Home Prices Decline For 8th Month Straight; Close to Testing 2009 Lows

April 26, 2011 · Posted in General Economics · Comment

S&P’s new home price report confirms that home prices continue to decline, now that the effects of tax credits and failed mortgage assistance programs have faded:

Data through February 2011, released today by S&P Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show prices for the 10-and 20-city composites are lower than a year ago but still slightly above their April 2009 bottom. The 10-City Composite fell 2.6% and the 20-City Composite was down 3.3% from February 2010 levels.

Tags: february 2011, home prices, s&p case shiller

Public Credit Expansion Fuels Inflation

April 23, 2011 · Posted in General Economics · Comment

Are the current price increases we see across the board inflation? Well, price increases are never in themselves inflation, but they can be signs of inflation.

Inflation, as I have explained before, is an increase in the supply of money and credit.

Let’s see what’s been happening in the US over the past year.

Total Loans and Leases:

Total Loans and Leases still had their peak in 2008. In early 2010 there was a big spike and they have been declining since then.

Total Bank Credit at Commercial Banks:

A similar pattern can be observed with Total Bank Credit ad Commercial banks as you can see above.

Together those two numbers give you a pretty good and complete indication as to how private credit has contracted in the in US and still continues to contract from peak credit.

However, the most complete picture of credit in the US is, as always, a number in the Fed’s Flow of Funds Report “Total Credit Market Debt Owed”:

Here we can see that indeed through 2010 there has been a resurgence in credit, in spite of a contraction in private credit. The reason is that public credit, that is money owed by governments, has soared:

Yes, we have been back in inflation mode indeed, but without the private sector playing along on a long term basis, I don’t think that this one can last very long. All that this has done is fuel speculation and bubbles again in commodities, junk bonds, and stocks. A few jobs may have been created as a result of that, a few more may get created. However, these developments are completely unsustainable. Government intervention in the past crisis has ensured that this will be a long, ongoing, and painful period, and we are witnessing it right now.

We are now in a desperate repetition of what I already warned about in 2007 when I wrote “Credit Expansion Policy“:

The policy of credit expansion has been pursued by governments time and time again. It has become prevalent in the United States under President Woodrow Wilson after the establishment of the Federal Reserve Bank under the Federal Reserve Act during the Christmas Holiday of December 1913. Since then, it has caused major credit booms and crunches in the form of asset booms and subsequent crashes and economic booms and subsequent recessions. In particular this has been the case in the years of 1929, 1987, and 2001, and will be visible in 2008 and the following years. It has always precipitated precisely the effects outlined above. Its workings and effects have been fully explained by this theory of the business cycles. No one has ever refuted the correctness of this theory.

Yet, to date economists and politicians appear completely riddled as to what causes booms and crashes. It is claimed to still be a matter of discussion amongst experts. It has been attempted to impute it upon humans’ greedy nature and natural exuberance. Whenever a crisis emerges the pundits, experts, central banks and politicians will try and regulate the market to stave off the impending crunch. They forget or don’t have the intellectual capacity to understand that it has been their own policy that has caused the crisis in the first place.

As long as the central banks keep pursuing this policy, there is no need to be surprised when the next credit crunch occurs. Neither is there any need to be surprised about the fact that all countermeasures taken by the government will turn out to be utter failures that will accomplish nothing but aggravate the crisis. For if the cause of the problem has been too much government intervention, then more government intervention will only add to it.

The only difference now is that private sector credit is not playing along anymore. In fact, private sector credit is doing precisely what it should be doing: contract.

When the next crash comes, I expect that we’ll be back in deflation mode again in no time at all, snapping back into the long term pattern of this contraction. Like I said before:

Thus the long term outlook for the US economy is the fate Japan took: A long lasting correction supercycle with one failing “stimulus” program after another, and with on and off periods where the economy slips out of and back into recessions from time to time.

And most importantly … when the next crash comes, I sure hope people will point their finger at the root causes, and not at whatever lying politicians and media minions will tell them to.

Tags: credit, deflation, inflation, public credit

Atlas Shrugged Movie Box Office Results – 3rd Place on a Per Screen Basis

April 21, 2011 · Posted in General Economics · Comment

I’m not an expert in the movie business, but I think it’s a good sign to see this movie anywhere at all in the box office results for its opening weekend:

Note the low number of theaters, only 299.

Wikipedia writes:

The film opened on 300 screens on April 15, 2011, and made $1,676,917 in its opening weekend, finishing in 14th place overall, but when compared on a per-screen basis, it finished 3rd (among films in wide release), with $5590 per screen.

