First Year-Over-Year Consumer Price Decline in Half a Century

The effects of Con economic policies continue to roll in.  This morning, it was reported that consumer prices dipped again in March.  That means that inflation over the past year fell at the highest rate in over 50 years.  Clearly, the effects of large-scale layoffs, record foreclosures and a worsening recession continue to be felt.  Long-term falling inflation numbers constitutes deflation.  It’s a horrible economic cycle, as the Japanese of the 1990s and 2000s can attest.  The biggest deflationary period on record was the 1st Republican Great Depression.  It remains to be seen whether we’re in the midst of the 2nd.

I wanted to point out once again the absurdity of the corporate media repeating numbers of inflation vs. so-called “core” inflation.  “Core” inflation takes out more volatile products like energy and food.  It is somehow supposed to give economists a better picture of how the economy is performing.  Unfortunately, the vast majority of Americans, who are in the middle- and lower-class socio-economic bins, actually have to pay for energy and gas on a somewhat regular basis.  We can’t really exclude food from our weekly and monthly budgets.  It’s sort of a necessity.  Thus, every wild swing in food prices is keenly felt by most Americans.  Taking it out of the inflation calculation might work in a theoretical sense, but it doesn’t make any sense in the real world.

As most of us in the reality-based community are aware, the spending authorized in Obama’s recovery and reinvestment plan is designed to at least ease the deflationary spiral we’re caught in.  More preferable would be a reversal of deflation – getting an economic expansion underway.  I personally don’t think the Obama spending was enough to get an expansion going.  I think additional government stimulus will be needed.  Nobody seems to really want to address the fact that Americans lived way beyond their means for decades.  Even $700 billion in stimulus spending won’t change the impacts of lenders tightening their lending policies and credit markets remaining frozen, to say nothing of 6 million plus lost jobs.  No, we won’t see the end of this recession any time soon.  The Cons weakened our economic fundamentals too much for that to happen.  Will the spending and its effects be enough to establish a bottom to the crisis?  I hope so.   I think an important question is how long will we be stuck at that bottom.

Interest Rates, Inflation, Housing Starts and OPEC

The Federal Reserve cut its federal funds rate to a record low yesterday: it will hover between 0% and 0.25% for the forseeable future.  I don’t think this action will do anything very meaningful since there was very little room downward for rates to move anyway.  The Fed has cut the rate for a solid year and a half, which followed a steady rise in rates in an attempt to recover from “Bubbles” Greenspan’s rate cuts in the firt half of this decade.  Bernanke’s current approach looks too similar to Greenspan’s for me to have much confidence that it will manifest it’s supposed intended response: a rise in economic activity by a majority of Americans.  The last thing our economy needs right now is for another bubble to grow and pop.

Consumer prices in November fell by a record amount (don’t you love all the records the Republican economy is setting?).  Prices fell 1.7 percent, surpassing the previous record decline of 1 percent set in October. It was the largest one-month decline dating to February 1947.  Part of it really is good news: energy prices were the main driver, which means some money is freed back up to pay for other goods and services.  If prices continue to fall, we’ll see how devastating deflation can be.  The early signs aren’t good: companies that saw their profits slipping fired workers instead of taking a hit; workers (consumers) haven’t seen a real increase in wages in 20+ years, they’re carrying massive debt on their credit cards, and they tapped all the equity on their homes, which means they have no more money to spend; fewer sales mean fewer profits which means more fired workers.  Fewer employed consumers means less buying.  And so on.  Compounding all of this more recently was the 2005 Bankruptcy Bill, which mandated that borrowers pay off their credit cards before their mortgages, which led to more foreclosures than those just from the sub-prime lending fiasco.  Put all of this together and the picture moving forward isn’t pretty.  That’s why it will be necessary for President-elect Obama, as well as state and local officials, to initiate and sustain projects that will re-employ workers.  That’s the only way out of this mess.

The Commerce Department reported last Friday that retail sales dropped by 1.8 percent in November. The decline was the fifth straight monthly drop, a record stretch of weakness.

