Friday, August 26, 2011

Barker's Newsbites: Friday, August 26, 2011


Fitting...?

(*GRIN*)

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6 comments:

William R. Barker said...

http://online.wsj.com/article/SB10001424053111904875404576530412322260784.html

If you really want to light the fuse of a liberal Democrat, compare Barack Obama's economic performance after 30 months in office with that of Ronald Reagan. It's not at all flattering for Mr. Obama.

The two presidents have a lot in common. Both inherited an American economy in collapse. And both applied daring, expensive remedies. Mr. Reagan passed the biggest tax cut ever, combined with an agenda of deregulation, monetary restraint and spending controls.

* AND I WAS THERE! GOD BLESS RONNY!

Mr. Obama, of course, has given us a $1 trillion spending stimulus.

(*SOUR PUSS*)

By the end of the summer of Reagan's third year in office, the economy was soaring. The GDP growth rate was 5% and racing toward 7%, even 8% growth. In 1983 and '84 output was growing so fast the biggest worry was that the economy would "overheat."

* YEP...

In the summer of 2011 we have an economy limping along at barely 1% growth and by some indications headed toward a "double-dip" recession.

(*GNASHING MY TEETH*)

By the end of Reagan's first term, it was Morning in America. Today there is gloomy talk of America in its twilight.

* FROM THE FIRST DAY OF REAGAN'S PRESIDENCY I KNEW WE WERE SAVED!

* WHEN OBAMA SIGNED PORKUBUS... WHEN OBAMA CALLED THAT CAMBRIDGE COP "STUPID"... I KNEW ALL WAS LOST.

My purpose here is not more Reagan idolatry, but to point out an incontrovertible truth: One program for recovery worked, and the other hasn't.

(*NOD*)

The Reagan philosophy was to incentivize production - i.e., the "supply side" of the economy - by lowering restraints on business expansion and investment. This was done by slashing marginal income tax rates, eliminating regulatory high hurdles, and reining in inflation with a tighter monetary policy.

(*THUMBS UP*)

Reaganomics was routinely ridiculed in the media, especially in the 1982 recession. That was the year MIT economist Lester Thurow famously said, "The engines of economic growth have shut down here and across the globe, and they are likely to stay that way for years to come."

(*SMIRK*) (*SNICKER*)

The Godfather of the neo-Keynesians, Paul Samuelson, was the lead critic of the supposed follies of Reaganomics. He wrote in a 1980 Newsweek column that to slay the inflation monster would take five to ten years of austerity, with unemployment of 8% or 9% and real output of barely 1% or 2%.

(*CHUCKLE OF CONTEMPT*)

The economy would soon take flight for more than 80 consecutive months.

(*JUMPING OUT OF MY CHAIR AND SCREAMING "YEAH!" WITH BOTH FISTS HIGH IN THE AIR*)

[Reagan era] borrowing financed a remarkable and prolonged economic expansion and a victory against the Evil Empire in the Cold War.

* UM-HMM! (*NOD*)

What exactly have Mr. Obama's deficits gotten us?

August 26, 2011 at 8:48 AM
William R. Barker said...

* TWO-PARTER... (Part 1 of 2)

http://online.wsj.com/article/SB10001424053111904787404576528720928619458.html

One year ago, on Aug. 27, 2010, Federal Reserve Chairman Ben Bernanke explained the rationale for a second round of quantitative easing. "A first option for providing additional monetary accommodation is to expand the Federal Reserve's holdings of longer-term securities," he said, thereby supposedly "bringing down term premiums and lowering the costs of borrowing."

Yet the bond market promptly reacted by raising long-term interest rates.

(*SNORT*)

The yield on 10-year Treasurys, which was 2.57% at the time of his Jackson Hole, Wyo., address, climbed to 3.68% by February 2011 and did not dip below 3% until late June when QE2 was coming to an end.

