Misery Index: The Obama Depression - "Private sector doing just Fine"

[Soul Crusher]

Related News:Canada  · Currencies .Canadian Dollar Heads for a Third Monthly Advance on Interest-Rate Outlook
By John Detrixhe and Catarina Saraiva - Apr 29, 2011 5:16 PM ET

Canada’s dollar gained for a third straight month on speculation the Bank of Canada will raise interest rates to contain inflation before the Federal Reserve.

The loonie, as the currency is nicknamed, reached the strongest level in more than three years against its U.S. counterpart, which fell this week after Fed Chairman Ben S. Bernanke said he was unsure when stimulus would unwind. The Canadian currency weakened earlier against most of its major counterparts as the nation’s economy unexpectedly shrank in February after four months of expansion.

“The Canadian dollar, while lagging certainly commodity peers and lagging Europe, is still outperforming the U.S dollar,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “The dollar continues to be a sell into the Fed, past the Fed, and much of that is driven by Bernanke’s dovish comments.”

The loonie appreciated 0.6 percent to 94.51 cents versus the greenback at 5:11 p.m. in Toronto, from 95.06 cents yesterday. It touched 94.46 cents, the strongest since Nov. 12, 2007. One Canadian dollar buys $1.0581.

The yield on June 2011 bankers’ acceptances, a barometer of short-term rate expectations, fell to 1.35 percent, from 1.36 percent yesterday, indicating investors may have tempered their anticipation for higher Canadian policy rates.

Bond Yields
Canadian government bonds advanced, with the yield on the benchmark 10-year security down two basis points, or 0.02 percentage point, to 3.2 percent. The price of the 3.5 percent security maturing in June 2020 increased 19 cents to C$102.33.

The BOC has held its target rate for overnight loans between commercial banks at 1 percent since September, when the rate increased for a third time last year. The central bank will keep its benchmark at that level during the second quarter and boost it to 1.50 percent during the third quarter, according to the median forecast in a Bloomberg News survey.

The Fed left its benchmark interest rate in a range of zero to 0.25 percent on April 27, where it’s been since December 2008, and said it will likely continue reinvesting maturing debt after its $600 billion program of bond buying expires in June.

Output in Canada’s economy fell 0.2 percent to a seasonally adjusted annual rate of C$1.26 trillion ($1.32 trillion) in February, Statistics Canada said. The result was weaker than estimates of all 22 economists in a Bloomberg News survey, which had a median forecast of no change.

Annual Growth Rate
The economy grew 2.9 percent in February from the same month a year earlier, the slowest annual pace of expansion in a year, according to Statistics Canada.

“GDP was a little weaker than expected,” said Blake Jespersen, director of foreign exchange at Bank of Montreal in Toronto. “It’s looking more like September if not later for a rate hike by the Bank of Canada.”

The loonie has fallen 1.5 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes, a measure of the 10 developed-nation currencies. The U.S. currency has lost 7.3 percent.

To contact the reporters for this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

[garebear]

Related News:Canada  · Currencies .Canadian Dollar Heads for a Third Monthly Advance on Interest-Rate Outlook
By John Detrixhe and Catarina Saraiva - Apr 29, 2011 5:16 PM ET

Canada’s dollar gained for a third straight month on speculation the Bank of Canada will raise interest rates to contain inflation before the Federal Reserve.

The loonie, as the currency is nicknamed, reached the strongest level in more than three years against its U.S. counterpart, which fell this week after Fed Chairman Ben S. Bernanke said he was unsure when stimulus would unwind. The Canadian currency weakened earlier against most of its major counterparts as the nation’s economy unexpectedly shrank in February after four months of expansion.

“The Canadian dollar, while lagging certainly commodity peers and lagging Europe, is still outperforming the U.S dollar,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “The dollar continues to be a sell into the Fed, past the Fed, and much of that is driven by Bernanke’s dovish comments.”

The loonie appreciated 0.6 percent to 94.51 cents versus the greenback at 5:11 p.m. in Toronto, from 95.06 cents yesterday. It touched 94.46 cents, the strongest since Nov. 12, 2007. One Canadian dollar buys $1.0581.

The yield on June 2011 bankers’ acceptances, a barometer of short-term rate expectations, fell to 1.35 percent, from 1.36 percent yesterday, indicating investors may have tempered their anticipation for higher Canadian policy rates.

Bond Yields
Canadian government bonds advanced, with the yield on the benchmark 10-year security down two basis points, or 0.02 percentage point, to 3.2 percent. The price of the 3.5 percent security maturing in June 2020 increased 19 cents to C$102.33.

The BOC has held its target rate for overnight loans between commercial banks at 1 percent since September, when the rate increased for a third time last year. The central bank will keep its benchmark at that level during the second quarter and boost it to 1.50 percent during the third quarter, according to the median forecast in a Bloomberg News survey.

The Fed left its benchmark interest rate in a range of zero to 0.25 percent on April 27, where it’s been since December 2008, and said it will likely continue reinvesting maturing debt after its $600 billion program of bond buying expires in June.

Output in Canada’s economy fell 0.2 percent to a seasonally adjusted annual rate of C$1.26 trillion ($1.32 trillion) in February, Statistics Canada said. The result was weaker than estimates of all 22 economists in a Bloomberg News survey, which had a median forecast of no change.

Annual Growth Rate
The economy grew 2.9 percent in February from the same month a year earlier, the slowest annual pace of expansion in a year, according to Statistics Canada.

“GDP was a little weaker than expected,” said Blake Jespersen, director of foreign exchange at Bank of Montreal in Toronto. “It’s looking more like September if not later for a rate hike by the Bank of Canada.”

The loonie has fallen 1.5 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes, a measure of the 10 developed-nation currencies. The U.S. currency has lost 7.3 percent.

To contact the reporters for this story: John Detrixhe in New York at jdetrixhe1@bloomberg.net; Catarina Saraiva in New York at asaraiva5@bloomberg.net

To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

What are you wearing?

[Bindare_Dundat]

I would be very surprised if they raised interest rates any time soon. If they did it would something very insignificant.

[GigantorX]

I would be very surprised if they raised interest rates any time soon. If they did it would something very insignificant.

Raising interest rates would cause the cost of borrowing money to skyrocket. Mortgage rates are based off of Treasury rates so those would skyrocket. Banks would probably go bankrupt....the U.S. then couldn't afford to borrow and the cost of existing debt would....well you get the point.

The Fed and the Govt. have completely boxed themselves into a corner with no way out now. They had a chance to do the right thing at the beginning but took the easy and wrong way out. Now they/we are fucked.

[Soul Crusher]

Raising interest rates would cause the cost of borrowing money to skyrocket. Mortgage rates are based off of Treasury rates so those would skyrocket. Banks would probably go bankrupt....the U.S. then couldn't afford to borrow and the cost of existing debt would....well you get the point.

The Fed and the Govt. have completely boxed themselves into a corner with no way out now. They had a chance to do the right thing at the beginning but took the easy and wrong way out. Now they/we are fucked.

