More Clunky Economic News

What are we to make of today's economic news that foreclosures were up in July, retails sales on everything but cars were down in July, and jobless claims for the last week jumped over a half million?

The Associated Press would like us to think that we need more "Cash for Clunkers" type stimuli.

While autos, helped by the start of the Cash for Clunkers program, showed a 2.4 percent jump -- the biggest in six months -- there was widespread weakness elsewhere. Gasoline stations, department stores, electronics outlets and furniture stores all reported declines.

Some of Europe's largest economies also benefited from government programs to support the auto industry. Germany and France returned to economic growth in the second quarter, raising hopes the recession in the 16-country euro area may end sooner than thought. Europe's two biggest economies each grew 0.3 percent from the previous three-month period, surprising analysts and technically ending their worst recession in decades.

The Euro-version of "Cash for Clunkers" has grown into a permanent plan, which has to be much appreciated in France where militant jihadists are burning hundreds of cars every month. But anyone with half a brain, even a government economist, knows that you aren't actually producing anything when you take one set of taxes (or borrowed funds, in our case) and redistribute it to another group. You temporarily alter behavior, true, but you produce nothing. In fact, you destroy since you are taking vehicles off the road that have serviceable life in them. That is waste, pure and simple.

Even with clunker cash, retail sales overall fell .1 percent in July. Spin that, Pillsbury Spokes-Boy!

There is much official hand-wringing over consumers' stubborn behavior of paying off debt and increasing their savings, which are historically laudable activities. Naturally you can expect our government to despise this trend.

There was one quote of which I approve:

"Households are in no position to drive a decent economic recovery," Paul Dales, U.S. economist at Capital Economics, wrote in a note to clients.

Amen to that. And households are in no position to absorb new taxes (direct or hidden) on health care and energy. You want to watch an economy in free-fall? Just keep pushing the socialist transformation of America!

Another AP Economic Report That Misses the Point

I've got a bit of a problem with today's report that July foreclosures rose by 7 percent.

No problem with the numbers themselves. Just this part:

WASHINGTON – The number of U.S. households on the verge of losing their homes rose 7 percent from June to July, as the escalating foreclosure crisis continued to outpace government efforts to limit the damage. [Emphasis mine.]

What government effort? We've been told that the TARP program, originally designed to combat the "toxic assets" in the housing market, has been redirected to save banks.

The loan adjustment program touted by President Obama turned out to be a scam. The government web site redirects you to several lenders who are cherry-picking people who have the least travails as homeowners.

The Treasury Department said last week that banks have extended only 400,000 offers to 2.7 million eligible borrowers who are more than two months behind on their payments.

Naturally, the AP "real estate" writer thinks that mortgage companies are to blame for not getting "up to speed" with the Obama plan, when the reality is the Obama plan stinks. Doesn't anyone in the mainstream press do their research anymore? Don't they read the back files?

For what it's worth: This economy is not recovering.

Deficit Numbers to Get Worse Than Forecast

Don't look now but those deficit projections made earlier in the year are going to be wrong.

According to that bastion of conservative propaganda, USA Today, government officials are acknowledging that new budget deficit estimates for the current year will be worse than first forecast.

As the White House and Congressional Budget Office (CBO) prepare to release new deficit estimates this month, several economists say the news is likely to be as bad as or worse than forecasts.

"This is going to be a very depressing outlook," predicts former CBO director Douglas Holtz-Eakin, top adviser to Republican John McCain in last year's presidential election. "They have just a nightmare in terms of these health care bills, which do nothing but make things worse."

A fiscal year 2009 deficit of $1.8 trillion was anticipated by the White House, $1.7 trillion by Congress. Reaching that level would produce a deficit four times last year's $459 billion deficit, just as Congress is considering health care overhaul plans that could cost $1 trillion over 10 years.

[SNIP]

While revenue continues to decline, government spending is rising as a result of the $787 billion economic stimulus plan passed six months ago. Stimulus spending will increase in the next few months, says Treasury chief economist Alan Krueger.

