the times they are a changin......

historic times that defy explanation...a world that has lost its rudder....adrift in the sea of the unknown.....with the 'experts' running the asylum.....

Dutch bonds just did something that we haven't seen in 499 years  Dutch 10-year government bond yields dropped below zero for the first time ever on Monday, making them the latest to join the negative yield club. The Netherlands' 10-year dipped by 0.08 percentage points to as low as -0.007%. It has fallen by about 30 basis points since the June Brexit vote. There's roughly $13 trillion of global negative-yielding debt now, according to data from Bank of America Merrill Lynch, cited by the Wall Street Journal on Sunday. By comparison, there was about $11 trillion ahead of the UK's vote on EU referendum. When a bond is negative yielding, it means investors get less back when the debt is due than what they pay for it today. The Dutch bond yields are the lowest the country has ever seen. Amazingly, there's nearly half a millennium of records to compare that against, as record keeping began in 1517. As a historical reference point, that's the same year that Marin Luther published his 95 Theses. You can see the history of the Dutch 10-year going back to 1517 in the chart, which was shared by Deutsche Bank's Jim Reid in his Monday note to clients.

a difficult time for retailers....

Macy’s Slashes Forecasts

Macy’s said its sales slump accelerated in the first quarter, dragging down earnings and prompting the retailer to cut its forecast for the year.
CEO Terry Lundgren said the company was experiencing "continued weakness in consumer spending levels for apparel and related categories," and noted that sales particularly slowed in mid-March
Shares of Macy's were getting hammered today after the company reported its fifth straight quarterly sales decline in its earnings report this morning.

Kohl’s Posts Surprise Sales Decline

Kohl’s posted a 87% drop in profit in the latest quarter and a surprise decline in sales, in the latest sign of distress by a department-store retailer.
Department store operator Kohl's reported a surprise drop in comparable sales and the first drop in net sales in six quarters as unseasonably cool weather hurt sales of spring wear amid a slump in demand for apparel. Sales at Kohl's stores open at least a year fell 3.9 percent in the first quarter. Analysts polled by research firm Consensus Metrix had expected sales to grow 0.4 percent.

Nordstrom Shares Slammed After Earnings

Department store operator Nordstrom Inc reported a drop in first-quarter sales at established stores and slashed profit expectations for the year, adding to the gloom in the department store sector.

J.C. Penney Reports 1Q Loss, Sales Drop

U.S. department store operator J.C. Penney joined rivals including Macy's and Kohl's in reporting a drop in sales in a quarter marked by a slump in apparel demand.
Sales at J.C. Penney stores open at least a year fell 0.4 percent in the first quarter ended April 30, compared with the 3.3 percent rise expected by analysts polled by research firm Consensus Metrix.
J.C. Penney's net loss narrowed to $68 million, or 22 cents per share, in the quarter, from $150 million, or 49 cents per share, a year earlier.
However, net sales fell 1.6 percent to $2.81 billion.

Tiffany Reports Steepest Sales Drop in Six Quarters

Tiffany reported its steepest sales drop in six quarters, missing analysts' estimates, as a strong dollar discouraged tourists from buying its high-end jewelry and ate into revenue from markets outside the United States.

The company also forecast a mid-single digit percentage fall in its full-year profit. Tiffany had earlier said it expected earnings to stay flat or fall by up to mid-single digit in percentage terms.

Sales at the jeweler's stores open for more than a year fell 10 percent in the Americas region in the first quarter ended April 30. Analysts on average had expected a 9.1 percent decline, according to research firm Consensus Metrix.

Sears Reports Bigger Loss, Exploring Options for Two Businesses

Sears Holdings reported a bigger net loss as sales fell and said it was exploring potential partnerships or other deals for its unit that houses the Kenmore, Craftsman and DieHard (KCD) brands and its Sears Home Services business.

Sears, controlled by CEO Eddie Lampert, has lost more than $8 billion over the last five years. The company has managed to post a profit just once in the last four years.

Net loss attributable to Sears' shareholders widened to $471 million, or $4.41 per share, in the first quarter ended April 30 from $303 million, or $2.85 per share, a year earlier.