BINGO.    This is exactly what Schiff was talking about in that debate with that Columbia Econ professor debate and it went right over his head.   

[Soul Crusher]

St. Louis Fed Stunner: Admits QE May Lead To Rise Rather Than Drop In Unemployment
Zero Hedge ^ | 04/30/2011 | Tyler Durden
Posted on May 1, 2011 9:49:23 PM EDT by Qbert

It's one thing for bloggers and even various non-mainstream economists to charge the Fed with pandering exclusively to Wall Street's interests, and accuse Ben Bernanke of hypocrisy when he says that the Fed's ultimate goal is the strengthening of the economy through a decrease in unemployment (recall that one of the original two mandates of the Fed is "maximum employment"... that is until it was supplanted by the third and only one: "Russell 2000 to 2000") and caring for "lower-income households." It is something far more serious when the one doing the accusing is... the Federal Reserve. In a seminal paper which we are convinced will make the rounds the next time the puppetmaster is undergoing his periodic grilling by Congressional and Senate critters, Yi Wen of the St. Louis Fed indicates that the entire experiment in increasing the adjusted monetary base by $2 trillion in 2 years is not only not benefiting the economy, but is in fact having an adverse impact on such key economic drivers as unemployment. To wit: "permanent increases in the monetary base foreshadow eventual increases in inflation that can increase, rather than reduce, unemployment over the long term." We wonder if Bernanke knew in advance that LSAP (aka QE2) had a statistically greater chance of resulting in greater unemployment, and thus more pain for the working class, and if the only offset, a doubling in the stock market when ever more capital is diverted from organic economic growth to pursuing speculative risk, was important enough for the Fed to effective replace its employment mandate with one of stock market manipulation?

Here is how the St. Louis Fed confirms that the Chairman is nothing but a puppet in the hands of Wall Street:

The impact of LSAP programs on economic activity depends on the programs’ effects on longer-term interest rates and the responsiveness of aggregate demand to such changes. The St. Louis-based consulting and forecasting firm Macroeconomic Advisers recently estimated that the Federal Open Market Committee’s current $600 billion LSAP program likely will reduce the 10-year Treasury yield by 20 basis points, increase the eight-quarter-ahead level of real gross domestic product by 0.4 percentage points, reduce the unemployment rate by 0.2 percentage points, and increase employment by 350,000 jobs. Although analyses conducted by other institutions (such as the Boston and San Francisco Feds) have suggested slightly higher figures, the overall effect of the LSAP programs on unemployment is modest.

A less-recognized risk in LSAP programs is that permanent increases in the monetary base foreshadow eventual increases in inflation that can increase, rather than reduce, unemployment over the long term. David Ranson of Wainwright Economics has analyzed the U.S. data over the period of 1950 through 2007. Ranson divided the 57-year period into two categories: years when the monetary base grew at an above-average rate (8.1 percent) and years when it grew at a below-average rate (3.5 percent).

And the stunners:

Ironically, economic growth was higher in the years of slow money growth (3.7 percent) than it was in the years of rapid growth (3.2 percent). The same was true for industrial production. Meanwhile, the consumer price index rose 5.1 percent in years of above-average monetary growth and just 2.6 per- cent in below-average years. It is, in fact, as we have always expected: QE not only does not result in relative economic outperformence (the opposite), it simply leads to higher inflation, and subdued economic growth. And the Chairman of the Federal Reserve was not aware of this data?

And while this too is more than obvious, anyone could have foreseen the impact QE/LSAP would have on precious metals:

The gold price showed an even bigger differential, rising 12.5 percent in above-average years and just 0.6 percent in below-average years.

Perhaps the above explains why we have been bullish on the precious metals complex since March 18, 2009 (official start of QE1). Alternatively it may just be our long-running bet that Bernanke will fail in his attempt at instituting central planning effectively, and the outcome will be the end of the monetary system in its current iteration.

And before skeptics accuse the St Louis Fed, which has sometimes been defined as hawkish (although we have yet to see James Bullard vote in the "against" column during an FOMC decision), this is a finding that has been replicated elsewhere on not just one occasion.

Other recent analyses, using different tools, have reached similar conclusions. In my current research, I have esti- mated models for the period 1948:Q1 to 2008:Q2 that sug- gest that a sustained increase of 1 percentage point in the growth rate of the monetary base has almost no impact on unemployment during the initial 20 quarters but can significantly increase the unemployment rate in the longer run (say, during the subsequent 20 quarters). Extrapolated to the very long run, my analysis suggests that a sustained 1-percent-per-year faster growth of the monetary base might increase the unemployment rate by between 1.0 and 2.2 percentage points. The reason is that expected long-term inflation is bad for growth and employment.

A recent article in the American Economic Review docu- mented a similar positive relationship between longer-term inflation and the unemployment rate (Berentsen, Menzio, and Wright, 2011). These authors use a search-and-matching model to explain why longer-term inflation can increase, rather than decrease, the unemployment rate. That is, inflation reduces the demand for money and, hence, hinders trade and the probability of matches in both the goods and labor markets.

The conclusion is obvious:

In summary, the near-term effects of LSAP programs on unemployment remain uncertain. Further, caution must be exercised such that long-term inflation does not increase. More and more economic research suggests that the long- run costs of inflation, measured in welfare terms, are likely higher than previously estimated (see Wen, 2010). Fortunately, at least one recent cross-country study (Anderson, Gascon, and Liu, 2010) suggests that this long-run lesson is well understood by policymakers.

Alas, unfortunately, the author is wrong. Policymakers, neither of the fiscal nor monetary variety have any care for what the long-term costs of inflation are for the general population. The only determinant is how far is the S&P has risen in any given electoral cycle. After all it is so much easier to manipulate the stock market than the economy. Which is why Bernanke is nothing more than an enabler of market manipulative political posturing... and Wall Street greed naturally: the one certain side effect of the R2K@2K is another year of record bonuses on Wall Street.

[Soul Crusher]

TREASURY TO IMPLEMENT EMERGENCY DEBT MEASURES THIS WEEK, CEILING TO BE HIT MAY 16
TBI ^ | 5-2-2011 | Joe Weisenthal


What Me Worry

Just out from the Treasury, in letter sent to Harry Reid...

The emergency measures to avoid a debt ceiling crisis begin this week.

We will hit the debt ceiling May 16.

Then, following that, emergency moves will get the country to be able to borrow until August 2.

The good news: Projected net borrowing needs for the April-June period has been reduced somewhat to $142 billion.

In the letters, says Bloomberg, Geithner writes: "Protecting America's creditwiorthiness and our economic leadership position in the world is a duty to our country that is shared by policy makers in both parties, in the legislative Branch as well as the Executive Brench... Therefore any attempt by either party to use the full faith and credit of the United States as a baraining chip to advance partisan policy agendas would be irresponsible."


(Excerpt) Read more at businessinsider.com ...

