupled with the increasing fortunes of the super wealthy will cost him dearly if the republicans can field even a semi competent candidate. His outstanding speaking skills cannot overcome a dismal record and the perception of betrayal among former supporters.
Oh my. It is amazing just how wrong a respected figure can be. After July 1st, anyone who files a new claim for unemployment insurance will be limited to 26 weeks with no extensions unless Congress does an improbable about face. Some states are even reducing the basic 26 to save money.
(Actually, some states do continue to offer an additional 13 weeks under the long-standing Federal/State Extended benefits program if their unemployment rate is high enough).
This nicely corresponds with the now being finalized state and local budgets. You remember - the budgets resulting in the layoffs of thousands upon thousands of teachers, municipal and state employees.
Very, very cruel timing. Just when benefits duration will be restricted due to the (end) of the Great Recession, the initial claims figure will be jumping above the 500,000 level. The four week moving average will be substantially above 500k by Labor Day.
Far from propelling Obama to another term, the unemployment mess coupled with the increasing fortunes of the super wealthy will cost him dearly if the republicans can field even a semi competent candidate. His outstanding speaking skills cannot overcome a dismal record and the perception of betrayal among former supporters.
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