Revenue fell 8.4 percent to $5.4 billion. Same-store sales fell 6.1 percent, mainly due to fewer Kmart and Sears mall-based stores in operation.

Abercrombie's Sales Fall for 13th Straight Quarter

Teen apparel retailer Abercrombie & Fitch's sales fell for the 13th straight quarter as customer traffic to its stores dropped, mainly in markets outside the United States.

Shares of the company, whose brands include Hollister and abercrombie kids, plunged 13 percent in premarket trading on Thursday.
Comparable sales at international stores open at least a year slumped 7 percent in the first quarter, surprising analysts, who had expected a 0.2 percent rise, according to research firm Consensus Metrix.
Same-stores sales fell 8 percent in the Abercrombie brand, a much bigger decline than the 0.6 percent expected by analysts.
Abercrombie's revenue fell 3.4 percent to $685.5 million in the quarter ended April 30, missing the average analyst estimate of $710.3 million, according to Thomson Reuters I/B/E/S.
The net loss attributable to the company narrowed to $39.6 million, or 59 cents per share, from $63.2 million, or 91 cents per share, a year earlier.

more velocity.....

Captain Kirk: Scotty, we need more velocity.....now!

Scotty: I'm on it captain......but I don't know how much more she can handle!

Growing debt levels, velocity of money plummeting, FOMC continuing accommodation....where are we headed? 

Looks like the final frontier.....

Sounds like an original Star Trek series episode!

Fighting Recessions With Hot Air

More Hot Air

We think both Duncan and Krugman are wrong. An economic boom, based on nothing but hot air (phony credit, with no real resources behind it), is fraudulent. It will never take us to real growth. Just the contrary. The best thing to do is to pop the bubble…and then pick up the pieces. Besides, it will pop whether we want it to or not.

Heck, we believe in magic as much as the next guy. But the magic act is wearing a little thin. The smoke is dispersing. The rabbits have disappeared. All the glam and sparkle, the shock and awe, the claptrap and hokum – they’re all giving way to economic reality.

We are beginning to see more clearly: the Fed’s theory is nothing but hot air. Now, its funny money is doing something even funnier than it imagined: the exact opposite of what the central planners intended. In yesterday’s Market Insight, Chris showed how the “velocity of money” is plummeting.

The “velocity” of M2. Actually, this is mainly telling us that the Fed has printed a huge amount of money and that surprise, surprise, it hasn’t produced much economic growth. When it begins to rise, it will mainly indicate that the demand to hold cash is declining as confidence in the currency is evaporating – when that happens, we will start to see wide-spread “price inflation” and even less real economic growth – click to enlarge.

This is serious. The velocity of money tracks how often each dollar is used to buy something in the economy. Falling velocity shows that consumers and business are pulling back… becoming more reluctant to spend and invest…downsizing… and holding onto dollars rather than spending them.

This has a similar effect as reducing the supply of money bidding for goods and services. Prices drop. Deflation, in other words.The bubble has developed a leak. The hot air is gushing out. Look out below…

http://www.zerohedge.com/news/2016-04-20/fighting-recessions-hot-air

what is the probability??

It is always a question of where the debt (leverage) rubber band is positioned - how much more stretch does it have until it snaps.....

There's a 100% Probability of a U.S. Recession Within a Year

http://www.bloomberg.com/news/articles/2016-03-04/jim-rogers-there-s-a-100-probability-of-a-u-s-recession-within-a-year

Rogers Holdings Chairman Jim Rogers is certain that the U.S. economy will be in recession in the next 12 months.
During an interview on Bloomberg TV with Guy Johnson, the famous investor said that there was a 100 percent probability that the U.S. economy would be in a downturn within one year.
"It's been seven years, eight years since we had the last recession in the U.S., and normally, historically we have them every four to seven years for whatever reason—at least we always have," he said. "It doesn't have to happen in four to seven years, but look at the debt, the debt is staggering."

