US Politics - Why we can't have even mediocre things

[Shryke]

shadowstats was is a stopped clock. CNBC is a much better source.

 

Exactly. When you are permanently calling for a catastrophe, you don't become right just because one occasionally comes around. If I predict it will rain every day, that does not make me a good weather forecaster even if it does rain sometimes.

[Guest]

Didn't it even come out that the guy running shadowstats was charging money for the supposedly premium info and admitted he was full of it and was a stopped clock?  That's like the whole business model.  It also has an added psychological appeal.  if you're following shadowstats you tell yourself that you and only the exclusively wise such as you know what's really going on, you smart person.

[The Marquis de Leech]

Interest rates will start going up if not this month then some time soon. One of the growing concerns is the idea the US will put itself in the situation of Japan, and be trapped in a near zero interest rate environment for another decade, if no attempt is made to break out.

 

You break out of a zero interest rate environment by encouraging inflation via fiscal and wage policy. 

 

To put it simply: if demand and supply of money were at a clearing "price" (i.e. interest rate), interest rates would be negative. But interest rates can't go negative, so zero interest rates fail to clear the market. You don't clear the market by ramping up interest rates and making the situation worse.

[Fragile Bird]

lokisnow, I won't answer point by point because ThinkerX already has, but the federal reserve has ended quantitative easing, and they are not going to launch back into it. Nor are they going to fund emerging nations by buying their bonds.

The analogy of gorging on candy is totally totally wrong, because no gorging on interest rates is going to happen. Interest rates are going to creep up, not leap up. Maybe the first increase will be 25 basis points, but from what I've heard and read future increases of only 10 or 15 basis points at a time would not come as a surprise.

RBPL, you may be correct in theory, but I don't think that's what Greenspan was doing when he raised rates 14 times in a row after he had dropped rates to 1% after 9/11 and brought them back to 4.5% by 2006. Yellen will raise interest rates when the Fed thinks the economy can handle it, and if it can't handle it with a 5.1% unemployment rate, when is it going to handle it? You can't keep rates near zero forever, it's too destructive.

[The Marquis de Leech]

You raise rates when *inflation* becomes an issue. Right now, it isn't - in fact, the major issue is deflation.

 

(Zero interest rates are hardly destructive. You need to focus on real interest rates - nominal rates minus inflation, not the nominal rates themselves. There is no real difference between a situation of 0% interest and 0% inflation vs 10% interest and 10% inflation).

[TerraPrime]

 

So Kansas is continuing it's example of the complete failure of the GOP as a governing party with now trying to defund the judicial branch because they won't stop declaring his policies unconstitutional:

http://www.motherjones.com/mojo/2015/09/why-entire-kansas-court-system-could-shut-down

 

TLDR: The GOP threatened the judicial branch with defunding if they struck down a law they had passed targeting the judicial branch for previous things they had struck down. The judicial branch called that bluff. Now shit going crazy.

 

 

 

I don't even have words.

 

Are the Kansas citizens actually happy and satisfied with the slate of politicians they elected to the state government?

[lokisnow]

The point of the article is that if we enter another recession in the next year, the fed will take additional action, probably quantitative easing, other than just cutting interest rates. We don't need to raise rates just to cut them when raising them would make the situation worse.

While rate rises of 5 basis points are possible, such an abnormal figure seems unlikely unless those predicting it are trying to figure out how to get a rate increase every session. I imagine when the fed does raise rates they will want to raise rates by a typical amount, but it is doubtful they will issue steady rate increases after they taje the first step. I think its extremely unlikely we will have more than two rate hikes per annum until the labor market escapes it's current severe recession conditions, there is no way rates will rise in consecutive sessions for years, we're likely to see extremely drawn out step ups. If rates go up 25 basis points in September then I doubt another rate increase will be possible until September 2016.

Here's another article pointing out the insanity of raising rates in our current severe recession labor market.

The message in these statistics is pretty clear: A little upward pressure on wages would be a welcome corrective to years of falling pay. Under the circumstances, the itchy trigger on the Federal Reserve staff seems out of touch with the basic reality that a years-long spell of high unemployment has given bosses an unprecedented ability to squeeze their employees.

http://www.vox.com/2015/9/6/9256981/wage-decline-chart-nelp

[ThinkerX]

Shadow Stats? I have not been to that site in years - is it even still around? Even back in 2007, I very rarely linked to it.

That said, another item to mull over:

http://www.msn.com/en-us/money/markets/nonunion-employees-turn-to-work-site-committees-for-protection/ar-AAe0Pgp?ocid=msnclassic

Luis Muñoz, a co-worker at the business, Squeaky Clean Car Wash, said their boss frequently humiliated workers, sometimes shouting, “You’re good for nothing.” One winter day, Mr. Munoz said, the boss — complaining that cars were not being washed faster — soaked him with bone-chilling water from a hose.

