Talk about a sugar high.
World sugar futures blistered technical resistance levels to surge to new
28-year tops, as massive speculative buying and a constructive fundamental
picture kept the bullish wheels turning.
Nearby October sugar on ICE Futures U.S. rose 101 points to settle at 20.81
cents, near the session top of 20.85 cents.
Sugar futures haven't been this high since April 1981.
For the week to Friday, October sugar soared 220 points, or 11.8%, as traders
realized how entrenched global crop problems had become.
Lower production in India due to dry weather and lower output out of Brazil
are ongoing supportive features, with strengthening global demand and short
stockpiles highlighting the market's balance sheet.
"We went through resistance like a hot knife through butter, and now bulls
will be looking at 23 cents and 23.5 cents for new targets," said Jack
Scoville, analyst and vice president at Price Futures Group.
"There's still a lot of concern about India, and the monsoon doesn't seem to
be getting any better. So people are pretty fired up about it," he said.
An erratic monsoon season in India has left sugarcane fields much drier than
normal for this time of year, and has caused analysts and crop experts to lower
their output projections. Monsoon rains are expected to remain weak for the
next four to five days, the official India Meteorological Department said
Saturday, August 8, 2009
Friday, August 7, 2009
The world is heading for a catastrophic energy crunch that could cripple a global economic recovery because most of the major oil fields in the world have passed their peak production, a leading energy economist has warned.
Higher oil prices brought on by a rapid increase in demand and a stagnation, or even decline, in supply could blow any recovery off course, said Dr Fatih Birol, the chief economist at the respected International Energy Agency (IEA) in Paris, which is charged with the task of assessing future energy supplies by OECD countries.
In an interview with The Independent, Dr Birol said that the public and many governments appeared to be oblivious to the fact that the oil on which modern civilisation depends is running out far faster than previously predicted and that global production is likely to peak in about 10 years – at least a decade earlier than most governments had estimated.
But the first detailed assessment of more than 800 oil fields in the world, covering three quarters of global reserves, has found that most of the biggest fields have already peaked and that the rate of decline in oil production is now running at nearly twice the pace as calculated just two years ago. On top of this, there is a problem of chronic under-investment by oil-producing countries, a feature that is set to result in an "oil crunch" within the next five years which will jeopardise any hope of a recovery from the present global economic recession, he said.
In a stark warning to Britain and the other Western powers, Dr Birol said that the market power of the very few oil-producing countries that hold substantial reserves of oil – mostly in the Middle East – would increase rapidly as the oil crisis begins to grip after 2010.
"One day we will run out of oil, it is not today or tomorrow, but one day we will run out of oil and we have to leave oil before oil leaves us, and we have to prepare ourselves for that day," Dr Birol said. "The earlier we start, the better, because all of our economic and social system is based on oil, so to change from that will take a lot of time and a lot of money and we should take this issue very seriously," he said.
"The market power of the very few oil-producing countries, mainly in the Middle East, will increase very quickly. They already have about 40 per cent share of the oil market and this will increase much more strongly in the future," he said.
There is now a real risk of a crunch in the oil supply after next year when demand picks up because not enough is being done to build up new supplies of oil to compensate for the rapid decline in existing fields.
The IEA estimates that the decline in oil production in existing fields is now running at 6.7 per cent a year compared to the 3.7 per cent decline it had estimated in 2007, which it now acknowledges to be wrong.
"If we see a tightness of the markets, people in the street will see it in terms of higher prices, much higher than we see now. It will have an impact on the economy, definitely, especially if we see this tightness in the markets in the next few years," Dr Birol said.
"It will be especially important because the global economy will still be very fragile, very vulnerable. Many people think there will be a recovery in a few years' time but it will be a slow recovery and a fragile recovery and we will have the risk that the recovery will be strangled with higher oil prices," he told The Independent.
In its first-ever assessment of the world's major oil fields, the IEA concluded that the global energy system was at a crossroads and that consumption of oil was "patently unsustainable", with expected demand far outstripping supply.
Oil production has already peaked in non-Opec countries and the era of cheap oil has come to an end, it warned.
In most fields, oil production has now peaked, which means that other sources of supply have to be found to meet existing demand.