Most Wall Street economists see a much smaller chance of a U.S. recession within this span, with odds typically below 33 percent.
Rogers was not specific on what could trigger a disorderly deleveraging process and recession but claimed that sluggish or slowing economies in China, Japan, and the euro zone mean that there are many possible channels of contagion.
The former partner of George Soros suggested that if investors focus on the right data, there are signs that the U.S. economy is already faltering.
"If you look at the … payroll tax figures [in the U.S.], you see they're already flat," he concluded. "Don't pay attention to the government numbers, pay attention to the real numbers."

In light of the economic turmoil envisioned by Rogers, he is long the U.S. dollar.
"It might even turn into a bubble," he said of the greenback. "I mean, if markets around the world are crashing, let's just say that scenario happens, everybody's going to put their money in the U.S. dollar—it could turn into a bubble."
Rogers added that a strengthening U.S. dollar has historically been negative for commodities—the asset class that the investor is best-known for.
While the yen is often designated as a risk-off currency, it won't benefit in the event of a flight to safety due to the massive, continued expansion of the Bank of Japan's balance sheet, according to Rogers, who said he exited his position in the yen last Friday.

new home sales trends

Economic trending data continues to reflect the rocky road of volatility that appears to be this extended cycles 'new normal'...

As the chart below shows, new home construction has plateaued and has been in decline ever since February of 2015 when it posted its post-recession peak of 545K. But what is more troubling is that the median price of new homes tumbled from 307,800 in September, or the highest in the series history to just $281,500, the lowest in 13 months!

The US consumer spending story

Continued 'unexpected' volatility appears to be the theme of this ongoing 'new normal' economic cycle......

NOT GOOD: The US consumer spending story everyone's been jazzed about is fizzling out 

American consumers are feeling increasingly pessimistic about their future spending.

One of the questions on the New York Fed's monthly Survey of Consumer Expectations asks respondents how they expect their household spending to change over the next year. This has been a very jumpy indicator in 2015, seesawing back and forth before dropping over the summer and hitting a new low in September.

As of September, the median household sees its spending growing just 3.18%, the lowest level in the survey's two year history. 

Consumers are a huge part of the American economy, with household consumption making up about 68% of GDP. The decisions consumers make about spending have a huge impact on the overall economy.

Many economists have been optimistic that the US consumer would be able to offset weakness overseas. That's what makes this survey particularly discouraging as the global economy slows.  

FNMA outlook

Economic Growth Outlook Less Upbeat for the Second Half of the Year

Katie Penote   August 24, 2015

WASHINGTON, DC – The first print of second quarter economic growth was weaker than expected, and its composition presents a less optimistic outlook for the rest of the year, according to Fannie Mae’s (FNMA/OTC) Economic & Strategic Research (ESR) Group. The federal government’s upward revision to first quarter growth was essentially offset in the second quarter, due in large part to a drop in nonresidential investment in equipment and structures. These factors, coupled with continued headwinds from a strong dollar and renewed declines in crude oil prices, are expected to continue to pose challenges in the current quarter, although consumer and government spending will likely provide support. Housing also is expected to contribute to 2015’s growth, with year-to-date main housing indicators staying well above year-ago levels.
“While consumer spending growth picked up as we expected in the second quarter of this year, other components disappointed,” said Fannie Mae Chief Economist Doug Duncan. “However, incoming data suggest some upward revisions may be in the cards for the second quarter. Furthermore, job creation remains steady, with full-time employment getting closer to pre-recession numbers, and household net worth continues its gradual rise. On balance, our full-year growth outlook remains unchanged from the prior forecast at 2.1 percent."
“We hold by our previous comments that income growth still needs to strengthen, particularly for younger households, in order to drive significant housing growth, but we are nonetheless seeing some positive improvements in the housing sector,” said Duncan. “Home sales have trended up and inventories are lean, supporting strong home price appreciation. That price growth, driven by laggard supply response, helps build equity for existing owners but is a headwind for first-time buyers. Given significant uncertainties from Greece and China, continued global monetary easing, and an expected slow pace of monetary tightening by the Fed, we anticipate mortgage rates to rise only gradually through next year, which should continue to help support mortgage demand.”