Deficits of $1.8 trillion this year and $1.3 trillion in 2010, as predicted by the White House, would add to the federal debt. The current $11.7 trillion debt already equals about $38,500 for every U.S. resident. The recession, now in its postwar-record 21st month, has dealt a worse blow to the budget than the administration expected:

• The economy is set to shrink by 2.6% this year, more than twice what the White House predicted in February and May.

• As a result, tax revenue is down by $353 billion over 10 months, which is about what the White House thought it would lose for the entire year.

• Unemployment, projected at 8.1% this year by the White House, was 9.4% in July. Spending for jobless benefits, Medicaid and Medicare has soared as people have lost work and health insurance. Jobless benefits are costing more than twice what was spent last year.

So why are we rushing headlong into nationalizing health care? The story suggests a theory:

Former CBO director Robert Reischauer, president of the non-partisan Urban Institute, an economics and social policy think tank, says administrations tend to believe that "the harder and faster one falls, the more rapid and steep the recovery."

Only if you strap on a jet pack, people.

Negative Economic Growth is the Right Direction?

Everyone in the media seems thrilled at today's news that the American economy was only one percent negative in the Second Quarter (April, May & June).

ABC News quotes Obama as declaring that "the economy is heading in the right direction."

If negative growth is the right direction, then he is a bigger enemy of capitalism than I had feared.

Can we put those visions of sugar plum fairies aside for a moment?

Sure, there is no one who would rather we wallow in recession, or worse, longer than necessary. But we have to be realistic. The old saw that "saying so doesn't make it so" applies here.

The president and his cronies want you to think that we've turned the corner. He desperately needs some good news to turn his poll numbers which I suspect are the only numbers he really cares about anyway.

First of all, we have to trust the government to give us good data on Gross Domestic Product (GDP). That's difficult to do in the short run. In fact, considering that the government has revised older economic data to make the recession look worse while Bush was president, I suspect that the statistics are being massaged for political effect.

What cannot be massaged is the impact on people's lives. There are millions more out of work today than on January 20, and even Obama admits that more people will lose their jobs before large scale hirings begin.

As far as the stock market goes, the Dow is on the upside in large measure because on June 8 Citigroup and Government Motors (GM) were kicked off and replaced with Travelers and Cisco Systems. That's a handy trick I'm going to remember the next time I'm having a bad golf outing. I'll just replace some of the bad hole numbers with better ones.

Yes, we are in a rally but it seems to be one of "hope" rather than substance. With all the new deficit spending, can our economy rebound? And if we nationalize health care, will it ever rebound?

I talked to a guy the other day whose new stockbroker was telling him how wonderful things will be in just a couple of years when the Dow hits 15,000. Say what? "I don't give advice," I told him. "But if it were my money, I dunno. Not all eggs in the same basket, I guess. And lots of prayer."

I think I can get away with saying that without being accused of giving market advice.

This was before I learned that President Obama's leftist Science Czar, John Holdren, is a big believer, not only in Zero Population Growth, but in Zero Economic Growth. That ought to spice up the administrative meetings at the White House.

Holdren, who is now President Obama’s top adviser on science and technology policy, wrote in the 1970s that it would be “entirely logical” to cap the Gross National Product--the total productivity of the American economy.

“It is by now abundantly clear that the GNP cannot grow forever. Why should it?” Holdren asked in a 1977 college science textbook he co-wrote with Paul R. Ehrlich and Anne H. Ehrlich, titled “Ecoscience: Population, Resources, Environment.”

“Why should we not strive for zero economic growth (ZEG) as well as zero population growth?”

The pertinent chapter, “Changing American Institutions,” discusses what the authors perceived as problems in America’s social mores, government, and economic system, which they say makes it “the leader in humanity’s reckless exploitation of Earth.”

The United States, they argued, should focus on limiting the amount of physical product produced and in circulation.

Again, it would be “entirely logical,” Holdren and the Ehrlichs wrote, “to set limits on the amount of product a nation needs and then strive to reduce the amount of work required to produce such a product (and, we might add, to see that the product is much more equitably distributed that it is today).”

If a nation were attempting to implement Zero Economic Growth as policy, could it do any better than the current administration?

On Stimulating a Titanic-Sized Disaster

Attention, all passengers aboard the (USS) Titanic: if you have any sense at all, you will find the nearest lifeboat, or floating piano, and prepare to abandon ship.