In other economic news, the Commerce Department reported that construction of new homes fell in November by 18.9 percent, the biggest drop in a quarter-century. The steep decline pushed construction down to a seasonally adjusted annual rate of 625,000 homes, the slowest pace on records dating to 1959.  The Cons goal has been to make American life just like it used to be.  How’s that looking now?  Are home sales at 1959 levels a good thing?  From the article: “Builders continue to be discouraged by the prospects of a housing turnaround amid what’s likely to be the worst recession in decades, spurring rising unemployment and foreclosures.”  Things aren’t likely to change any time soon.

Keep in mind that Bush’s Treasury Department has largely wasted $300 billion by giving it to banks so they can buy up their competition.  No bad assets were taken care of, no jobs were created.  The economy will be the worst since the Great Depression and the “Compassionate Con-servative”, who has utilized the most expansive definition of executive power in our history, does nothing.  This will be a good lesson for Americans to learn: we can take action early on in a crisis and pay a little bit or we can delay action until the crisis grows out of control and pay a whole lot more.  Most Americans will end up paying a very high price for Bush’s actions.

Finally, in a move that should shock absolutely no one, OPEC decided to cut their production by 2.2 million barrels per day.  OPEC decided just a short time ago to decrease output by 2 million barrels per day.  So since oil has backed of its speculation-fueled record high price in July, OPEC has cut production of oil by 4.2 million barrels per day.  That’s a very significant cut: it’s 1/6th its total production.  Moving forward, America needs to promote hybrid and all-electric vehicles.  OPEC countries have no love for the U.S. and we’ve transferred too many billions of dollars to them as it is.  If we as a country can make oil more irrelevant, we should do so.  Our security and the state of our climate would benefit from such moves.

Economic News: Bad and Worse

Wall St. continues its free fall, with the Dow falling over 500 points today after falling 370 points yesterday.  Indices are at the same level as they were in the fall of 2003.  Retirement accounts have lost $2 Trillion in value.  The problem?  Despite the approval of the Bush Bailout by Congress last Friday, no one has any confidence in anyone else.  Banks still refuse to lend to one another or to credit-worthy customers.  As I and others stated last week, the Bush Bailout didn’t address the fundamental problems in the economy.  More and more people recognize that and are reacting to it.

They’re also reacting to the realization that the Bush administration’s refusal to do anything about the housing bubble for over two years spread tons of bad debt and risk around to world banks.  So the world is staring a deep recession in the face because the Bushies decided they’d rather wait until America was in debt past its eyeballs before proposing something.

The Federal Reserve is offering to buy up another $300 billion of loans from banks, without collateral of course, to unfreeze credit markets.  How are they going to pay for that?  By borrowing money from the banks.  By printing more money.  Printing more money, by the way, increases inflation, which was at 5.4% last I checked (and that’s a b.s. low-ball calculation by economists who want to pretend the economy is doing better than it really is).  In an era of stagnant incomes and rising unemployment, higher inflation will simply wreck the middle class’ ability to stay afloat.

The economy has been running on credit, as everyone should be well aware of by now.  First in the 1980s and 1990s with credit cards.  Then in the 2000s with home equity.  Now that credit is being taken away in a flash.  What’s left has two distinct faces: consumer borrowing is down for the first time since 1998.  While it’s good that people are borrowing less, it also means they’re going to spend less.  After all, incomes after inflation haven’t increased in years.  Consumers without credit will have no money to spend unless one of two things happen: incomes increase (the better solution) or credit flows again (the worse option).  Raising incomes will put our economy back onto the path of health again in a meaningful way.

Oh, here’s the worse economic news.  Foreclosures were running at record rates for the past 12 months or so.  Well, it turns out that the government uses numbers from RealtyTrac.  So good, so far?  Well, RealtyTrac hasn’t kept track of foreclosures in 900 rural counties across the United States.  Here’s a choice piece of the article:

But in West Virginia last year, it [RealtyTrac] counted fewer than 500 foreclosure notices. New federal statistics counted 12,000 notices in the state, since the start of 2007.

Heck, that’s only 24 times as bad.  Who’s counting?  Thankfully, a Democratic Senator in July co-sponsored the Foreclosure Prevention Act, which Congress passed in July. The bill required the Department of Housing and Urban Development to measure foreclosure rates in each state.