Visit the Economic & Strategic Research site at www.fanniemae.com to read the full August 2015 Economic Outlook, including the Economic Developments Commentary, Economic Forecast, Housing Forecast, and Multifamily Market Commentary. To receive e-mail updates with other housing market research from Fannie Mae's Economic & Strategic Research Group, please click here.

its all about the math....

the parallels between the functioning of the federal government and the public education system are becoming more and more apparent - both are dysfunctional and focused on bureaucracy growing....

Oh, I forgot...the Department of Education is a federal bureaucracy!  

Improving Education Could Pay Off In Economic Growth

August 18, 2015

Developing students who think critically about math could have national economic implications. 

Mathematics not only teaches students how to perform basic math functions, but also it also cultivates problem-solving, refines cognitive ability and develops reasoning skills. (which are important in the 'real world' that we live in....my comment)

A nation's future economic growth can be predicted by student performance at age 15 on an internationally standardized mathematics test, highlighting the need for quality mathematics instruction in U.S. schools. 

• Statistical analysis of student mathematic abilities are indicative of national economic growth.
• Performing 25 points higher than average on the international test correlated to an additional national output of more than $40 trillion in the next 20 years.
• The quality of education is imperative, not the number of years of schooling a student completes.

Inspiring a generation to become competent mathematicians will require a high caliber of teacher that cares more about the student′s quality of learning than yearly test scores.  Instead of focusing on student performance or early childhood education, policymakers would do well to shift attention to recruiting and retaining excellent teachers.  

Increasing requirements for teacher certification, offering enticing wages and competitive benefits, and allocating substantial time for professional development and lesson planning would all serve to provide students with a higher caliber of teachers necessary to improve the national mathematics competency. (not more administrators!!! my comment)

The incentive to improve U.S. mathematics education is clear. If poorly performing student scores could be raised to even 100 points below the international average, the additional output over the next 20 years would equal $72 trillion, roughly four times the annual U.S. GDP. The urgency to develop quality mathematics programs taught by high caliber teachers is necessary.

Source:  Robert Litan, "How Improving Education Could Pay Off In Economic Growth," Wall Street Journal. August 8, 2015.

10 year treasury yield....

With all of the economic indicators reflecting continuing volatile conditions it would appear that the 10 yield movement shall follow suit. 

economic volatility...

Ongoing economic volatility would appear to indicate an environment that continues to lack a solid foundation....cracks continue to show up and global head winds may (will)  create additional fissures within the system. 

Economic prognostication: Volatility is thy name...

quotes for consideration

The ill effects of an intrusive central government reverberate across our economic horizon resulting in less liberty for all...

Bastiat quotes for your consideration: 

When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.

Each of us has a natural right, from God, to defend his person, his liberty, and his property.

Government is the great fiction, through which everybody endeavors to live at the expense of everybody else.

Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.

Everyone wants to live at the expense of the state. They forget that the state wants to live at the expense of everyone.

Frederic Bastiat

Claude Frederic Bastiat was a French economist, legislator, and writer who championed private property, free markets, and limited government. Perhaps the main underlying theme of Bastiat's writings was that the free market was inherently a source of "economic harmony" among individuals, as long as government was restricted to the function of protecting the lives, liberties, and property of citizens from theft or aggression. To Bastiat, governmental coercion was only legitimate if it served "to guarantee security of person, liberty, and property rights, to cause justice to reign over all."

One of Bastiat's most important contributions to the field of economics was his admonition to the effect that good economic decisions can be made only by taking into account the "full picture." That is, economic truths should be arrived at by observing not only the immediate consequences – that is, benefits or liabilities – of an economic decision, but also by examining the long-term second and third consequences. Additionally, one must examine the decision's effect not only on a single group of people (say candlemakers) or a single industry (say candlemaking), but on all people and all industries in the society as a whole. As Bastiat famously put it, an economist must take into account both "What is Seen and What is Not Seen."

The New Mediocre

The New Mediocre - is this the future for our economy?

Michael Feroli, of JPMorgan economics has been way, way out in front of the story of a new structural slowdown for the U.S. Economy. 

On Surveillance today, he reiterated his call for a sub-2% run-rate for America.

And then he dropped a bombshell.

Feroli suggests that without technological progress, America's demographics and subdued productivity will drive "normal" GDP growth even lower. And the pace of job creation in the coming years will fall to around 75,000.