The price of West Texas crude oil, which was $72.91 a year ago, remained above $100 from March to mid-June and did not come down until QE2 ended and the dollar stopped falling.

* FOLKS. FORGET TRYING TO FOLLOW THE NUMBERS. HERE'S THE BOTTOM LINE: BERNANKE'S POLICIES ARE INFLATIONARY - DELIBERATELY SO. (BEST CASE SCENARIO... BERNANKE'S POLICIES ARE SIMPLY THE RESULT OF INCOMPETENCE - IGNORANCE FUELED MISJUDGMENTS AS OPPOSED TO "TREASONOUS" INTENT.) (TIP OF THE HAT TO GOV. PERRY!) (*WINK*)

When Mr. Bernanke spoke, the price of a euro was less than $1.27. By the week ending June 10, 2011, 15 days before QE2 ended, the dollar was down about 15% (a euro cost $1.46). In that same week, The Economist commodity-price index was up 50.9% from a year earlier in dollars - but only 22.8% in euros.

* AGAIN, FOLKS... PUT ASIDE TRYING TO RETAIN THE NUMBERS... (*PAUSE*)... READ ON FOR THE BOTTOM LINE:

How could paying much more than Europe did for imported oil, industrial commodities, equipment and parts make U.S. industry more competitive?

(*NOD*) (*SLAPPING THE AUTHOR ON THE BACK*) HOW INDEED, MY FRIENDS? HOW INDEED?

* To be continued...

August 26, 2011 at 9:16 AM
William R. Barker said...

* CONCLUDING... (Part 2 of 2)

The chart nearby subtracts the contribution of government purchases (such as hiring and construction) from real GDP growth to gauge the growth of the private economy. The generally negative contribution of government purchases (column two) does not mean government spending has slowed, as some contend. Instead it reflects the fact that federal and state spending has been increasingly dominated by transfer payments (such as Medicaid, food stamps and unemployment benefits) which do not contribute to GDP, and in some cases reduce GDP by discouraging work.

* IN OTHER WORDS, FOLKS... FORGET THE WHOLE "SHOVEL READY PROJECTS" NONSENSE THAT OBAMA SIMPLY LIED ABOUT.

(*SHRUG*)

The chart also shows that growth of private GDP was also much faster before QE2 than it has been since, and the increase in producer prices (i.e., U.S. business costs) was much more moderate. And that is no coincidence.

* NOPE! NO COINCIDENCE AT ALL! (FOLKS...! WHAT HAVE I BEEN TELLING YOU SINCE I STARTED THIS BLOG...?!)

As Fed policy pushed the dollar down, higher prices for imported inputs such as oil, metals and cotton meant higher costs (producer prices) for U.S. manufacturing and transportation.

* DUH!

* UNDERSTAND, FOLKS... FOR THE WASHINGTON ELITE... FOR THE NY/LA/CHICAGO ELITE... FOR THE ELITE IN GENERAL... WHAT'S IT REALLY MATTER IF GAS IS $4/gal. OR EVEN $8/gal.? FOR US $2/gal. GAS MEANS WE CAN GO OUT TO DINER, GO ON VACATION, BUY STUFF WE OTHERWISE COULDN'T. BUT TO PEOPLE LIKE BEN BERNANKE... THEY LIVE IN A DIFFERENT WORLD, FOLKS!

In demand-side theorizing, monetary stimulus means the Fed buys more bonds. The Treasury has certainly been selling a lot of bonds, and the Fed has been buying (monetizing) a huge share of those bonds. That helped push the broad M2 money supply up at a 6.8% rate over the past six months. Yet the only thing we have to show for all that stimulus over the past year has been rapid inflation of producer prices and a simultaneous slowdown in the growth of the private economy. Consumer price inflation also accelerated to 5.2% in the first quarter and 4.1% in the second, from just 1.4% in the third quarter of 2010.

