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