Should we Prepare for Oil Price Spikes Ahead?
Oil Prices (Brent) over 10 years in Dollars and Euros via Wikipedia
Now that the Obama Administration and the International Energy Agency have teamed up to release 60 million barrels of oil from strategic reserves in a politically timed move to drive down oil prices what should we anticipate the reaction and counter reaction to those moves will be?
Short Term Gain, Long Term Pain?
If the politicians wanted a ‘feel good’ press release experience from their action they got it as global oil prices fell 5.5% the first day but by the second day they had begun to creep back up slightly as the markets digested the true significance of the action and speculated on what it meant for the future.
To put the action taken in context, the 30 million barrel release from the U.S. strategic petroleum reserve (SPR) is about 4% of total reserve but those reserve levels are high with 727 millions barrels of oil on hand. So President Obama had the reserve capacity to take this action but needed to decide whether the big bang short term impact of releasing the reserves to bring down prices was worth the risk of a big bang counter reaction that might pike oil prices even higher at a future time.
The calculus for the Europeans is about the same since the IEA’s 30 million barrel release represents about 5% over total reserves, but the IEA has made unexpected oil releases in the past and on three separate occasions the result was a counter reaction of higher oil price spikes down the road.
The question is ‘do you feel lucky’?
For economists and corporate executives these are long term strategy decisions, but for politicians these are short-term choices revolving largely around when the next election will be, what bad can happen between now and then, and how can to divert accountability for this problem to others. For consumers the result is often higher retail prices since the typical market action for falling wholesale prices is to reduce prices slowly while wholesale price spikes result in rapidly increasing retail price response.
The Europeans have a more legitimate short term worry from the disruption of Libyan oil but cheating on production quotas is historically common among OPEC and non-OPEC market participants. Given relatively weak demand due to the weak recovery the short-term disruption seemed manageable. The EU could actually improve that situation if it got off its hands to step-up action by NATO to unseat Col Gaddafi rather than dither and drag out the conflict. But cheating alone by oil producers will likely be enough as oil prices stay high or creep higher.
Higher Risk of Oil Price Spikes
The bottom line for politicians responsible for this strategic petroleum release action is not likely to be very satisfying. Oil prices will not go down measurably at the gas pump or stay down long enough to improve consumer confidence or make a positive impact on the economy. But price volatility will increase and the risk of even higher prices from worry and speculation about the impact of future supply disruptions given smaller reserves could actually make things worse.
Back to consumer confidence for a minute, the lack of confidence is one of the biggest factors in holding down growth. It is caused by uncertainty about the policies being used by politicians and their impact on business and job creation. In the US, the huge federal deficit, the huge uncertainty over health care policy and costs, the threat of higher taxes, higher inflation and more regulation in financial, investment, environmental and employment areas is causing business to hoard cash and hunker down. It is discouraging consumers fearful for their jobs, with houses with negative equity as home prices fall, and fear of loss of health insurance and of rising inflation starting with those gasoline prices.
If politicians want economic growth and improved consumer confidence they must deal with these uncertainties in real and constructive ways to unleash investment, encourage consumer spending and stabilize housing prices. Political stunts like the SPR release avoid the real problems and add even more uncertainty and volatility in an already nervous market environment. It is both economic and political malpractice.
Related articles
- Strategic Petroleum Uncertainty (insightadvisor.wordpress.com)
- Open Areas to Drilling, Don’t Open the Strategic Petroleum Reserve (papundits.wordpress.com)
- IEA move to have minor long term impact (rt.com)
- America’s Energy Policy Reality #3: Domestic Energy Security Requires Domestic Energy Production (insightadvisor.wordpress.com)
- The reasoning behind the IEA oil release (rt.com)
- How to Make USA More Vulnerable to OPEC ??? (2012patriot.wordpress.com)
Baggage, Politics, Economics and America’s World Leadership Future
Image via Wikipedia
President Obama announced June 22nd the phased withdrawal of American surge troops from Afghanistan. The announcement was more a political calculus than geopolitical one, but it has unintended consequences for the latter and America’s leadership role in the world.