So amid stagnant wages, rising unemployment, rising inflation and worse foreclosure numbers than have been reported in two years, the Republicans have done a pretty good job of wrecking America’s economy.  Their pursuit of making the richest Americans uber-rich has affected millions of good, hard-working Americans negatively.  That’s the reason Barack Obama is leading John McCain by double digits in polls and is nearing a blowout in the electoral college numbers.  That’s the reason why John McCain and Sarah Palin are inciting their supporters with hate speech.

More Bad Economic News: 9/17/08

How bad are things going to get? Where is the bottom to any of the markets? I don’t think we’re there yet, and that could be the worst news yet. August saw a 6.2% drop in housing starts, dropping to an annual rate of 630,000 units. That number is the smallest since 1991. Construction activity is 33% lower than it was a year ago. And yet Republican John McCain thinks our economic fundamentals are strong? It’s anything but for the vast majority of us. How is he going to fix the economy if he can’t see the problems with it in the first place? The next few months shouldn’t be any better as building permits fell 8.9% last month too.

Gone unreported so far, manufacturing has also taken a hit this year.  The Empire State Manufacturing index has been negative for nearly a year.  Also, industrial production has grown increasingly negative all this year.  industrial capacity is being utilized at levels last seen in late 2005, down consistently since early 2007.  Where are people going to get jobs if overall production is down?  Businesses wait until there is demand to increase their worker numbers.  We’ll be in the doldrums, at best, for some time to come.

The housing problems have, as we all know now, led to the biggest restructuring of the U.S. finance sector since the Great Depression. Bear Stearns was bailed out in March. Lehman is being piece-mealed for peanuts. Fannie Mae and Freddie Mac were brought back under government control, contrary to the belief of Republican Sarah Palin, who thought they already were (see my above comment regarding John McCain). Oops. Merrill Lynch was bought for pennies on the dollar. And now insurance giant AIG is getting a bridge loan from the Federal Reserve. Wait … doesn’t that mean that we’ve just nationalized another part of the financial system?  Where are the Republican cries for capitalism and free markets? The Fed also decided yesterday to keep interest rates steady at 2%, keeping ridiculous amounts of cash flowing through the system. Is it really any wonder why inflation has been steadily growing this year?

The government is slowly starting to do something about the situation. What’s depressing is they didn’t do anything when the only news was sub-prime mortgage problems. Once prime mortgages started failing and housing prices started falling due to last year’s sub-prime foreclosures, the big, unregulated financial giants started writing their assets down. They had been gambling big time with people’s mortgages, trying to create profit where they shouldn’t have. They lost on their gambles and now Americans are losing their homes. Now that the big houses are discovering their assets are wroth far less than what they’ve been reporting, Wall St. has noticed. Following Monday’s 500 point DJIA drop, the Dow is down over 300 more points today. One year ago, the Dow sat at 14,000. Now, it’s at 10,750. And now, finally, the Republican’s government is doing something about it. Not when regular Americans were starting to lose their homes a year ago, but when millionaires and billionaires are seeing their portfolios shrink.

These problems were accurately predicted by more than a few people as far back as five years ago. Corrective action could have taken place even then. But greed was rampant and rich people convinced themselves that they could write new rules for the system. Ideologues like George Bush and John McCain keep trying to convince Americans that everything is fine and under control. It was their failed economic policies that got us into this mess. There is no way they’ll get us out of it.

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[Update]: I guess if the FDIC runs out of money, that’s a sign of economic fundamentals’ strength, correct?  It’s a good thing no one tried to help those sub-prime mortgage owners renegotiate their mortgages.  I’m sure they’re learning their lessons now…

Corporate Media Cheers Slightly Less Worse Economic News

Initial inflation numbers are out for August.  I’ve argued for years that the focus should be on the larger inflation numbers, the one that includes food and energy prices since real people have to pay for them.  For the first time that I can remember, a corporate media article writing about inflation spends more time on that number than the core inflation number.  This demonstrates to me that the corporate media will present whatever numbers it thinks will support their “economy is good” story.  I’ve always concentrated on the larger inflation number, and this post will be no different.

For the first time in two years, inflation edged slightly down in August, compared to last year, by 0.1%.  Core inflation was up 0.2%.  Fuel price declines were the reason the larger inflation number was down.  Everything else is up.  And the only reason fuel prices are down is Congress’ threat to initiate regulation of speculators’ actions.  Huh.  Markets without responsible oversight chase down profits to an extreme and its real Americans that suffer.  Republican John McCain realizes how upset Americans are and now wants to introduce more regulation.   Riiiiight.

