Tuesday, July 31, 2012

Sunday, July 29, 2012

US budget updates, 2nd quarter GDP, june’s durable goods, new home sales, et al

with time running out before congress heads out for their august recess and the pre-election campaign season, there has been some movement that suggests they'll avoid the fiasco of an unresolved budget that repeatedly threatened to shut down the government last year...house republicans, who are seen as the most likely roadblock to an agreement, were close to a deal to fund the government at the same level as it's been funded under the 2012 budget for the first 6 months of the new fiscal year (starts Oct 1st), which would effectively kick the budget can past the elections through march, when republicans figure they'll be in control of the oval office & both houses...although the House has made no progress on dealing with the fiscal cliff, those end of the year tax cut expirations & budget constraints now written into law which could knock 5% off GDP  (which we discussed here), the Senate Democrats, the party of the rich, has made some progress on resolving issues on the expiring 2001 & 2003 packages collectively known as the Bush tax cuts...with the republicans agreeing to drop their filibuster, a bill to reinstate clinton era tax rates of 36% and 39.6% for upper income brackets above $250,000 passed the senate 51 to 48...although the bill taxes earned income at these slightly higher rates, it exempts dividends & capital gains from those rates, and also reverts the estate tax to 35%, the lowest level ever reached under the regressive bush cuts, with a $3.5 million exemption, which will virtually assure that almost no one will pay an estate tax…and in other matters fiscal, the CBO rescored the Affordable Care Act based on changes imposed by the Recent Supreme Court Decision and found that it will now have a net cost of $1,168 billion over the next 11 years, compared to the $1,252 billion when it was last scored in March of this year for that same 11-year period, which amounts to a net budget reduction of $84 billion, and the White House released its mid-year budget estimate, wherein they estimated the deficit for the fiscal year ending Sept. 30th would be $1.21 trillion, which is $116 billion lower than the $1.32 trillion they estimated for this year in February; the ten year defict projection is now also $240 billion lower, mostly due to lower interest rates, & smaller medicare, medicaid & social securty expenditures; the Treasury further relates that the debt ceiling will not be reached until late this year, when they’lll be able to shuffle funds & suspend some payments to avoid dealing with it until after the new year…

Click to View on Friday, the BEA (Bureau of Economic Analysis) released the advance estimate for 2nd quarter GDP, which showed the "output of goods and services produced by labor and property in the US" increased at a seasonally adjusted annual rate of 1.5%, or more specifically, at a rate of 1.54%, a higher growth rate than most estimates, with the caveat that the data is "incomplete and subject to further revision" ...the real (inflation-adjusted) annual growth rate for the 1st quarter was also revised from it's last reported 1.9% to 2.0% (it had originally been reported as 2.2%, then revised to 1.8%, so it's obvious these reports arent cast in concrete)...the increase of an annualized 1.5% in the 2nd quarter over the 1st was from gains in personal consumption expenditures (PCE), exports, residential & non-residential construction & investment, and business inventories, which were partially offset by imports (which are subtracted from GDP) and decreases in state & local government spending...PCE increases contributed less to the change in the second quarter than they did in the first (which we saw in the retail sales reports), as did residential & non residential investment, while increases in inventories and a slower decrease in federal spending contributed more, while both imports & exports increased...doug short produces a bar graph that shows how the change of each of the 4 major components of GDP contributed to the change in GDP since the 1st quarter of 2007, with PCE in blue, net private investment in red, exports minus imports in green, and total government spending in violet...bars above the line contributed to a quarter over quarter increase (at an annual rate), & bars below the line subtracted from the reported quarterly change...the specific areas showing the greatest change in this report were real nonresidential fixed investment, which increased at a rate of 5.3%in the 2nd quarter, compared with an increase of 7.5% in the 1st, non residential structures, which only increased 0.9% in the 2nd quarter after a 7.5% increase in the first quarter, residential investment, which fell from a 20.5% annual rate of increase to a 9.7% rate of increase, and equipment & software, which increased 7.2%, up from the 5.4% increase in the 1st quarter...the largest category, personal consumption expenditures (which account for over 70% of GDP), increased at an annual rate of 1.5%, after increasing at a rate of 2.4% in the 1st quarter...real exports increased at a 5.3% rate in the 2nd quarter, vs a 4.4% rate of growth in the 1st quarter, while the QoQ change in the growth rate of imports was from 3.1% to 6.0%...meanwhile, federal govt consumption decreased at a 0.4% rate in the 2nd quarter, vs a decrease rate of 4.2% in the 1st, while state & local expenditures were off at a 2.1% rate, nearly the same as the 2.2% decrease in the 1st quarter...this release also reflected the regular annual revision of the national income and product accounts beginning with the estimates for the first quarter of 2009, so GDP figures back to that date were revised further...the only sizable changes were for the first 2 quarters of 2010, where GDP growth was overstated by more than 1%, and the 2nd and 4th quarters of 2011, where GDP growth was understated by over a half a percent...doug short also has a quarterly chart which illustrates these revisions...and former administration economist & now blogger jared bernstein does a good job of explaining why GDP is important for employment, graphing "Okun's law" to show that in recent years a growth rate of 2.5% has been the baseline, with each percent of GDP growth above that generallt lowering unemployment by a half percent...