The Baggage of Afghanistan. Let’s face it, after ten years America is tired of chasing bad guys in the mountains of the ‘far-off-istans’ of the world. While we are doing so under the military fiction of NATO all the heavy lifting is being done by the US. We have reached a point in Afghanistan that without the active policy support of Pakistan we will not change the long term fundamentals of that place even if we continue to pour blood and treasure into it endlessly. In a very real and practical sense, President Obama’s decision to authorize a phased withdrawal is both good politics and good sense.
As with most tough choices there are consequences. In the case of Afghanistan those include the high probability of a resurgent Taliban and the potential for safe havens again for terrorists. But maintaining a special forces presence and predator drones to target bad guys is a lot cheaper and probably as effective as what we are doing now on the ground.
Thus while I think President Obama is making this decision almost entirely for domestic political reasons I still think it makes sense to extricate ourselves from Afghanistan because except for killing bad guys it is just not in America’s strategic interest to be there absent a credible partnership with Pakistan.
The Baggage of Pakistan. Extricating ourselves from Afghanistan reduces our dependence upon Pakistan since we will not need it for access to the Afghan front. Pakistan remains a vital strategic interest of the US but exiting Afghanistan has the beneficial effect of redesigning the chess board of strategy options for dealing with Pakistan. The options include tying future foreign and military assistance to the actual performance of Pakistan in keeping the Taliban and other militants under control. This aligns American interests with the Pakistani interests since letting the bad guys wreak havoc also threatens their own government and military. Our policy with Pakistan is containing the bad guys and keeping the country’s nuclear assets secure and we’ve proven adept at long term containment policies before. Cutting their allowance for misbehavior a few times would be instructive for the Pakistani’s forcing them to earn back our trust and dollars with good deeds. Growing our relationship with India is also useful pressure on the Pakistani’s to stick with the program.
The Baggage of NATO. That Libya’s Gaddafi is able to defy NATO and hold his own is an indictment of Obama for failure to execute his policy that Gaddafi must go and failure of the European members of NATO to step up to the plate when called upon to enforce a consensus policy. Libya exposes the fiction that is NATO and Secretary Gates said it plainly and honestly—the United States is no longer willing to defend Europe when Europe will not spend the money to defend itself or act in concert with the strategic policy goals of the alliance. So while Obama has bungled Libya badly, he has done the United States a good service by framing the fiction that NATO has become and made possible a strategic discussion with the Europeans that was unthinkable until now. In short, the EU must learn to defend itself again.
Again this stark reality has consequences. It forces the EU to get its military act together for good or ill. It forces the EU nations to decide if they are going to hang together or separately. It resets the calculus for their relationships with Russia, Turkey, Iran and others in the world absent the security of America’s defense umbrella to hide under. On the other hand, the growing relationship between Germany and Russia is worrisome not just for the US but for the other EU nations. And a NATO breakdown invites mischief from Russia writ large seeking to fill the vacuum and regain its lost sphere of influence. But these issues are inevitable and need to be addressed and now is the time the facts on the ground have dictated.
The 2012 Referendum. The 2012 election is a referendum on many fronts. It is the report card on President Obama’s performance and today that is not looking very good. It is a strategic review of America’s military and defense relationship with Europe and the implications for NATO as a global force. It is a reality check on the limits of America’s resources in the current economic conditions to maintain all its foreign adventures and be the world’s policeman. It is also a wake-up call that reminds us that isolation and pulling back on long term strategic commitments has consequences both intended and unintended.
The job of the presidential candidates is to frame the issues we must face as a nation today and for the long term. Let’s see if they are up to the challenge. The challenge for President Obama is to convince us that we should renew his lease on 1600 Pennsylvania Avenue for another four years based upon the report card of his performance for the last four years.