Personally I can say that I really enjoyed watching the movie. No doubt, the acting could have been a lot better, meaning more credible, emotional, and gripping. The cinematography seemed a bit too clean and stylized for my taste.

However, the philosophy comes across well and that’s what matters most to me. These ideas have been dead and gone for so long, at least in the mainstream, and it’s exciting to me to see them take a peek into the public sphere again. I see this as an indicator that philosophical change is on its way slowly but surely, but of course I may be utterly biased. :)

In any case, I’m sure looking forward to the next parts!

Tags: atlas shrugged, atlas shrugged movie, ayn rand

US Debt Outlook Lowered – The Bills Are Coming Due

April 19, 2011 · Posted in General Economics · 1 Comment

Bloomberg writes U.S. Credit Rating May Be Cut by S&P Unless Lawmakers Agree to Reduce Debt:

Standard & Poor’s put the U.S. government on notice that it risks losing its AAA credit rating unless policy makers agree on a plan by 2013 to reduce budget deficits and the national debt.

“If an agreement is not reached and meaningful implementation does not begin by then, this would in our view render the U.S. fiscal profile meaningfully weaker than that of peer ‘AAA’ sovereigns,” New York-based S&P said today in a report that maintained its top rating on U.S. long-term debt while lowering the outlook to “negative” for the first time.

S&P said there’s a one-in-three chance that the rating might be cut within two years and that its “baseline assumption” is that Congress and the Obama administration will come to terms on a plan to reduce record deficits. Treasuries and the dollar rebounded from early losses following the statement, while stocks declined. Moody’s Investor Service, which has a stable outlook on U.S. debt, today said the U.S. budget debate is “positive” for the country’s credit.

Such a vague rating revision by a monopoly institution in an industry that has been monopolized through government intervention (as explained before here) has no direct, tangible effects to any real person who works in a real job in the real world.

Its effect is largely of opinion making nature. It would seem to me that it surely provides federal government bureaucrats with a welcome justification to default on less binding obligations for the sake of protecting their higher priority items, now that there is no more ability to inflate their way out of this mess, as I outlined in The Government’s Insolvency.

In addition, and to what degree remains to be seen, it paves the road for the inevitable tax increases that taxpayers will be subjected to in order to fund excesses, wars, bailouts, and special interest favors from the past. The final brick in the exploitation of younger generations by older and politically connected ones through debt slavery is an ongoing increase in the public’s tax burden, as I explained in What’s the Problem With Government Budget Deficits?:

As I explained, the ultimate damage caused by public budget deficits occurs at that point in time when taxpayers are forced to restrict their consumption and unjustly bear the cost of malinvestments from the past.

Ironically, when you look at the political stage, all you will hear in regards to “solutions” to deficits in the end, will for the most part be tax hikes. These are not solutions. They are the ultimate manifestation of the very problem at hand. They are, in fact, the precise opposite of a solution. Keep this in mind whenever you hear politicians talk about deficit solutions. Raising taxes to reduce deficits is absolutely and 100% an admission that one has completely failed to solve this deficit problem, and in fact laid the final brick that was missing in the very process of the public’s depredation via deficit spending.

This may explain why in response to today’s statement Treasury yields actually declined, although it remains to be seen if this trend will continue over the next months.

In order to get a feel for the level of budget cutting that the political class is willing to settle for, watch this clip:

Long story short: The willingness to truly attack the budget deficit in any substantial manner is of course nil, as you would expect. (I’m not saying that that means that budget cuts won’t happen at some point out of plain necessity, only that an increase in taxation will most certainly be explored as a buffer and to the extent the sheeple buy its necessity and play along.)

Over 2 years ago I already predicted:

If President Obama keeps spending like this, and really wants to cut the deficit in half by 2013, he will at one point be faced with no other choice but to raise taxes on all Americans, rich, middle class, and poor. This is of course nothing new.

The administration and Congress will probably try to postpone higher taxes until after the election and try more covert means of stepping up their extortion racket, such as smuggling tax increases into other bills, or cracking down through more audits and stricter enforcement.

As the public debt interest begins eating away more and more of the public purse, the regime of debt and tax slavery will be coming to full fruition.

(We may even see the US lapse back in to the Great Depression 2.0’s general downward move via another recession before the end of the year. That would indeed be a deplorable spectacle to watch to see Democrats be the ones trying to deny that we’re in a recession this time while Republicans will be very keen on pointing out all that’s wrong with America these days, all in all, basically a complete reversal of the last election. As a curious and intelligent individual watching such a spectacle you would really need to try hard to deny the futility, nay destructiveness, of political action.)