[garebear]

TREASURY TO IMPLEMENT EMERGENCY DEBT MEASURES THIS WEEK, CEILING TO BE HIT MAY 16
TBI ^ | 5-2-2011 | Joe Weisenthal


What Me Worry

Just out from the Treasury, in letter sent to Harry Reid...

The emergency measures to avoid a debt ceiling crisis begin this week.

We will hit the debt ceiling May 16.

Then, following that, emergency moves will get the country to be able to borrow until August 2.

The good news: Projected net borrowing needs for the April-June period has been reduced somewhat to $142 billion.

In the letters, says Bloomberg, Geithner writes: "Protecting America's creditwiorthiness and our economic leadership position in the world is a duty to our country that is shared by policy makers in both parties, in the legislative Branch as well as the Executive Brench... Therefore any attempt by either party to use the full faith and credit of the United States as a baraining chip to advance partisan policy agendas would be irresponsible."


(Excerpt) Read more at businessinsider.com ...

I can't believe you're posting while the Obamas are on Oprah.

I guess you're just DVRing it.

[Soul Crusher]

US Debt Rating Should Be 'C': Independent Agency
Published: Tuesday, 3 May 2011 | 3:09 AM ET Text Size By: CNBC.com

http://www.cnbc.com/id/42871647



There have been increasing concerns about the fate of United States' prized triple-A sovereign debt rating. While Standard and Poor's recently downgraded its U.S. debt outlook to negative from stable, implying that a ratings cut could happen in two years, one independent ratings agency has given the U.S. sovereign rating a "C".



"A 'C' is equivalent to approximately a triple-B on the S&P, Moody's and Fitch scales. It's two notches above junk and one notch above the equivalent of a single A," Martin Weiss, President of Weiss Ratings, told CNBC Tuesday.

Weiss was quick to add that while the rating seems weak, the debt situation is not in a danger zone that would trigger panic, noting that there was still broad market acceptance for Treasurys.

The grade reflects the U.S. massive debt burden, low international reserves and the volatility in the American economy, he said.

The U.S. government debt is fast approaching the $14.3 trillion ceiling, with the debt-to-GDP ratio close to 100 percent. And a downgrade of U.S. Treasurys - one of the most widely held assets - could theoretically raise borrowing costs and in a worst case scenario, trigger a default on the government's debt obligations.

America's rating was ranked 33rd out of 47 nations, according to Weiss, which began tracking sovereign debt last year. France and Japan also got a "C" rating, while Only China and Thailand received an "A" rating.

Weiss Ratings based its score purely on statistics, and does not take into account qualitative factors such as political stability.

[Deicide]

US Debt Rating Should Be 'C': Independent Agency
Published: Tuesday, 3 May 2011 | 3:09 AM ET Text Size By: CNBC.com

http://www.cnbc.com/id/42871647



There have been increasing concerns about the fate of United States' prized triple-A sovereign debt rating. While Standard and Poor's recently downgraded its U.S. debt outlook to negative from stable, implying that a ratings cut could happen in two years, one independent ratings agency has given the U.S. sovereign rating a "C".



"A 'C' is equivalent to approximately a triple-B on the S&P, Moody's and Fitch scales. It's two notches above junk and one notch above the equivalent of a single A," Martin Weiss, President of Weiss Ratings, told CNBC Tuesday.

Weiss was quick to add that while the rating seems weak, the debt situation is not in a danger zone that would trigger panic, noting that there was still broad market acceptance for Treasurys.

The grade reflects the U.S. massive debt burden, low international reserves and the volatility in the American economy, he said.

The U.S. government debt is fast approaching the $14.3 trillion ceiling, with the debt-to-GDP ratio close to 100 percent. And a downgrade of U.S. Treasurys - one of the most widely held assets - could theoretically raise borrowing costs and in a worst case scenario, trigger a default on the government's debt obligations.

America's rating was ranked 33rd out of 47 nations, according to Weiss, which began tracking sovereign debt last year. France and Japan also got a "C" rating, while Only China and Thailand received an "A" rating.

Weiss Ratings based its score purely on statistics, and does not take into account qualitative factors such as political stability.

But we got Osama, all out problems have been solved.

[Soul Crusher]

..FOREX-U.S. economic data pushes dollar down vs euro, yen

By Steven C. Johnson | Reuters – 25 minutes ago



EmailPrint......* Weak U.S. jobs, services data adds to dollar's woes

* Euro hits 17-month high but fades ahead of ECB meeting

* Dollar at 6-week low vs yen; high-yield FX struggles

* ECB still seen outpacing Fed on rate hikes (Recasts, updates prices, adds U.S. data, comment)

NEW YORK, May 4 (Reuters) - The dollar fell to a fresh three-year low on Wednesday and the euro briefly rose above $1.49 as weaker-than-expected U.S. employment data convinced investors that U.S. interest rates would remain low this year.

The yen also hit a six-week high against the dollar after data showed the pace of growth in the dominant U.S. services sector also slowed unexpectedly in April, another sign the U.S. economy may be hitting a soft patch. See [ID:nN04186623]

With markets worried about a yawning U.S. budget deficit, traders said signs of slower growth will only add to trouble for the dollar, which fell to a three-year low against major currencies Wednesday. It has lost 7.7 percent in 2011. <.DXY>

"The dollar got beat up pretty badly against the euro," said Firas Askari, head of foreign exchange trading at BMO Capital Markets. "The U.S. fiscal situation is a concern. Now it seems the U.S. economy isn't just tepid but actually cooling off again. That's not encouraging."

But Askari and others said concerns about slower U.S. growth also dulled appetite for commodities and higher-yield assets for fear a U.S. slump would reverberate globally.

That sent the safe-haven Swiss franc to a record high against the greenback and drove the U.S. currency up against the Canadian dollar . Canada's economy is heavily depend on exports to its southern neighbor.

EURO SUPPORT

The euro remained fairly well supported in anticipation of higher euro zone interest rates and strong sovereign demand. Investors brushed off news that Portugal had become the third euro zone country in the last year to need a bailout and drove the euro to $1.4939, a 17-month high. It later eased to $1.4860 , up 0.3 percent and about a cent above the day's low.

Traders said a move above $1.50 was likely but would probably have to wait until after Thursday's European Central Bank meeting, which should offer clues on future rate hikes.

The ECB raised rates in April for the first time since 2008 and is expected to do so again this year to tame inflation, even as higher rates make it more difficult for countries such as Portugal to service their debts. [ID:nLDE7422CB]

"The currency market seems to have learnt to live with the struggles of the peripheral euro zone nations." said Audrey Childe-Freeman, currency strategist at JP Morgan Private Bank.

Markets do not expect the Fed to raise rates from near zero until the middle of 2012. <0#FF:>

YEN STRENGTHENS

The dollar fell 0.3 percent to 80.68 yen . If it falls further, analysts said it could put markets on alert for official intervention to slow the pace of yen gains.

Major central banks actively sold the yen earlier this year after it hit a record high against the dollar. A strong yen could hurt Japan's export-led economy as it struggles with slow growth and the aftermath of March's earthquake and tsunami.

