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Thursday, March 29, 2012

Brief Notes

Unfortunately the SC drama took up most of this week. The Medicaid/state coercion claims portion of yesterday's argument is being beautifully covered by Ann Althouse.

Economic stuff: GDP latest update, about the same. Four quarter growth average at 1.6%, which is hardly a strong basis for anything.

Initial claims at 359K SA, 4 wk moving average SA at 365K. But don't be misled - this is not an increase, but a result of revised seasonal adjustment factors. Really, we are still in the same range.

There's a Fed paper published on foreign investment influences on Treasury yields. I recommend it.

Yesterday's crude inventories report was a bit of a shock. Only increased production of propane held the overall 4 week supply measure up to -5.3% YoY. That is almost the same as the YTD YoY of -5.2%. There was a big build in commercial crude inventories, even with refineries running at a pretty decent 84.5% clip. We'll have to see how this plays out over the next few weeks, but:
Total products supplied over the last four-week period have averaged about 18.2 million barrels per day, down by 5.3 percent compared to the similar period last year. Over the last four weeks, motor gasoline product supplied has averaged 8.4 million barrels per day, down by 6.1 percent from the same period last year. Distillate fuel product supplied has averaged 3.5 million barrels per day over the last four weeks, down by 8.6 percent from the same period last year. Jet fuel product supplied is 3.3 percent lower over the last four weeks compared to the same four-week period last year.
Umm....Maybe my ideas on construction pace were a bit overoptimistic? The trucking reports, when they come in, won't be too good. So far this year -4.6% in January, +0.5% in February, cannot be too optimistic about March.

Four quarter growth average at 1.6%, which is hardly a strong basis for anything.

Au contraire!

It is a strong basis for mediocrity! ;)

Hey, I was just looking for an excuse to refer to "au" subliminally.

AU = Astronomical Units

It is handy for determining distances when total credit market debt owed is stacked in pennies. Past Pluto! Woohoo!

AU = Gold

Nothing says prosperity like digging up a rock and storing it in a bunker, lol.

Welcome to the au contrarian economy, lol. Sigh.
Mark, whatever you've been eating or drinking, I want some.

Rail was kind of bad too, this week. Maybe next month things will look better?
Debasing the dollar to satisfy The needs of the finance sector has limited benefit for labor and the domestic
economy. Labor here has fixed costs too high to compete
with cheaper overseas labor and destroying the dollar
has does not benefit an economy that imports most
of it's oil. The tax code and trade policies needed to be changed. No other way out.
Labor has fixed costs here to high to compete, and rather than address that issue directly, you propose to change everything BUT the actual problem. Are you running for CONgress, spork?
Actually, U.S. labor doesn't have a fixed-cost problem. The cost to have an employee or contractor do something for you has two components: hourly wage and the cost of the tools.

At current rates, we're increasingly competitive with Chinese labor because Chinese labor costs are rising and because China is perceived to be increasingly hostile toward foreign fixed investment (which raises the effective price of the tools). The fastest way to out-compete Chinese labor would be to lower the taxes imposed on fixed investment, such as changing to 100% first-day depreciation. That would also have the salutary effect of soaking up
a lot of cash in new investments, and so help prevent inflation.

I suppose there are two sectors of the U.S. labor market that are in terminal decline due to excessive fixed costs: Public and private unionized employees.
Neil - that much is definitely true.
Spork - the dollar will continue to be debased one way or another unless we can eventually shift our economy to producing much more of the goods we are consuming.

Eventually, if we all get poor we will consume less. I mean, it's going to come into balance one way or another. Naturally I am not in favor of spiralling to the bottom of the wage scale, nor can we afford to do so because of the tax revenues we need.

You can't raise wages without raising the pace of production.

Lowering taxes on production would help somewhat. Especially investment. The US is increasing capable of competing with mechanized/robotic production. For it to work we need to have appropriate policies in place to ensure an inexpensive and highly secure electricity grid (right now we're backpedaling), control the overall cost of energy (admin is trying to push that the wrong way), cut taxes on capital investment (cut the capital gains tax, permanently make some changes to favor capital investment), and cease the increasingly destructive range of the EPA.

Beyond that, you are always going to be better off letting wages wander. The responsiveness alone is a big benefit.

You cannot tariff your way out of this situation, although perhaps fighting against destructive competition can bring some gains.
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