Mr. Porras, Mr. Muñoz and eight co-workers became so fed up that they took an unusual step. They formed a workers committee (not a labor union) and sent a certified letter to the owner of the carwash. In it, they complained about being “insulted and humiliated” in “front of our co-workers and customers” and protested being required to work off the clock and not being given goggles or gloves even though they worked with toxic chemicals.

“We knew we’d have little protection if we acted alone,” Mr. Porras, an immigrant from Guatemala, said in Spanish. “But we knew that if we formed a committee, we’d be protected.”

An advocacy group for immigrant workers, Somos Un Pueblo Unido, advised Squeaky Clean’s workers to set up such a committee because the National Labor Relations Act — enacted under President Franklin Delano Roosevelt in 1935 — prohibits employers from retaliating against workers for engaging in “concerted” activity to improve their wages and conditions, even when they are not trying to unionize.

I can see this movement taking of big time - and ticked off republicans doing everything they can to ban such organizations.

Comments section rapidly turned to commentary on a subject using words forbidden here.

[TrackerNeil]

I don't even have words.

 

Are the Kansas citizens actually happy and satisfied with the slate of politicians they elected to the state government?

 

These Republicans--if they can't rule, they'll ruin.

[Altherion]

A bit of good news for people who don't like any of the Establishment candidates: Clinton's lead over Sanders is down to 7% in Iowa (she leads 37% to 30%):

 

 

On the Democratic side, Clinton's steep decline in support is a case of 2008 deja-vu, pollster J. Ann Selzer told the Des Moines Register.

"This feels like 2008 all over again," she said.

 

Seven years ago, Clinton held a similarly narrow lead over then-Sen. Barack Obama and former North Carolina Sen. John Edwards in October, and Obama surged to an unexpected win late in the race.

 

In the latest poll, Clinton's lost 20 percent support since May, a troubling trajectory for the candidate heading into the real start of the campaign season this fall.

 

In New Hampshire, Sanders is actually in the lead by 9% (he leads 41% to 32%). It's pretty surprising given how little money Sanders has collected so far.

[BloodRider]

I may have to take issue with that statement. As of late I keep running across articles like this one - a bit 'out there,' but apparently with a factual core of sorts:

http://www.counterpunch.org/2015/08/28/looting-made-easy-the-2-trillion-buyback-binge/



I keep running across similar articles, some mainstream, some not, linking the current zero rate interest policy to a not so distant financial disaster - possibly larger than the 2007-2008 mess.

I suspect Obama is concerned about this fiscal house of cards, and his support for the odious TPP his attempt at a partial solution: he saw the Chinese market crash coming, and the TPP as a way to mitigate the damage.

Seems like the CEOs have figured out how Private Equity made their money.

[ThinkerX]

I think we got a few posters here from Mississippi. This guy got your vote?

http://www.msn.com/en-us/news/politics/shy-trucker-emerges-as-democrats%e2%80%99-pick-for-mississippi-governor/ar-AAe2baS?ocid=msnclassic

JACKSON, Miss. — Only three people who had ever met this man, Robert Gray, knew that he was running in the primary for governor of Mississippi.

There were the two volunteers who took his $300 filing fee and qualifying papers several months ago at the state Democratic Party office and the candidate for agriculture commissioner who happened to be in the headquarters at the same time.

Otherwise, no one — not even Mr. Gray’s mother, with whom he lives.

At least, she voted for him when she saw his name on the Aug. 4 ballot. Mr. Gray, 46, a round-faced, soft-spoken long-haul truck driver who lives on a quiet country road south of Jackson, was too busy working on his rig to vote himself. He would, nonetheless, go on to win, taking 79 out of Mississippi’s 82 counties.

Mr. Gray beat two other candidates, who unlike him spent money and campaigned. Democratic Party officials were stunned. The news media was stunned. Mr. Gray, now Mississippi’s Democratic nominee for governor, gave some interviews and then set off with a truck full of sweet potatoes for a potato chip factory in Pennsylvania.

[Fragile Bird]

You raise rates when *inflation* becomes an issue. Right now, it isn't - in fact, the major issue is deflation.
 
(Zero interest rates are hardly destructive. You need to focus on real interest rates - nominal rates minus inflation, not the nominal rates themselves. There is no real difference between a situation of 0% interest and 0% inflation vs 10% interest and 10% inflation).

Thank you for reminding me what I learned in Economics 101 in 1972. :P

I've lived through a few wild periods of inflation and stagflation and seen extremes in interest rates.

The point is, keeping rates at zero is very destructive to people who can no longer acquire capital, like senior citizens, because they either have to encroach on capital or purchase risky investments. Low interest rates also discourage saving, because without getting any interest being paid on your savings, you fear prices will continue to increase so you might as well spend. Spending means banks have fewer reserves, which they need in order to make loans.

Aside from pushing seniors into riskier assets in search of yield, it encourages speculation. Money is cheap! Borrow money and buy speculative stocks or real estate or by into business opportunities that promise high returns!