JPMorgan Economist: Get Ready for the Economy to Produce Way Fewer Jobs in the Future

http://www.bloomberg.com/news/articles/2015-06-09/jpmorgan-economist-get-ready-for-the-economy-to-produce-way-fewer-jobs-in-the-future

Caterpillar's amazing trend line...

Caterpillar has now reported an unprecedented 28 months of declining global retail sales, with the month of March seeing a 16% Y/Y collapse in China (after a 20% plunge in 2014 and a 24% plunge the year before), while Latin America has seen a 34% Y/Y crash, after a 21% drop the year before.

Or as far as the industrial and heavy equipment bellwether is concerned, the emerging markets (or BRICS) are in an unprecedented economic collapse.

And just to put the 28 months of declining retail sales in context, during the Great Financial Crisis, CAT suffered "only" 19 months of consecutive declines. As of March 2015, this number is now 28!

Or as a more truthful Tim Geithner would have said, "Welcome to the second Great Depression, Caterpillar!"

economic volatility remains....

U.S. housing starts dropped 17% in February, hurt by weather-related weakness.

U.S. retail sales dropped 0.6% in February, hit by weak demand at auto dealers.

The Government-Mortgage Complex

Instead of understanding the root cause we seem to be increasingly prone to 'fixing the problem' by just putting a band-aide on the symptom....and the 'fix' is always tied to a political agenda! 

“How we view the past affects what we do in the future,” Wallison writes. “If we have failed to correctly assess what caused the financial crisis, we will stumble blindly into another one in the future. And that, indeed, seems to be where we are headed.”

The Government-Mortgage Complex

Review: Peter Wallison’s ‘Hidden In Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again’