Even if demand remained steady, the world would have to find the equivalent of four Saudi Arabias to maintain production, and six Saudi Arabias if it is to keep up with the expected increase in demand between now and 2030, Dr Birol said.
"It's a big challenge in terms of the geology, in terms of the investment and in terms of the geopolitics. So this is a big risk and it's mainly because of the rates of the declining oil fields," he said.
"Many governments now are more and more aware that at least the day of cheap and easy oil is over... [however] I'm not very optimistic about governments being aware of the difficulties we may face in the oil supply," he said.
Environmentalists fear that as supplies of conventional oil run out, governments will be forced to exploit even dirtier alternatives, such as the massive reserves of tar sands in Alberta, Canada, which would be immensely damaging to the environment because of the amount of energy needed to recover a barrel of tar-sand oil compared to the energy needed to collect the same amount of crude oil.
"Just because oil is running out faster than we have collectively assumed, does not mean the pressure is off on climate change," said Jeremy Leggett, a former oil-industry consultant and now a green entrepreneur with Solar Century.
"Shell and others want to turn to tar, and extract oil from coal. But these are very carbon-intensive processes, and will deepen the climate problem," Dr Leggett said.
"What we need to do is accelerate the mobilisation of renewables, energy efficiency and alternative transport.
"We have to do this for global warming reasons anyway, but the imminent energy crisis redoubles the imperative," he said.
Oil: An unclear future
*Why is oil so important as an energy source?
Crude oil has been critical for economic development and the smooth functioning of almost every aspect of society. Agriculture and food production is heavily dependent on oil for fuel and fertilisers. In the US, for instance, it takes the direct and indirect use of about six barrels of oil to raise one beef steer. It is the basis of most transport systems. Oil is also crucial to the drugs and chemicals industries and is a strategic asset for the military.
*How are oil reserves estimated?
The amount of oil recoverable is always going to be an assessment subject to the vagaries of economics – which determines the price of the oil and whether it is worth the costs of pumping it out –and technology, which determines how easy it is to discover and recover. Probable reserves have a better than 50 per cent chance of getting oil out. Possible reserves have less than 50 per cent chance.
*Why is there such disagreement over oil reserves?
All numbers tend to be informed estimates. Different experts make different assumptions so it is under- standable that they can come to different conclusions. Some countries see the size of their oilfields as a national security issue and do not want to provide accurate information. Another problem concerns how fast oil production is declining in fields that are past their peak production. The rate of decline can vary from field to field and this affects calculations on the size of the reserves. A further factor is the expected size of future demand for oil.
*What is "peak oil" and when will it be reached?
This is the point when the maximum rate at which oil is extracted reaches a peak because of technical and geological constraints, with global production going into decline from then on. The UK Government, along with many other governments, has believed that peak oil will not occur until well into the 21st Century, at least not until after 2030. The International Energy Agency believes peak oil will come perhaps by 2020. But it also believes that we are heading for an even earlier "oil crunch" because demand after 2010 is likely to exceed dwindling supplies.
*With global warming, why should we be worried about peak oil?
There are large reserves of non-conventional oil, such as the tar sands of Canada. But this oil is dirty and will produce vast amounts of carbon dioxide which will make a nonsense of any climate change agreement. Another problem concerns how fast oil production is declining in fields that are past their peak production. The rate of decline can vary from field to field and this affects calculations on the size of the reserves. If we are not adequately prepared for peak oil, global warming could become far worse than expected.
Steve Connor, Science Editor
They say the rich aren’t like you and me. Well guess what? They’re not investing like we are, either.
As you might remember from Monday’s Fast Money, the traders talked about how sentiment in the market has turned from broadly bearish to broadly bullish. Karen Finerman said she was afraid to be short. “As a hedge fund manager I can’t risk being under-invested and missing the moves,” she explained.
Steve Grasso, managing director of institutional trading at Stuart Frankel told the panel his money manager clients feel the same way.
Perhaps this quote from Angel Mata of Stifel Nicolaus sums it up best. “The one thing that's driving this market more than anything is the fear that as an investor, you're missing out on something big."
Well guess what? The rich don’t exactly feel that way.
In fact, you might say they don’t feel that way at all. And from how they’re investing, they’re not nearly as bullish as the rest of us.