And yes, deflation is incredibly destructive, and at the financial company where I used to work I felt like a voice crying in the wilderness about deflation. With rates at zero deflation is a real risk. But with the levels of debt that many governments around the world are in, they can't afford to raise rates. In the end, I think that's why Yellen will have to bite the bullet and start making increases, even if they are tiny.

It's always the extremes that kill you, either in inflation or deflation. The 4.6% rate of 2006 is looking mighty fine right now in this environment.

[maarsen]

I think we got a few posters here from Mississippi. This guy got your vote?

http://www.msn.com/en-us/news/politics/shy-trucker-emerges-as-democrats%e2%80%99-pick-for-mississippi-governor/ar-AAe2baS?ocid=msnclassic
 

Infrastructure and education are his priorities. Sounds good to me.

[Guest]

snip

 

There's a part of that argument I don't quite understand.  Why must one get a yield?  I mean, sure, one would prefer a yield to not getting one, but even in a low interest rate environment can you bite the bullet and just park your money to avoid riskier investments?  Or go for bonds with small but safe returns?  Who says you must send your money out chasing yields even if a lot of people do that?

[Shryke]

The point of low rates is to encourage spending and discourage saving.

[Fragile Bird]

There's a part of that argument I don't quite understand.  Why must one get a yield?  I mean, sure, one would prefer a yield to not getting one, but even in a low interest rate environment can you bite the bullet and just park your money to avoid riskier investments?  Or go for bonds with small but safe returns?  Who says you must send your money out chasing yields even if a lot of people do that?

As you get older, Trisk, you lose the ability to do two things. (Financially. You lose the ability to do a lot of other things. ;) ) You lose the ability to replace your capital, because you stop working. Because you lose your ability to replace capital, preserving capital becomes extremely important, so you gradually reduce your ability to take risk. Triple A bonds and certificates of deposit become what you invest in, and you try to live off the interest earned on them as long as possible before encroaching on your capital. Once you dip into your capital, you start reducing the amount of interest you live on. Some people have 'safe stocks' as well, but many people can't sleep at night thinking they might lose all their money if the stock market crashes, or lose income if a dividend is cut or cancelled.

With interest rates at staggering low rates, say 1%, the person who once lived on $1M of capital at 5%, $50,000 income, now needs to have $5M of capital to live on. But if he only has $1M, he'll have to start reducing his capital by $40k a year to make up that $50k, taking more and more each year as they earn less and less interest. This is the situation that someone who retired 10 years ago finds himself in. And people who are going to be retiring in the next few years are looking at what they've saved and wondering how the hell they are going to survive on what they spent a lifetime saving, because it probably isn't enough.

I only used $1M to make the math simple.

If you are no where near retirement, you have more time to take risks, so you can invest your money in stocks, for example, hoping for capital appreciation that way. But the stock market crash in 2008 scared a lot of people out of the market, so they are buying things like Certificates of Deposit instead while they hope things turn around. But 6 or 7 years at 1% hasn't given you much of a return.

$10,000 compounded quarterly at 1% over 7 years is $10,724.

Compounded at 6%, your return is $15,172.

Add a zero to the end and you see you are out quite a sum of money.

Compound interest calculator you can play with: http://www.davemanuel.com/compound-interest-calculator.php

Now, sometimes the interest rate barely keep ups with the inflation rate, which happened when rates went sky high in the early 80s for a brief period. But after a while inflation was substantially reduced, and interest rates were higher than the rate of inflation, which is generally the way things are. I disagree with RBPL, that the rate of interest is fine as long as it's higher than the rate of inflation, because of the destruction of capital as I outlined above.

None of this would matter if we all had government or private pensions that paid enough money to live on, but very very few of us do.

[Commodore]

artificially low rates begets overleveraging, begets the boom/bust cycle

[TerraPrime]

artificially low rates begets overleveraging, begets the boom/bust cycle

 

Like certain types of clothing beget rape, I presume? Because, you know, if we lower the rate enough, business people and banks just couldn't help themselves from predatory practices like betting against your own clients in a mortgage market by inventing investment instruments. Totally not their fault that they did it. 

[ThinkerX]

And here we go again:

http://www.msn.com/en-us/money/markets/when-us-markets-open-tuesday-investors-face-3-dreaded-%e2%80%98death-cross%e2%80%99-formations/ar-AAe2B20?ocid=msnclassic

NEW YORK (TheStreet) -- When the U.S. markets open for trading on Tuesday, investors face more than just a "death cross" for the Shanghai Composite. Since the flash crash of "Black Monday" on Aug. 24, "death cross" formations have been spreading around the world.

In the U.S., the Russell 2000 ended last week with a "death cross" confirmed. A "death cross" occurs on a daily bar chart when the 50-day simple moving average declines below the 200-day simple moving average, which is a warning that lower prices may lie ahead.

On Monday, while U.S. investors celebrated Labor Day, the German DAX ended the day with a "death cross," despite posting a gain on the session.

And it goes on and on in that vein, complete with lots of spiffy graphs.