Buried in the news story above is very bad news for workers and the economy.  Wages for most of us dropped 2.5% in August versus last August.  So the majority of Americans have 2.5% less purchasing power than last year.  And that’s if they have a job.  Unemployment (calculated too low) stands at 5.9%.  And the wage drop isn’t an isolated incident.  Wages have decreased for 11 straight months now.  And Republican John McCain spent the last week talking about how the fundamentals of the economy are strong.  Which fundamental is he talking about?

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Here is some additional detail about those unemployment numbers:

When the unemployment rate for women went from 4.6 percent in July to 5.3 percent in August, it was the largest one-month spike in the jobless rate for women in more than 33 years.

Black women were hit even harder, as their unemployment rate jumped 21 percent, from 7.5 percent in July to 9.1 percent in August.

Among single mothers and women with families, unemployment climbed to 9.6 percent in August — the highest level in 15 years.

Economy Is Bad; Elitist McCains & Palins Don’t Care

We’ve seen nothing but bad economic news for the better part of a year or more now. The housing market is collapsing, foreclosures continue to set records, inflation is at 20-year highs, wages haven’t gone up for the majority of Americans in 8 years, now unemployment is once again more than 6% and I’m probably forgetting some measures. Who brought us this horrible economy? Republicans! This is what deregulation and tax cuts for the rich produce. It happened in the late 1980′s, early 1990′s after Reagan and Bush I wrecked it and it’s happening now that Bush II has screwed things up for 7 years.

What issue did McCain not substantively address during his acceptance speech last night? The economy. Do you know why? Because he and his rich, elitist pals are doing just fine. They can absorb 9% inflation because their incomes have increased at a higher rate in the past seven years, unlike 99% of the rest of Americans. They’re not losing their jobs or their houses. Cindy McCain wore $300,000 outfits to the RNC. Sarah Palin has her choice of $500 designer glasses to wear every day. The economy that they live in every day is obviously doing just fine. They can’t fix a problem if they don’t see it.

Unemployment is now at 6.1%, the highest reading in 5 years. 84,000 jobs were lost during August alone, bringing this year’s total to 605,000. 605,000 is 10% of the jobs gained in the past 6 years. The “recovery” from the 2001 recession has produced the fewest number of jobs since any recovery since the end of WWII. And that’s considered a success by Republicans. Here’s why: the only mention of the economy during McCain’s speech revolved around globalization. Sure, the fewest jobs on record were put on the rolls during the Bush-II era. But thanks to economy wreckers like NAFTA, GATT and CAFTA, many more jobs were created overseas. Corporations have continued to make profit and more and more of it has been directed at people who are already rich. The rest of us are on our own.

I’ve written before that the reported unemployment rate doesn’t include everybody who really are unemployed. It’s a false measurement of the state of workers in this country. So conditions are actually worse than what the Labor Department is reporting today.

The economy is the number one concern cited by Americans and has been for months now. What solutions to the malaise did McCain describe last night? None. McCain and Palin want to continue and strengthen the failed Bush economic policies. Instead, McCain (and every other speaker this week) kept trying to scare Americans into voting for them again. Terrorism, Iran and Iraq were major talking points. Isn’t it interesting that the economy, health care and Afghanistan weren’t? Fear, fear, fear. Fight, fight, fight. Those were the themes of the RNC.

More of the same for the next four years? America can’t take it. Our middle class is being devastated. We need elected officials who have a better understanding of the economy the majority of us are facing and who possess the empathy to do something to change things that obviously aren’t working. Barack Obama and Joe Biden have that understanding and that empathy. More than that, instead of being bought off by corporate interests like McCain and Palin, Obama is more beholden to the millions of campaign donors and workers. If he doesn’t enact policies that benefit those millions, do you really think they’ll let him get away with it? If McCain doesn’t enact policies that benefit those millions, what recourse do they have? All he has to please are his corporate benefactors.