* AND FOLKS... (*SNORT*)... AS YOU ALL KNOW... (*SMIRK*)... THIS "CORE INFLATION" NUMBER IS BOGUS. IF THE GOVERNMENT WENT BACK TO THE CARTER ERA MEASUREMENT OF INFLATION... (*SIGH*)... THEY'D BE WHOLESALE PANIC.

In short, the Fed's experiment with quantitative easing from November 2010 to June 2011 was accompanied by a falling dollar and inflated prices of critical industrial commodities, including oil. The net effect was to reduce the profitability of manufacturing and distributing products in the United States, and therefore to shift such activities (and jobs) to other countries which were less handicapped by the dollar's weakness.

August 26, 2011 at 9:16 AM
William R. Barker said...

http://online.wsj.com/article/SB10001424053111904787404576532370229403888.html?mod=WSJ_hp_MIDDLENexttoWhatsNewsThird

MONTERREY, Mexico—Some 500 Mexican soldiers fanned out across Mexico's northern business capital of Monterrey to hunt for members of a presumed drug gang that set fire to a casino a day earlier and killed 52 people, most of them women.

* WAS ANYONE EVEN AWARE OF THIS PRIOR TO JUST HAVING READ ABOUT IT HERE? (I WASN'T!)

A commando of six to eight masked men carrying automatic rifles burst into the Casino Royale on Thursday afternoon and yelled at customers to leave, dousing the place with gasoline and setting it on fire, according to witnesses. Dozens of clients managed to escape through the main entrance before flames engulfed the way out, forcing those who remained to try to get out through exits in the back of the casino. Many of those rear exits appear to have been blocked for reasons that remain unclear. Rodrigo Medina, governor of Nuevo León state, where Monterrey is located, said on Friday the total number of fatalities was 52...

* FOLKS... MONTERREY IS A MAJOR CITY! IMAGINE THIS HAPPENING IN BOSTON OR SAN FRANCISCO OR MIAMI...

The death toll could still rise, however. Rescue workers had said earlier they pulled 61 bodies from the casino.

President Calderón called on Mexican society to unite against organized crimes, and called on congress to pass stalled security legislation, and on the states to step up vital police reforms. He acknowledged that the endemic corruption in Mexico's police forces as well as in the country's justice system was a big problem.

* YA THINK...?!?! YEAH... DIVERSITY... WHY CAN'T WE BE MORE LIKE MEXICO... (*SNORT*)

The massacre in the Casino Royale in an upper-middle-class area of the city was the second such attack on an entertainment center in the past two months in Monterrey. In July, gunmen attacked a Monterrey bar with a reputation as a drug distribution center, killing 21 people, most of them bar workers. So far this year, more than 1,000 people have died in drug-related violence in the state of Nuevo León.

August 26, 2011 at 2:24 PM
William R. Barker said...

http://www.facebook.com/note.php?note_id=10150274863408435

* A NEW FACEBOOK POSTING BY SARAH PALIN

We join the Libyan people in gratefulness as we hear of Col. Gaddafi’s defeat. The fall of a tyrant and sponsor of terrorism is a great day for freedom-loving people around the world. But the path to democracy in Libya is not complete, and we must make wise choices to ensure that our national interests are protected.

First, the White House needs to avoid triumphalism. Gaddafi may be gone, but the fighting may not be complete. As we’ve seen in Kosovo, Bosnia, Iraq, and Afghanistan, we must not celebrate too quickly. There are now mounting concerns that we will see tribal and sectarian fighting in Libya like we saw in Iraq. Let’s hope that is not the case, but it must be prepared for.

Second, we must be very concerned about the future government that will emerge to take Gaddafi’s place. History teaches that those with the guns usually prevail when a coalition overthrows a tyrant. We must remember that military power ultimately resides with the rebel commanders. This should be a source of some concern. The armed opposition to Gaddafi is an outgrowth of a group called Islamic Libya Fighting Group, and some rebel commanders admit that they have Al Qaeda links. The rebel fighters are from different tribes, and they have a variety of political views. Some are Islamists, some appear to favor some sort of western democracy. We should work through diplomatic means to help those who want democracy to come out on top.