Click to View

while GDP tells us where we've been, there were also few reports this week that might give us some insight into where our economy is heading...first we'll look at the Advance Report on June Durable Goods from the Dept of Commerce (pdf), which is mostly watched for new orders; they report that new orders for manufactured durable goods in June increased $3.4 billion or 1.6% to $221.6 billion, which was a greater increase than the 0.3% gain expected; however, excluding transportation goods, which had the largest increase of $5.1 billion or 8.0%, as Boeing received an order for 24 jets, new orders actually decreased 1.1%, and excluding defense, new orders decreased 0.7%, so orders for what are considered "core durables" actually decreased 4.6%, the sharpest drop since January...the greatest decrease was in orders for capital goods such as machinery & computers, which slumped 4.9%, likely reflecting slowing orders from Europe, where even german manufacturing is contracting...Doug Short graphs durable goods and core durables in a series of reports; included here is his chart for core durable orders on a per capita basis adjusted for inflation; by this reasonable metric, real durable goods orders per capita are 40.6% lower than their April 2000 peak...another forward looking report out this week was the Markit Flash Manufacturing PMI for July (pdf); their preliminary survey of purchasing managers showed manufacturing barely expanded so far this month, with a reading of 51.8, down from 52.5 in June, being the lowest since December of 2010, on the typical PMI scale where readings below 50 signal contraction; their new orders index dropped to 51.9 from 53.7, while the new export orders index was at 48.3, the employment index was at 52.8, and work backlog was at 49.5...regional Fed reports this week included a dismal report from the Richmond Fed, which showed manufacturing in the Mid Atlantic region shrank, as its overall index fell in July to -17 from -3 in June, its lowest since April 2009, and the Kansas City Fed, which showed modest growth, with its month-over-month composite index up 5 in July from 3 in June but down from 9 in May; however, in the same vein as other reports, they reported their new orders for export index dropped from -7 to -13, almost matching their all-time low of -14 in early 2009...last week the New York Fed's Empire State manufacturing index for July rose five points to 7.4, while its index for new orders went negative for the first time since November 2011, falling five points to -2.7, while the Philly Fed's July index failed to improve much, as it only inched up to -12.9 from -16.6 in June... Homeownership Rate

this week also brought an unexpectedly weak report on June new home sales from the Census Bureau (pdf), which showed that new home sales had declined 8.4% (±12.4%) to a seasonally adjusted annual rate of 350,000, from May's annual sales rate of 382,000 new homes, which was also revised down, from a gain of +7.6% over april's rate to a +6.7% gain, however, April's sales were revised up to a rate of 358,000 from 343,000, as were March sales, to a 352,000 annual rate...nonetheless, reported June sales were still 15.1% (±16.7%) over the rate of June last year...home sales in the Northeast reportedly fell 60.0%, which some attributed to the heatwave; meanwhile, sales in the midwest were up 14.6%, sales in the south were down 8.6%, while new home sales in the west were reportedly up 2.1%...the median sales price of new houses sold in June was $232,600; while the average sales price was $273,900...according to census, 144,000 completed new homes remained on the market at the end of June; this would be a 4.9 month supply of unsold homes at June's sales rate... 

the census was also out with another report this week, on Residential Housing Vacancies and Homeownership for the second quarter of 2012 (pdf), a quite detailed report with charts and tables...it reports that the homeownership rate is up to 65.5% in the second quarter, up from the record low of 65.4% in first quarter but still 0.4% below the rate of the same quarter last year...they also report a rental vacancy rate of 8.6% and a homeowner housing vacancy rate of 2.1%; with the median asking rent at $716 and the median asking price for sales units at $134,600...bill mcbride covers this report in more detail, often disagreeing with their findings...he posts the above chart which graphs the homeownership rate as taken from this report, with red dots representing homeownership rates as reported by the decennial Census from the same agency; it's quite obvious that the reported numbers are considerably different in the two reports...

in another housing report, LPS released their First Look at mortgage delinquencies & foreclosures for June this week; reporting an increase in delinquencies for the 3rd straight month, they show 3,602,000 mortgages past due but not in foreclosure, or 7.14% of all mortgages outstanding, which is a 3.4% increase over the 6.91% of mortgages so qualified in May...they also report another 2,061,000 homeowners in the foreclosure process, representing 4.09% of the total, which is down from the 4.17% reported in foreclosure in May...despite the recent increases, the delinquency rate is now 7.3% below where it was a year ago, while the year-over-year decline in foreclosure presale inventory is only 1.0%...the complete Mortgage Monitor pdf will be available on LPS’ website on Aug. 6, after which we'll cover it in more detail...

also released this week was the Midyear Metro Foreclosure Report from RealtyTrac, on foreclosure activity in 212 of the largest US metro areas; they show increasing activity in 125 of them, or 59%, although 129 are still reporting year over year decreases…of the 10 metros with the highest foreclosure rates, 7 are located in California, and also included Phoenix, Las Vegas & Atlanta outside of that state, while Florida had four cities among the top 20RealtyTrac sees the foreclosure rate increasing in the second half, & apparently thinks this is a good thing; as RealtyTrac CEO Brandon Moore saysforeclosure starts are welcome news for prospective buyers and real estate brokers in many local markets where a shortage of aggressively priced inventory has been holding up sales activity; {such areas} will likely see more distressed inventory for sale in the form of short sales and bank-owned properties in the second half of the year.”

(the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Tuesday, July 24, 2012


Published on Jul 13, 2012 by sabineprogram Here is the formal statement I gave to Federal Police on 16 June 2012: On a trip to visit family in Seoul in April, I was approached by a man and a woman who claimed to be North Korean defectors. They presented me with a DVD that recently came into their possession and asked me to translate it. They also asked me to post the completed film on the Internet so that it could reach a worldwide audience. I believed what I was told and an agreement was made to protect their identities (and mine). Despite my concerns about what I was viewing when I returned home, I proceeded to translate and post the film on You Tube because of the film's extraordinary content. I have now made public my belief that this film was never intended for a domestic audience in the DPRK. Instead, I believe that these people, who presented themselves as 'defectors' specifically targeted me because of my reputation as a translator and interpreter. Furthermore, I now believe these people work for the DPRK. The fact that I have continued to translate and post the film in spite of this belief does not make me complicit in their intention to spread their ideology. I chose to keep posting this film because - regardless of who made it - I believe people should see it because of the issues it raises and I stand by my right to post it for people to share and discuss freely with each other.

