"Jobs for Us, Jobs for Our Kids" - a Close Encounter of the Senator Cantwell Kind

You may wonder why congressmen and senators seem to be so out of touch with the reality that middle and lower class Citizens face each and every day. In fact, you may wonder why they seem to completely ignore any message you try to get to them via email, phone calls, or even smoke signals. Nothing seems to work.

From what I observe of Senator Maria Cantwell (D-WA), she is a recluse to the middle and lower classes. I have never seen her do a "town hall meeting" like Congressman Jay Inslee frequently does. I also find that when she visits a city within Washington State, she is more likely to be visiting with the Chamber of Commerce than a local labor council.

The Economic Slowdown is Global

For those who claim that China, India, et al. will bail out the US slowdown by picking up the slack, I bring you this chart of China's Shanghai A shares:

The index reached a high of 6430 back in October 2007. This morning it finished at ~3590. That's a 45% decline in 5 months! If it reminds you of the Nasdaq in 2000, it should. This is the chart of a bubble popping. Large numbers of Chinese "investors" opened brokerage accounts in the last year. Just how many? This is from the February 19 edition of USA Today:

The Two Economies

Waiting for the Wall Street implosion that didn't materialize, I watched the financial news. What emerged was a discussion of the two economies.

Bloomberg: Ben S. Bernanke's interest-rate cuts have touched off a vicious circle of doom for the dollar

Guess what? Now there are two economies, one for the investors, super elites and the real one for the rest of us. We should not pay attention to the paper economy according to financial advisers, it's just the place where the super elites create investment vehicles, derivatives, hedge funds, bonds...and all of that stuff which is simply the trading of paper. Nope, the real economy is just fine. The trouble is this paper economy.

Bernanke signs on to voluntary mortgage cramdowns

This will be a quick note. I will probably post more extensively tomorrow.
The Housing Crisis Fairy ain't coming. Ten years of housing were built in the 5 years of 2001-2005, and the only way the market will be restored to a reasonable equilibrium is by falling house prices. Those who bought houses in 2004-7 at very least are going to have to acknowledge that the value of their house is declining. I.e., there will be pain.
Fed Chairman Ben Bernanke has signed on to the idea of voluntary mortgage cramdowns, similar to those proposed by the Office of Thrift Supervision last week. Here's a quick summary, per CNN:

1946! Interest rates, inflation, and war

I'm not a trader, and I don't put much faith in short term charts the likes of which you typically see in financial porn. Longer term charts, however, are more interesting. It is much easier to separate the signal (or trend) from the noise, and the "trend" is a reflection of the economic psychology of the public. Not just that part of the public that invests, but the public who buys houses and has mortgages, buys cars and retail and pays on credit, or even saves in CDs and money market accounts. In short, just about everybody.

2 housing crisis proposals Democrats should support

Like many people, I loathe the idea of a housing "bailout" for the greedy, the reckless, and the spendthrift. Certainly those bankers and borrowers had no problem "privatising their gains" in the early part of this decade. I see no reason why they should look to the prudent and the thrifty now, especially when so many millions of those prudent and thrifty are those whose own dreams of owning a home of their own at a reasonable price were frozen out by the housing mania.
But out of crisis comes opportunity. In this case, the opportunity for the Democratic party to show average Americans what a Democratic majority would do for them and their financial well-being. The opportunity to earn their trust and their votes for years to come. To show that a party that believes in governance for the average citizen can separate the wolves from the sheep, penalizing the former and acting with basic humanity to the latter.

Why inflation isn't the problem

With the release of today's January 2008 CPI showing a yearly reading of 4.1%, inflation hawks are certainly out in force in the blogosphere. While I certainly agree that the average American family has faced a vastly increased burden purchasing food, gasoline, and medical care, I do not think it is inflation itself that will be the problem going forward in 2008. Below I explain why.

Below is a graph showing how inflation tends to play out over economic cycles. The blue line is consumer inflation (cpi). The red line is producer inflation (ppi) which is the rate at which costs are increasing to producers. The green line is household debt.

Mayor Bloomberg's weird logic

The headline on Huffington Post sounded promising: Bloomberg Rips Government Over Failing Economy. It started out well enough:

Mayor Michael Bloomberg has unleashed another flurry of jabs on Washington, ridiculing the federal government's rebate checks as being "like giving a drink to an alcoholic" on Thursday, and said the presidential candidates are looking for easy solutions to complex economic problems.

Recession watch: retail sales, new jobless claims rolling over

One of the things I wanted to try here is to post bits of significant economic data that would scroll off the page on the great orange satan in about 10 minutes. One of those items was yesterday's retail sales number. For about the last 6 months, most economic data has been deteriorating steadily, but two of the holdouts were retail sales and jobs data. A couple of weeks ago the December nonfarm payroll number finally went negative.

NonFarm Payroll

How Long, How Deep?

Two economic reports today show the deeply indebted US economy is in a decline that is likely to stretch into a recession that could be quite severe.

The BLS jobs report shows a loss of -17,000 jobs in January, an even sharper -0.3% loss in total hours worked and a decline in average weekly wages even before considering the effects of inflation. Annual revisions to data back to 1990 that are included in today’s report, shows the economy had -376,000 fewer jobs in December than previously estimated. Only 994,000 new jobs were created over the past year and of these, only 809,000 were created by the private sector.