That's the scenario offered today by Michael Gerson in The Washington Post, as he surmises that this month's disastrous jobs report "opened a long gash beneath the waterline of President Obama's legislative agenda."

"Few realize it, but a scramble for lifeboats is about to begin."

Today's news is chock full of speculation on whether there will be, or even should be, a new stimulus package "bigger than the last" to "get us out of this recession."

Clueless politicians in Washington seem hellbent on recreating all of the mistakes of the past year, not to mention some of the doozies from the Great Depression.

Stimulus spending -- deficit spending -- is like applying more speed when you have reports of icebergs. Hell, we're unsinkable!

Around midnight on April 15, 1912, there were a few minutes when Capt. Edward Smith of the Titanic realized his ship was going down -- six watertight compartments breached, less than two hours to float -- yet his passengers slept in happy ignorance. A historical fate hardened while most of the participants dreamed on.

Of course the Titanic would not have been in that position had the boat slowed down when it first heard of the icebergs. At a slower speed even that clunky ocean liner could have been turned in time to avoid disaster.

It is the same with our economy. There were plenty of advisories of danger in the waters. Our last captain, George W. Bush, increased the speed with the first stimulus package, and then was stampeded by his economic team into the TARP program and unconstitutional backdoor loans to GM and Chrysler. But what the hell, he'd put in his time and was transferring off the ship of state. Let the new captain worry about the icebergs!

The new captain, Barack Hussein Obama, issued orders for full steam ahead with a record stimulus, record deficits, and a legislative plan for carbon taxes and health care socialism never seen. Despite the cries from the lookouts, the U.S.S. Titanic is heading straight for that monster mountain of white!

On closer inspection, the economic news, which seemed bad, is even worse. Not only did unemployment rise to 9.5 percent but wages fell, undermining the consumption needed to revive a consumption-driven economy. Unemployment increased among "breadwinners" -- married men and women who head households -- also making major family purchases more difficult. Recent increases in unemployment benefits and food stamps have helped many Americans pay for food and rent. Jobs, however, are what lead to the purchase of furniture, cars and homes. Paired with a decline in business investment, these trends make a second-half recovery less likely.

The stimulus package hasn't been very stimulating -- as many economists predicted. Pouring money into the economy through a thirsty sponge of federal programs -- the preferred method of Congress -- is slow and inefficient. In retrospect, all of the stimulus funds should have been given to individuals directly from the tap.

[SNIP]

Obama's spending ambitions would have been jaw-dropping even in the best of economic times. Federal spending this year is about 28 percent of gross domestic product -- a figure exceeded only when Franklin Roosevelt was fighting a global war against Germany and Japan. Along the fiscal path Obama has chosen (according to the Congressional Budget Office) our national debt will more than double in 10 years and will amount to 82 percent of the entire economy.

Initially, Obama counted on an atmosphere of economic crisis to grease the passage of any legislation he pronounced an economic need. But it hasn't worked out that way. Whatever their virtues, restricting carbon emissions and expanding the health entitlement do not constitute a direct response to America's financial and economic failures. No economic theory suggests that a round of new federal regulations and entitlements would result in a burst of economic growth.

Gerson concludes that instead of entertaining more "speed" like stimuli packages, expensive new health care and energy bureaucracies, and higher taxes on all Americans -- violating his "no taxes" pledge on anyone making less than $250,000 (which has already been broken), our captain take the honorable path before it is too late.

Wake up the passengers, end their entitlement dreams, and announce that his ambitious programs must be deferred until the ship (country) is out of danger.

I don't think he'll do it. That doesn't mean you shouldn't do something to protect your own family.

Prescription for Economic Disaster: Obamacare

What is the formula for really screwing up the economy of an entire state, or nation?

From Kevin Hassett today:

It takes years and years to make a mess as terrible as the California debacle, but the recipe is simple. All that you need is two political parties that are always willing to offer easy government solutions for every need of the voters, but never willing to make the tough decisions necessary to finance the government largess that results. Voters will occasionally change their allegiance from one party to the other, but the bacchanal will continue regardless of the names on the office doors.