Sunday, July 22, 2012

june’s retail sales, CPI, industrial production, housing starts, existing home sales, drought update, et al

Year-over-year change in Retail Salesthe week started with a pitiful report on retail sales from the commerce department (pdf), which showed that June retail sales, which includes food services sales, were at a seasonally adjusted $401.5 billion, which was down 0.5% (±0.5%)* from May but up 3.8% (±0.7%)*  from one year earlier...excluding the often volatile auto sector, retail sales in June were $328.5 billion, down 0.4% from May but up 3.0 percent from June 2011...even though falling gas prices contributed to the decline (sales ex-gasoline decreased 0.3%), weakness was across the board; we spent less on autos, furniture, appliances, at department stores, and for building materials...the only notable sales gains were by non-store retailers (internet & mail order) which increased to $35.886 billion from 35.540 billion...with May sales unrevised down 0.2% and April sales also down 0.5%, this is the first time retail sales have fallen 3 straight months since the implosion at the height of the financial crisis in 2008...as these reports are unadjusted for inflation, sales as reported are still up 21.2% from the early 2009 bottom, as you can see the relative depth of the 2009 collapse on the adjacent chart from bill mcbride, which shows year over year changes; however, adjusted for inflation and changes in population, retail sales are down 7.3% from the peak of January 2006, and are now at the same level first reached in November 1999..since noone else does, we should note the census footnote that goes with the ±0.5%* margin of error on these reports; that these reports result from a sampling of "approximately 5,000 retail and food services firms whose sales are then weighted and benchmarked to represent the complete universe of over three million" - in other words, the accuracy of these totals isnt much more accurate than the household employment survey of 60,000...nonetheless, since personal consumption expenditures account for over 70% of GDP, and retail sales are a sizable chunk of that, this report resulted in downward revisions to forecasts of 2nd quarter GDP by economists at several firms; Goldman lowered their estimate for the period 0.2% to 1.1%, as did Merrill Lynch; Deutsche Bank dropped theirs from 1.4% to 1%, MacroAdvisers is also forecasting 1%, while Roubini came in at an optimistic 1.2%; we're noted before the relationship between GDP and employment; at 2% we're just treading water; it generally takes a 3% increase in GDP to cut the unemployment rate 1%...

in a related report, the commerce department reported business inventories for May (pdf) were estimated at an end-of-month level of $1,578.4 billion, up 0.3% over April's level and 5.2% over levels of a year ago...the inventory/sales ratio remained steady at 1.27, which is still at the low end of the historical range (see pdf graph), so it shouldnt affect restocking...also this week, the Bureau of Labor Statistics released the Consumer Price Index summary for June, which they report as little changed overall, after a decline of 0.3 in May...the all items index has now increased 1.7% over the last year...the energy index fell 1.4% as the gasoline index declined for a third month in a row; but other energy indexes were mixed and the food index rose 0.2 percent after being unchanged last month...so the core CPI from the BLS, which removes prices for food and energy, was up 0.2%...for more detail, a post by doug short breaks down other components) ...coincidental with the BLS release of the CPI, the Cleveland Fed releases a median CPI and a trimmed-mean CPI, both of which were designed to remove some of the monthly volatility from the price indexes...the trimmed mean removes the 16% of the price changes at each extreme, highest and lowest, before computing the average..the median CPI is a bit more complex than a simple median because of the different weightings of the components (June detail here)...over the last 12 months, the median CPI rose 2.3%, the trimmed-mean CPI rose 2.2%, the CPI rose 1.7%, and the CPI less food and energy rose 2.2%...and not to be outdone, the Billion Prices Project at MIT reports daily online price index data which shows inflation has been tracking near a 1.25% annual rate...

Capacity Utilization

another important release this week was for June Industrial production and Capacity Utilization from the Fed; for industrial production, there was a rebound in June, as it increased at a seasonally adjusted rate of 0.4% after declining 0.2% in May; manufacturing output of 0.7% reversed a decline by the same amount in May, just as April's increase reversed a March decline; the production index for durable goods rose 0.8% in June after having declined 0.6% in May, it was led by a 1.6% increase in production of business equipment, which showed similarly sized gains in each of its major components: transit equipment, information processing, and industrial equipment; the output of consumer durables rose 0.9% after a decrease of 1.4% in May, with the index for automotive products increasing 1.5% and the index for home electronics decreasing 1.3%;  meanwhile, manufacturing of non-durables was up 0.5, after a 0.7% decline in May...in the other major industry groups, "mining", which includes oil & gas extraction, also showed a 0.7% gain in May, while the output of utilities declined 1.9% on a seasonally adjusted basis...for the second quarter, manufacturing rose at an annual rate of 1.4%, down from its increase of 9.8% in the first quarter; the second quarter increase was led by motor vehicles and parts, which climbed 18.2%; excluding motor vehicles and parts, manufacturing output edged up only 0.1%...the output of mining fell at an annual rate of 1.2% in the second quarter, while the output of utilities rose 14.9% for the quarter, apparently rebounding on a seasonally adjusted basis from the decreased usage caused by the mild winter...meanwhile, capacity utilization for total industry was up 0.2% in percentage point in June to 78.9 percent, with capacity utilization at 77.7% for manufacturing, 74.2% for utilities, and 89.4% for "mining"...the above graph from bill mcbride shows capacity utilization rates for manufacturing in red and total industry in blue over 40 years; although our industry is now operating at levels above the troughs of the recessions (horizontal bars), we're still well off the levels of plant & equipment usage seen during better times... with 27.5 million of us who arent working at the level they want to, it's clear our country's economy continues to run well below it's potential...