Expect to hear that Reaganesque question ‘are you better off today than you were four years ago’ asked often. President Obama’s fate is likely to be determined by events beyond his control in the economy and elsewhere. He can make it worse if he acts unwisely on any of the challenges we face, but there is little he can do to make it better fast enough to avoid a bruising race to the 2012 finish line. The President’s perceived weak performance also makes him subject to be ‘fragged’ by his own party. We are beginning to see that with Bill Clinton’s recent cover story scale strategies for improving the economy and Al Gore’s sniping about the President’s failure to press the climate change and environmental agenda.
In his policy failures and stumbles President Obama has also made it tougher on all his campaign competitors who must now come up with positions on these baggage issues and the broader foreign policy, global economic competitiveness, and national security issues we face. He has reminded us as voters that there are consequences for accepting the sales pitch of a positive sounding uplifting candidate with no work experience. Many of the candidates will be questioned more sharply on their own resumes and views because of it.
The conventional wisdom is that the 2012 election is an “it’s the economy stupid” contest, but President Obama’s foreign policy stumbles or the desire of bad guys around the world to use his perceived weakness and vulnerability to gain advantage could turn foreign policy and national security into equally high priorities quickly.
Lastly, there is the matter of public confidence. We need more of it right now. We get it from talking to each other about what is right about America, about our shared values and common heritage and generally optimistic view of the future. The president has charmed us before and maybe he can do it again—but this time we expect change we can believe in—and we really mean it!
Related articles
- Obama announces rapid drawdown of surge forces from Afghanistan (longwarjournal.org)
- Under Obama, U.S. Casualty Rate In Afghanistan Increased 5-Fold (thedaleygator.wordpress.com)
California Legislators Forfeit Pay over Budget Failure
California State Controller John Chiang via Wikipedia
No Budget, No Payday!
That was the stunning decision yesterday by California State Controller John Chiang. Under California law the State Legislature must adopt a balanced budget (Proposition 58) and they must do so by June 15th by a simple majority vote instead of the previously required 2/3 vote (proposition 25).
But the budget the Legislature approved was so full of gimmicks that Governor Jerry Brown, also a Democrat, vetoed it and State Treasurer Bill Lockyer, said he could not finance it.
BUSTED!
Yesterday the other shoe dropped when State Controller John Chiang, also a Democrat, said the Legislature failed to meet the tests under both Proposition 58 to pass a balanced budget and Proposition 25 to do so on time. Therefore, he was just following the law (Proposition 25) and ordered that the Legislators would forfeit about $260 per day in salary and $142 in tax-free travel and living expenses. Under Prop 25 that money is forfeited meaning it cannot be later paid back once the budget is adopted.
Since the Legislature is a full-employment act for politicians with members making $95,291 getting cut off cold-turkey is the voters’ equivalent of a furlough, and legislators are not accustomed to being disciplined especially by other Democrat elected officials.
The Democrat Legislative Leaders were furious believing Governor Brown stabbed them in the back. The Republicans were largely quiet observing the age old political proverb—‘when your opponent is committing suicide, let him’.
Brown told the Legislative leaders to go back to the budget negotiating table and try to talk the Republicans into a short-term extension of the current sales and income tax increases and to allow voters to decide whether to extend them further. Otherwise he told the Legislature to send him a budget with cuts deep enough to close the $9.6 billion gap.
The Controller’s action was refreshingly gutsy and the blogosphere was alive with calls of “Chiang for Governor.” In the short-term Chiang’s action strengthens the hand of Governor Jerry Brown in getting the Legislature to act responsibly enough to allow State Treasurer Bill Lockyer to sell the bonds needed to keep the state in cash.
Republican have resisted calls for a tax extension arguing that past use of that strategy has resulted in the Legislature spending all the money and then some. The problem Republicans have is voters surveyed have repeatedly said they want the opportunity to vote up or down on taxes. So if Republicans continue to hold out they risk irritating voters on a core issue. But voters also passed Prop 25 reducing the vote needed in the Legislature to approve the budget to a simple majority thus depriving the minority party—almost always Republicans in California—the ability to hold the budget hostage. So Democrats have the votes but not the will to adopt a balanced budget making deep cuts, but they don’t have the votes to call a special election on the tax questions.