One way or another, the ride is over. That abstract “future” that people have always been talking about when complaining about government budget deficits, that future is no longer future, it is here and now. And it’s happening on a global scale.

How far the ruling classes will be able to take it and how much longer this can go on is basically up to this generation’s willingness to bring about true change and its intellectual curiosity to understand what this actually means. True change would be peace and freedom for all, on other words voluntaryism. We do now have the means of communication and the unique opportunity to make that change happen.

It’s either that or more of the same. Don’t settle for the latter.

Tags: debt outlook, s&p

Adam vs The Man – 1st Show!

April 14, 2011 · Posted in General Economics · Comment

Congrats to freedom fighter Adam Kokesh … may many shows follow!! :)

In spite of all potential imperfections that some people may complain about in this (first!!!) show of his, I am absolutely and totally thrilled by the fact that the ideas of voluntaryism are slowly but surely making their way into the mainstream media!!

Tags: adam kokesh, adam vs the man

Obama vs Obama on Raising the Debt Ceiling

April 12, 2011 · Posted in Government, Politics · Comment

Senator Obama in 2006 when the debt ceiling was at $8,965 billion or 64.2% of GDP:

The fact that we are here today to debate raising America’s debt limit is a sign of leadership failure. It is a sign that the U.S. Government can’t pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. … Increasing America’s debt weakens us domestically and internationally. Leadership means that ‘the buck stops here. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and grandchildren. America has a debt problem and a failure of leadership. Americans deserve better.

And of course as a standup and incorruptible agent of change, President Obama in 2011 (via spokesperson), with a debt ceiling at $14,294 billion or 92.1% of GDP:

Obama “thinks it was a mistake,” presidential spokesman Jay Carney told reporters. “He realizes now that raising the debt ceiling is so important to the health of this economy and the global economy that it is not a vote that, even when you are protesting an administration’s policies, you can play around with.”

Ah, the idiocy of politics in all its beauty …

I wonder if this is the kind of “CHANGE” he was talking about all along. ;)

Tags: debt ceiling, obama, Politics

The Government’s Insolvency

April 9, 2011 · Posted in Government · Comment

Insolvency in the voluntary market occurs when, due to a lack of long term profitability, an individual or a business are no longer able to meet monetary obligations to vendors, employees, creditors, etc. The outcome of insolvency is bankruptcy, a process in which the remaining factors of production are sold to people who mostly intend to use them in more profitable lines of production and in which remaining obligations are settled to the extent possible, based on the contractual and legal seniority of the debt obligations incurred.

Government bureaucrats, meanwhile, do not raise money by purchasing factors of production and selling the goods produced with them in voluntary transactions with voluntary buyers and sellers, respectively. Bureaucrats raise money via theft, that is by threatening and using aggression against those who do not pay the money they demand. This money is then distributed to those who invested in or voted for getting those bureaucrats in power.

To make a long story short: The government is now defaulting on its blood money commitments. But it’s not going not be a government default of the kind that people tend to think of. It’s not going to be a big announcement and proclamation of public debt insolvency.

It’s going to be a silent and creeping default. One that in fact has already been silently happening for years. When you get your SS statement once a year, does it nor plainly and obviously tell you that you will be getting less than what you paid in?

In any case, this is how I see the seniority in the realm of government expenses:

1. Public Debt Interest Payments
2. Military Spending
3. Domestic Law Enforcement (FBI, DEA, etc.)
4. Medicare/Medicaid
6. Social Security
7. Unemployment & Welfare
8. Minor budget items such as education, roads, environment, etc.

So as the bankruptcy of the US and other governments progresses and as higher items start eating up more and more of the budget, I believe that they will begin to axe the lower seniority items and work their way up bit by bit when they have to. To be sure, this doesn’t mean that there will be no cuts at all in higher priority items, but I suspect them to remain rather low and unsubstantial in the bigger picture of things so long as other programs leave room to cut big time.

Naturally, they will likely discard those programs that actually provide some kinds of tangible benefits to voters and taxpayers before cutting spending on any of the higher level expenses to bureaucrats or to corporations who have bribed politicians into power via campaign donations. This is always the best way to try and keep people in the mindset that the government is actually needed for something.

It’ll be an interesting and spectacular mess to watch …

Tags: government bankruptcy, seniority