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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 the 'Uncategorized' Category

Consumer credit

Posted by WARREN MOSLER on 7th May 2014

Keeps coming back to fiscal for me.

I see the year over year change going from up nicely to flattening/decelerating as the tax hikes, followed shortly after by the sequesters, took their toll. And with the federal deficit way down, that ‘spending more than income’ isn’t there to help offset the ever growing ‘demand leakages’, meaning we need that much more ‘borrowing to spend’ to grow, etc.

So far, with GDP tracking at about -.5 for q1 and +4.5 for q2, that’s about a +2% first half, down a lot from H2 2013, which I saw as higher than otherwise due to inventory building and ‘mysterious’ year end surges that had the appearance of spending ahead of expiring tax credits, etc.

So I see what’s happened (and worse) as consistent with my narrative, with the evidence looking more and more like the demand leakages may now be ‘winning the race.’

Which also explains the long bond coming down in yield??? ;)

Consumer Credit

Credit card debt is not building, a plus for consumer wealth perhaps but a definite minus for store sales. Consumer credit did expand by a sharp $17.5 billion in March but, as has been the case since the 2008 financial meltdown, the gain is centered almost entirely in non-revolving credit which continues to get a boost from strong vehicle sales and the government’s acquisition of school loans from private lenders. Revolving credit is barely showing any life, up $1.1 billion following a decline of $2.7 billion in February.

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Auto stabilizers reduce the deficit until growth goes negative causing them to reverse

Posted by WARREN MOSLER on 20th April 2014

(chart from Roger Mitchell)

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small business optimism index

Posted by WARREN MOSLER on 9th April 2014

The post weather ‘bounce’ didn’t even reverse the prior month’s drop:

There are signs of confidence in the small business optimism index which jumped 2.0 points to 93.4 to nearly reverse a 2.7 point downswing in February. The March gain is led by expectations for future sales and by plans to build inventories — both pointing to expectations of building strength. Of the 10 components, six are up in the month, two are unchanged, and only two are down. Unfortunately, of the two that are down one is hiring plans.

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March U.S. Auto Sales Were In Like A Lamb, Out Like A Lamb – Forbes

Posted by WARREN MOSLER on 31st March 2014

Not a lot of bounce back here yet:

March U.S. Auto Sales Were In Like A Lamb, Out Like A Lamb

By Jim Henry

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NFIB Small Business Optimism Index

Posted by WARREN MOSLER on 11th March 2014

Weather worse than expected.

This is a lesser indicator that only matters if it goes up…

NFIB Small Business Optimism Index

The small business optimism index, which had been on a rebound, fell sharply in February, down 2.7 points to 91.4. A weakening in sales expectations pulled the index down the most followed by economic expectations and hiring plans.Respondents continue to reduce inventories and are reporting no more than limited pricing power.

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Bernanke out visiting friends…

Posted by WARREN MOSLER on 4th March 2014

Plus airfare, hotel, meals, airport limo, etc. ;):

Bernanke received at least $250,000 for his appearance at the financial conference staged by National Bank of Abu Dhabi, the UAE’s largest bank, according to sources familiar the matter. NBAD did not announce the fee.

Because of Abu Dhabi’s oil wealth, state-controlled NBAD prospered during the global crisis caused by Lehman’s collapse, taking market share from hard-hit U.S. and European banks.

Bernanke’s speaking fee is similar to one received by his predecessor Alan Greenspan for an Abu Dhabi speaking engagement in 2008, the sources said.

Greenspan embarked on a series of lucrative speeches after he stepped down, and Bernanke now appears to be doing the same. He is scheduled to speak at an event in South Africa on Wednesday and in Houston on Friday.

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Strapped Scientists Abandon Research and Studentst

Posted by WARREN MOSLER on 2nd March 2014


Strapped Scientists Abandon Research and Students

Less money means less science, as shown by a Chronicle survey of more than 10,000 researchers.

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Business borrowing down 44% from Dec

Posted by WARREN MOSLER on 26th February 2014

Expiring tax cuts accelerated capex?

U.S. business borrowing for equipment rises in January: ELFA

Feb 25 (Reuters) — U.S. companies borrowed more in January to spend on capital investment, the Equipment Leasing and Finance Association (ELFA) said.