Checkmate as usual—but this time no paycheck as usual.
Related articles
- California State Controller Sticks Lawmakers’ Face In It (cehwiedel.com)
- California Controller to Pols: No Pay for You! (reason.com)
- Chiang Cuts Off Legislators Pay As California Budget Saga Continues (economy4abc.blogspot.com)
- California Budget Rapture is Near (civicchoices.wordpress.com)
- California Voter Revenge Hits Politicians Hard! (civicchoices.wordpress.com)
- Jerry Brown vetoes budget – Democrats ‘dismayed’ (sfgate.com)
NBC’s Pledge of Allegiance to Political Correctness
NBC apologizes for omitting ‘under God‘ in Pledge
– Sun Jun 19, 11:10 pm ETBETHESDA, Md. – An omission in the Pledge of Allegiance had NBC issuing an on-air apology Sunday during the U.S. Open.
The network opened its broadcast with a montage that included children reciting the pledge, but the words “under God” and “indivisible” were omitted.
The backlash on social media was quick and harsh, with some tweets calling for a boycott of NBC.
“We began our coverage of this final round just about three hours ago, and when we did it was our intent to begin the coverage of this U.S. Open championship with a feature that captured the patriotism of our national championship being held in our nation’s capital for the third time,” announcer Dan Hicks told viewers. “Regrettably, a portion of the Pledge of Allegiance that was in that feature was edited out. It was not done to upset anyone, and we’d like to apologize to those of you who were offended by it.”
That was the story from AP yesterday describing NBC’s action to intentionally edit out “under God” from a video of the Pledge of Allegiance—an OMISSION!
Sacrilege maybe, idiotic certainly,but NBC’s ‘omission’ is all too common place at NBC and across the media. We have reached a point of absurdity in this country when being politically correct is more important than being fair, reasonable, inclusive or consistent with the law. We seem only too willing to abandon our national traditions on the altar of political correctness when they don’t suit our politics.
It is time to name it and call it out. The good news is that is exactly what happened to NBC—blasted for its crassness and lambasted for its insulting decision to altar the Pledge of Allegiance and equally boorish to do so by deleting “under God” from the video.
Shame!
Related articles
- One Nation Under God (fellowshipofminds.wordpress.com)
- The U.S. Open Omits ‘Under God’ from the Pledge (friendlyatheist.com)
- NBC Omits “Under God” From U.S. Pledge, Ignites Controversy [VIDEO] (mashable.com)
- Hey, NBC, What the Heck???? (earthoceanskyredux.wordpress.com)
- VIDEO: NBC Skips ‘Under God’ In 2011 U.S. Open Final Round Intro (sbnation.com)
- Pledge of Allegiance: This is Not Brainwashing (settingbrushfires.wordpress.com)
California Budget Rapture is Near
Image via Wikipedia
A fist fight between opposing views on the State budget broke out at the California Legislature just before the Democrat-sponsored State Budget was approved anyway and sent to Democrat Governor Jerry Brown. But Brown vetoed the budget sent him by fellow democrats saying it was full of gimmicks and did not solve the problem.
He told them to talk the Republicans into allowing voters to decide whether to extend the current temporary sales and income tax increases as a bridge and to find more cuts in budget categories or else.
This is Jerry Brown at his finest!
He knows every legislative and political trick in the books and he obviously surprised the Democrats by not rolling over for their latest attempt to kick the can down the road.
Why were they doing it?
Voters approved a ballot Initiative last election that stops legislative paychecks if they fail to approve a balanced budget on time. So the Legislature approved a budget they called balanced in time—the first time in decades—to meet that paycheck deadline betting that fellow Democrat Jerry Brown would let them get away with this smoke and mirrors trick.