BY: Daniel Wiser February 8, 2015 

Peter Wallison noticed something odd on the Amazon.com page for his new book.
Immediately after its publication last month, a throng of online commenters gave it overwhelmingly negative reviews. They called his account of the 2008 financial crisis “not truthful,” “biased,” and “not accurate,” though none of the reviews indicated that they had actually read his book. More than 60 commenters rated it one star.
The publisher, Encounter Books, eventually figured out what was happening—a blogger, someone named Tim Howard, had encouraged readers of his website to assail the book on Amazon.
Wallison wryly noted in an op-ed for the Daily Caller that his “book got trolled by the Left” in the latest “expression of the intolerance and bigotry that has begun to infect much of the Left’s attitude toward any dissent.”
“Hidden In Plain Sight, for anyone who might care to actually read it, makes a data-based case that the financial crisis was caused by the government’s housing policy,” Wallison wrote. “Yes, this contradicts the Left’s desire to show the government as omni-competent and omniscient, but we have to understand why the 2008 financial catastrophe happened in order to avoid pursuing the same policies in the future. This issue needs a robust debate, with facts.”
Wallison, a fellow at the American Enterprise Institute and a former general counsel for the Treasury department during the Ronald Reagan administration, sets out to challenge a narrative that congealed almost immediately after the 2008 calamity. Rather than insufficient federal regulation of financial markets on Wall Street, the real culprit was the government’s own policies.
In 1992, the “Federal Housing Enterprises Financial Safety and Soundness Act” was enacted. The new law required Fannie Mae and Freddie Mac—mortgage giants known as “government-sponsored enterprises” (GSEs)—to guarantee more home loans for low-income borrowers. But the loan stipulations proved to be neither safe nor sound. As the GSEs’ regulator, the Department of Housing and Urban Development (HUD), gradually raised the low-income mortgage goal from 40 percent of all loans in 1996 to 56 percent by 2008, Fannie and Freddie were forced to drastically lower their standards.
The GSEs began backing mortgages with down payments of less than 5 percent for borrowers with weak credit histories. Private lenders such as Countrywide Financial Corporation saw the market opportunity for selling risky “subprime” loans to the GSEs and profited handsomely. The contagion of loose lending standards then spread to the wider market as Countrywide and other private firms began to package their own risky loans in mortgage-backed securities. Yet the government remained the principal guarantor. By 2008, federal agencies were exposed to three-fourths of the subprime loans in the market, with Fannie and Freddie accounting for most of them.
Market watchers were shocked when these mortgages defaulted in large numbers in 2008 and depressed home prices by 30 to 40 percent. Perhaps they would not have been if Fannie and Freddie had publicly disclosed that 22 million of the mortgages the GSEs underwrote were, in fact, subprime loans—not prime ones. The Securities and Exchange Commission (SEC) sued former Fannie and Freddie executives in 2011 for allegedly misrepresenting the nature of their loans; the suit is still pending.
Barack Obama showed no inclination after his 2008 election to investigate the government’s disastrous housing policies. Instead, he signed the “Dodd-Frank Wall Street Reform and Consumer Protection Act” into law in July 2010—which passed the House without a single Republican vote and the Senate with just three GOP votes—and blamed the crisis on the financial industry. “Because of this law, the American people will never again be asked to foot the bill for Wall Street’s mistakes,” Obama declared at the signing ceremony for the act. “There will be no more tax-funded bailouts—period.”
Whether Dodd-Frank will actually prevent another financial catastrophe or not—and the evidence that it would is dubious—the law essentially exonerated the GSEs and the affordable-housing goals despite their central role in the crisis. Congress didn’t even bother to wait for the results from its own Financial Crisis Inquiry Commission (FCIC), which issued its report six months after the law passed.
Wallison was the lone dissenter on the FCIC to place the blame squarely on government-housing policies for the crisis. And he is still waging a lonely fight. Journalists, politicians, and activists were all captured by the Left’s narrative of insatiable greed on Wall Street and inadequate regulation, and they never looked back after Dodd-Frank.
The most revealing aspect of Wallison’s analysis is his discussion of the “government-mortgage complex.” This is the web of realtors, homebuilders, mortgage lenders, community activists, sympathetic lawmakers, and corroborative think tanks that provided the real impetus for the affordable-housing goals.
Prominent Democrats including James Johnson (a well-known political operative and former Fannie chairman) and Andrew Cuomo (HUD secretary during the Clinton administration and now governor of New York) advocated for the loans to low-income borrowers as a means of maintaining congressional support for the GSEs and preserving their plans for expansion. Democratic lawmakers such as Reps. Nancy Pelosi (D., Calif.) and Barney Frank (D., Mass.) were only too happy to champion the goals as they cashed in hundreds of thousands of dollars in campaign checks from the real estate, home building, and bank lending industries. And think tanks such as the Urban Institute pushed Fannie and Freddie to serve even more low-income homebuyers as it donated to Democrats and collected government contracts worth millions. What the Left called an altruistic concern for low-income individuals really became one of self-interest.
Wallison believes the same lobby is currently creating the conditions for another future crisis. Mel Watt, director of the Federal Housing Finance Agency (FHFA)—now the regulator of the GSEs—announced in December that Fannie and Freddie would again back loans with down payments as low as 3 percent, but without abandoning “safe and sound lending practices” (language borrowed from the 1992 goals). It should come as no surprise that Watt garnered thousands in campaign contributions from the real estate and lending industries when he was a Democratic congressman for North Carolina.
Obama also extoled a cut last month to annual premiums on mortgages insured by the Federal Housing Administration (FHA)—loans that are typically even riskier than those guaranteed by the GSEs and have required sizable bailouts before. Lastly, six federal agencies in October issued the final definition for a “qualified residential mortgage”—intended to be the new gold standard for a prime mortgage loan—as required under Dodd-Frank. However, they decided upon a definition so weak that it lacked any down payment or credit requirements.
“How we view the past affects what we do in the future,” Wallison writes. “If we have failed to correctly assess what caused the financial crisis, we will stumble blindly into another one in the future. And that, indeed, seems to be where we are headed.”
For some readers, Wallison will seem at times to venture into an uncomfortable level of technical detail in his attempt to present a comprehensive account of the financial crisis—but no one can fault him for a lack of data to back his assertions. His book is meticulously researched and forwards an alternative narrative of the crisis that the current administration finds politically inconvenient. Above all, Wallison’s book makes the case that acting upon the lessons of the past first requires understanding what those lessons really are.