"People are watching that 80 level, which isn't very far away," said BNY Mellon strategist Michael Woolfolk.

The Australian dollar fell 0.8 percent to $1.0754, retreating from a post-float high above $1.10 as a decline in silver weakened demand for commodity-sensitive currencies.

Some gauges of market positioning suggest speculators and hedge funds are heavily short the dollar, leaving open the possibility of more position unwinding.

But the U.S. dollar has been unable to build on short-covering support seen in past days, and investors are likely to look for fresh selling opportunities.

"There are still no big incentives to go short euros," said Roberto Mialich, strategist at Unicredit in Milan. "At the end of the day, the dollar will be sold again, and it's just a matter of time for a test of $1.50." (Additional reporting by Naomi Tajitsu in London; Editing by Andrea Ricci)
..

[Soul Crusher]

US Treasury Tells Lawmakers It Needs $2 Trillion In Debt Capacity (to fund the US to end of 2011)
Zero Hedge ^ | May 4, 2011 | Tyler Durden




Reuters reports that the US Treasury has informed lawmakers it needs a $2 trillion debt limit increase to operate... until the end of 2012. Better stated, this is 112% of US GDP (which will soon be declining). This is precisely as Zero Hedge speculated. We hope PIMCO will be swayed soon enough to buy all this extra debt about to start coming down Geithner's conveyor chute. But yes, the Fed will most certainly not be needed to monetize this extra debt: Japan, Europe and Libya have it covered. That said, we don't know if Libyan rebels will have the capacity to monetize the $3 trillion in debt in 2013, $4 trillion in 2014, and so forth. The pattern is clear.

[Soul Crusher]

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Smithfield CEO: Higher Food Prices Are Here To Stay
TWS ^ | Phoenix Capital Research
Posted on May 4, 2011 9:47:32 PM EDT by blam

Smithfield CEO: Higher Food Prices Are Here To Stay

Phoenix Capital Research
April 4, 2011

Here’s a zinger of a news story that most commentators haven’t bothered to take note of…

The CEO of Smithfield Farms, the largest pork producer in the US. Among other things he said:

“Maybe to someone in the upper incomes it doesn’t matter what the price of a pound of bacon is, or what the price of a ham, or the price of a pound of pork chops is,” he says. “But for many of the customers we sell to, it really does matter.” Workers can share cars when the price of oil rises, he quips, but “you can’t share your food.”

Mr. Pope also worries about the impact on farmers, who are leveraging up operations to afford the ever-rising price of land and fertilizer that has resulted from the increased corn demand. “There are record prices for livestock but farmers are exiting the business!” he exclaims. “Why? Farmers know they won’t make money.”

Weather is a factor, too. “We’ve had the luxury for the last three years of extremely good corn crops, with high yields and good growing conditions. We are just one bad weather event away from potentially $10 corn, which once again is another 50% increase in the input cost to our live production.”

…Not all companies will survive this economic whirlwind. Mr. Pope recalls what happened the last time there was a surge in corn prices, in 2008: “The largest chicken processor in the United States, Pilgrim’s Pride, filed for bankruptcy.” They “couldn’t raise prices, so their cost of production went up dramatically.” Could it happen again? “It darn well could!” Mr. Pope exclaims.

…Mr. Pope says the “losers” here “are the consumer, who’s going to have to pay more for the product, and the livestock farmer who’s going to have to buy high-priced grain that he can’t afford because he’s stretching his own lines of credit. The hog farmer . . . is in jeopardy of simply going out of business ’cause he doesn’t have the cash liquidity to even pay for the corn to pay for the input to raise the hog. It’s a dynamic that we can’t sustain.”

So here’s a CEO, someone with actual business experience (not some moron academic who’s never run a business a day in his life) telling us the following:

* Food prices are up a lot and going higher in the future.

* Despite high food prices, farmers are quitting farming (lower supplies are coming).

* Food companies will be going bankrupt (even lower supplies are coming).

In other words, we are rapidly heading into a food crisis. Food prices are NOT going to be coming down. And we’re going to be seeing food shortages in the US in the coming months.

Smart folks are already preparing their families and portfolios for what’s to come.

TOPICS: Business/Economy; Click to Add Topic
KEYWORDS: food; inflation; prices; shortages; Click to Add Keyword
 
Woo hoo!! We need your help to keep the lights on!!

[GigantorX]

http://www.marketwatch.com/story/us-stocks-stung-by-economic-reports-2011-05-04?dist=afterbell


Data disappoints

The Institute for Supply Management said its services index declined to 52.8 last month from 57.3 in March, missing analysts’ expectations. Read more about ISM data.

“Generally speaking, data such as this corroborate our more cautious stance entering the year and should further push to the sidelines those expecting 4% growth or more this year,” said Dan Greenhaus, chief economic strategist at Miller Tabak & Co.

The ISM report was the day’s second disappointment for economic data. The first was a 179,000 increase in private-sector payrolls estimated by Automated Data Processing Inc. ADP -0.04%  . Economists were expecting a gain closer to 200,000. Read about ADP report.

Decliners outpaced gainers more than 2 to 1 on the New York Stock Exchange, where 1.1 billion shares traded.

------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Ouch, not good.

[GigantorX]

http://www.zerohedge.com/article/initial-claims-474k-bring-out-qe3[/b]]http://www.zerohedge.com/article/initial-claims-474k-bring-out-qe3

Not good, not good at all.

-Previous revised upward to 431k
-Current report well above expectations at 471k


Not good.

[Soul Crusher]

Hyperinflation And Double-Dip Recession Ahead
TMO ^ | 4-3-2011 | TGR/John Williams

Posted on Thursday, May 05, 2011 9:25:25 AM by blam

Hyperinflation And Double-Dip Recession Ahead

Economics / HyperInflation
May 03, 2011 - 04:22 AM
By: The Gold Report


Economic recovery? What economic recovery? Contrary to popular media reports, government economic reporting specialist and ShadowStats Editor John Williams reads between the government-economic-data lines. "The U.S. is really in the worst condition of any major economy or country in the world," he says. In this exclusive interview with The Gold Report, John concludes the nation is in the midst of a multiple-dip recession and headed for hyperinflation.

The Gold Report: Standard & Poor's (S&P) has given a warning to the U.S. government that it may downgrade its rating by 2013 if nothing is done to address the debt and deficit. What's the real impact of this announcement?

John Williams: S&P is noting the U.S. government's long-range fiscal problems. Generally, you'll find that the accounting for unfunded liabilities for Social Security, Medicare and other programs on a net-present-value (NPV) basis indicates total federal debt and obligations of about $75 trillion. That's 15 times the gross domestic product (GDP). The debt and obligations are increasing at a pace of about $5 trillion a year, which is neither sustainable nor containable. If the U.S. was a corporation on a parallel basis, it would be headed into bankruptcy rather quickly.