BUSTED!
The Governor knew he would have to live with a flawed budget and thus would get all the blame for making draconian cuts needed to make up for the gimmicks the Legislature approved. So in vetoing the budget he told them to try again.
So angry was Senate President Pro Tem Darrell Steinberg that he announced he was halting Senate consideration of Governor Brown’s appointments and there would be no further confirmations for an indefinite period of time.
WORRIED!
Pressure on the Legislature to approve a realistic state budget is compounded by bad economic news. California employers shed 29,200 jobs from payrolls in May after several months of job growth had boosted California’s estimated revenue for the year. California’s unemployment rate still fell to 11.7% from 11.8% in April, according to Bureau of Labor Statistics.
California was not alone in this bad economic news as only 54,000 jobs were added in May and the national unemployment rate grew to 9.1%. First quarter job growth averaged 220,000 jobs a month. Add falling home prices and lower retail sales and consumer confidence numbers and you see why Governor Brown was tired of waiting for the Legislature to do its job.
A POX ON BOTH YOUR HOUSES
Jim Boren, an editorial writer for the Fresno Bee, summed up the nasty mood pervading the State with this editorial:
“Here’s more evidence that we need a part-time Legislature in California: It took lawmakers almost six months to come up with a phony budget, which Gov. Jerry Brown vetoed within hours of its passage. Part-timers couldn’t have done any worse, and likely would have solved the problem.
The Sacramento political establishment scoffs at the thought of a part-time Legislature for many reasons. If lawmakers are part time, their staffs would be part time. The public relations professionals and lobbyists, who operate full time, would have less work.
A full-time but dysfunctional California Legislature works for everyone except the taxpayer. We have a system in Sacramento that has morphed into a moneytree for the political class.”
And so it goes.
Related articles
- Calif. Gov. Jerry Brown vetoes state budget (marketwatch.com)
- Uncertainty reigns as Jerry Brown vetoes ‘questionable’ California budget (csmonitor.com)
- Gov. Jerry Brown vetoes Democratic budget bill (abclocal.go.com)
- Jerry Brown Vetoes California Budget, Cavanaugh on 10 O’Clock News Again Tonight (reason.com)
Give the President what He wants and Give it to Him Hard!
AEO 2011 Electric Generation by Fuel
That was the message from American Electric Power in announcing that it will retire 6,000 MW of coal fired power generation to comply with new US EPA regulations. The stunning announcement by AEP on June 9th rattled power markets and sent politicians running for cover. The decision will cost more than 600 jobs and $40 million per year in payrolls.
On June 10th US EPA spokesman Roy Seneca said:
“These long-overdue Clean Air Act standards will slash hazardous emissions of mercury and other acid gases, preventing thousands of asthma and heart attacks and premature deaths. Utilities have known for decades that these standards — which are still in the proposal stage and have a built-in 3-year-compliance timeline, have been coming for decades. They also know that they are free to approach EPA with serious, fact-based compliance plans, and that state governments also have the ability under the law to seek more time for the plants in their jurisdictions.”
AEP Chairman and CEO Mike Morris said the utility will take other actions in its proposed compliance plan including adding advanced emissions reduction equipment on 10,100 MW of remaining coal capacity, converting 1,070 MW of coal generation to 932 MW of natural gas, and adding 1,220 MW of new natural gas-fueled generation to restructure its power portfolio.
AEP to Replace coal with Natural Gas Generation
AEP said in a press release that the cost of the EPA compliance plan was between $6 billion to $8 billion in capital investment over the next 8 years but could go higher because of the high demand for labor and materials caused by EPA’s aggressive 3-year compliance time frame which AEP has called unreasonable. The costs of the compliance plan could also change based on the final form of the EPA regulations and the actions by state regulatory commissions that must approve the plan and fund it likely through higher rates.
