The Center of the Universe

St Croix, United States Virgin Islands

MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Archive for January 8th, 2009

Re: Unemployment!

Posted by WARREN MOSLER on 8th January 2009

[Skip to the end]

(email exchange)


It’s all coming apart.

Need that full payroll tax holiday now!

(Treasury makes all contributions for employees and employers to keep the accounting in order)

>   On Thu, Jan 8, 2009 at 2:27 PM, Morris wrote:
>   It seems the problems with unemployment
>   claims system overload this week is even more
>   severe than we thought. To recap, NY state’s
>   internet and phone systems went down on
>   Monday due to unusually high applicant
>   volumes. Ohio and North Carolina had volume-
>   related problems that caused their internet
>   system to go down, Kentucky’s system
>   crashed, Massachusetts reported problems
>   getting through for thousands of callers and
>   internet filers and New Mexico, Pennsylvania,
>   Oklahoma and Washington all added additional
>   operators to deal with the spike in call volumes.
>   To recap, all of these problems happened this
>   week, so they will affect next Thursday’s
>   report, not this morning’s. They suggest an
>   unusual spike in layoffs which suggests the
>   difficulty seasonally adjusting data around the
>   year-end holidays may have caused the claims
>   data of the past two weeks to be understated.
>   Based on a quick web search, we could not
>   find any evidence of similar problems in the
>   past.
>   Thanks to all of you who sent links.


Posted in Email | No Comments »

Saudi production falls

Posted by WARREN MOSLER on 8th January 2009

[Skip to the end]

Saudi’s production falls as they work to regain control of price after the Great Masters Inventory Liquidation runs its course.

OPEC Oil Output Fell 1.5% in December, Survey Shows

by Diane Munro and Margot Habiby

Jan. 6 (Bloomberg) — Crude-oil production from the 13 OPEC members in December declined 475,000 barrels a day from November, the latest Bloomberg survey of producers, oil companies and industry analysts shows. Figures are in the thousands of barrels a day.

Opec Production
December 2008

Opec Country Dec Est. Nov. Output Monthly Change Nov. 1 Target Est. vs. Target Est. Cap. (@)
Algeria 1,330 1,360r -30 1,286 44 1,450
Angola 1,820 1,850 -30 1,801 19 2,000
Ecuador 500 500 0 493 7 500
Indonesia* 840 850 -10 900
Iran 3,850 3,820 30 3,618 232 4,100
Iraq* 2,345 2,320 25 2,500
Kuwait# 2,500 2,550 -50 2,399 101 2,650
Libya 1,690 1,710 -20 1,623 67 1,800
Nigeria 1,900 1,880 20 2,050 -150 2,500
Qatar 790 790 0 785 5 900
Saudi Arabia# 8,400 8,800r -400 8,477 -77 10,800
U.A.E 2,350 2,350 0 2,433 -83 2,800
Venezuela 2,320 2,330 -10 2,341 -21 2,500
Total OPEC-13 30,635 31,110r -475 35,400
Total OPEC-11* 27,450 27,940r -490 27,308 142 32,000

*Quotas effective Nov. 1, 2008. OPEC agreed at its Dec. 17 meeting in Algeria to cut its quota target by 2.463 million barrels a day from the previous level, to 24.845 million barrels daily from Jan. 1. The quota target excludes Iraq, which has no formal quota, and Indonesia which left OPEC at end-2008.

>   On Thu, Jan 8, 2009 at 9:56 AM, David wrote:
>   I honestly don’t like or trust a lot of the “World
>   Oil Demand” stats that many people look at.
>   I think perhaps the EIA/DOE figures compiled
>   below are most realistic, if not a bit lagged.
>   Seems to show steady decline in US/OECD,
>   rising China and flat/rising ME and rest. Wish
>   they had an India bucket to be frank, have
>   requested a few times already.

Thanks, still looks like the world is reasonably close to the edge, and any pickup in world economic activity could be problematic.

Saudi Production (Dec)


Posted in Articles, Oil | No Comments »

2009-01-09 EU News Highlights

Posted by WARREN MOSLER on 8th January 2009

[Skip to the end]


Trichet Sees ‘Significant’ Economic Worsening, II Magazine Says
European Confidence Drops to Record Low; Unemployment Increases
German Exports Drop 10.6% as Recession Hurts Orders
German Ministry Seeks $136 Billion Fund to Ease Company Credit
German bond sale’s fate signals trouble ahead

‘Bond failures’ are not all that uncommon in the eurozone and more of a debt management issue at this point.

