'Nother Jobz Rant

This time on the WSJ, complete with some detailed criticisms of the unemployment stats. People are watching. This summer better show some signs of improvement, or there will be revolt against the President's policies. Stagnation won't be good enough.

Stop It Already!

I agree with this guy. I wish the Gov't would just say "enough" and let Americans find our way through this mess. The financial industry is stable-ish. Good enough. Now everyone get back to work!

Instead, investors and job hunters and entrepreneurs are all wondering what the Gov't is going to do, how the rules are going to change, and which industries are going to get puffed up with taxpayer money. People are standing around watching Citi, AIG, BoA, GM, and California flounder, uncertain whether these entities will default on their promises. Meanwhile, the federal deficit grows and grows. My son better get used to working three jobs because that's what it will take to pay off the Baby Boomers' debt.

The first stimulus package was not a stimulus package. It was a vote-getting fund for Congress. It was a profile in achieving graft, waste, and corruption. Why would round two be any better?

On a side note: why is it expected that liberals are also Keynesian?

Uh oh?

It has to be said. If Obama can't cap the job losses, his presidency will be a colossal failure. And if you think it's getting bad now, imagine what the next buffoon will do . . .

Message to the President: forget tomorrow's problems. Today's are worse.

Here is how the summer is about to unfold.

1. Unemployment will be revised upward any day now to about 9.7%.
2. The political masses will call for a second stimulus. (Biden is already greasing the wheels)
3. Borrowing rates to support the stimulus will reach critical levels as investors demand a greater risk premium than the USG is prepared to offer.
4. Fed loses credibility as it suddenly buys up Treasury debt to make up for weak demand.
5. Inflation chicken littles (myself included) and bond vigilantes (Gross, et al.) will issue even more dire warnings about fiscal projections.
6. Stock market volatility (as measured by the VIX) will be back to 2008 levels.
7. Oil producing nations, Russia in particular (especially as it faces the threat of bond default again), will slash production. The resultant price of crude will keep recovery forecasts for the US economy pessimistic.
8. Even CNBC will talk about the liquidity trap. Simply, the threat of inflation is not enough to get sideline money back in the game because there is still too much fear.


Deja vu all over again?

Jobs plz.

What do I keep saying about jobs?

http://online.wsj.com/article/SB124645016745579363.html#mod=testMod

Inflation Itself Caused the Credit Bubble?

Martin Wolf analyzed a recent GS research paper. Conclusion: Inflationary policies under Bush/Greenspan led to the credit bubble. How: inflation here decreased savings and increased borrowing.

Net result: inflation led to inflation, which led to devaluation (naturally, as a correction), but which has led to drastic inflationary policies to prevent depression. Maybe those gold bugs got it right after all.

If America can't compete globally as a manufacturer or farmer, our economy is doomed to stagnation, decreased wages, and general loser-ness.

Definition of Leadership

I found this on Paul Kedrosky's blog. Naturally, he defined it as group think/mob behavior. I'm an optimist. The first dancer is a leader.

Bond War: Krugy, Fergy, and Grossy

Daniel Gross opined on the ongoing battle to interpret the spike in long-term T-Bill rates. Is the spike a signal from the market that the USG's long term health is at risk (Ferguson's view)? Or, does it signal a retreat from safety (Krugman's view)?

My take on the matter was that it was a combination of factors. There are technical reasons to take cash out of 30 year Treasurys and reinvest them in foreign denominations. Namely, the US will lead the recovery, but it will still face a long and painful period of economic stagnation. This US-led recovery will enable smaller, more vibrant economies to flourish. In the short run, it will keep China afloat. In the long run, though, this means the US equity market and currency is overvalued. For an investment, it makes sense to take some portion out of the US.

I have come to realize, also, that many big money investors are extremely ideological and are tied to long-standing perceptions that Democrats are bad for business, despite the historical trends that suggest otherwise. There are bond vigilantes. They are Bernanke's audience.

Gross offers a rather different point of view, and one that I find convincing:

Both the Fergusonians and the Krugmanites (of whom I count myself one) err in
reading too much into short-term fluctuations in bond prices. There's so much
more at work. Randall Forsyth of Barron's explains a technical reason for the short-term spike in 10-year and 30-year rates. Banks and financial institutions that own mortgages hedge their exposure to refinancing by buying and selling Treasury bonds. When mortgage rates start to rise, as they've done in recent weeks, institutions do
the opposite and sell. "While mortgage investors previously had bought
noncallable Treasuries to offset the risk of their mortgages, mortgage investors
have unwound that hedge, selling their Treasuries," Forsyth writes.

If nothing else, this three-way exchange demonstrates the difference between finance and economics.

This