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[Update]: With the economy in tatters and getting worse, plenty is being written about it.  I found this while perusing the tubes.  The total U6 (defined as total unemployed, plus all marginally attached workers plus total employed part time for economic reasons, as a percent of all civilian labor force plus all marginally attached workers) is higher today than it was during any point of the 2001-2003 recession.  The U6 value has actually been increasing since January of last year and it hasn’t peaked yet.  That’s why the economy is the #1 issue on voters’ minds.  And that’s why McCain, Palin and the rest of the Republicans responsible for the economy’s bad shape don’t want to talk about it on the campaign trail.  Since they don’t want to discuss middle class economic issues (they brought up the estate tax during the RNC!), McCain and Palin aren’t likely to do anything about it once they get in office either.  Pay attention to who these candidates are now.  They won’t change if elected.

Inflation Numbers Worsen & McCain Wasn’t Tortured

July’s Producer Price Index, a measure of inflation before it reaches consumers, jumped to the highest level since 1981. The index measured inflation at 9.8% in the last year. Oh, and overpaid economists forecasted it to rise at a much slower pace. They’re certainly earning their money, aren’t they? Meanwhile, the rest of us continue to get screwed while policy makers hold out on acting until the end of Bush’s term, waiting to blame the economic malaise on a Democratic President. I can imagine the amount of screaming we would all hear if double digit inflation came about under President Clinton.

Natural gas prices shot up 8.8%. Which pretty much refutes Republican plans to push down gas prices by opening up more drilling sites. After all, the Roan Plateau was opened to additional gas drills. If prices don’t start going down this month, we’ll know that opening up more drilling areas doesn’t reduce fuel prices, won’t we. If only Democrats in Congress weren’t so afraid of their shadows, the offshore drilling plan Republicans are whining about wouldn’t even be on the table.

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Heh. Neoconservatives and their allies should be sweating this a little: was John McCain tortured or not? See, John has run many campaigns discussing the events that happened to him after he became a POW. According to definitions set forth by neoconservatives like Dick Cheney, John Yoo, David Addington, George Tenet and others, McCain gave his interrogators intelligence after humane techniques of information gathering were applied to him. No war crime was committed on McCain or the other POWs, according to Boy George’s “administration”. Isn’t that quite the pickle? By the way, McCain approved the use of the same techniques used on him on CIA terror suspects. Nice.

Economy Not Looking So Good, Still

Last week, we got to hear about how regular guy Sen. Gramm insulted most of the country by saying we were a bunch of whiners when it came to the economy. After all, Sen. Gramm might have to wait to buy his new Mercedes or another palatial residence. And that’s real sacrifice, people!

How is the economy doing exactly? Inflation is running rampant, but you’d have a hard time learning that looking at corporate media websites. Normally, when the Labor Department releases new numbers, it leads the headlines at places like CNN. Not so today. And it’s not hard to figure out why. The Labor Department reported that wholesale inflation jumped by 1.8 percent last month, with a year-to-year rise of 9.2 percent, the most since 1981. I’ll ask this again: is your take home pay keeping up with inflation?

The Republican Party, led by average student George Bush, keeps setting significant mark after significant mark. We are now experiencing the highest inflation since 1981. What was going on back then? Oh yeah, an energy crisis, much like the one we’re going through today. Who stopped funding research for alternative energy 27 years ago? St. Ronnie. Yup, the markets worked out real well, didn’t they? The more unregulated they get, the more they fail.

Which brings me to my next hard question for fiscal conservatives: if the market is so good at correcting itself, and if mortgage bundlers should stand or fall based on their actions, why aren’t you screaming about the government bail-out of banks? See folks, government is only bad when it helps out the little guy, which happens to make up the majority of people in this country. When it helps out the biggest corporations and the richest individuals, either by bail-outs or by corporate welfare or tax cuts, then government interference in the market is good. What a package of b.s.

Fellow citizens, if you enjoy the situation we’re in: where our tax dollars are being handed over for free to the rich and the risky, keep voting Republicans into office. If, however, you would prefer your tax dollars to be invested in the commons: our roads, dams and electrical grid, among others, there are clear choices again this fall: vote Democratic.

Will inflation reach double-digit growth in the near future? How far will the American citizen be pushed before they collapse from the inequities of the conservatives’ economy? Meanwhile, Republicans keep demonstrating how far in La-La Land they live by talking about how good the economy is every day.