Mark Axelowitz, director of wealth management at Morgan Stanley Smith Barney advises some of the richest people in the world. And he’s spotted three trends among the ultra high net worth crowd.
The high net worth are:
1. Cautious and not chasing the rally
2. Heavy into fixed income, only moving some into equities
3. Not ready to trust the system enough to dive in with both feet.
It’s ironic. The wealthy could probably afford to be a little more aggressive in this market. We mean, losing a million or two on a wrong-way bet wouldn’t seem like a big deal to these folks.
Yet from what Axelowtiz tells us, it’s just the opposite. The super-rich appear to be super-conservative and more important, unwilling to bet on this bull. Perhaps that’s why they’re so rich.
"When you’re a high net worth investor, you win by not losing,” says Axelowitz. Are they onto something. What do you think? We want to know!
The Department of Labor Weekly Unemployment Report is now so skewed by abnormalities, it is difficult to get a clear picture. First, let's take a look at the data.
Seasonally Adjusted DataWeekly Claims
In the week ending July 25, the advance figure for seasonally adjusted initial claims was 584,000, an increase of 25,000 from the previous week's revised figure of 559,000. The 4-week moving average was 559,000, a decrease of 8,250 from the previous week's revised average of 567,250.
The advance seasonally adjusted insured unemployment rate was 4.7 percent for the week ending July 18, unchanged from the prior week's unrevised rate of 4.7 percent.
The advance number for seasonally adjusted insured unemployment during the week ending July 18 was 6,197,000, a decrease of 54,000 from the preceding week's revised level of 6,251,000. The 4-week moving average was 6,416,250, a decrease of 131,750 from the preceding week's revised average of 6,548,000.
click on chart for sharper image
Initial Claims Analysis
One could point at the substantial +25,000 jump in initial claims and conclude things are deteriorating. However, it is difficult if not impossible to know exactly because a huge seasonal adjustment factor beyond the ordinary related to auto manufacturing plant shutdowns skewed the seasonally adjusted numbers.
The unadjusted drop of -78,111 is even more misleading. Moreover, the only way to use unadjusted numbers accurately is on a year-over-year basis and that fails for reasons stated.
Continuing Claims Analysis
Note the huge drop of 131,750 in continuing claims. Ordinarily this might be significant. However, these are not ordinary times. Much, perhaps all of that drop is due to benefits expiring.
Indeed states and federal programs have extended unemployment benefits several times. They do so but do not adjust the headline numbers.
Please look at lines boxed in red for Extended Benefits and EUC 2008. The latter is Federal extensions picking up where states left off. The former is state extended benefit programs.
Note that 2,656,879 people are on extended federal benefits compared to 127,438 a year ago!
In other words, the headline extended claims number of 6,416,250 is off by more than 2.6 million. And one also needs to add in another 352,000 from various state programs.
Still More Considerations
Even though EUC 2008 claims rose by 24,518, one cannot count on that number either because hundreds of thousands have used up all of their extended benefits.
On July 19, I noted 500,000 Will Exhaust Unemployment Benefits by September, 1.5 Million by Year-end.
Unemployment benefits plus extension last 79 weeks in New York, over 1.5 years. Yet, in June alone, for New York alone, 47,000 used up 72 of those weeks, and count on the extra 7.
From the above post, courtesy of Dave Rosenberg:
Record Number See Benefits End
Take a good look at that chart. It's 50,000 now. The expectation is 500,000 by September and 1.5 million by the end of the year. What are the odds Obama creates 1.5 million jobs by the end of the year? Can he really create any? For how long?
Emergency Unemployment Compensation
Inquiring minds may wish to consider the Emergency Unemployment Compensation (EUC) PDF.
EUC is a federal emergency extension that can provide up to 33 additional weeks of unemployment benefits. The first payable week was the week of July 6-12, 2008.With that backdrop, here are some custom created charts courtesy of Chris Puplava at Financial Sense, based on my request. The charts show the effect of the EUC program over time.
The original extension passed in July 2008 paid up to 13 weeks of additional benefits. Effective November 23, 2008, we can pay up to 7 additional weeks of benefits.
Effective December 7, 2008, we can pay up to another 13 weeks of benefits.