That said, we should not commit U.S. troops or military assets to serve as peacekeepers or perform humanitarian missions or nation-building in Libya. Our military is already over-committed and strained, and a vaguely designed mission can be the first step toward a quagmire. The internal situation does not seem stable enough for U.S. forces to operate in a purely humanitarian manner without the possibility of coming under attack. Troop deployment to Libya would mean placing America’s finest in a potentially hostile zone that is not in our vital national security interest.

Finally, we must make sure that terrorist groups don’t try to co-opt the revolution, as Al Qaeda is trying to do in Syria. We should continue to use our intelligence assets to monitor the situation in Libya to ensure that potentially dangerous weapons are secured, and that terrorist organizations such as Al Qaeda don’t gain a foothold in Libya.

People of Libya, be vigilant. May this opportunity be used to build a free and peaceful country.

* SOUNDS RIGHT TO ME.

* FOLKS... ESPECIALLY THOSE OF YOU WHO TEND TO DISLIKE AND/OR DISMISS SARAH PALIN... I REALLY DO SUGGEST YOU ESCAPE THE MEDIA FILTER BY READING WHAT SHE HAS TO SAY DIRECTLY. IT'S ALL THERE IN THE ARCHIVES OF HER FACEBOOK PAGE.

August 26, 2011 at 3:06 PM
William R. Barker said...

http://www.washingtonpost.com/opinions/feds-rate-policy-leaves-no-relief-for-main-street-banks/2011/08/25/gIQAgo0heJ_story.html

After nearly a decade of living inside the Beltway, I have learned not to be surprised by much in Washington. But I was astounded this month when the Federal Reserve announced its intention to keep interest rates at zero percent for at least the next two years.

(*SADLY NODDING*)

I have been a community bank owner and was president of a bank that served hundreds of community bankers for more than 20 years. I have always known that the model of community banking is different from that of Wall Street banks. Unlike Wall Street banks, which make their money based on volume and transaction fees, community banks make their money the old-fashioned way. They pay their customers interest on their hard-earned savings, they lend those deposits back into their communities to small businesses that create jobs, and they price those deposits and loans to make enough on the difference to pay their employees and utility bills, and maybe even to purchase a scoreboard for their local high school football team.

That is, until now.

(*DEEP SIGH*)

Now the Fed is pricing their deposits.

Now the Fed is setting the spread.

With nearly zero percent rates and slack credit demand, how are community banks supposed to make a viable margin on their funds?

[T]he Fed has taken away community bankers’ ability to compete in the free market. In the midst of a depressed economy with low loan demand, the central bank is exacerbating the financial crisis.

Why?

In my view, the Fed’s policy is nothing more than a backdoor bailout for the Wall Street mega-banks and investment houses; it amounts to the back of the hand for the community banks of this country. The Wall Street money houses are basically getting free money that they can hedge and arbitrage worldwide to make baskets of money, while local banks are stuck with deposits costing more than the federal funds rate, sluggish loan demand and a 2.20 percent 10-year Treasury. For the extended future, earnings contractions will accelerate as the investment portfolio prepays and runs off, and capital will be difficult if not impossible to raise, stifling growth on America’s Main Streets.

(*NOD*)

And what about fixed-income savers and retired senior citizens who were encouraged for years to save for their retirement so as not to be a burden to their families or their government? How long will their savings last when rates are held to artificially low levels?

* FOLKS... AS I TOLD YOU WHEN BERNANKE FIRST ANNOUNCED THIS SCAM... (*PAUSE*)... WE'RE TALKING DISASTER!

Once again, Wall Street gets a bailout on the backs of Main Street’s banks, small businesses and hardworking Americans.

* OBAMA'S WALL STREET. OBAMA'S GOLDMAN-SACHS. OBAMA'S GE CAPITAL.

August 26, 2011 at 3:22 PM

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