Random Stories 5/27/08

Out here in the Western U.S., we know that forest fires are a critical issue. Forest health is an issue that should receive serious attention by those we send to represent us in D.C. As usual with Republicans in charge, the publics’ best interests aren’t being considered. Here is the Bush administration’s plan to deal with forest fires: slash forest fire prevention budgets, then propose that the shortfalls in budgets be made up by selling off the timber that would have otherwise had to have been protected from fire. Ingenious, no?

But the proposal slashes the agency’s preparedness funding by $77 million, including a $13 million reduction in money to remove dead trees and overgrown brush that act as kindling for fires in 155 national forests.

Republicans are out to prove to the American public that government can’t work. That’s why you shouldn’t vote for them. Would you go to a doctor who wanted to prove to you that medicine didn’t work? The Bushies are out to pad the pockets of their corporate cronies. Affected citizens are getting the shaft.

Meanwhile, climate change continues to impact these areas that were mismanaged by forest policies for a century. A drier climate will not make the Forest Service’s future tasks any easier.

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Now, some economic news.

Last week, a barrel of oil cost $135, setting record after record. Following suit, gas prices continue to rise. The national average? $3.90 today. That’s putting some hurt on consumers.

The Federal Reserve last week lowered their 2008 economic forecast, then raised their projections for inflation and unemployment. Which should worry all of us because the most widely accepted values of both inflation and unemployment miss significant portions of our economy. If those commonly accepted values are increasing, the values that more closely match reality are also rising, and likely doing so more quickly.

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Dick Wadhams and Bob “Sweatshop” Schaffer are in the news trying to make something out of nothing. They’re pushing the meme in the corporate media that Mark Udall really does live in Boulder, gosh darn it! Why would they be wasting their time on this? Aside from the fact that they have nothing of substance to offer Colorado voters this fall, they’re trying to magically legitimize Dick’s favorite name for Mark: “Boulder liberal”. Mark Udall moved to Eldorado Springs over five years ago. Dick’s latest plug: showing Udall’s mailing and physical address zip codes, the former is in Boulder, the latter is in Eldorado Springs, according to the Assessor’s office.

Stygius at S2 shared a good zip code that’s much more relevant to the issues:

96950. That’s the zip code for the Mariana Islands, where Bob Schaffer helped out labor bosses and Jack Abramoff’s agenda. Human rights, labor rights, the child sex trade and forced abortions: issues Bob Schaffer and Dick Wadhams want to distract our attention from by repeatedly calling Mark Udall names. It’s one reason why Bob Schaffer will lose this election.

Those At The Top Desperately Out of Touch

Three pieces of news from the business world are a clear indication that there are people in the U.S. that are out of touch, but it certainly isn’t someone like Barack Obama.

First, foreclosure filings hit a record last month. 243,353 households received a foreclosure filing in April 2008. That’s up 65% over the previous year and up 4% from March. Municipalities’ will be the second group to suffer from this as their tax base plummets.

Second, the Consumer Price Index (CPI), a measure of inflation, rose 0.2% in April, versus forecasts for a rise of 0.3%. Well that sounds alright, doesn’t it? Here is where economists go cukoo: they always take part of the calculations out to present a rosier picture and try to convince people the economy is just fine. Stripping out food and auto sales, the CPI rose 0.1%, versus expectations for a rise of 0.2%. I’ve said this before and I’ll continue to say it: stripping out food from any measure of economic analysis makes absolutely no sense. Can you strip out food from your budget, just because prices are higher? Of course not. At this point in our economic cycle, here is why it is harmful to throw them from consideration: food prices played a big role in the rise in prices, posting the biggest jump in 18 years. Not surprisingly, who was “running” the country 18 years ago? That’s correct: Republicans. Running the country into the ground is something they excel at.

The above isn’t too terribly bad, in and of itself. It’s when we get to the next piece of news that you know most of us are getting the shaft. As of 10:15MDT, the Dow was up 116.59 points, mostly because of the inflation news. You read that right. Food prices jumped by the largest margin in 18 years and the markets respond by moving upwards, because that’s good news. The top earners of our country are making money today on news that the rest of us are less able to afford the food we have to put on our tables. By the way, they’re not paying their fair share of taxes on that extra money. A big portion of the Bush tax cuts included a reduction of the amount of tax paid on capital gains, the gains the Wall Streeters are “earning” today. That’s pretty twisted.