Continuing Claims Since 2000
Continuing Claims Since 1970
Continuing Claims as % of Population Since 2000
Continuing Claims as % of Population Since 1980
Chris notes "The EUC and the extended benefits come out with a lag as Moody’s had data for them only up to 07/11/09 while the continuing claims data is up to 07/18/09. The charts above are through 07/11/09."
Unparalleled Continuing Claims
On a percentage of population basis this recession is unparalleled.
Making matters worse, the US consumer was nowhere near as leveraged to real estate in 1980 or 1982 as now. Also note that boomers are heading into retirement now, undercapitalized and looking for jobs, in effect competing against their kids and grandkids for jobs.
Look at the average age of baggers in grocery stores or greeters at Walmart. These people are not working because they want to; they are working because they have to. Demand for jobs is at an all time high while the number of available jobs and the pay scales of those jobs have both collapsed. The employment situation is not only an unmitigated disaster, things are about to get worse with pending state cutbacks.
Because of expiring claims, continuing claims data will soon start looking better. The reality however, is things will get worse for another year as unemployment soars into double digits. My forecast in January was 10.8% in 2010 while the Fed's was 8.5%. I see no reason to change mine, but the Fed upped theirs.
The implications for housing and especially commercial real estate are ominous.
Mike "Mish" Shedlock
Thursday, August 6, 2009
from my post on Marketwatch in reply to someone who suggested that Patriotic people don't believe in science:
We believe in science, just not the made-to-order JUNK science that Al "Chicken Little" Gore and the Global Warming Borg dole out! "Cluck, cluck! The climate sky is falling!" "You WILL comply!" "Resistance is FUTILE!" Global Warming is a religion now imposing a new tyrannical Inquisition on the world!
The Global Warming agenda is about money and power, not climate preservation or science! That's why Cap and Trade does NOTHING to reduce temperatures or carbon emissions, but imposes all sorts of new taxes and crushing regulation on everyone. It's amazing that there are so many people willing to give up their freedom for counterfeit pseudo-science! It will increase the cost of everything -- even food!
Global Warming is the "earth-is-flatism" du jour! Here today and disproven and forgotten tomorrow. How many scientific "certainties" have found their way into the trash heap of history in our lifetimes? There is just as much science -- and even more scientists -- debunking Global Warming! Of course, since their minds are shut and already made up, Al's goons and the Global Warming Borg ignore all that -- a truly inconvenient truth!
I seems hard to believe that the same people that can't consistently forecast the local weather more than 2 days from now also want us to believe that they can forecast the climate for the entire PLANET several decades from now. We believe in science! We're just not gullible enough to believe the Borg!
NEW YORK (Reuters) - Fannie Mae, the largest provider of U.S. home mortgage funding, on Thursday reported a $14.8 billion quarterly net loss that it said would force it to go to the U.S. Treasury trough a third time for money to stay in business.
The company noted a "significant uncertainty" of its long-term financial health in reporting its eighth consecutive quarterly loss, which illustrates its struggle to make money in the face of rising defaults and pressure to do more to stabilize the housing market.
Fannie Mae and rival Freddie Mac have become more crucial to the nation's housing system since 2007 as the financial crisis sealed off other sources of loan funding. The government last September seized the congressionally chartered companies to ensure that they would continue supporting housing while taking stiff losses. The government promised to inject up to $400 billion of capital.Washington-based Fannie Mae said its regulator requested $10.7 billion from the Treasury to erase a deficit in its net worth, bringing total draws under a senior preferred stock purchase program to $45.9 billion
CHICAGO (Dow Jones)--U.S. wheat futures hit new contract lows Friday as a
firm dollar, falling corn futures and bearishness about hefty world supplies
Chicago Board of Trade September wheat ended down 10 3/4 cents at $4.89 1/2
per bushel, down 38 3/4 cents on the week. Kansas City Board of Trade September
wheat closed down 8 3/4 cents at $5.25 1/4, and Minneapolis Grain Exchange
September wheat lost 6 cents to $5.73 1/4.
CBOT September wheat set a new contract low of $4.88 a bushel, below its
pervious open outcry low of $4.99, set Thursday. Commodity funds sold an
estimated 5,000 contracts.