The Depression That Was Fixed by Doing Nothing

The often forgotten 1920-21 economic crisis suggests that sometimes the best stimulus is none at all.

(for your pondering enjoyment.....and something to think about as we continue to slide (are aggressively pushed!) into more and more government involvement in our daily lives...)

By James Grant

Jan. 2, 2015 

To combat the Great Recession and its long-lingering aftermath, leading central banks have pulled some $10 trillion out of thin air. Governments of the world’s principal economies have rung up almost $20 trillion in deficit spending. We often hear that the authorities have done too little. Perhaps they have done too much.
Not so long ago, the authorities did hardly anything. In response to the severe, little-known economic slump of the early 1920s, they virtually sat on their hands. It is an often forgotten episode that suggests the potential for constructive federal inaction—and underscores the healing power of Adam Smith ’s invisible hand.
Beginning in January 1920, something much worse than a recession blighted the world. The U.S. suffered the steepest plunge in wholesale prices in its history (not even eclipsed by the Great Depression), as well as a 31.6% drop in industrial production and a 46.6% fall in the Dow Jones Industrial Average. Unemployment spiked, and corporate profits plunged.
What to do? “Nothing” was the substantive response of the successive administrations of Woodrow Wilson and Warren G. Harding. Well, not quite nothing. Rather, they did what few 21st-century policy makers would have dared: They balanced the federal budget and—via the still wet-behind-the-ears Federal Reserve—raised interest rates rather than lowering them. Curiously, the depression ran its course. Eighteen months elapsed from business-cycle peak to business-cycle trough—following which the 1920s roared.
The adage that “the past is a foreign country” is especially apt in economics. In 1920, “macroeconomics” had yet to be invented. People spoke of prosperity and depression but not of a national economy. Still less did they identify an organic whole for the government to manage. Intervention came later; by 1929, central bankers had begun to dabble in the technique of price-level “stabilization.” After the crash, President Herbert Hoover famously pressed employers not to cut wages.Laissez faire had its last hurrah in 1921. In the 1920 Republican Party platform, the only comment on “national economy” had to do with the stewardship of the federal finances.
Borrowing and interest-rate suppression during World War I had fostered a postwar boom. Imbibing the inflationary ether, Harry Truman, then in his mid-30s, opened a new haberdashery in Kansas City. General Motorsbuilt the world’s largest headquarters building in Detroit. National City Bank , forerunner to today’s Citibank , overexpanded in Cuba.
The sky took its time in falling. A belated monetary tightening compounded the hardship of plunging prices—a combination that battered bankers, laborers, farmers, corporate titans and small businesspeople alike. By the close of 1920, Billy Durant, the flamboyant chief of GM, was broke and jobless. A year and a half later, the future 33rd president of the U.S. and his haberdashery partner were out of business, and the mighty City Bank was nursing its self-inflicted wounds in Cuba.
All this made 1921 a grim time. There had been a flu pandemic and a Red Scare. Labor and management were at each other’s throats. Prohibition had closed the bars and taverns (or driven them underground). Someone had fixed the 1919 World Series. And the Federal Reserve, determined to protect the purchasing power of the gold dollar, actually raised interest rates in the face of collapsing business activity—to as much as 8% in 1920. Without a federal safety net, people got by on savings, wits or charity—or they didn’t get by.
In the absence of anything resembling government stimulus, a modern economist may wonder how the depression of 1920-21 ever ended. Oddly enough, deflation turned out to be a tonic. Prices—and, critically, wages too—were allowed to fall, and they fell far enough to entice consumers, employers and investors to part with their money. Europeans, noticing that America was on the bargain counter, shipped their gold across the Atlantic, where it swelled the depression-shrunken U.S. money supply. Shares of profitable and well-financed American companies changed hands at giveaway valuations.
Of course, the year-and-a-half depression must have seemed interminable for all who were jobless or destitute. It was, however, a great deal shorter than the 43 months of the Great Depression of 1929-33. Then too, the 1922 recovery would bring tears of envy to today’s central bankers and policy makers: Passenger-car production shot up by 63%, for instance, and the Dow jumped by 21.5%. “From practically all angles,” this newspaper judged in a New Year’s Day 1923 retrospective, “1922 can be recorded as the renaissance of prosperity.”
In 2008, as Lehman Brothers toppled, the Great Depression monopolized the market on historical analogies. To avoid a recurrence of the 1930s, officials declared, the U.S. had to knock down interest rates, manipulate stock prices to go higher, repave the highways and trade in the clunkers.
The forgotten depression teaches a very different lesson. Sometimes the best stimulus is none at all.
—Mr. Grant is the author of “The Forgotten Depression: 1921: The Crash That Cured Itself.”
http://www.wsj.com/articles/the-depression-that-was-fixed-by-doing-nothing-1420212315?mod=WSJ_hp_RightTopStories