He gets it. As long as this Progressive prescription remains in force, it doesn't matter if it's Dr. Democrat or Dr. Republican. It's just a matter of the dosage.

Hassett says the California nightmare is beginning to scare even Democrats, as they see the passage of Obamacare as the trigger for a national meltdown.

Last week, we discovered that the state of California will gladly pay you Tuesday for a hamburger today.

With California mired in a budget crisis, largely the result of a political impasse that makes spending cuts and tax increases impossible, Controller John Chiang said the state planned to issue $3.3 billion in IOU’s in July alone. Instead of cash, those who do business with California will get slips of paper.

The California morass has Democrats in Washington trembling. The reason is simple. If Obama’s health-care plan passes, then we may well end up paying for it with federal slips of paper worth less than California’s. Obama has bet everything on passing health care this year. The publicity surrounding the California debt fiasco almost assures his resounding defeat.

That's pretty strong language, and I hope he's right. Let's continue.

California has engaged in an orgy of spending, but, compared with our federal government, its legislators should feel chaste. The California deficit this year is now north of $26 billion. The U.S. federal deficit will be, according to the latest numbers, almost 70 times larger.

The federal picture is so bleak because the Obama administration is the most fiscally irresponsible in the history of the U.S. I would imagine that he would be the intergalactic champion as well, if we could gather the data on deficits on other worlds. Obama has taken George W. Bush’s inattention to deficits and elevated it to an art form.

The Obama administration has no shame, and is willing to abandon reason altogether to achieve its short-term political goals. [SNIP] Nobody believes that his unprecedented expansion of the welfare state will lead to enough economic growth. Nobody believes that it will pay for itself. Everyone understands that higher spending today begets higher spending tomorrow. That means that his economic strategy simply doesn’t add up.

There's more, and it's well worth reading.

A Chips Economy -- Oh, the Humanity!

Could it be a sign of economic meltdown?

First there was that strange story earlier this week of a woman in Oklahoma City accepting a case of Doritos as payment for sexual favors. (The "john" was not charged; perhaps he was given credit for original thinking.)

Now there's this: a domestic dispute in Tennessee in which the couple assaulted one another with Cheetos.

A local couple arrested on domestic assault charges Sunday had an unusual choice of alleged weaponry -- Cheetos.

Warrents filed by Cpl. Kevin Roddy, of the Bedford County Sheriff's Department, stated he responded to a call at a home on Pass Road, where 40-year-old James Earl Taylor and Mary S. Childers, 44, were allegedly involved in an argument.

According to Roddy's report, the pair became "involved in a verbal altercation" with each other "at which time Cheetos potato chips were used in the assault."

"There was evidence of the assault," the report read, "however no physical marks on either party and the primary aggressor was unable to be determined."

Both Taylor and Childers were charged by Roddy with domestic assault. Both posted a bond of $2,500 and will appear in Bedford County General Sessions Court on July 15.

I'm just looking for a little Pretzel Logic here.

Is this the kind of nation we wish to become, where we are reduced to using potato chips for money and ammo?

This is the kind of nightmare that will only get worse under Waxman-Markey (Cap'n Tax).

Warren Buffett: No 'Green Shoots,' No Economic Bounce

Billionaire investor and money guru Warren Buffett says he sees no "green shoots" in the U.S. economy.

Everything that I see about the economy is that we've had no bounce. The financial system was really where the crisis was last September and October, and that's been surmounted and that's enormously important. But in terms of the economy coming back, it takes a while. There were a lot of excesses to be wrung out and that process is still underway and it looks to me like it will be underway for quite a while. In the (Berkshire Hathaway) annual report I said the economy would be in a shambles this year and probably well beyond. I'm afraid that's true.

Buffett also opposes "cap and trade," which goes before the full House on Friday.

Buffett repeated his criticism of "cap and trade" as a method to control pollution, saying it would be a huge, regressive tax.

But no one is perfect: Buffett endorsed the reappointment of "Helicopter" Ben Bernacke as Federal Reserve chairman, and praised the work of Tiny "Tax Cheat" Tim Geithner at Treasury.