Strength in the U.S. dollar "certainly kind of poisoned the atmosphere for
finding a reason to rally the grains," said Dave Marshall, an independent
marketing adviser and commodities broker. A firm dollar makes U.S. wheat less
competitive for export business on the world market.
Lackluster export demand continued to hang over the market as the demand
front was quiet, traders said. Egypt passed over the U.S. on Thursday in a
tender and bought wheat from France and Russia.
"The perception is just that there's plenty of wheat around," Marshall said.
The markets will likely consolidate early next week ahead of U.S. Department
of Agriculture crop reports due at 8:30 a.m. EDT Wednesday. The reports will
include fresh estimates on U.S. wheat production and world supply and demand.
Corn and wheat had been weak throughout the day, but they had begun to see bids again until stocks sold off forcefully within the past few minutes. Even soybeans, for which the fundamentals are extremely bullish (ie., tight supply), have now begun to sell into the close, which is only a few minutes away.
I was just reading in Phantom's Gift the following:
POP: (speaking of his early days in trading) ...I took it personally when I would throw money away. I started out with such a small amount of money, and I couldn't stand to lose money at first.There are two principles named here:
- First, that it is normal and even expected to take it personally when we lose money on a trade. It hurts!
- Second, that it is possible to build a life-long trading career from a small monetary base.
Weekly soybean export sales @ 106.9 million bushels! 18.2 million of that is old-crop that we don't have. We're running out of beans.Corn yields are in record-setting territory, while beans continue to be in short supply.
Weekly corn export sales good once again at more than 45 mln bu; wheat solid at more than 20 mln.
Early call from CBOT floor; corn down 2-4, soybeans down 12-15, wheat down 4-6 cents; weak overnight on headwind from outside mkts.
Wednesday, August 5, 2009
In 2007, the deficit for the entire YEAR was $167 billion!
Fast forward to 2009:
Last WEEK, the U.S. government sold $211 billion in new debt! That's one WEEK's worth of debt!
Welcome to bondage, America!
from John Mauldin:
by David A. Rosenberg
U.S. GDP Review -- Consumer, Where Art Thou?
While the headline real GDP number came in a tad better than expected, at -1.0% QoQ annualized rate, the back data were revised lower and show the recession to be deeper. First quarter of this year, for example, was revised to -6.4% from -5.5% previously. And, it may not be lost on anyone that the four consecutive quarters of economic contraction was unprecedented in the post-WWII era; ditto for the -3.9% year-on-year trend. In other words, while nobody is willing to go out on the limb and call this a depression (the same academics that brought you "The Great Moderation" during that last great albeit leveraged economic expansion are now labeling what we have endured over the past year-and-a-half as "The Great Recession"). This does go down as the worst economic performance both in terms of duration and intensity since "The Great Depression". While we are past the most pronounced part of the downturn, it may still be premature to call for the end of the recession merely because of the prospect of a positive third-quarter GDP result. After all, we saw GDP advance at a 1.5% annual rate in last year's second quarter, and if memory serves us correctly, the NBER did not subsequently declare the end of the recession. And even if the recession is ending, as we saw in 2002, that does not guarantee a durable rally in risk assets. Sustainability is the key, and it remains the wild card.
The details in today's report left something to be desired. Consumer spending came in at -1.2% annualized, twice the decline expected by the consensus. This occurred in the face of gargantuan fiscal stimulus and leaves wondering how this critical 70% chunk of the economy is going to perform as the cash-flow boost from Uncle Sam's generosity recedes in the second half of the year. Imagine, government transfers to the household sector exploded at a 33% annual rate, while tax payments imploded at a 33% annual rate and the best we can do is a -1.2% annualized decline in consumer spending in real terms and flat in nominal terms? What do we do for an encore? In the absence of the fiscal largesse, it is quite conceivable that consumer spending would have shrunk at a 10% annual rate last quarter! Nonresidential construction action sagged at an 8.9% annual rate and this was on top of a 44.0% detonation in the first quarter. Ditto for equipment & software 'capex' spending, also down at a 9.0% annual rate and this too followed a 36.0% collapse in the first quarter. Residential construction slumped sharply yet again, this time at a 29.0% annual rate. These are the guts of private sector spending and collectively, they contracted at a 3.3% annual rate -- the sixth decline in a row. So while there are many calls out there for the recession's end, it remains a forecast as opposed to a present-day reality.