more and more government intervention means less and less freedom and economic progress.....

but the 'progressives' (ie: socialists et al) believe just the opposite, yet they do not look at the reality of their 'thinking'.....and the actual real-life results of their so called progressive agenda: less freedom and liberty!

What's the Best Country for Business?

December 30, 2014

Forbes recently released its list of the best countries for business, and the United States has found itself far down the list. Kurt Badenhausen reports that America fell four spots this year, dropping to 18th place. While the country was second on the list in 2009, it has declined every year since.

Why the decline? Badenhausen offers a number of reasons:

• The U.S. government has expanded in size, bringing with it a host of new regulations in the health care and finance industries.
• Since 2009, there have been 130 new major federal regulations for starting businesses, costing $60 billion annually.
• For seven years in a row, the United States has dropped in the "economic freedom" rankings, as compiled by the Heritage Foundation, and its "monetary freedom" ranking is eighty-first out of 146 countries.
• America's corporate tax rates are the highest in the developed world, and the tax system is incredibly complex. The World Bank ranks the U.S. corporate tax system forty-third among 146 nations.

Which nation topped the Forbes list? Denmark. Badenhausen explains that its few regulations make it easy -- and relatively inexpensive -- to start new businesses in the country. Following Denmark and rounding out the top 10 were Hong Kong, New Zealand, Ireland, Sweden, Canada, Norway, Singapore, Switzerland and Finland.

Source: Kurt Badenhausen, "U.S. Slides Again As Denmark Tops Forbes' Best Countries For Business," Forbes.com, December 17, 2014.

proliferation of laws, rules, and regulations...

Liberty and freedom require effort, sacrifice, honor and a people with a strong moral character.

“Only a virtuous people are capable of freedom. As nations become more corrupt and vicious, they have more need of masters.”-Benjamin Franklin

Historian Tacitus noted, as Rome became more and more corrupt, the number of laws grew rapidly. The Roman aristocracy, through corruption and thievery achieved lofty status in Roman society. Senators and wealthy knights engaged in extensive practices of conspicuous consumption, creating palatial town houses and monumental “art villas” to demonstrate their high rank in society. The peasants sank into poverty, while being satiated with bread and circuses. And it was all done legally, just as it is being done legally today by our beloved aristocracy and their minions.

“The more corrupt the state, the more numerous the laws.” – Tacitus – The Annals of Imperial Rome

Has the proliferation of laws, rules, and regulations over the last century made us freer, safer and less corrupt?

(this is truly an amazing graphic.....)

We live in a warfare/welfare surveillance state built on a foundation of debt, consumerism, and delusion, with no tears. We’ve learned to love our servitude.

http://www.zerohedge.com/news/2014-11-10/bread-circuses-bombs-decline-american-empire-part-2

Yesterday's FOMC Statement

The FOMC voted to leave the Fed's target interest rate unchanged at 0.00% to 0.25% for the 49th consecutive meeting yesterday. 

They did, in fact, announce the end of the third round of quantitative easing although they will continue to reinvest the cash-flows from the S.O.M.A. 

All told, the Fed has now increased its balance sheet through three rounds of quantitative easing by $3.7 trillion, from 6.2% of GDP to 25.7% (see chart).

(The Market Today ONLINE)

A very interesting data set....

starts and permits - September 2014

Some interesting data sets regarding housing...can anyone say 'continued volatility' with multifamily taking the lead...

U.S. housing starts increased 6.3% in September, driven primarily by multifamily construction.