Then again, Buffett is a guy who is interested in the performance of money, not someone who spends a lot of time worrying about whether government is ethical, or constitutional. That's why big money guys should never be permitted to intertwine their operations with government; they have no love of limitations on anything and thus have a tendency to run roughshod over people (and laws) that get in the way.

I listen to Warren Buffett on money matters, but I'd rather have Jimmy Buffett in Congress.

Where is Your Proof, Mr. President?

The Associated Press does another soft take-down of President Obama's latest "repackaging" of old stimulus promises and more or less comes to the conclusion that the Obama Economic Team doesn't know how to find its own posterior.

This would be fun to watch were it not for all the pain and misery suffered by those who are losing jobs and those whose lives are being "transformed" as The One attempts to redesign our nation's economics and political system.

Toward the end of a rather long report, they quote Mr. Obama defending himself against his critics. I reprint them here:

Without naming names, Obama shot back at skeptics during the Cabinet meeting.

"Now, I know that there's some who, despite all evidence to the contrary, still don't believe in the necessity and promise of this recovery act."

"And I would suggest to them that they talk to the companies who, because of this plan, scrapped the idea of laying off employees and, in fact, decided to hire employees. Tell that to the Americans who received that unexpected call saying, 'Come back to work.'"

No, sir, Mr. President. This is pure baloney. How dare you raise up another false argument without providing proof!

The first sentence: "I know that there's some who, despite all evidence to the contrary, still don't believe in the necessity and promise of this recovery act."

Yes, there are plenty of people who do not believe in the necessity of the "recovery act," i.e., the stimulus -- porkulus -- package. That part is true.

But "all evidence to the contrary" means, exactly, what? Give us the evidence that the stimulus is working. You can't; furthermore, you don't even try because you know it isn't possible. If all you mean is that we are in dire straits economically, that is not evidence. That is simply restating the problem. It proves nothing.

The same goes for believing in the "promise" of the recovery act. They were your promises. They aren't coming true. You seem to think that it is our unbelief in your promises that is the problem, not the plain and obvious reality that they are not coming true.

Next portion, and this is where the bull manure gets really deep: "And I would suggest to them that they talk to the companies who, because of this plan, scrapped the idea of laying off employees and, in fact, decided to hire employees."

Which are these companies? How many employees were "saved." Even your own people admit that they have no evidence to prove this, and yet this is your argument? Spare us your fantasies, O exalted One! Give us proof. Every other previous administration has done this in spades, and a fawning media is at your beck and call anxious to please you in this.

Next you say "Tell that to the Americans who received that unexpected call, saying, 'Come back to work.'"

Okay, we'll bite. Who are those Americans? What are there names? Why don't you know? Don't you have legions of willing Obamatons desirous of proving that you, sir, are the Great and Infallible One?

I know this is "irreverent", but I am just one of millions who are sick and tired of the mealy-mouthed marlarkey you regularly serve up as your version of rational argument.

Facts are facts. If you got 'em, give 'em. If not, maybe you should consider the fact that your brilliant stimulus plan is, in fact, a disaster of Titanic proportions, borne of equal parts economic ignorance and hubris in high places. You came into office full of piss and vinegar intent on proving that you are smarter than the rest of us Constitution-loving yokels. In fact, you seem to think you are smarter than history itself, which has shown that no nation has ever cured the disease of economic malaise brought on by massive debt by incurring new and record levels of massive debt.

One would almost believe that you are trying to destroy our economy, rather than save it.

The Perfect Economic Storm Approaches

Paul Craig Roberts is a smart man and a good writer.

He also happens to know a little something about economics. He was assistant Secretary of the Treasury in the Reagan administration where, you might recall, stagflation was whipped and an economic boom which lasted nearly three decades began.

That boom is over, and the bust is but beginning. Roberts says economic disaster is rolling our way.

What happens to the dollar will be the key driver of what lies ahead. The likely scenario could be nasty.

America’s trading partners do not have large enough trade surpluses to finance a federal budget deficit swollen to $2 trillion by gratuitous wars, recession, bailouts, and stimulus programs. Moreover, concern over the dollar’s future is causing America’s foreign creditors to seek alternatives to US debt in which to hold their foreign reserves.