Total Housing Starts and Single Family Housing Starts there were also a couple major housing reports this week; we'll start with the "good news" first, which came from the census bureau, on "Permits, Starts and Completions”(pdf) for June, which is mostly watched for data on new housing starts,  and it didnt disappoint; new housing starts rose last month to an annual rate of 760,000, which was a new post-bubble high, 6.9% (±13.3%)* above the revised May estimate of 711,000 and 23.6 percent (±16.8%) above the June 2011 rate of 615,000 starts... single-family starts in June were at a rate of 539,000; which was 4.7% above the revised May figure of 515,000, while the annual start rate of units in buildings with five units or more was 213,000...the strength this month was again fairly regional, with gains of 22.2% in the northeast and 36.9% in the west, while the midwest saw a 7.3% month over month decrease, and housing starts in the south fell 4.2%...the jump also puts to rest fears that building activity had mostly been "pulled forward" by a warmer than normal spring...but since some of the cheering might be overdone (home builders’ confidence jumped the most in almost 10 years), we'll include bill mcbride's long term chart of housing starts to put it all in perspective - blue is single family starts, & red is the total...increasing population and foreclosed and older houses falling into ruin tell us eventually that home building must return to the trend, but as housing is general longer lived than other depreciating assets, it could be some time before that happens...this report also showed that building permits issued in June were at a seasonally adjusted annual rate of 755,000, which was 3.7%(±1.0%) below the revised May rate of 784,000, but still 19.3 percent (±1.8%) above the rate of a year ago, and that home completions in June were at a seasonally adjusted annual rate of 622,000, 2.6 % (±12.5%)* above the revised May estimate of 606,000 and 7.2% (±13.2%)* above the June 2011 rate of 580,000...

the other important housing report of the past week was for June completed sales of previously owned residences from the National Association of Realtors, generally referred to as "existing home sales"...NAR reported that existing home sales declined 5.4% to a seasonally adjusted annual rate of 4.37 million in June from an upwardly revised 4.62 million in May, which was an eight month low, but which was nonetheless still 4.5% higher than the 4.18 million annual sales rate of last June; of those sales, 3.90 million were single family homes, which was 5.1% less than the 4.11 million single families that sold in May...NAR claimed the lower home sales rate was due to low inventories constricting supplies, but other reports claim as much as 90% of foreclosed homes are being held off the market, in order to artificially boost home prices...if that's the case, then it seems to be working, as NAR reported that the median existing-home price was $189,400 in June, the 4th monthly price gain in a row, and up 7.9% from a year ago...that was the greatest year over year price gain reported by the NAR since February of 2006, when YoY prices were up 8.7%...during the period covered, the national average rate for a 30-year, conventional, fixed-rate mortgage fell to a record low 3.68% from 3.80% in May; which means buyers were committing to even lower monthly payments than last month for the same sales price; the 30 year rate was 4.51% in June 2011...NAR also reported reported inventory decreased 3.2% from May's 2.47 million units to 2.39 million units in June, which was 24.4% below the inventory of June 2011, and 10.8% lower than the pre-bust inventory level of June 2005...at June's sales pace, that reduced inventory represents a 6.6 month supply of homes on the market...first time home buyers accounted for 32% of June's home sales, down from 34% in May but still above the 31% share of sales they accounted for last June; all cash home sales remained fairly steady at 29% of the total, compared to 28% in May but still the same as last year..real-estate investors accounted for the bulk of the cash sales, as they purchased 19% of the homes sold in June, again the same percentage of homes that they purchased in June of last year...

the widespread drought continues to be a major economic story as well, with estimates from agricultural economists that it could cost us $50 billion by the time the effects play out...according to the most recent corn progress report from the USDA, corn conditions dropped by 9 percentage points and soybeans fell by 6 points last week, the 6th consecutive week of deteriorating conditions; indiana, kentucky and missouri all reported more than 70% of their corn crops in poor to very poor condition, while just over 30% of corn crops nationally were considered in good or excellent condition,..although crop areas of michigan, northern indiana and ohio had decent rainfall this week, most of iowa, illinois, & nebraska, which are the top three producers, saw none, and since 71% of the corn crop was past the silking stage at the beginning of the week, additional rainfall now would do little to effect yields (silks must be pollinated to produce kernels)…early in the week there was concern that the water levels in the mississippi and ohio rivers would disrupt barge traffic, as the lack of runoff had dropped water levels to five feet in some places, 50 feet below last years flood-stage level, forcing barge owners to reduce their loads to avoid running aground…however, many areas west of the Appalachians received twice normal rainfall this past week, with some of the tennessee watershed getting more than 5 inches, which would suggest that river conditions south of the tennessee-mississippi confuence should have improved…however, the latest outlook from the National Weather Service forecasts increasingly dry conditions over much of the nation’s breadbasket for the coming week, so there doesnt seem to be much relief in the offing for the crops…as a result, morgan stanley is forecasting the largest reduction in livestock herds in history, as livestock producers fight with ethanol producers over the reduced output….this will not only lead to higher food prices, but higher gas prices as well

(the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)