As expected, inventories were sliced sharply -- by $141 billion at an annual rate, which alone subtracted 0.8 percentage point from headline GDP growth. But with consumer outlays slipping 1.2% and no signs of a 3Q recovery in sight, based on early back-to-school results looking rather tepid thus far and spending intentions in the confidence surveys rolling over, we wonder aloud just how much re-stocking we are going to see this quarter and even if we do, whether it will be a one-quarter wonder and set the stage for a fourth-quarter relapse. (Hopefully it has not been lost on anybody that the Chicago PMI inventory index in July hit its lowest level since June 1949. So maybe there is less to this inventory story than meets the eye.) Something tells us that an equity market trading north of a 760x multiple on reported earnings is not prepared for such a prospect.
While it is tempting to strip out the inventory withdrawal and look at the fact that outside of that, real GDP contracted at a mere 0.2% annual rate, misses the point. While inventories will undoubtedly add to current quarter growth, we doubt that we'll see another quarter of 13.3% growth in defense spending either. This added to GDP growth in 2Q by almost the same amount that inventories subtracted. Not only that, but the sharp improvement in the foreign trade sector, which added 1.4 percentage points to GDP growth in 2Q, is unlikely to be repeated either. The overwhelming consensus is that real GDP will be positive in3Q; but the key for how 4Q will shape up will rest in how real final domestic demand performs, which sagged at a 1.5% annual rate in 2Q, and -3.3% for private sector demand.
We remain in the deflation camp for the sole reason that the data compel us to. Wages and salaries contracted at a 5.0% annual rate in the second quarter and have deflated 4.3% on a year-over-year basis. This is the flip side of having the majority of companies beating their earnings estimates by aggressive cost-cutting -- a wage contraction of historical proportions that bites into aggregate demand and requires recurring doses of fiscal stimulus and other gimmicks (like "Cash for Clunkers") to establish a floor under the economy.
And, it is not just labour income that is still in deflation mode. Practically all forms of income are deflating from a year ago -- interest income is down 4.5%, dividend income is down 23.0% and proprietary income is down 8.0%. The only income that is really going up is the income from Uncle Sam, which is up more than 10.0% and we have reached a point where a record of nearly one-fifth of personal income is being accounted for by paychecks out of Washington. But it should be known that Uncle Sam himself does not create income -- he borrows cash from current bondholders and future taxpayers. Not the stuff that seems deserving of a 760x multiple.
Inflation was non-existent in the second quarter, with the GDP deflator flat and taking the YoY trend down to 1.5% from 1.9% in the first quarter. (We have seen out of the diffusion indices, such as the Chicago PMI, that pricing trends are in reverse.) This lack of pricing power along with sustained negative volume growth, dragged nominal GDP down at a 0.8% annual rate and -2.4% on a year-over-year basis, which is something we haven't seen since the fourth quarter of 1949. And, what should matter most for stocks and bonds is nominal GDP -- price multiplied by volume. Indeed, Charts 1 and 2 illustrate the case -- the rate of change in the S&P 500 (Chart 1) and the rate of change in bond yields (Chart 2) ultimately track the trend-line in nominal GDP growth.
Canadian Monthly GDP Weaker Than Expected
We also received Canadian GDP data today for May, which came in weaker than expected at -0.5% MoM (the consensus was expecting -0.3%) and we saw April revised to now show -0.2% instead of -0.1%. Therefore, despite all the bravado over the end of the Canadian recession, what we are seeing first hand is that any recovery is coming off a much deeper hole. It looks as though real GDP in Canada contracted at an annual rate of at least 3.0% in the second quarter -- triple the decline in the U.S.A.
Tuesday, August 4, 2009
What they never tell us regarding the impact of government stimulus like "cash for clunkers" and "green jobs stimulus" programs, is that they cannibalize the funds people would have spent elsewhere INSTEAD! So instead of buying a car, people would likely have purchased a new sofa, or a new furnace, or new windows for the house. Those furniture, furnace, and windows jobs will go away instead. The $3 billion taken from taxpayers and funneled into autos is $3 billion that WON'T be spent in another part of the economy to give work to other Americans. Thus, these government incentive programs ALWAYS rob Peter to pay Paul. They don't really CREATE any jobs at all. They just reallocate jobs from one sector to another based upon political favoritism! Thus the politicians will claim that they "saved" or "created" jobs, when they just reallocated them. It's very misleading, and even deceptive!