[SNIP]

China’s premier, Wen Jiabao, has publicly expressed his concern about the future of the dollar. Arrogant, hubris-filled American officials and their yes-men economists discount Chinese warnings, arguing that the Chinese have no choice but to support the dollar by purchasing Washington’s red ink. Otherwise, they say, China stands to lose the value of its large dollar portfolio.

China sees it differently. It is obvious to Chinese officials that neither China nor the entire world has enough spare money to purchase $4 trillion of US Treasuries over the next two years. According to the London Telegraph on May 27, Dallas Federal Reserve Bank president Richard Fisher was repeatedly grilled by senior officials of the Chinese government during his recent visit about whether the Federal Reserve was going to finance the US budget deficit by printing money. According to Fisher, “I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States.”

[SNIP]

As monetization of federal debt goes forward, US interest rates will continue to rise, worsening the problems in the real estate sector. The dollar will continue to lose value, making it harder for the US to finance its budget and trade deficits. Domestic inflation will raise its ugly head despite high unemployment.

The incompetents who manage US economic policy have created a perfect storm.

The Obama-Federal Reserve-Wall Street plan for the US to spend its way out of its problems is coming unglued. The reckless spending is pushing the dollar down and interest rates up.

It's a harsh assessment but a fair one, in my opinion. But Roberts saves his worst prognostications for the last.

Every sector of the US economy is in trouble. Former US manufacturing firms have been turned into marketing companies trying to sell their foreign-made goods to domestic consumers who have seen their jobs be moved offshore. Much of what is left of US manufacturing--the auto industry--is in bankruptcy. More decline awaits housing and commercial real estate. The dollar is sliding, and interest rates are rising, despite the Federal Reserve’s attempts to hold interest rates down.

When the Reagan administration cured stagflation, the result was a secular bull-market in US Treasuries that lasted 28 years. That bull market is over. Americans’ living standards are headed down. The American standard of living has been destroyed by wars, by off-shoring of jobs, by financial deregulation, by trillion dollar handouts to financial gangsters who have, so far, destroyed half of Americans’ retirement savings, and by the monetization of debt.

The next shoe to drop will be the dollar’s loss of the reserve currency role. Then the US, an import-dependent country, will no longer be able to pay for its imports. Shortages will worsen price inflation and disrupt deliveries.

Life for most Americans will become truly stressful.

Pay off your debts and learn to farm.

And don't count on Uncle Obama to save you.

The Ax Begins to Fall on GM's Dealers

While GM is too big to fail, not so much for many of its dealers.

Between 400 and 500 of the dealers notified Friday sold an average of only 35 vehicles a year, or about three a month.

The rest of the dealers on the list also had very low average sales by industry standards - only about five or six vehicles a week. In total the 1,100 dealers sold about 7% of GM's sales volumes last year.

"These are dealerships that were hurting, in danger of going out of business anyway," said LaNeve. "It [the letter] shouldn't be a surprise to them."

I know many small dealerships that do a brisk "pre-owned" business that could thrive selling only a handful of new cars each month. But I guess that kind of thinking is just too small for the federally-motivated great minds of the new Government Motors.

You can smell the government-sponsored elitism in an earlier paragraph of the CNN story:

The company's expectation is that the surviving dealerships will become larger and more profitable as a result of the thinning out, which in turn will allow them to spend more on advertising and facilities. But GM also acknowledges that its long-term decline in U.S. market share will continue as a result of the smaller network of dealers.

Long-term decline in market share. Do any of these geniuses understand that true sales diversity means that you take the large and the small customers alike?

What a disaster that is coming.

My prediction: these companies will continue to fail, and Washington will eventually issue an edict attempting to force Americans to buy.

Repeating History: Trade War

What America doesn't need right now is a "trade war" reminiscent of the one that helped shut down the economy in the 1930s, but it may be developing.

This is not your father's trade war, a tit-for-tat over champagne or cheese. With countries worldwide desperately trying to keep and create jobs in the midst of a global recession, the spat between the United States and its normally friendly northern neighbor underscores what is emerging as the biggest threat to open commerce during the economic crisis.