There's good reason for fear about the debt, but it would be a tremendous shock if either S&P or Moody's Investor Service actually downgraded the U.S. sovereign-debt rating. The AAA rating on U.S. Treasuries is the benchmark for AAA, the highest rating, meaning the lowest risk of default. With U.S. Treasuries denominated in U.S. dollars and the benchmark AAA security, how can you downgrade your benchmark security? That's a very awkward situation for rating agencies. As long as the U.S. dollar retains its reserve currency status and is able to issue debt in U.S. dollars, you'll continue to see a triple-A rating for U.S. Treasuries. Having the U.S. Treasuries denominated in U.S. dollars means the government always can print the money it needs to pay off the securities, which means no default.

TGR: With the U.S. Treasury rated AAA, everything else is rated against that. But what if another AAA-rated entity is about to default?

JW: That's the problem that rating agencies will have if they start playing around with the U.S. rating. But there's virtually no risk of the U.S. defaulting on its debt as long as the debt's denominated in dollars. Let's say the U.S. wants to sell debt to Japan, but Japan doesn't like the way the U.S. is running fiscal operations. It can say, "We don't trust the U.S. dollar. We'll lend you money, but we'll lend it in yen." Then, the U.S. has a real problem because it no longer has the ability to print the currency needed to pay off the debt. And if you're looking at U.S. debt denominated in yen, most likely you would have a very different and much lower rating.

TGR: Is there a possibility that people would not buy U.S. debt unless it's in their currency?

JW: It is possible lenders would not buy the Treasuries unless denominated in a strong and stable currency. As the USD loses its value and becomes less attractive, people will increasingly dump dollar-denominated assets and move into currencies they consider safer. And you'll see other things; OPEC might decide it no longer wants to have oil denominated in U.S. dollars. There's been some talk about moving it to some kind of basket of currencies—something other than the U.S. dollar, possibly including gold. This would be devastating to the U.S. consumer. You'd get a double whammy from an inflation standpoint on oil prices in the U.S. because the dollar would be shrinking in value against that basket of currencies.

TGR: Different countries are starting to discuss the creation of an alternative to the USD as reserve currency. How rapidly could an alternative currency appear?

JW: That would involve a consensus of major global trading countries; but just how that would break remains to be seen. Let's say OPEC decides it no longer wants to accept dollars for oil. Instead, it wants to be paid in yen. It's done. It's not a matter of creating a new currency—it's a matter of how things get shifted around.

TGR: What other commodities or monetary issues would that create?

JW: Again, the dollar's weakness is doubly inflationary. It is the biggest factor behind the ongoing rise in oil prices. Let's say you're a Japanese oil purchaser. Oil, effectively, is purchased at a discount in a yen-based environment due to the dollar's weakness. Usually, the market doesn't let such advantages last very long. As the dollar weakens, you see upside pressure on oil prices. If, hypothetically, you're pricing oil in yen, there's no reason for anybody to hold the USD. The dollar would sell off more rapidly against the yen and oil inflation would be even higher in a dollar-denominated environment.

TGR: You've mentioned that hyperinflation will happen as soon as 2014. If that is true, wouldn't OPEC want to shift off dollar pricing as quickly as possible?

JW: From a purely financial standpoint, that would make sense. Other factors are at play, though, including political, military and unstable times in both North Africa and the Middle East. Those who are able to get out of dollars, I think, will do so rapidly and as smoothly as possible.

TGR: And how will they do that?

JW: They will sell their dollar-denominated assets. They will convert dollars to other currencies. They will buy gold. Generally, they will dump whatever they hold in dollars and sell the dollar-denominated assets they don't want. There's a market for them; it's just a matter of pricing. As the pressure mounts to get out of the USD, the pricing of dollar-denominated assets will fall, which in turn would intensify that selling. The dollar selling will intensify domestic U.S. inflation, which is one factor that picks up and feeds off itself and will help to trigger the hyperinflation.

TGR: The U.S., even in recession, is still the largest consuming economy. If the U.S. continues in, or goes into a deeper, recession, doesn't that impact the rest of the world?

JW: If the U.S. is in a severe recession, it will have a significant negative economic impact on the global economy. That doesn't necessarily affect the relative values of other currencies to the USD. If you look at the dollar against the stronger currencies, a wide variety of factors are in effect—including relative economic strength. The U.S. is probably going to have an economy as bad as any major country will have, with higher relative inflation. The weaker the relative economy and the stronger the relative inflation, the weaker will be the dollar. Relative to fiscal stability, the worse the fiscal circumstance in the U.S., the weaker is the dollar. Relative to trade balance, the bigger the trade deficit is, the weaker the currency. As to interest rates, the lower the relative interest rates in the U.S., the weaker will be the dollar.

Part of the weakness in the dollar now is due to the way the world views what's happening in Washington and the ability of the government to control itself. That's a factor that may have forced S&P to make a comment. So, even having a weaker economy in Europe would not necessarily lead to relative dollar strength.

TGR: If the U.S. experiences a continued, or even greater, recession, doesn't that impact spill over into Canada?

JW: The Canadian economy is closely tied to the U.S. economy, and bad times here will be reflected in bad times in Canada. However, I'm not looking for a hyperinflation in Canada. Its currency will tend to remain relatively stronger than the U.S. dollar. Canada is more fiscally sound; it generally has a better trade picture and has a lot of natural resources. Keep in mind that economic times tend to get addressed by private industry's creativity and, thus, new markets can be developed. For instance, you're already seeing significant shifts of lumber sales to China instead of to the U.S.

TGR: What about the effect on other countries?

JW: The world economy is going to have a difficult time. You do have ups and downs in the domestic, as well as the global, economy. People survive that. They find ways of getting around problems if a market is cut off or suffers. I view most of the factors in Canada, Australia and Switzerland as being much stronger than in the U.S. Even when you look at the euro and the pound, they're generally stronger than in the U.S. Japan is dealing with the financial impacts of the earthquake. There's going to be a lot of rebuilding there. But, generally, it's a more stable economy with better fiscal and trade pictures. I would look for the yen to continue to be stronger. Shy of any short-term gyrations, the U.S. is really in the worst condition of any major economy and any major country in the world and, therefore, in a weaker currency circumstance.

TGR: Then why are media analysts talking about the U.S. being in a recovery?

JW: You're not getting a fair analysis. There's nothing new about that. No one in the popular media predicted the recession that was clearly coming upon us, and the downturn wasn't even recognized until well after the average guy on Main Street knew things were getting bad. We have some particularly poor-quality economic reporting right now. The economy has not been as strong as it advertised. Yes, there has been some upside bouncing in certain areas, but it's largely tied to short-lived stimulus factors.

Let's look at payroll numbers and the way those are estimated. In normal economic times, seasonal factors and seasonal adjustments are stable and meaningful. What's happened is that the downturn has been so severe and protracted it has completely skewed the seasonal-adjustment process. It's no longer meaningful, nor are estimates of monthly changes in many series. The markets are flying blind—it's unprecedented, in terms of modern reporting.