48,000 MW of Coal Power Plants Affected by EPA Rules
AEP’s announcement is the first of what likely will be a string of bad news stories resulting from the proposed EPA’s Clean Air Transport Rule (CATR) and Utility Maximum Achievable Control Technology (MACT) rulemaking to limit nitrogen oxides, sulfur dioxide and mercury emissions by the electric power industry.
EPA Rules Cost the Economy $184 Billion
A economic impact study of the proposed EPA rules done by NERA, a nationally recognized economic analysis consultant, hired by a power industry trade group, the American Coalition for Clean Coal Electricity said the rules will force 48,000MW of coal fired generation to shut down at a cost of about $18 billion per year or $184 billion total to consumers for added coal unit compliance costs, fuel price impacts, and the costs of replacement energy and capacity including the stranded cost of power plants that still have substantial remaining useful life and thus revenue requirements that will also have to be recovered in higher rates. NERA estimated average U.S. retail electricity prices in 2016 would increase by about 12%, making the CATR and MACT rules the most expensive EPA regulations ever imposed on power plants.
So what?
So stumping for votes for reelection in West Virginia, Ohio, Virginia, Kentucky and Indiana just got a lot tougher for President Obama who must not only defend these new EPA rules but also the economic impacts they cause on industry, job creation and economic recovery in Midwest, South and Texas where coal is important.
Related articles
- EPA responds to American Electric Power on closing coal-fired plants (genomega1.wordpress.com)
- BROWN OUT: New EPA regs force five power plants to close… (thehill.com)
- Boiler MACT Rule Rescinded by Retreating EPA (insightadvisor.wordpress.com)
- AEP says it will close five coal plants to comply with EPA regs (farxistreport.wordpress.com)
- AEP Predicts Need to Shutter 25% of Coal Fleet (nytimes.com)
- AEP lays out power-plant closings to meet proposed EPA rules (dispatch.com)
- Trend Watch After EPA Rules: Time to Rethink Utilities? (AEP, XLU, IDU, RYU, UPW, ETR, ITRI) (247wallst.com)
- Daily Benefactor News – Thanks Barack… American Electric Cuts 600 Jobs, Closes Several Plants To Comply With Oppressive EPA Regulations (thedaleygator.wordpress.com)
- New Analysis Finds EPA’s Power Plant Regulations Would Increase Electricity Costs; Lose Jobs (pumabydesign001.wordpress.com)
California Voter Revenge Hits Politicians Hard!
Proposition 25: No Budget, No Paycheck! The California Legislature has five days to complete work on a state budget or risk missing the Constitutional deadline. What’s new, you ask, they have missed the deadline in 24 of the past 25 years.
What’s new is that THIS TIME as a consequence of Proposition 25 approved in the November 2010 election if the Legislature fails to approve the budget on time the State Controller must stop paying them. California lawmakers are paid $95,291 per year in addition to a daily expense allowance of $141.86 on days the Legislature is in session so each day the budget is late after June 15th will cost them $403.93. Since most of the legislators consider it their full time job this is a serious consequence, but there is more—-any compensation withheld is considered forfeited and cannot be paid retroactively.
Proposition 11: Redistricting Hits Home. Proposition 11 approved by California voters in 2008 gave authority to the California Citizens Redistricting Commission to redistrict State Legislative seats, Congressional Districts and seats on the State board of Equalization. As you can imagine, the Legislature hates this idea because it undermines the careful gerrymandering done to protect incumbents. It worked too—in the November 2010 election not a single incumbent legislator was defeated. But this week the California Citizens Redistricting Commission released the first draft redistricting maps using new census data and input from citizens across the State.
Shock would be a mild term for the legislative reaction. Virtually no district was the same since the plan was to assure that the election contests are competitive. Independent analysis of the first draft of maps from the California Citizens Redistricting Commission by the Public Policy Institute of California said the proposed boundary changes would more than doubles the number of competitive congressional and legislative seats. PPIC says the Assembly would gain 7 competitive seats for a total of 16; the Senate would see a gain of 6 competitive seats for a total of 9. The US House of Representatives would gain 5 competitive seats for a total of 9 out of 53.
