There’s a fair bit of controversy going on about “President Obama again criticizes trips to Las Vegas” which (no surprise) is making gigantic headlines in where? Las Vegas, of course.
What got Obama in trouble with Vegasites and Chamberites was saying that when times are tough “You don’t going buying a boat when you can barely pay your mortgages. You don’t blow a bunch of cash on Vegas when you’re trying to save for college.” Hmmm…common sense, there…
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What escapes the discussion is a fundamental problem of economics: IF people really DO cut back on their spending, it actually LENGTHENS the amount of time taken to recover. Sometimes best to shut up.
Which is exactly what turns an economic recession into an economic Depression. When a recession recovery begins, people promptly forget about the ‘bad times’ and go about their previous free-spending ways. That creates consumption and that creates what? Jobs, velocity of money, and you can wander back over into virtuous cycle feedback fairly quickly. Print money and off you go – plenty of demand for it.
What’s going on now, however, is the whole nation is tipping toward the reciprocal of virtuosity… This as we just passed a tipping point (invisible to most) where people start becoming thoughtful about their spending if not outright afraid. Velocity crashes, manufacturing backs up, pricing power evaporates and along comes deflation. Oops!
While the president thinks he’s making economic sense (thrift and savings) by telling people to actually save for a rainy day, he may want to consider that he’s actually keeping employment low in the hospitality industry and so forth. That means pressure on airlines, car rental outfits (which impact Detroit, right?) and so forth.
Economies are almost never static. A sector that’s not expanding is shrinking and with the last Fed G.19 report showing credit card spending dropping at nearly 20% per year, that’s bound to have continued impacts on the service sector and so forth.
Timing Volker’s Ascension
About the safest bet I can think of in politics now is that someone will have to be offered to the increasingly angry public as a sort of ‘human sacrifice’ to appease voters. A number of candidates for this political sacrifice come to mind (Geithner, Summers, et al) and the replacement actor who is making a lot of headlines right now might be someone like Paul Volker.
Speaking of which, you saw where he is taking a firm stand against banks doing too much speculating that doesn’t benefit investment clients?
I don’t look for Volker to make his move yet…more likely, he’ll wait till the tide of economic history has started to swing a little more clearly. Although he gets a lot of credit for “Whip Inflation Now” back when, the reality is that a lot of economic geniuses are so ordained simply for being in the right place at the right time.
Just like Summers & Geithner, et al, are in the right place at about precisely the wrong time and we collapse toward the bottom of D2.
Next Round of Layoffs
My consigliore called yesterday and explained how the next round of layoffs – which has the potential to be huge – will be in state and local governments. All a matter of falling property values and with it will come declines in tax revenues.
Unlike Uncle, of course, where “Largest-over federal payrool to hit 2.15 million” is about to happen. They have the printing press which helps.
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California is out of the limelight (for the past few weeks) but “As feds stiff state, budget crisis deepens” warns a Dan Walters piece in the Fresno Bee.
And in Florida where the governor’s budget assumptions are being roasted.
And in Nevada where 300 state workers are likely to get pink slipped…
And in….well, you got the idea, huh? This is what double-dips on the slippery-slip come from - and why we’ll be seeing some kind of human sacrifices offered up by Washington this year. Sacrificial scapegoating we’d called it back in the newsroom days. Some things never change.
Change? Did someone say “Change”?
To Market
ADP job report says companies cut fewer than their forecast 22,000 jobs in January. no, there’s no growth yet, so I wouldn’t be holding a block party over this. Maybe I will get my reversal to the downside today which will get wave 5 to the downside rolling.
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ISM non-manufacturing number comes later today along with the energy stocks report if my handy-dandy crib notes are correct.
Pays to Be A Bankster
“Outrageous!” Yes, but those AIG super-compensation bonuses are ‘legal’ says a federal pay czar.
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OK, fine. How much has all the genius and posturing cost when a $500/hour employment comp lawyer would have given the same answer in what, 2-hours of staff time?
Repeat after me: “Show time!”
Truth Leak
Meantime, Moody’s figures that bad bank debt is not declining – Nope! Likely to rise for another year according to a Telegraph report… Say, is that an echo I hear? Listen closely….
Show time! Show time! Show time….
Sunspot Jitters
OK, OK, relax. People have been sending me emails all morning about the headline that “Solar storms threaten Olympics blackout” at the London 2012 games.
Pardon me while I just chuckle at this. First of all, the current sunspot check over at www.spaceweather.com shows what? One lousy sunspot.
Now, what does this mean? Simply that Solar Cycle 24 is way slow getting started. I mean way slow. Slower than Obama ‘change’ slow. Slower than ‘transparency’. Slower than ‘balanced budget’ slow…(I could go on, but you get the idea, right?)
Here’s the deal. Solar cycles are 11.5 years or so in length (and yes, they correspond to the 11-11.5 year economic cycle which can be observed in California real estate and Juglar’s work (which was 8.5-11 if I remember right). (Why these don’t get tied to sunspots is beyond me…..)
So, I assume you’ve read the papers which are widely available that the peak of solar flare risk is on what? The backside of the cycle which puts the risk of a major flare predominately 5.5 years into a cycle and more likely around 6.5 years into a cycle.
Which means what? Well, seeing as the bottom of Cycle 23/24 is still being formed and looks to be drawing out much longer than anyone expected, I’m not putting on the tinfoil hat and installing Schottky diodes on my beard trimmer until mid…oh…what’s ’09 +5? 2014?
And the longer the bottom takes, the more Mr. Ure will be able to take advantage of falling diode prices. Sheesh! “The sky is falling, the sky is falling! And I must find a surge protector!”
Apparently, sheep do poorly at astronomy and physics.
Who’s Afraid of Virginia Snow?
A panicky reader is worried about the possible 3-4 feet of snow around Charlottesville, Virginia expected later this week:
“I have been told the Virginia Dept of Transportion had a meeting this morning in Charlottesville where they were briefed on the distinct possibility this one storm could dump over 40 inches of snow between Friday afternoon and Sunday morning.
That’s up to my wife’s shoulders !
Anyway, its snowing like crazy now, so we’ll see by tomorrow morning if we get that 4-6 inches tonight and will keep you posted.
While suggesting local residents just ‘chill’, we will go so far as to grant a gold star for headline writing to The Hook which headlines “Snowmageddon: Friday in Charlottesville…” I like it – a lot…