Saturday, July 21, 2012


“I'm sorry, but I don't want to be an emperor. That's not my business. I don't want to rule or conquer anyone. I should like to help everyone if possible; Jew, Gentile, black man, white. We all want to help one another. Human beings are like that. We want to live by each others happiness, not by each other's misery. We don't want to hate and despise one another. In this world there is room for everyone, and the good earth is rich and can provide for everyone. The way of life can be free and beautiful, but we have lost the way. Greed has poisoned men's souls, has barricaded the world with hate, has goose-stepped us into misery and bloodshed. We have developed speed, but we have shut ourselves in. Machinery that gives abundance has left us in want. Our knowledge has made us cynical; our cleverness, hard and unkind. We think too much and feel too little. More than machinery, we need humanity. More than cleverness, we need kindness and gentleness. Without these qualities, life will be violent and all will be lost. The airplane and the radio have brought us closer together. The very nature of these inventions cries out for the goodness in men; cries out for universal brotherhood; for the unity of us all. Even now my voice is reaching millions throughout the world, millions of despairing men, women, and little children, victims of a system that makes men torture and imprison innocent people. To those who can hear me, I say, do not despair. The misery that is now upon us is but the passing of greed, the bitterness of men who fear the way of human progress. The hate of men will pass, and dictators die, and the power they took from the people will return to the people. And so long as men die, liberty will never perish. Soldiers! Don't give yourselves to brutes, men who despise you, enslave you; who regiment your lives, tell you what to do, what to think and what to feel! Who drill you, diet you, treat you like cattle, use you as cannon fodder. Don't give yourselves to these unnatural men - machine men with machine minds and machine hearts! You are not machines, you are not cattle, you are men! You have the love of humanity in your hearts! You don't hate! Only the unloved hate; the unloved and the unnatural. Soldiers! Don't fight for slavery! Fight for liberty! In the seventeenth chapter of St. Luke, it is written that the kingdom of God is within man, not one man nor a group of men, but in all men! In you! You, the people, have the power, the power to create machines, the power to create happiness! You, the people, have the power to make this life free and beautiful, to make this life a wonderful adventure. Then in the name of democracy, let us use that power. Let us all unite. Let us fight for a new world, a decent world that will give men a chance to work, that will give youth a future and old age a security. By the promise of these things, brutes have risen to power. But they lie! They do not fulfill that promise. They never will! Dictators free themselves but they enslave the people. Now let us fight to fulfill that promise. Let us fight to free the world! To do away with national barriers! To do away with greed, with hate and intolerance! Let us fight for a world of reason, a world where science and progress will lead to all men's happiness. Soldiers, in the name of democracy, let us all unite!”

Charles Chaplin (among others NOT resting in peace)

Obama for America TV Ad: "Drone Warrior"


Responding to the jingoism around the First Gulf War, Andrew Shapiro's 1992 book, We're Number One!: Where America Stands - and Falls - in the New World Order was a sober-minded reality check on how the US really measured up. Just last month, a worthy successor appeared, a short ebook, Decline of the USA, by Edward Fullbrook, comparing the US to the other 29 countries in the OECD (Organisation for Economic Co-operation and Development) in a series of tables, with only a brief dash of introductory text.
Fullbrook is the editor of the Real World Economic Review, the online journal of heterodox economics that emerged out of the empirically-driven "post-autistic economics" movement of the previous decade. The data presented here - challenging presumptions of superiority and leadership with stubborn facts - epitomises what the post-autistic movement was all about.
The book looks at eight indicators each in seven categories, ranking counties in order along with precise figures for how they score. It also divides them into first, second and third divisions (in sets of 10), which comes in handy for gauging overall performance. The seven categories are: health, family, education, income and leisure, freedom and democracy, public order and safety, and generosity. Indicators include things like life expectancy at birth, infant mortality rate, share of income received by richest 10 per cent, years of life lost in injury, etc. Those with some awareness of these sorts of measures will probably not be surprised to learn that the United States ranks next to last overall (go Mexico!), while those who get their information from FOX or other corporate media may be stunned to the point of disbelief.