Are we really seeing a surge in retail sales? If so, you should be seeing growth in consumer income or consumer borrowing—but we're not seeing that. The consumer is strapped. An average consumer's income cannot keep up with inflation. The recent credit crisis also constrained consumer credit. Without significant growth in credit or a big pick-up in consumer income, there's no way the consumer can sustain positive economic growth or personal consumption, which is more than 70% of the GDP. So, you haven't started to see a shift in the underlying fundamentals that would support stronger economic activity. That's why you're not going to have a recovery; in fact, it's beginning to turn down again as shown in the housing sales volume numbers, which are down 75% from where it was in normal times.

TGR: But we were in a housing boom. Doesn't that make those numbers reasonable?

JW: Housing starts have never been this low. Right now, they are running around 500,000 a year. We're at the lowest levels since World War II—down 75% from 2006—and it's getting worse. I mean the bottom bouncing has turned down again. We're already seeing a second dip in the housing industry. There's been no recovery there.

In March, all the gain in retail sales was in inflation. Retail sales are turning down. You're going to see a weaker GDP number for Q111. The GDP number is probably the most valueless of the major series put out; but, as the press will have to report, growth will drop from 3.1% in Q410 to something like 1.7% in Q111.

TGR: You've stated that the most significant factors driving the inflation rate are currency- and commodity-price distortions—not economic recovery. Why is that distinction important?

JW: The popular media have stated that the only time you have to worry about inflation is when you have a strong economy, and that a strong economy drives inflation. There's such a thing as healthy inflation when it comes from a strong economy. I would much rather be in an economy that's overheating with too much demand and prices that rise. That's a relatively healthy inflation. Today, the weak dollar has spiked oil prices. Higher oil prices are driving gasoline prices higher—the average person is paying a lot more per gallon of gas. For those who can't make ends meet, they cut back in other areas. The inflation of Q410, which is now running at an annualized pace of 6%, was mostly tied to the prices of gasoline and food.

You also have higher food prices. It's not due to stronger food or gasoline demand—it's due to monetary distortions. Unemployment is still high, even if you believe the numbers. I'll contend the economy really isn't recovering. At the same time, you're seeing a big increase in inflation that's killing the average guy.

TGR: Why isn't there more pressure on the U.S. government to reduce the debt deficit?

JW: When you get into areas like debt and deficit, it's a little difficult to understand. The average person, though, should be feeling enough financial pain that political pressure will tend to mount before the 2012 election; but whether or not the average person will take political action remains to be seen. I don't think you have until 2012 before this gets out of control and there's hyperinflation. It could go past that to 2014, but we're seeing all sorts of things happening now that are accelerating the inflation process.

TGR: Like the dollar at an all-time low.

JW: If you compare the U.S. dollar against the stronger currencies, such as the Australian dollar, Canadian dollar and Swiss franc, you're looking at historic lows. You're not far from historic lows in the broader dollar measure.

TGR: In your April 19 newsletter, you stated, "Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem. Until such time as financial market expectations catch up with the underlying reality, reporting generally will continue to show higher-than-expected inflation and weaker-than-expected economic results." What do you mean by "until such time as financial market expectations catch up with the underlying reality?"

JW: A lot of people look closely at and follow the consensus of economists, which is looking at (or at least still touting) an economic recovery with contained inflation. I'm contending that the underlying reality is a weaker economy and rising inflation. I think the expectation of rising inflation is beginning to sink in. Given another month or two, I think you'll find all of a sudden the economists making projections will start lowering their economic forecasts. Instead of looking at half-percent growth in industrial production, they'll be expecting it to be flat; if it comes in flat, it will be a consensus—and the markets will be pleased it wasn't worse in consensus. But the consensus outlook will have shifted toward a more negative economic outlook.

TGR: Do you think economists will shift their outlooks before we get into hyperinflation or a depression?

JW: In terms of economists who have to answer to Wall Street, work for the government or hold an office like the Federal chairman, by and large, they'll err on the side of being overly optimistic. People prefer good news to bad news. If Fed Chairman Ben Bernanke said we were headed into a deeper recession, it would rattle the market. People on Wall Street want to have a happy sales pitch. What results may have little to do with underlying reality.

TGR: In your April 15 newsletter, you mentioned that a signal of an unfolding double-dip recession is based on the annual contraction of the M3, which was the Fed's broadest measure of money supply until it ceased publishing it in 2006. Recent estimates show that the annual contraction of M3 went down from 4.3 in February to 3.6 in March. Is this good news?

JW: No. It doesn't have any particular significance as a signal for the economy. You do have recessions that start without M3 going negative year over year. In the last several decades, every time the M3 went negative, there followed a recession—or an intensifying downturn—if a recession was already underway. If you tighten up liquidity, you tend to tighten up business conditions. Again, though, you've had recessions without those signals. When it goes positive, it does not signal an upturn in the economy. It doesn't make any difference if it continues negative for a year or two, or if it's negative for three months. The point is—when it turns negative, that's the signal for the recession.

We had a signal back in December 2009, which would have indicated a downturn sometime in roughly Q310. We already were in a recession at that point. According to the National Bureau of Economic Research, the defining authority in timing of the U.S. business cycle, the last recession ended in June 2009. So, this current recession will be recognized as a double-dip recession. The Bureau doesn't change its timing periods.

I'll contend that we're really seeing reintensification of the downturn that began in 2007. Although it's not obvious in the headline numbers of the popular media, you'll find that September/October 2010 is when the housing market started to turn down again. That is beginning to intensify. We'll see how the retail sales look when they're revised. When all the dust settles, I think you'll see that the economy did start to turn down again in latter 2010. Somewhere in that timeframe, they’ll start counting the second or next leg of a multiple-dip recession.

TGR: Does M3 have anything to do with calculating potential inflation or hyperinflation?

JW: It does; but when you start looking at the inflation picture, you also have to consider that we are dealing with the world's reserve currency and the volume of dollars both outside and inside the U.S. system. Right now, M3 is estimated at somewhat shy of $14 trillion. You have another $7 trillion outside the U.S., which is available for overnight liquidation and dumping into the U.S. markets. It's not easy to measure how much is out there, but that has to be taken into account to assess the money supply related to inflation. Again, that's where the Fed chairman's policies come into play.

Efforts have been afoot to weaken the U.S. dollar. Usually with the weakening of the U.S. dollar, you see increased repatriation of dollars from outside the system. If everyone is happy holding the dollars, the flows can be static; but when they start shifting and the dollars are repatriated, you begin to have currency problems. That's when you have the money supply and the inflation problems we're beginning to see.

TGR: This has been very informative, John. Thank you for your time.

[Soul Crusher]

Jobless claims hit 8-month high, rises 43,000 to a seasonally adjusted 474,000!
Reuters ^ | 05/05/2011 | Lucia Mutikani




(Reuters) - The number of Americans filing for jobless benefits rose to an eight-month high last week and productivity growth slowed in the first quarter, clouding the outlook for an economy that is struggling to gain speed.