PPIC defines “competitive” as any voter registration within 5% for Republicans and 10% for Democrats because it says Democratic voters crossed party lines more often than Republican voters.
Proposition 14: Open Primary Elections. Adding insult to this injury, the voters also approved a new primary election rules advancing the top two vote-getters to the General Election regardless of party. Meaning two Democrats or two Republicans or two Tea Party types could be nominated by voters. This seriously messes with the ability of the political parties to engineer the elections, but since a growing share of California voters are officially “decline to state” or independent it forces the candidates to broaden their appeal rather than courting only the base in their own party. The objective is to encourage a more centrist set of candidates and to breakdown the partisan gridlock that has held up decision in the Legislature.
Related articles
- California Redistricting Commission Releases First Draft of New District Maps (elections.firedoglake.com)
- Fair redistricting? It is to laugh (maureenholland.wordpress.com)
- California Voting Map Stirs Criticism (online.wsj.com)
- California to get first look at new political maps (sfgate.com)
- Controller Announces No Pay for Legislators Absent Balanced Budget by June 15 Deadline (yubanet.com)
- Controller to legislators: No budget, no pay (sfgate.com)
The Confidence to See our Glass Half Full
Fed Chairman Ben Bernanke via Wikipedia
Why doesn’t our economy grow faster? We know the answer. A majority of the people surveyed routinely say they believe the country is going in the wrong direction. Business is sitting on hoarded cash now estimated to be more than $1 trillion dollars and growing. Individuals reduced spending and paid down debt as home values stay underwater. Banks are no help. After getting bailed out they are telling consumers to forget about getting loans unless you don’t need it and raising fees like airlines looking for any excuse to stick it to us.
Addressing the problems causing our current economic funk requires that our politicians take actions that are against their own political interests. So in Washington DC we mostly hear speeches but get little action as Congress scores points against the opposing party and the President tries to deny the problem hoping it will go away until after he is re-elected.
We see our glass as half empty and thus fear sipping the water lest it run out.
There were two glimpses of sunshine among the clouds this week. Tim Pawlenty, former Governor of Minnesota and now an announced GOP candidate for president went to Iowa to give a generally upbeat pro-growth stump speech with some specific ideas for getting our economy out of the ditch. Most of the other candidates are spending their time scoring points against President Obama rather than telling us how they would fix the mess.
Meanwhile, Fed Chairman Ben Bernanke got out of DC long enough to address the June 7th meeting of the International Monetary Conference in Atlanta. Speeches by the Fed Chairman are usually so vague as to be meaningless. Bernanke, however, had a few “sound bites” that summarized the current problem pretty well. He said:
“As is often the case, the ability and willingness of households to spend will be an important determinant of the pace at which the economy expands in coming quarters. Increases in household wealth–largely reflecting gains in equity values–and lower debt burdens have also increased consumers’ willingness to spend.
On the negative side, households are facing some significant headwinds, including increases in food and energy prices, declining home values, continued tightness in some credit markets, and still-high unemployment, all of which have taken a toll on consumer confidence.”
Getting the economy growing requires seeing our glass as half full again.
When we do—then business will start spending to create jobs, consumers will start spending to buy goods and services and a rising tide will lift all boats as economic activity ripples through the economy. Confidence is the missing ingredient in our strategy today.
What actions can be taken to restore confidence?
One good place to start would be an agreement between Democrats and Republicans on the debt ceiling. Both sides know that there is little alternative but to raise the debt ceiling and assure bond holders that we will not default as a nation on our obligations. The price President Obama is now paying for his hyper-partisan approach to virtually every issue is that Republicans are sweating him to extract the maximum price for doing what they know they must.
An ‘eye for an eye’ political price being demanded by Republicans has been translated into a dollar for dollar cut in spending to match the increase in the debt ceiling. That would not be a bad outcome giving both sides something to take credit for and signaling both a willingness to confront the monsters under the bed and doing so in ways that are enduring not smoke and mirrors.