Companies signed up for $6 billion in new loans, leases and lines of credit last month, up 2 percent from a year earlier, but fell 44 percent from December, according to data from the ELFA.

“With fiscal pressures in Washington subsiding … and most major U.S. economic indicators showing positive signs, we are hopeful that these factors will help promote a favorable climate for continued investment in 2014 and beyond,” ELFA Chief Executive William Sutton said.

Washington-based ELFA, a trade association that reports economic activity for the $827 billion equipment finance sector, said credit approvals totaled 76.9 percent in January, down from 78.3 percent in December.

ELFA’s leasing and finance index measures the volume of commercial equipment financed in the United States. It is designed to complement the U.S. Commerce Department’s durable goods orders report, which it typically precedes by a few days.

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Portugal comments

Posted by WARREN MOSLER on 24th February 2014

From FT on Portugal, says it all:

The national statistics office noted worrying signs that domestic demand was contributing positively to growth in the last quarter for the first time since 2010. This may reflect the impact of previous cuts in public sector pay and pensions that were subsequently overturned by Portugals constitutional court. An over-reliance on the domestic market has been seen as one of Portugals structural weaknesses but exports are now driving the turnround.

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Dallas Fed chart (just weather)

Posted by WARREN MOSLER on 24th February 2014

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no income growth=no spending growth

Posted by WARREN MOSLER on 24th February 2014

CFOs signal fears of consumer spending slump

By Matt Clinch

February 20 (CNBC) — With wage rises failing to match the flickering signs of an upturn in the global economy, chief financial officers have told CNBC that a lack of consumer spending is a major fear for their companies.

CNBC asked 51 chief financial officers (CFO) from Europe and Asia who make up the CNBC CFO council to give their insight on the state of the world economy and conditions for doing business. Nearly half of the respondents ranked weakening consumer demand as their strongest concern for their business. No other risk factor even came close, with fears of a China slowdown receiving 16 percent for their highest ranked concern.

The results match a similar signal from CFOs in the America. In December, the U.S.-based members of the exclusive Global CFO Council ranked weakening consumer demand as one of biggest issues keeping them up at night.\

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G-20 delays making things worse until at least November

Posted by WARREN MOSLER on 23rd February 2014

The G-20 said it would “significantly raise global growth” without overtaxing national finance through measures to promote competition and increase investment, employment and trade.

As an initial step toward achieving the $2 trillion target, each country will present a comprehensive growth strategy to a summit of leaders scheduled for November in the Australian city of Brisbane.

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philly fed chart and details

Posted by WARREN MOSLER on 20th February 2014

Sending this around for another data point and as a reminder that the higher readings of a few months ago were used by the mainstream to support their growth forecasts.


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IP Chart

Posted by WARREN MOSLER on 14th February 2014

More downward revisions on the way, with expectations of a reversal when the weather issues subside.

But with the federal deficit probably south of 3%, which seems to be struggling to keep pace with the demand leakages, the income lost due to the reduced growth of sales/output/employment means there is that much less support for any post weather rebound in spending/GDP.

“But freezing temperatures boosted demand for heating last month, causing utilities production to jump 4.1 percent.”

Industrial Production

The manufacturing sector is losing traction-weather related or not. Overall industrial production fell 0.3 percent in January, following a 0.3 percent gain the month before. Analysts expected a 0.3 percent rise for the latest month.

Turning to major components, it was worse for manufacturing which dropped 0.8 percent after a 0.3 percent increase in December. The consensus projected a 0.1 percent increase for January. Atypically adverse weather helped the overall number from being weaker as utilities jumped 4.1 percent in January, following a 1.4 percent dip the prior month. Mining slipped 0.9 percent after gaining 1.8 percent.

Looking at detail for manufacturing, durables fell 0.8 percent in January, led down by a 5.0 percent drop in motor vehicles and parts. Nondurables declined 0.8 percent in January.

Manufacturing excluding motor vehicles decreased 0.5 percent in January, following a 0.3 percent rise in December.

Capacity utilization declined to 78.5 percent from 78.9 percent in December.