But there's more to this than so-called "America bashing". The indicators raise serious questions about what we value (even just attend to) and why, as well as presenting some interesting surprises. They also reveal who we Americans ought to be modelling our policies on if we really want our country to excel.
Health and wealth
Let's start off by considering the health category, since healthcare is very much in the news in the US, and what's happening with it now so richly illustrates the value of Fullbrook's austere marshalling of stubborn facts. Republicans repeatedly claim that the US has the best healthcare system in the world. And if you're a third-world dictator - the Shah of Iran, most famously - you would probably be inclined to agree. But for actual American citizens? Not so much. The indicators in this category, along with the United States' ranking, are as follows: life expectancy at birth (24), healthy life expectancy at birth (24 [tied] out of 29), probability of not reaching the age of 60 (25), infant mortality rate (25), obesity (30), practicing physicians per capita (23), acute care hospital beds per capita (25 out of 29), psychiatric care beds per capita (25 out of 29).
There is no indicator for percentage of people with health care, perhaps because universal coverage is taken for granted in the rest of the developed world, which includes virtually all of the OECD members except Turkey and Mexico. On the combined index of health care indicators, the US comes in at 28, just ahead of ... Turkey and Mexico.
Why does the US fare so poorly? It can't be lack of resources, since the US is still the richest nation in the world, and spends far more per capita on health care than anyone else. Political will is another matter entirely, however, as illustrated by the latest fall-out from the Supreme Court's healthcare decision: A number of Republican governors are rejecting expansions of Medicaid that would substantially reduce the number of people without healthcare - which, of course, could only help the US' ranking in Fullbrook's book. The federal government would pay for all the costs the first three years and at least 90 per cent of the costs in the long run.
Even paying 10 per cent, states could make money on the deal, because fewer people are uninsured, requiring more expensive ER treatment, more people get less expensive preventive treatment, etc. But if you hate the federal government as much as you hate poor people, it's easy to spin this expansion as a bad thing. Texas Governor Rick Perry - who presides over the largest such state - shows us how. Talking Points Memo reported:
"One in four Texans are uninsured, the highest rate of any state. The Medicaid expansion would cover 49.4 per cent of uninsured Texans by 2019, according to the Kaiser Family Foundation. The programme is broadened to cover Americans within 133 per cent of the poverty line - currently the eligibility for a working Texan parent cuts off at 27 per cent. The federal government will cover the full cost of the first three years and pay 90 per cent thereafter."
But Perry was defiantly proud of Texas. When pressed by a usually friendly Fox News reporter, who pointed to Texas' last-place ranking on a multifaceted measure of state health care performance, Perry exhibited classic conservative behaviour, engaging in several ego defence mechanisms at once - most notably narcissistic ones. His over-all approach was a form of rationalisation (making excuses), he went into denial (calling the data "fake and false on its face"), he engaged in projection (saying that the federal government doesn't like Texas) and fantasy (claims about how wonderful Texas health care is). Here's a short snippet of what Perry said:
"We’ve got some of the finest health care in the world whether it’s MD Anderson or UT Southwest, some incredible health care facilities in the country. So the idea that this federal government which doesn’t like Texas to begin with to pick and choose and come up with some data and say somehow Texas has the worst health care system in the world is just fake and false on its face. The real issue here is about freedom."
If you want to finish in last place, that's the way you do it - indulging in unconscious defence mechanisms to make yourself feel better, rather than using conscious coping strategies that can help you actually do better. In the real world, the Agency for Healthcare Research and Quality exists to identify what works and what doesn't - indispensable information if you want to things right. But in Perry's hyper-defensive mind, it only exists to make Texas look bad. And Perry's attitude typifies the US all too well, as you read through Fullbrook's book. Clinging to a false sense of superiority is the absolute worst strategy for actually attaining superiority. And yet it seems to dominate American political discourse.
Family values?
Exhibit A, in that regard: American conservatives just love to yammer on about the family, as if they invented it. But the US record on family issues is no better than its record on health care. The family indicators are as follows, along with the US rank: teenage pregnancy births per 1,000 women aged 15-19 (28 out of 28); paid maternity leave entitlement as a percentage of annual wage (29/29); public spending on family benefits in cash, services and tax measures (26/29); child poverty rate (25/26); family-time index (22/27); percentage of young people (0-14) living with both parents (21/23); percentage of young adolescents living with both parents (26/26); and divorce rate (30). All together, the US comes in dead last in the combined index of family indicators.
These low rankings are directly related to conservative practices and social policies. Divorce rates and teen pregnancy rates are both higher in "red states", a result of patterns of family formation according to law professors Naomi Cahn and June Carbone in their book Red Families v. Blue Families: Legal Polarisation and the Creation of Culture. Even aside from culture, practices like "abstinence only" sex education and restrictive access to birth control both make for higher teen pregnancy rates. In the US, conservative politicians even opposed unpaid maternity leave - no wonder the US is the only advanced industrial nation with zero weeks of paid maternity leave - and very low rates of any public spending in the way of family support. In short, conservatives really are uniquely responsible for the United States' poor showing in the family category - the exact opposite of what they tend to believe.

When it comes to freedom and democracy, however, conservatives are not alone in mistakenly thinking that the US leads the world, when it's actually dragging up the rear among the advanced industrial nations. The US does score in the mid-range on a couple of indicators, but fails abysmally on others: voter turnout for parliamentary elections (30); female parliamentarians (24); gender gap [economic, political, etc.] (13 -tied); corruption perceptions index (18); press freedom index (26/29); collective bargaining coverage (24/25); prisoners per capita (29/29); support for human rights [international agreements signed] (30). For the category as a whole, the US ranks 28th out of 30.
The story is not much different for three other categories: The US scores last in public order and safety (30th) and in generosity (24/24), and 27th out of 30 in income and leisure.
There is one category in which the US does dramatically better than any other - education. Although its Number 18 rating is still slightly below average, this is the only category in which it finishes more than a few slots from the bottom. Yet, this is the one category on which you will regularly hear the US get bashed by its own elite political class.
The reason for this isn't hard to figure out: It's the only category that conservatives routinely bash the United States for (much less tolerate America-bashing by others). It's part of their war on everything public or governmental, and education-bashing also serves as a scapegoat for all the other failures that conservatives categorically deny. Neoliberals like Clinton and Obama have joined in with conservatives, seeking one more illusory "grand bargain" while dropping almost all talk about the United States' real education problem - its spectacular levels of child poverty (25/26) and economic inequality (28/29).
For example, a 2010 international comparison found that US schools which had fewer than 10 per cent of their students receiving free or reduced lunches due to poverty had a reading score of 551 - second only to Shanghai, China. On the other hand, schools with 75 per cent or more in those programmes scored 446 - less than Greece, which scored 483 and received last place. Thus, education - the one area the US does relatively well in - is scapegoated to avoid debating the real underlying problems facing the US, where it ranks almost at the bottom. This is precisely the way conservatives want things, and yet the so-called "liberal media" and much of the national Democratic Party goes along with it as well.
As I argued in a recent column, even most conservative voters don't want to cut welfare state spending. Yet the Republican Party keeps moving further and further to the right, and Democrats keep trying to compromise with them - getting further and further away from what the American people really want. One reason this pathological dynamic persists can be found in what I've just described - a perverse set of narratives embraced by bipartisan elites, which simply has no place for pesky old facts to get in the way.
In the meantime, Fullbrook's book reminds us that there's a rational order in the world - that countries can learn from one another's experience in tackling social problems and challenges, and that by striving to match what already works elsewhere, they can make their own countries better. This is, after all, the Enlightenment faith on which the United States was founded. Real patriots fix problems, they don't deny them.
Paul Rosenberg is the senior editor of Random Lengths News, a bi-weekly alternative community newspaper.