The other issues affecting confidence have to do with the uncertainty of looming costs for ObamaCare, inflation, new regulations driven by the President’s political agenda, and a generally anti-business, pro-tax and spend philosophy of government that can only be solved with the cathartic 2012 election ahead. It is a long time to wait for an answer to the question, but whether we see our glass as half-empty or half-full makes all the difference in how fast our economy gets back on track.
Related articles
- Bernanke: Econ Below Potential;Accomdtve Mon Pol Still Needed (forexlive.com)
- Bernanke: Sharp Spending Cuts Could Hurt the Economy (swampland.time.com)
- Obama expresses concern about slowing economy (thegrio.com)
- Obama expresses concern about slowing economy (seattlepi.com)
- Federal Reserve chairman Bernanke says US growth slower than expected (telegraph.co.uk)
- Bernanke pushes back on oil prices (finance.fortune.cnn.com)
- Bernanke Says ‘Uneven’ Recovery Needs Fed Stimulus (businessweek.com)
Consultants
Image via Wikipedia
A shepherd was herding his flock in a remote pasture when suddenly a brand-new BMW advanced out of the dust cloud towards him. The driver, a young man in a Broni suit, Gucci shoes, Ray Ban sunglasses and YSL tie, leaned out the window and asked the shepherd, “If I tell you exactly how many sheep you have in your flock, will you give me one?”
The shepherd looked at the man, obviously a yuppie, then looked at his peacefully grazing flock and calmly answered, “Sure.”
The yuppie parked his car, whipped out his notebook and connected it to a cell phone, then he surfed to a NASA page on the Internet where he called up a GPS satellite navigation system, scanned the area, and then opened up a database and an Excel spreadsheet with complex formulas. He sent an email on his Blackberry and, after a few minutes, received a response.
Finally, he prints out a 150 page report on his hi-tech, miniaturized printer then turns to the shepherd and says, “You have exactly 1586 sheep.”
“That is correct; take one of the sheep,” said the shepherd.
He watches the young man select one of the animals and bundle it into his car.
Then the shepherd says: ” If I can tell you exactly what your business is, will you give me back my sheep?”
“OK, why not,” answered the young man.
“Clearly, you are a consultant,” said the shepherd.
“That’s correct,” says the yuppie, “but how did you guess that?”
“No guessing required,” answers the shepherd. “You turned up here although nobody called you. You want to get paid for an answer I already knew, to a question I never asked, and you don’t know crap about my business.
Now give me back my dog.”
John Edwards is a Jerk but is that Criminal?
The Inquisition via Wikipedia
The rumors have circulated for some time now that John Edward, the former presidential candidate caught with a mistress and love child while his wife was ill and then dying with cancer, would be indicted by federal prosecutors. That shoe finally dropped this week, but the case seems much weaker than expected and the prosecutors are looking a little like jerks for bringing it.
The prosecutors are charging that Edwards used two supporters to funnel $925,000 to his mistress. Former Edward’s campaign finance chairman Fred Baron and Rachel “Bunny” Mellon, of the Mellon Bank family, paid Ms Hunter $925,000 according to the indictment. The prosecutors allege the money was in essence a diverted campaign contribution used to prevent public disclosure of the affair thus cratering his candidacy. One big problem for prosecutors is Fred Baron died in 2008 and Bunny Mellon is 100 years old.
But wait a minute—-this legal theory has NEVER been used before in a campaign finance case. If successful, it would subject virtually every transaction involving virtually every person who knows a candidate for office to an endless risk of prosecutorial witch-hunting. It is the proverbial ‘when did you quit beating your wife’ allegation.
Now maybe the prosecutors have some chain of evidence to support their claims they are not revealing and if so that might make a difference. But if they do not, then this is one more reason to repeal the special prosecutor law which has been the American version of the Inquisition far too long.
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