Rather than merely raising taxes on imported goods -- acts that are subject to international treaties -- nations including the United States are finding creative ways to engage in protectionism through domestic policy decisions that are largely not governed by international law. Unlike a classic trade war, there is little chance of containment through, for example, arbitration at the World Trade Organization in Geneva.

At fault are the provisions of the Stimulus, formally known as the American Recovery Act of 2009. Its "Buy American" mandates are so overly broad that they can actually shut down firms employing real Americans in favor of other plants located just a mile down the road!

Take, for instance, Duferco Farrell Corp., a Swiss-Russian partnership that took over a previously bankrupt U.S. steel plant near Pittsburgh in the 1990s and employed 600 people there.

The new buy American provisions, the company said, are being so broadly interpreted that Duferco Farrell is on the verge of shutting down. Part of an increasingly global supply chain that seeks efficiencies by spreading production among multiple nations, it manufactures coils at its Pennsylvania plant using imported steel slabs that are generally not sold commercially in the United States. The partially foreign production process means the company's coils do not fit the current definition of made in the USA -- a designation that the stimulus law requires for thousands of public works projects across the nation.

In recent weeks, its largest client -- a steel pipemaker located one mile down the road -- notified Duferco Farrell that it would be canceling orders. Instead, the client is buying from companies with 100 percent U.S. production to meet the new stimulus regulations. Duferco has had to furlough 80 percent of its workforce.

"You need to tell me how inhibiting business between two companies located one mile apart is going to save American jobs," said Bob Miller, Duferco Farrell's executive vice president. "I've got 600 United Steel Workers out there who are going to lose their jobs because of this. And you tell me this is good for America?"

President Obama thinks so. He's proposing new legislation that would "close corporate loopholes" that permit companies to "pay lower taxes if you create a job in Bangalore, India, than if you create one in Buffalo, N.Y."

That populist rhetoric might win him points in the opinion polls, but it is unnerving businesses and irritating leaders in other nations who are considering preemptive retaliation.

You can tell your grandkids, as they pound the cornmeal to make the day's ration of mush, that you watched history repeat itself, as a progressive do-gooder president repeated all of the mistakes of Hoover and FDR, and then added a few new wrinkles himself.

An Unemployment Stats Update

If you will forgive more April unemployment statistical news, there is this from the Labor Dept.:

- adult men (up from 8.8% in March to 9.4% in April) -
blacks (up from 13.3% to 15%) -
adult women (up from 7.0% to 7.1%), -
teenagers (down from 21.7% to 21.5 %) -
Hispanics (down from 11.4% to 11.3%)

Every category of worker is up (women just barely) with the exception of teenagers and Hispanics.

Why, do you suppose, is this?

Could it be that teens seek jobs about this time every year for the summer AND they don't get paid as well?

And Hispanics? Isn't this about the time of seasonal farm employment, and for much the same reason?

Just asking.

Beware Presidential Happy Talk on Unemployment

Before you get all excited and spend the money you've been rat-holing for the past several months, don't let today's slightly -- and I would emphasize very slightly -- improved jobless numbers allow you to be blinded to the ongoing truth of where we are.

Layoffs in April were at 539,000. While that's less than analysts were predicting (620,000), it's still a lot of people without work.

Worse, March numbers were revised upward to 700,000.

Worser, the unemployment rate went from 8.5 percent to 8.9 percent. People aren't finding new jobs. Businesses, for various reasons, aren't planning on hiring. Also, remember that Government Motors (GM) is planning on idling most of its production for 9 to 11 weeks this summer. Chrysler is also shutting down.

Worst, the federal government is going to make things harder for business in the very near future. Nearly every significant piece of legislation or proposed regulatory rule is going to act as disincentive for business, particularly small business, to go and grow. So when you read ...

"Although we have a long way to go before we can put this recession behind us, the gears of our economic engine do seem to be slowly turning once again," President Barack Obama said Friday hours after the employment report was released.

... just remember that there is only so much that presidential "happy talk" can do to lift the numbers.

A spokesman for UBS Financial Services told CNBC today that he thinks the numbers are being cooked.