Sunday, July 15, 2012


May’s consumer credit, trade deficit, & LPS mortgage monitor, RealtyTrac’s mid year foreclosure report, et al

the multi-year manipulation of the benchmark LIBOR interest rate by Barclays and at least 11 other major banks continued to attract the most attention in the blogosphere this past week; several attempts to explain the the implications the scandal for the public were interspersed with calls for prosecution of the banksters responsible, and a representative selection of links to those articles lead the main body of links below...probably the most damming revelation was probably that regulators on both sides of the atlantic knew that the interest rate was being falsely reported by the banks for the duration of the financial crisis and did nothing...tim geithner, who was then president of the NY Fed, sent an email to the mervyn king, governor of the bank of england, suggesting maybe something ought to be done, but it went no farther than that...& some are also still following the fallout from the supreme court rulings on obamacare; probably the most significant are those states, including texas and florida, who've announced that they will reject the Federal funds for Medicaid expansion and refuse to set up state insurance exchanges where mid-income families can buy insurance at a discount...even some democratic governors are leaning toward opting out; recall that 26 states joined florida in the lawsuit against the Medicaid expansion...a map of the states and where they stand on Medicaid was posted at the WaPo midweek..


the past week was a relatively slow week for economic releases, at least those that attract widespread attention around the blogosphere...but there were several reports on distressed home mortgages, a problem that is arguably as serious a national crisis as unemployment....the first one we'll look at is the monthly report on mortgage performance that you should all be familiar with by now, the May Mortgage Monitor from Lender Processing Services (LPS); this covers homeowners with loans in trouble in three general groupings; delinquent, meaning they've missed at least one housepayment, seriously delinquent, or those more than 90 days behind on their mortgage, & those that have entered the foreclosure process; the summary data of mortgages in trouble this month is contained on page 2 of the PDF, along with a year's worth of monthly data...for May, LPS reported that the percentage of delinquencies increased to 7.20%, from 7.12% in april; 1,967,000 home loans were less than 90 days delinquent, & another 1,575,000 loans were over 90 days delinquent, they also reported that 2,027,000 homes, or 4.12% of those with a mortgage, were in the foreclosure process, which was a slight decrease from the 4.14% in foreclosure in April, but above the 4.11% who were in foreclosure last year... the 5,569,000 loans delinquent or in foreclosure in May gives us gives a total percentage of homeowners who were not paying on their mortgages of 11.32%, or approximately 1 in 9, an improvement from the 12.07% who were delinquent or in foreclosure a year ago...May also saw the first jump in foreclosure starts in 2 months, with 202,707 homes receiving their first notice, up from 181,584 in april and the most since january...that was triple the number of foreclosures completed in May; again, it's the judicial states where the backlog continues to build; home seizures have increased at a faster rate in states where banks are not required to show proof of the note in court, as you see on the adjacent chart from page 10 of the LPS pdf; for judicial states, 6.50% of all loans are in some stage of foreclosure, compared to the 2.46% rate in non-judicial states, where banks seize houses quicker...a similar chart on page 11 of the pdf will show that 52% of those homes in foreclosure in judicial states have been there more that two years, vs 30% of homes in non judicial states...looking further at the table of problem mortgages by state on page 4 of the pdf, we can see again that it's the judicial states (red asterisks) that have the highest percentage of homes stuck in the pipeline; led by florida, with 13.7% of mortgages in foreclsure, new jersey with 7.6%, illinois with 6.8%, and new york, where 6.1% of home loans are in foreclosure...

the other major report on distressed housing came from RealtyTrac, an online foreclosure database, who was out with their midyear foreclosure market report...they report that during the first six months of the year, a total of 1,045,801 properties were in some stage of the foreclosure process, from default notices to auction sale notices and bank repossessions, and that 0.79 percent of all housing units, or one in 126, had at least one foreclosure filing in the first six months of the year...since this is only half the number reported by LPS, it seems evident that RealityTrac is only counting new actions; however, since this report includes june, it can give us better picture of the changes since the administration's foreclosure fraud whitewash was put in place the first week of april: they report that during April-June period, 311,010 properties started the foreclosure process, a 9% increase from the previous quarter; in June, the number of U.S. homes entering the foreclosure process for the first time increased 12% on an year over year basis, the second YoY increase in a row...overall, first-half filings were up 2% from the second half of last year, but they were down 11% from the same period a year ago; a total of 31 states posted year-over-year increases in foreclosure starts in the second quarter; 17 were judicial foreclosure states and 14 were non-judicial foreclosure states, with the 18% increase in california foreclosure starts being the most for any state and pushing california into the top spot for foreclosure action for the first time in RealityTrac's 7 1/2 year record...the states with the highest foreclosure rates in the first half were Nevada (1 in 57 homes), Arizona (1 in 58), and Georgia, where one in 63 homeowners had at least one foreclosure filing during the period...bank owned properties that sold in the second quarter took an average of 195 days to sell from the time they were foreclosed, up from 178 days in the first quarter, with properties in New York remaining bank owned the longest, at 430 days, followed by Arkansas at 357 days and New Jersey at 354 days...they also report a new record for average time for homes to remain in foreclosure nationally at 378 days, up from 370 days in the first quarter; although the average time to foreclose in the worst state, New York, decreased from 1,056 days in the first quarter to 1,001 days, & decreased 3 percent in New Jersey, the state with the second longest foreclosure process...the adjacent chart from RealtyTrac, which will open for a larger view, shows how foreclosure timelines have generally increased in the largest states since the 1st quarter of 2007; new york in green and florida in red are judicial states; in california in blue and texas in violet, court action is unnecessary…