Initial claims for state unemployment benefits rose 43,000 to a seasonally adjusted 474,000, the highest since mid-August, the Labor Department said on Thursday.

Claims were pushed up by factors ranging from spring break layoffs to the introduction of an emergency benefits program.

Economists had expected claims to fall to 410,000.

A second report from the department showed nonfarm productivity increased at a 1.6 percent annual rate, braking from a 2.9 percent pace in the fourth quarter. The growth pace was above economists' expectations for 1 percent.

"I think we're in a situation where the markets and the Fed have been too optimistic," said Bob Andres, chief investment strategist and economist at Merion Wealth Partners in Berwyn, Pennsylvania.

"I don't think we're going to fall off a cliff but the road to real recovery and full unemployment is going to take a long time, and people ought to get back into that mode."

U.S. stock index futures extended losses after the jobless claims data, while government debt prices touched session highs the data. The dollar extended losses against the yen, but rose against the euro.

EMPLOYMENT GROWTH SEEN SLOWING

The claims data falls outside the survey period for the government's closely watched employment report for April, which will be released on Friday. Nonfarm payrolls increased 186,000 last month, according to a Reuters survey, after rising by 216,000 in March -- which was the most in 10 months.


(Excerpt) Read more at reuters.com ...

[Soul Crusher]

.World Food Prices Rise to Near-Record High as Inflation Speeds Up, UN Says
By Rudy Ruitenberg - May 5, 2011 6:44 AM ET




Corn has almost doubled in the past 12 months. Photographer: Nadine Hutton/Bloomberg

 
 Play VideoMay 4 (Bloomberg) –- Peter Hickson, a commodities strategist at UBS Ltd., talks about the outlook for metal and energy prices. He speaks with Maryam Nemazee on Bloomberg Television’s “The Pulse.” (Source: Bloomberg)

World food prices rose to near a record in April as grain costs advanced, adding pressure to inflation that is accelerating from Beijing to Brasilia and spurring central banks to raise interest rates.

An index of 55 commodities rose to 232.1 points from 231 points in March, the United Nations’ Rome-based Food and Agriculture Organization said in a report on its website today. The gauge climbed to an all-time high of 237.2 in February before dropping 2.6 percent in March.

The cost of living in the U.S. rose at its fastest pace since December 2009 in the 12 months ended in March, the same month in which Chinese consumer prices rose by the most since 2008. The European Central Bank raised interest rates on April 7, joining China, India, Poland and Sweden in a bid to control inflation partly blamed on food costs. Costlier food also contributed to riots across northern Africa and the Middle East that toppled leaders in Egypt and Tunisia this year.

“There seems to be some easing for a lot of commodities, but whether this is demand rationing, we have to wait and see,” Abdolreza Abbassian, a senior economist at the FAO, said before the report. “If the weather is good, if plantings expand, I think we could see some relief in food prices.”

Sugar prices slumped 18 percent in New York last month, while milk futures fell 1.8 percent in Chicago, U.S. wholesale beef prices dropped 3.4 percent and pork declined 2.2 percent. Wheat prices rose 5 percent in Chicago after falling the previous two months and corn jumped 9.1 percent.

Corn Planting

Corn has almost doubled in the past 12 months on speculation that more planting in the U.S., the world’s largest grower, won’t be sufficient to rebuild global stocks. Wheat surged 57 percent over the same period and soybeans gained 39 percent as flooding ruined crops in Canada and Australia and drought reduced harvests in Russia and Europe.

Of the grains, corn “is the most worrisome,” Abbassian said in a statement. “We would need above-average, if not record, yields in the U.S.,” however, “plantings so far have been delayed considerably due to cool and wet conditions on the ground,” he said.

The FAO’s gauge of grain prices, which account for 27 percent of the overall index, jumped to its highest level since June 2008, advancing to 265.1 points in April from 251.2 the previous month.

Dry Weather

World grain stocks will probably slide for a second year in the 12 months through June 2012 as corn consumption outpaces production and dry weather hurts wheat prospects in the U.S. and the European Union, the International Grains Council said in a report April 20.

“With demand continuing strongly, prospects for a return to more normal prices hinge largely on how much production will increase and how much grain reserves are replenished in the new season,” David Hallam, the director of FAO’s Trade and Market division, said in a statement.

The FAO’s food-price index fell for eight months in a row after reaching its previous peak in June 2008, a situation that probably won’t be repeated this year, Concepcion Calpe, an economist at the UN agency, said last month. “Very strong” demand for food, feed and biofuel may mean prices will climb in coming months, she said.

Meat Prices

The index of meat prices, which make up 35 percent of the overall index, was little changed at 172.8, up 0.5 percentage point from the March level.

The FAO index of sugar prices fell to 347.8 points, the lowest level in seven months, from 372.3 in March. Cooking-oil prices slipped to 259.1 points in April from 259.9, while the dairy index fell to 228.7 from 234.4 in March.

Food output will have to climb by 70 percent from 2010 to 2050 as the world population swells to 9 billion and rising incomes boost meat and dairy consumption, the FAO forecasts. Producing 1 kilogram (2.2 pounds) of pork can take 3.5 kilograms of feed, U.S. Department of Agriculture data shows.

About 44 million people have been pushed into poverty since June by the “dangerous levels” of food prices, World Bank President Robert Zoellick said in February. Another 10 million may join them should the UN food index rise another 10 percent, the World Bank said April 16. The number of hungry people in the world globally declined last year to 925 million from more than 1 billion in 2009, according to the FAO.

“A sliding dollar and increased oil prices are contributing to high food-commodity prices,” Hallam said.

To contact the reporter on this story: Rudy Ruitenberg in Paris at rruitenberg@bloomberg.net

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter2@bloomberg.net

[Soul Crusher]

Why the weak dollar isn't fixing the economy
Business Insider ^ | 05/06/2011 | Joe Weisenthal



A disappointment in Q1 was the relatively modest growth of US exports, confounding economists who might have assumed that the weak dollar would rectify that problem.

As explained in his latest FX Focus, Citi's Steven Englander points out that the connection between a weak currency and strong exports is dicey at best.

Here are the three main reasons why:

1) It may be small beer in the big picture. Productivity changes and the regulatory environment among other factors may in practice matter more than measured shifts. EM countries climbing up the quality ladder may matter more for growth in export markets than moves in the exchange rates.

2) How fast your exports grow also depends on how fast your export markets grow and how sensitive your export destinations are to price moves in your exports

3) Causality is uncertain. Sometimes the causal channel is that capital inflows will make a currency stronger and weaken exports. Sometimes the causal channel is that improved competitiveness will increase exports and simultaneously put upward pressure on the currency. Sometimes a combination of both forces is at play.

This chart is the killer. There's just no correlation between US "competitiveness" (blue) and export performance.


(Excerpt) Read more at businessinsider.com ...

[Soul Crusher]

As for the so called great jobs number today - 62,000 of those jobs were a result of the mcdonalds hiring.   