THESE FAUX PROGRAMS JUST RE-DISTRIBUTE JOBS BETWEEN SECTORS
What the media often overlooks with these fabricated programs is that both the giveaway money AND the money consumers spent on those cars will be money that will NEVER be spent elsewhere on other products. It just sucks the life out of other sectors of the economy, while forcing workers in those other sectors to fund the programs that are sucking them dry. Whether those funds are cannibalized from purchases that would have been made on television sets, computers, recreational vehicles, furniture or furnaces for the house, or new shoes for the kids, will never be acknowledged by the politicians or their complicit media.
This cash for clunkers program is just UAW bailout #2 -- or is it #3 -- or #4? It funnels resources into the auto industry that would have provided jobs elsewhere instead!
But the jobs that are LOST by the "out-of-favor" (non-union) sectors, as these funds are reallocated by government edict from one sector to another are a certainty, even while the politicians applaud themselves for what they term "success" at these re-allocations.
And the administrative expenses for those programs are just wasted and unproductive money, too. I just read yesterday that many administrative costs rise as high as 80% of the available funding in some government programs intended to serve the poor. The poor benefit only marginally. They are its greatest victims, not its beneficiaries! The politicians benefit greatly by, in essence, buying votes!
It gradually, but inevitably, saps the vitality from the economy, causing more and more lost jobs and economic stagnation!
WASHINGTON – The recession is starving the government of tax revenue, just as the president and Congress are piling a major expansion of health care and other programs on the nation's plate and struggling to find money to pay the tab.
The numbers could hardly be more stark: Tax receipts are on pace to drop 18 percent this year, the biggest single-year decline since the Great Depression, while the federal deficit balloons to a record $1.8 trillion.
Other figures in an Associated Press analysis underscore the recession's impact: Individual income tax receipts are down 22 percent from a year ago. Corporate income taxes are down 57 percent. Social Security tax receipts could drop for only the second time since 1940, and Medicare taxes are on pace to drop for only the third time ever.
The last time the government's revenues were this bleak, the year was 1932 in the midst of the Depression.
"Our tax system is already inadequate to support the promises our government has made," said Eugene Steuerle, a former Treasury Department official in the Reagan administration who is now vice president of the Peter G. Peterson Foundation.
"This just adds to the problem."
While much of Washington is focused on how to pay for new programs such as overhauling health care — at a cost of $1 trillion over the next decade — existing programs are feeling the pinch, too.
Social Security is in danger of running out of money earlier than the government projected just a few month ago. Highway, mass transit and airport projects are at risk because fuel and industry taxes are declining.
The national debt already exceeds $11 trillion. And bills just completed by the House would boost domestic agencies' spending by 11 percent in 2010 and military spending by 4 percent.
For this report, the AP analyzed annual tax receipts dating back to the inception of the federal income tax in 1913. Tax receipts for the 2009 budget year were available through June. They were compared to the same period last year. The budget year runs from October to September, meaning there will be three more months of receipts this year.
Is there a way out of the financial mess?
A key factor is the economy's health. The future of current programs — not to mention the new ones Obama is proposing — will depend largely on how fast the economy recovers from the recession, said William Gale, co-director of the Tax Policy Center.
"The numbers for 2009 are striking, head-snapping. But what really matters is what happens next," said Gale, who previously taught economics at UCLA and was an adviser to President George H. W. Bush's Council of Economic Advisers.
"If it's just one year, then it's a remarkable thing, but it's totally manageable. If the economy doesn't recover soon, it doesn't matter what your social, economic and political agenda is. There's not going to be any revenue to pay for it."
Monday, August 3, 2009
This is off Table 3B in the BEA's release and is actual year-over-year change in constant (chained) dollars. Feel free to check my work - in fact, you should check my work, just like you should check everyone else's you hear, especially if you hear a politician or media pundit opine about how "things are getting better."
Baloney. Not only is the GDP still falling it is still falling at an increasing year-over-year rate.