However a rising deficit due to falling revenues and rising transfer payments as GDP weakens could cause the ability to fund to deteriorate rapidly.

Bank failures that require national government funding don’t help either, and the eurozone seems long overdue for multiple major bank failures.

German Builders See 2% Drop in Revenue in 2009, HDB Group Says
Steinmeier Casts Doubt on German Deficit Limit, Rundschau Says
Sarkozy Says France to Provide More Capital to Banks
Spain December Jobless Claims Rise as Economy Enters Recession
European Two-Year Government Notes Decline, Reversing Gains

German bond sale’s fate signals trouble ahead

by David Oakley

A German sovereign bond auction failed on Wednesday as investors shunned one of the most liquid and safe assets in the world in a warning for governments seeking to raise record amounts of debt to stimulate slowing economies.

The fate of the first eurozone bond auction of 2009 signals trouble ahead as governments around the world hope to issue an estimated $3,000bn in debt this year, three times more than in 2008.

The 10-year bonds failed to attract enough bids to reach the €6bn the German government wanted. Bids of €5.24bn, a cover of only 87 per cent, amounted to the second worst auction on record in terms of demand.

Such developments were rare before the credit crisis. Before the seven German bond auctions that failed last year, the last German bond auction to fail was in July 2000 after the dotcom crash.

Analysts said the vast amount of supply is deterring investors and a growing number of countries, including those with deep and mature bond markets, such as Germany, the UK and Italy, are struggling to attract buyers.

The Netherlands has seen bond auctions fail, the UK and Italy have been forced to offer investors higher yields to meet their auction targets, while Spain and Belgium have cancelled offerings because of a lack of demand.

The German finance agency admitted that investor appetite for government debt had waned, although insisted the auction was “not a disappointment”.

Meyrick Chapman, a UBS fixed-income strategist, said when a German bond auction failed it “does suggest there may be trouble ahead for other governments wanting to raise money in the debt markets. Before the financial crisis, German bond auctions just did not fail.”


Posted in Articles, Bonds, Germany, News Highlights | No Comments »

Credit card risks

Posted by WARREN MOSLER on 8th January 2009

[Skip to the end]

>   Matt writes;
>   …But as far as credit card debt, I think that
>   the negative reporting may be overblown by
>   debt doomsday types. Ive always suspected
>   so, and may finally have found the proof in a
>   column I read by Gene Epstein in Barrons back
>   in October. Excerpt: “…But according to a
>   source at, approximately
>   $400 billion of the nearly $1 trillion in
>   outstanding credit- card debt is paid down
>   completely each month, essentially used as a
>   short-term interest-free loan. More than $500
>   billion of the rest is owed by users who pay
>   somewhere between the full amount and the
>   minimum due. Only about 6% of the total is
>   owed by customers who pay only the
>   minimum.”
>   The $500B he identifies as carry over debt is
>   the real credit card debt (to me), and is
>   equivalent to about only 6 weeks of US retail
>   sales. It also probably includes much business
>   wholesale trade as many businesses are using
>   AMEX Corp Card and VISA Business for small
>   purchasing nowadays, often for the “rewards”
>   programs.
>   I think the government and media reports on
>   credit card debt are only taking a snapshot of
>   balances at a given time in a month, and as
>   monthly closing dates on the cards can vary
>   from one cardholder to another, and the cards
>   are continuously used throughout the month,
>   the number looks larger ($900B) than what I
>   think they are trying to track, which I think is
>   the $500B amount (true credit card “debt”).
>   $500B is about $1650 per capita. I dont think
>   this will be a much of a drag for the US
>   economy.
>   Perhaps this perspective will give you some
>   hope that the large stimulus package is going
>   to help improve the economy this year.


Posted in Email | No Comments »

India doing OK?

Posted by WARREN MOSLER on 8th January 2009

[Skip to the end]

Yes, if they keep up that much criticized deficit spending.

And the new regional ‘employer of last resort’ program helps as well.

Indian Economy to Grow About 7% This Fiscal Year

by Kartik Goyal

Jan 8 (Bloomberg) — India’s economy will grow about 7 percent in the 12 months ending March 31, Prime Minister Manmohan Singh said in Chennai today. “Despite the global economic downturn, the fundamentals of Indian economy continue to remain strong,” Singh said. “Much of India’s growth is internally driven and I expect we can maintain a strong pace of growth in the coming years.”