[GigantorX]

As for the so called great jobs number today - 62,000 of those jobs were a result of the mcdonalds hiring.   

175,000 of the 244k were from the "Birth/Death Adjustment"

So that leaves around....oh 7k actual jobs?

And the number of people not considered in the labor pool also increased to another historic high.

[Soul Crusher]

The top five states for business in 2011, according to the magazine:


1) Texas

2) North Carolina

3) Florida

4) Tennessee

5) Georgia

The five worst states:

46) Michigan

47) New Jersey

48) Illinois

49) New York

50) California

[Soul Crusher]

As People Not In Labor Force Hit New Record, Those Who "Want A Job Now" Jump By 232,000 In One Month
Submitted by Tyler Durden on 05/06/2011 09:21 -0400
www.zerohedge.com
BLSBureau of Labor Statistics



Another observation from today's BLS data: while the labor participation rate may have remained flat, the total number of persons not in the labor force as an absolute number just hit a new all time record of 86.248 million, higher than the previous record hit in February of 86.216 million. And just as relevantly, the total number of "people who want a job now" jumped by 232,000 from March to April to 6.482 million, just short of the previous record of 6.643 million. Can someone please redirect all these people to the minimum wage, part time jobs that just opened up at US fast food retailers please?

[Soul Crusher]

Morning Jay: If Our 'Food Stamp Recovery' Persists, Obama Will Lose Big
Jay Cost
May 6, 2011 6:00 AM

I have noticed something unsettling in my own life lately: I know a lot of people who are on food stamps or some kind of extraordinary government assistance. The count right now stands around 10 people, which is a lot for a small town denizen such as myself.

That is a personal reminder of a very serious, yet rarely discussed economic, social, and indeed political problem: the fact that better than one out of seven Americans today requires government help to put food on the table.

The following graph is only for the hale and hearty:



The start date of this heartbreaking graph is important – June, 2009 is the point at which, according to the National Bureau of Economic Research (NBER), the economy hit bottom and began to recover.

What we see in this graph is one example of a persistent feature of the recovery to date. On the top-line of the economic data, it often appears as though we have filled in the hole that was dug by the Great Recession. Check out this graph of personal income per capita to appreciate that. However, it is largely an illusion, a product of deficit-financed government spending – in the form of things like food stamps, extraordinary unemployment benefits, and the relatively stable federal employment situation.

Call it the American "food stamp recovery:" take away the government supports, and the economic picture looks very bleak indeed. Two sobering features stand out.

First, the ability of the private sector to provide people with a stable standard of living is in a long-term decline, one that has only eased, not reversed, in recent months. The following graph captures this phenomenon by tracking real wages per capita derived from the private sector.



What we see here is that the private sector wages and salaries are actually at a thirteen-year low point when measured on a per capita basis, and the most recent reading (from Quarter I of 2011) showed a continued decline. The only “good” news is that the slope of the descent has eased.

Second, the empty spot in the national wallet generated by the breakdown of private wealth has been filled by a socialization of personal income directed by the government. The following graph tracks the share of personal income that comes from either government transfer payments or government salaries.



Yikes.

All of this leads to the next point. This has been the worst economic recovery in generations, at least as it is felt by the average American. Let’s be precise in our language here: we’re not talking about the recession itself; we’re talking about the recovery, which has entirely been on Barack Obama’s watch.

This is not rhetorical bluster, but empirical fact. The following graph demonstrates that by comparing employment in this recovery against every recovery since 1960. What I did was take the percentage of the adult population that was employed when NBER says a recovery began, set that as a baseline (100 percent) and tracked how this recovery stacks up against previous ones.





As we can see, this one is worse than any other in 50 years.           

Unsurprisingly, we also see weakness in terms of real per capita income, as the next graph demonstrates. I did something similar with this one – taking real income per capita (minus government transfer payments) at the point that NBER says a recovery began, setting that at 100 percent, and tracking how the current recovery stacks up against previous ones.





Taking the last two graphs together, the ultimate point is validated: this is the worst recovery in generations. The 2001 recovery saw similar weakness in terms of real income, but jobs bounced back better that time. What's more, the 2001 recession was substantially milder, so we should have expected a greater snap-back this time around.

On a cause-and-effect level, it’s hard to assign much blame to this president, or any president for that matter. As we can see from the last two graphs, the recoveries from the 1990, 2001, and 2007 recessions were all slow and unimpressive, suggesting that there are greater forces at play than the current occupant of 1600 Pennsylvania Avenue. Indeed, the transition to a post-industrial economy might be the single biggest factor. The once-great anchors of the American economy – steel, automotive, rubber, and other industries – used to be able to lay workers off temporarily during a slowdown, then bring them back when demand picked up, as can be seen in this graph. But the industrial sector of the economy is today just a fraction of what it used to be, meaning that such a brisk rebound is no longer possible.

Obama does deserve some of the cause-and-effect blame for this recovery, mostly due to the terribly inefficient stimulus. I was recently in Washington and was able to snap this photograph, which should go down in the annals of history as a testament to Keynesianism run amok.



It goes without saying that there were better ways to generate a recovery than this, so Obama and congressional Democrats deserve some cause-and-effect blame for the pace of the rebound. (Side note: Two years after Congress appropriated the money for this project, it is still not completed.)

On a political level, the blame for the recovery goes entirely to President Obama. Indeed, looking at the polls on his handling of the economy, you can see that he is already taking the heat.

And so, we can lay down the following marker: if the economic recovery does not begin to show substantial improvement, the likes of which we have not really seen in the last two years, and if the GOP nominates a reasonably acceptable alternative, this president is going to lose in 2012, and the final result will not be close. Nobody gets reelected with employment way down, real income way down, and 14 percent of his fellow citizens on food stamps. Nobody.

And the president needs something more than a “recovery” in the sense that we’ve seen to date. When you start controlling for inflation, population growth, and government intervention, the recovery we’ve seen has only been, at best, a treading of water for average people. This president needs to see a significant improvement in real, per capita, and private metrics of personal economic vitality. Put simply, he needs something more than this "food stamp recovery" to win next year.

People who are giving such a heavy advantage to the president next year must be making at least one of two assumptions: (a) the economy is suddenly going to do better than it has done in the last two years; (b) the GOP nominates a dud.

On the Republican nomination front, Democrats and their friends in the mainstream media shouldn't count on that, for the reasons I elaborated here. And when it comes to the economic growth front, no more peeing on my leg while telling me it's raining: After two years of this disappointing, anemic, worst-in-several-generations, quote unquote recovery, I just don’t believe that the big, long-promised rebound is coming any time soon.

Instead, what I believe nowadays is that this president is in a huge amount of trouble, as we all are.


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Source URL: http://www.weeklystandard.com/blogs/morning-jay-economy-still-not-good-enough-reelect-obama_559238.html

[Soul Crusher]

Check out these graphs.


http://www.freerepublic.com/focus/f-news/2716564/posts