  in other housing releases, the FHA also reported on their government-guaranteed loans for the 1st quarter: those that were 90 days or more delinquent  jumped nearly 27% during the year ending March 31, and foreclosures increased nearly 17%FHA has been the lender of last resort throughout the crisis and made loans that private lenders shunned, so their loan portfolio, guaranteed by the taxpayers, is more risky than those reported by Fannie, Freddie or the banks..CoreLogic also reported on home with negative equity for the 1st quarter (pdf)…they showed that 11.4 million, or 23.7 percent, of all residential properties with a mortgage were in negative equity at the end of the first quarter, down from 12.1 million properties, or 25.2 percent, in the fourth quarter of 2011; an additional 2.3 million borrowers had less than 5 percent equity, which they refer to as near-negative equity, in the first quarter…

another monthly report that we usually look at that was released this past week was the Fed's consumer credit report for May; you might recall this as being divided into two broad categories; revolving credit, ie, credit cards, and non-revolving credit, generally longer term borrowings for such items as cars, yachts, & education (& not including mortgages), and that generally our concern has been that the record jumps in borrowing were concentrated in an exploding amount of student debt that had been accumulating over the past several years...in that respect, May's report is something of an outlier; the increase in student debt was modest, with a seasonally adjusted annual rate of $74.3 billion borrowed from the Federal government in May, as compared to the $73.4 billion annual rate of student borrowing in April, as part of a 6.5% increase in non-revolving credit...but consumer credit still grew to $1.703 trillion, a 8.04% annualized rate overall, the fastest pace in five months; the increase was driven by an 11.2% jump in revolving credit, from $862.2 billion in April to 870.2 billion in May, which was the largest one month jump in credit card debt since November 2007, which you can see as the blue portion of the bar on the adjacent graph of monthly consumer credit changes from zero hedge, which also shows changes in non-revolving credit in red and the net change as a black line...considering that May saw a 0.2% decline in retail sales, the worst in 2 years, this jump in credit card debt would seem to suggest that people are borrowing just to make ends meet, and that its would not be indicative of any major jump in confidence; in fact, the primary indexes of consumer confidence from the Conference Board & the U of Michigan both show confidence continuing to slide..

the only other major economic release was for the May trade deficit from the Dept of Commerce (48 pp pdf); they reported exports of $183.1 billion and imports of $231.8 billion, which resulted in a deficit of $48.7 billion, down from the $50.6 billion revised deficit in April; exports increased, even to europe, and imports decreased as oil averaged $107.91 per barrel in May, down from $109.94 per barrel in April....our trade deficit with China increased to $26 billion in May, up from $24.9 billion a year ago, so once again most of our trade deficit was due to imports from china and of oil...in a separate release  from the Labor Dept, import prices for June were reported to have dropped 2.7%, the steepest price decline since 2008 and the 3rd straight month overall import prices have declined...even excluding fuel, import prices fell 0.3 percent, which was the most in almost two years...the Labor Dept also reported that wholesale price rose in June by 0.1%, with higher prices of food, light trucks and appliances offsetting the decline in energy costs...the Commerce Dept reported that May wholesale trade decreased by 0.8% in May from April, but was still up 5.7% on the year, unadjusted for price changes...wholesale inventories rose 0.3% to a seasonally adjusted $484.13 billion; oil inventories dropped 3.6%; durable inventories increased 0.6% led by a 1.3% increase in auto inventories, and inventories of non-durables decreased 0.2%...

the early summer heat wave with its accompanying record high temperatures that we mentioned last week lifted in the east this past week, but it continues in the plains states & eastern rockies; as we expected, the first six months of this year are now in the record books as the hottest ever for the continental US; in addition, the 12 months ending June 30th also ranks as the hottest 12 month stretch in history, as June temperatures came in at an average 71.2°F for the contiguous 48 states, which was 2.0°F above the 100 year average...the more significant weather story, however, continues to be the worsening drought over the south and the important agricultural states, which has become severe enough for the US Dept of Agriculture to declare to declare a federal disaster area in more than 1,000 counties over 26 states, the largest agricultural disaster ever declared due to drought; the drought declaration covers almost every state in the southern half of the US, from  s.carolina to california, with parts of Colorado, Wyoming. Illinois, Indiana, Kansas and Nebraska also included... according to the weather service's drought monitor, 61% of the US was listed as being in drought this week, up from the 56% of last week's report....corn crops in particular have been hard hit; the USDA cut its corn crop forecast by 12%, from 166 bu/acre to 146 bu/acre this week, as corn growing regions in illinois and indiana in particular are experiencing drought conditions of "severe" and "extreme" intensity, as you can see in dark orange and red on the adjacent map, a larger 12 week animation of which is embedded below...with higher corn prices making refineries unprofitable, ethanol output fell to its lowest in 2 years...the USDA also cut its yield forecast for the soybean crop nearly 8%, from 43.9 bushels per acre to 40.5 bushels per acre...this will likely translate into higher prices for variety of foods from cereals to soft drinks and cooking oil, as well as for meat, dairy & poultry products, as producers pass their costs on...

(the above is my weekly commentary that accompanied my sunday morning links mailing, which in turn was mostly selected from my weekly blog post on the global glass onion, and also includes other links of interest…if you’d be interested in getting my weekly emailing of selected links that accompanies these commentaries, most coming from the aforementioned GGO posts, contact me…)