"The job numbers are suspect," Cashin said. "You have revisions that came out, with March being up to 700,000. And you have the census hires. The government is hiring people to take the census and that makes the numbers suspect."

I don't know whether these new census workers are being paid yet, and how much, but if the government is considering them part of the work force, then the UBS guy may be right.

Deconstructionist Economic Times

When it is cheaper to tear down than complete ... a sad sign of the times in California.

Housing crunch becomes literal in Victorville

Curtis Forrester moved into a brand-new house in Victorville last week, but there was little time to enjoy the Jacuzzi and designer kitchen. He was there only to see it destroyed.

Just a few days after his arrival, the two-story residence and three other luxurious model homes were crushed and hauled off for scrap, the latest fallout from Southern California's real estate crash.

The homes were part of a planned 16-unit project in this community 100 miles north of Los Angeles. The Texas bank that owns the failed development decided to demolish the houses, a cheaper alternative to completing and selling them.

[SNIP]

... abandoned developments have become an all-too-common sight in California. Nearly 250 residential developments totaling 9,389 homes have been halted across the state, according to one research firm.

Don't let anyone fool you into thinking the "recession" is over. This scene is more reminiscent of the 1930s than the 1980s.

Why Are the Market Analysts So Happy?

On a day where it is announced that another 631,000 workers lost their jobs in a week's time, comes this headline at Bloomberg:

Job Cuts Avert Catastrophic Quarter as Profits Excel

Corporate earnings worldwide haven’t been the disaster analysts predicted as companies from Ford Motor Co. to Siemens AG beat earnings estimates through job cuts, factory consolidations and a dose of lowered expectations.

“It’s one of those things where you walk away from the car crash and think, ‘Well, that could’ve been a lot worse,’” said Andy Lynch, who helps manage about $5 billion at Schroder Investment Management Ltd. in London. “The first quarter is marginally less catastrophic than feared.”

Fantastic news! Let's throw a few million people out of work, close a bunch of factories, make those who still have jobs work a bit harder and make sure that we lower our forecasts so we look good at the next report.

This is further evidence of the disconnect between the elites of the world and the common people. Gee, everything must be fine because the Dow is rising, earnings weren't bad at all. It's a public relations game to the elites.

Outside, however, the losers of the game are not much consoled that the markets are rallying.

Dow Chemical Co., the largest U.S. chemical maker, today reported an unexpected profit excluding some items of 12 cents a share, instead of the 19-cent loss that was the average estimate in a Bloomberg survey. The Midland, Michigan-based company has said it’s firing 10,000 workers.

If you are one of the 10,000, I'm sure you're very proud of your former employers. Your job termination was a vital part of the company's unexpected profitability.

Look, I'm not naive. I understand that in tough times people lose jobs. It's part of the natural cycle of things. If left alone, the business cycle will reset itself and companies will start hiring again. Unfortunately, the federal government is not leaving things alone.

What I deplore is that today's bean-counting business culture too often looks for the quick fix instead of examining the systemic cause of a company's business woes. It's so easy just to let people go to make shareholders happy. They are so easily pleased.

Despite what you hear and read, we are not near the end of the bottom of this economic downturn. We are nowhere close to the end. As long as banking is not "fixed," the federal government still spending, the Fed operating the printing presses on "11," and Congress on the verge of regulating health care and energy, uncertainty rules. There will be no major investor push back into American business until that uncertainty is resolved in favor of stability, and the only game right now is to look for under-educated small investors to pluck for badly needed cash.

Want to See Something Really Scary?

This is even scarier than some of the Oklahoma City steroid pictures I've seen posted today.

This is a graph that shows first what our federal deficits have been since 2000, and two versions of what is expected this year and beyond to 2019.

Actions have consequences, and there are three possibilities. 1) Taxes must be raised or there will be no private capital available for lending; 2) Money must be borrowed from overseas to finance our spending, and/or 3) printing presses run overtime, inflation rages out of control and our currency collapses.

In reality, there will likely be a bit of all three scenarios involved. The only real solution would be to dramatically cut spending to essential services and pray that we survive the Depression which follows. It is the only course of action that gives us a fair chance of saving our Republic.

Why do so few people see this?