Today’s report adds to the argument that the first quarter will be sluggish. It also calls to attention as to whether the Fed will pause in its “measured steps” for tapering quantitative easing. But the Fed clearly will watch the next employment report before making that decision in mid-March.

The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.

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Big incentives likely as inventories of new vehicles pile up

Posted by WARREN MOSLER on 11th February 2014

Big incentives likely as inventories of new vehicles pile up

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GEI comments on incomes

Posted by WARREN MOSLER on 4th February 2014

Given this healthy economic growth, the US electorate should be thrilled happy to be part of one of the fastest growing developed economies.

Yet they are clearly less than thrilled with the economy, let alone the administration or their representatives in Congress. Why? With real household income stagnant and still below where it was in 2012, the electorates view of the economy differs substantially from these numbers.

Unlike their elected representatives, they have to deal with the real world problems of making ends meet while juggling debt loads at credit card rates. It is likely that they have a deep and abiding sense that either these numbers are a bureaucratic fiction, or (more troubling) they are benefiting someone else:

The headline unemployment numbers mask a major deformation of the work force with fewer people choosing to look for work and more being forced to accept multiple part time jobs. People on the street understand the difference between an increasing quantity of part-time work and the quality of full-time jobs.

Real per capita disposable income was down -0.85% during 2013. And to maintain the prior years standard of living, the household savings rate plunged 2.3%.

For many households (and especially the 18-35 demographic) the Affordable Care Act (aka ObamaCare) will result in increased net monthly outlays for health insurance.

The per capita numbers continue to mask an ongoing shift in income distribution: although the average per capita income data has grown some 3.3% since October 2008 (per the BEA), the median household income has shrunk some 7% over that same time span (per Sentier Research). The typical member of the electorate lives at the median, and they are not sharing the growth reported by the BEA.

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Car sales worse than expected

Posted by WARREN MOSLER on 3rd February 2014

I know, it was cold in January…

And the inventory to sales ratio isn’t too high based on November’s sales rate…

U.S. Light Vehicle Sales decrease to 15.1 million annual rate in January

By Bill McBride

Based on an estimate from WardsAuto, light vehicle sales were at a 15.14 million SAAR in January. That is down slightly from January 2013, and down 2.5% from the sales rate last month.

This was below the consensus forecast of 15.7 million SAAR (seasonally adjusted annual rate).

Full size image

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Jackson on high auto inventories

Posted by WARREN MOSLER on 30th January 2014

Slow down! We have too many cars: AutoNation CEO

Automakers should watch their bloated inventories even though 2014 seems like it will be a good year for car sales, AutoNation Chairman and CEO Mike Jackson told CNBC on Thursday.

The automakers have a “pretty bizarre” way of calculating inventories to justify these levels, he said in a “Squawk Box” interview. “But if you cut through the bogus calculations and look at dealer inventory for the Detroit 3, it’s over a 100-day supply. And it simply doesn’t need to be there.”

In response, Joe Hinrichs president of the Americas at Fordtold CNBC: “We have been cutting some production in the fourth quarter of last year and in the first quarter of this year on a couple of our product lines where we saw the inventory grow a little bit.”

But Hinrichs added, “The industry is a little different now. With our capacity running max out, we actually grow an inventory in the winter, come down in the spring and summer because we run our plants full all year round. In the old days when we had excess capacity, we’d take the plants down in the winter and work overtime in the spring/summer to supply to the demand.”

He added: “We’re watching it carefully, but I think we’re going to be OK.”

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Jan US auto sales news

Posted by WARREN MOSLER on 25th January 2014

With 15 days down they are looking for only minuscule growth of total vehicle sales for January, year over year, as the growth rate looks to have dropped to near 0.

And that was before stocks got shaky…

J.D. Power and LMC Automotive Report

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Wind power tax credit expiration

Posted by WARREN MOSLER on 22nd January 2014

Can the American Wind Energy Industry Survive Without the PTC?

Production tax credit expired after 2013 (renewed for a year in 2012). This was the first year that they added a provision extending the credit to any production started before 2014, in previous years they had to be completed by the year end. This caused a jump in new projects at year’s end.

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