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Thursday, June 28, 2012

Everything Day

Practically speaking, that is. Initial claims are rough. The official number for this week is 386K, but last week's number was revised up to 392K, perilously close to new recession levels. The four week moving average creeps ever higher on a like-to-like basis. 

I do not believe at this time that this claims number indicates that we fell through the ice - I think it reflects the disproportionate contribution of school system employment. The big question now is auto sales - if they stay high enough to keep inventory moving through and production up, then we skip through the summer. If not, the real weakness in the economy takes over.

The health care decision, if it is to be released this term, should come today. Scotusblog will cover it live - the best coverage around. 

Final US GDP Q1 was released. Not much in the way of surprises. Although real gross private domestic investment was low in the quarter, it increased. Also Gross Domestic Income came in at over 3% in comparison to GDP's 1.9%. However corporate profits after inventory valuation and capital consumption adjustments shifted sharply negative (Table 11), dropping by over 4%. Cash flow also went negative, dropping by over 5%. That should tell you all you need to know about why the second quarter economy has been slowing and claims are creeping up.

US growth is slowing and becoming more regionalized. The manufacturing surveys tell us that. Later today we will get Kansas. So far in June Philly was a recessionary shocker and Dallas was the best economic date of your life. Those should be the two extremes. The big fall in Chicago PMI at the beginning of the month makes the Kansas survey more important.

Housing is a bit of a help right now, although not much. Lord knows mortgage rates are a hefty economic stimulus. Anything below 4% is pretty much economic crack. We can only hope this does not end with us chewing each other's faces off in a drug-induced economic zombie attack.

The first day of the Euro summit to solve absolutely nothing is today. Presumably the real remaining question is what the ECB will do in response to what will come out of this summit. ECB has been pleading for action but won't get it, and you have to think they will act. Merkel has said "Nein!" Everyone else south is humming "Du, du hasst, du hasst mich" in response, although everyone north is quietly sending Germany love notes with hearts and flowers. Finland especially. If Merkel stands they will send die gnaedige Frau flowers and chocolates.

ECB could throw money into the banks to keep Spain and Italy alive. Optimism is not running high, and Spanish 10 year yields touched 7% again today in response.  Euro is probably weakening in response. German unemployment rose a tad last month and rose more this month - it is obvious that Europe is tipping into deeper recession, and the Euro is weakening. However Mr. Market will not be that enthused, because the more ECB dumps money into the banks, the more the risk retracts to the countries in question. Short yields are a huge problem for both Spain and Italy.

India is preparing to spend a lot of money on roads to try to boost growth. They don't have the money to spend, so the currency will probably continue to weaken. Also, the monsoon has been bad so far. If this continues India's economic and fiscal difficulties could mount rapidly.

Oh yeah, isn't the US AG supposed to get cited for contempt this week? Nothing like chaos to make an election season fun!

Lovely SC ruling for attacking investment: The highest court has now said they are completely ok with a tax bill that is open-ended, and scalable at the discretion of the sovereign. Obama will be remembered as the Canadian workman's best friend.
Economically speaking, today's HC ruling was a complete disaster.

Politically speaking it may be the only way forward.

However, this starts a fiscal and cultural war that will change the face of the US. The HC bill is not workable, and now the battle is thrown back in the political arena.
Congratulations and jubilations to us, we now have a poll tax. We owe the government $750 every year, no matter our income, unless we can convince the HHS bureaucracy that we are in "financial hardship". The bill is, of course, also waived if we buy HHS-approved insurance from an approved insurer. Who, I'm sure, will throw some lovely parties for their benefactors in Congress.

Of all the cockamamie ideas to dredge up from classical antiquity, I can't believe we've decided to bring back the poll tax!
Today should have been called "Fast and Furious Day." All this fast and furious activity. My goodness, Mr. Market, who's been rather more manic-depressive than usual, dropped into a funk, gulped down a huge dose of tranquilizers, and almost finished even for the day. Like being on a big roller coaster.

In the meantime the pundits are all parsing Justice Roberts' state of mind (is he INSANE?).

The remedy appears to be tossed into the laps of the citizenry. Can good sense sweep the nation or will Obama be re-elected and the Europeanism of the U.S.A. be completed?

Too darn much for an old geezer to keep up with. I am getting out my TEA Party shoes and signs, though.
With the Labor Dept., it's better to ask "What will last week's numbers look like next week?"
Of all the cockamamie ideas to dredge up from classical antiquity, I can't believe we've decided to bring back the poll tax!

Neil, I am in agreement.

Seems like Roberts, in deciding it is a tax, either missed that logical conclusion or was too chicken to rule as such (but dropped a couple hints to GOP'ers in hallway conversations).
I'm reading the opinion carefully, but on the face of it we have the largest expansion of federal power just about ever.

I strongly suspect that this generates a whoop-ass political war. Cultural and fiscal, not just ideological.

Change is painful for everyone, but we are faced with the pressing necessity of keeping SS alive and paying most benefits out to a generation that will be acutely dependent on them, plus keeping some form of Medicare alive.

Because the fiscal pressures are so extreme, the temptation to tax people for behavior is acute. I don't think our political union can survive this.
I'm inclined to think that this decision was the best that could be expected. The prevailing legal opinion for 70 years has been that Congress' power in the economic realm is absolute. The fact that everybody is waking up to the ramifications of that doesn't mean that the courts are going to just turn on a dime and start rediscovering property rights in the Constitution. Limiting the Commerce, General Welfare, and Necessary and Proper clauses takes a big chunk out of Progressive legal theory.

I think Roberts had no choice but to walk the tightrope this time.
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