Posted in Articles, India | No Comments »

WWII Deficit Spending

Posted by WARREN MOSLER on 8th January 2009

[Skip to the end]

This is from ‘Full Employment and Price Stability’ under ‘Mandatory readings‘ at

Past Attempts at Government Sponsored Full Employment

With a private sector desire for H(nfa), and a government that fails to run a deficit large enough to accommodate that desire, the corresponding unemployment can be severe. It may eventually be reduced by a reduction in desired H(nfa) because of lower interest rates, or, as some contend, by falling wages. However, the time necessary to test this hypothesis is usually beyond human tolerance, and the pragmatic view of government employment arises.

For example, from 1931 to 1941 unemployment averaged well over 10% – the definition of a depression. It hit a high of 24.9% in 1933, and was still 14.6% as late as 1940. GNP reached a high of $203.6 (billions of 1958 dollars) in 1929; fell to a low of $141.5 in 1933, and by 1939, had crept up only to $209.4. Low interest rates were not enough to decrease desired H(nfa). Short term Treasury securities reached a high of just over 5% in May of 1929, were cut to the mid 3% range in November 1929 following the stock market crash, and were as low as about 0.5% by September 1931. Rates were increased to about 2.5% until May of 1932, and then remained well under 1% until 1948. Continuous low interest rates also did not seem to result in run-away asset prices. The Dow equity index price did not recover to its 1929 highs until 1958, the 1927 highs were not reached until 1946, and the low of 1930 was not surpassed until 1936.

In 1933, after several years of undesirable unemployment and depressed GNP, the Public Works Administration, the first public works program, was enacted. It was followed by the WPA in 1935. It is noteworthy that these programs did not come about until after several years of troubling unemployment, and fell short of solving the unemployment crisis and ending the depression. Work relief never reached more than 40% of the unemployed, and only 3 million of the 9 million unemployed participated in the WPA. The reason these programs were constrained was the reluctance to engage in government deficit spending. During the 1930′s, in spite of the high unemployment and depressed growth, budget balancing was never far from the forefront of political purpose. Belief in a balanced budget prevented government relief programs from ending the depression, and when Roosevelt honored his 1936 campaign pledge to balance the budget in 1937, the economy suffered a major setback with unemployment jumping back to 19.1% from a seven year low of 14.3%. Public works programs that were ‘paid for’ by other spending cuts or by tax increases could not reduce unemployment as there was never enough net government spending to accommodate desired H(nfa). The largest deficit of the 1930′s was 5.9% of GNP in 1934, and it was down to 0.1% of GNP by 1938. The U.S. was on a gold standard, and policy had to include managing the national gold supply. This led to various extremes such as suspending domestic convertibility in 1934, and making it illegal for domestics to own gold, as well as strong support for balancing the federal budget.

During WWII, a radically different approach was initiated. Government spending exceeded tax collections in 1942, 1943,1944, and 1945 by 14.5%, 31.1%, 23.6%, and 22.4% of GNP respectively. Unemployment was under 2% by 1943, and output increased from $209.4 (billions of 1958 dollars) to $337.1 by 1943. Prices were fixed, and government planning agents from the Office of Price Administration enacted rationing. Great effort was taken to ensure that rationing was perceived as equitable ensuring public support for the program. Patriotism kept Americans from black markets that may have otherwise drained resources needed for the war effort, and patriotism also became associated with nominal savings. The idea was to get desired H(nfa) up to the level of deficit spending in a low interest rate environment. In other words, hoarding of dollar denominated financial assets via government bond purchases was encouraged, allowing the government to purchase up to 60% of the real output without price competition from consumers. The desire of the American public to earn money and not spend it, which caused the unemployment of the previous decade, now dovetailed well with the public sector demands for war production, and unemployment was, for all practical purposes, eliminated.


Posted in Articles | 2 Comments »

2009-01-08 USER

Posted by WARREN MOSLER on 8th January 2009

[Skip to the end]

Initial Jobless Claims (Jan 3)

Survey 545K
Actual 467K
Prior 492K
Revised 491K


Continuing Claims (Dec 27)

Survey 4483K
Actual 4611K
Prior 4506K
Revised 4510K


Jobless Claims ALLX (Jan 3)


Posted in Daily | No Comments »