Economics

Sequestration Math

"The media are bombarding us with stories of how sequestration, with its 'drastic cuts' in government spending, will affect our lives. Marketplace ran one yesterday about the USDA and the potential loss of federal meat inspectors. Don’t worry, we were told, the authorities won’t allow tainted meat on the shelves! But they might inspect more slowly, meaning less meat for sale, and higher prices. I spent 5 minutes on the CBO website and discovered that what’s in play is $27 billion of projected 'discretionary' spending. The sequester cuts that by 8% to about $24 billion. So the sequestered 2013 budget is $152 billion, a 4.8% increase over 2012." Continue reading →

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The Developing Student Loan Crisis

"Government continues to support the growth of student loans, which is a method by which government influences education. At the same time, the debt borrowed is turning students into mini-eurozone type debtors. Many have no chance of paying back what they owe. Donghoon Lee, an economist at the New York Federal Reserve, has put together the horrifying data." Continue reading →

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The Bond Bubble Is About to Burst

"The United States is shown in the following chart. Central banks have aided the government in managing to keep rates low despite big deficits, by buying the debt. Balance sheets of the world's central banks are growing rapidly to support government deficits while forcing rates to low levels. It is a bubble. When you buy Treasury bonds, you are putting your fate in the hands of the government, expecting it to give back your purchasing power and a reasonable amount of interest to you, in return for the use of your money. I believe we are headed for a serious loss of confidence in the value of the dollar, which will be accompanied by a burst of the Bond Bubble." Continue reading →

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Michigan Governor Declares Emergency in Detroit; Grabs Power from Locals

"Michigan Governor Rick Snyder plans to name an emergency manager to handle Detroit’s fiscal crisis, stripping power from local officials. Detroit has a budget deficit of about $327 million and more than $14 billion in long-term obligations, reports Bloomberg. Starting later this month, a manager will have the power to cancel labor contracts, cut spending and sell assets. This all is, of course, an attempt to prevent what could be the largest U.S. municipal bankruptcy. Snyder will act to protect Detroit's debt holders. However, the best thing that could happen to Detroit is for the city to declare bankruptcy and start fresh, rather than a Motown version of eurozone-type austerity." Continue reading →

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Bill Bonner: A Close Encounter with Zombiedom

"When it comes to zombies, nothing beats government. The feds have the power to force people to do things they would rather not do... notably, support bloodsucking zombies. So, when the elite landowners of Anne Arundel County, Md., got together with the environmental protectors and enlisted the power of government... you could be sure that money was going to change hands. In the event, some of it came to your humble zombie-fighting editor. You see, the idea was elegant. Subtle. And very profitable for those who understood what was going on. The landowners – often from old farm families – wanted to hold on to their land. But the cost of holding it was rising." Continue reading →

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Subway Founder: ‘Wouldn’t Exist’ If Started Today Due to Regulations, Then Calls For Min. Wage Hike

"Deluca said the environment for entrepreneurs in the U.S. has 'continuously gotten worse because there are more and more regulations. It's tough for people to get into business, especially a small business.' The Subway founder pointed to a number of government regulations that are degrading the business environment for entrepreneurs. Examples include the Affordable Care Act, an increase in the minimum wages and the end of the payroll tax holiday. The Affordable Care Act is 'the biggest concern of our franchisees,' Deluca said. 'They don't know what to expect. It's causing a lot of concern, but that too will be passed on to the consumer.'" Continue reading →

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Bernanke’s Subsidies: Houses and Cars

"What happens when the Federal Reserve promises to create $1 trillion in fiat money per year, and then starts by buying long-term Treasury bonds and Fannie/Freddie bonds? Interest rates go up. Wait a minute. Weren’t interest rates supposed to go down? Yes, they were. That is what Keynesian economics teaches. Problem: Keynesian economics is wrong. But Bernanke and the FED will move forward, inflating on a scale undreamed of prior to 2008. That is the only trick it has up its collective sleeve. 'When in doubt, inflate.' That is alpha and omega. That is the law and the prophets. Lock in that mortgage rate." Continue reading →

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