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"Economics with Attitude"

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A record 107 million Americans have car loans

Americans went on a massive shopping spree for cars and trucks in recent years. Many paid for their vehicles by taking out a loan. A record 107 million Americans have auto loan debt, according to data released this week by the Federal Reserve Bank of New York. That's about 43% of the entire adult population in the US.

It's an eye popping number. Auto loans have been growing rapidly. In early 2012, only 80 million Americans had car loans. In fact, more Americans had home mortgages than auto loans in 2012. But all that has changed.

Today the number of auto loans far outpaces home loans. It helps explain how car makers have had year after year of record sales. Car sales notched another all-time high in 2016, though lately the buying frenzy seems to be over.

Americans don't need to buy new cars every year, and an alarming number of people can't afford to pay their car loans. There are 6 million people who are 90 days or more behind on their car payments, according to the data. That puts them in danger of having their car or truck repossessed.

Fed Will Blink

There was a time when central banking was an honest profession. Central bankers provided financing for the government. They backed the banking system, too, by holding savings as reserves, which they lent to solvent member banks in emergencies.

They were tight-lipped, tight-laced, and tightwads. Their role was to say “no” more often than “yes.” When the king wanted money to fight in a war… or build a bridge… the banker would give the terse reply: “Sire, we don’t have any.”

Real money was backed by gold. And credit had to be backed by real money, which meant it had to be saved. Savings were limited, as was money. Savings backed 100% of U.S. credit needs until about 1973… two years after President Nixon first announced that the dollar would no longer be backed by gold.

Then, almost unnoticed, a new financial system took over… with new central bankers in control of it. Forty-five years later, America saves scarcely 20% as much as it issues in new credit. The other 80% is “funny money” – credit created out of nowhere by the Fed, by banks, and by foreign central banks (mostly recycling trade surpluses).

Black Swans And Interventionistas...With Special Guest Nassim Nicholas Taleb

The Average American Worker Lost $9,000 A Year In Income Over The Decades - That's Why Stagnation

A new paper is out insisting that the average American worker lost some $9,000 a year in income over recent decades. That is, if we compare the amount people got paid some time ago with the amount that same average person is getting paid today then there's been a fall in wages by that $9,000. This isn't true, there is no way that it's true, so what we've got to do is work out what it is that they've done to see if we can pinpoint the error. The reason it isn't true is because everyone lives a richer life these days. Food is cheaper, absolutely anything to do with technology is cheaper, we live longer lives, medical treatment is better, houses are larger and, well, just everything. And income is the measure of the lifestyle we can buy. If what we can buy has got better, larger, cheaper, then we cannot then go around shouting that people have lower incomes. The two statements would be in direct contradiction to each other.

The answer is simply that we're measuring inflation wrongly and we already know we are too. Correct that one point, by the amount we think that we're mismeasuring inflation by, and male and household incomes have risen over the decades. Which would make the calculation accord with our simple observation of the world around us again. Which is useful--because we do want our economic findings to reflect reality, don't we?

Here's one report on it: America is getting richer every year. The American worker is not. Far from it: On average, workers born in 1942 earned as much or more over their careers than workers born in any year since, according to new research — and workers on the job today shouldn’t expect to catch up with their predecessors in their remaining years of employment.

Their calculation does indeed show this. But there's a problem here: The new paper includes some “astonishing numbers,” said Gary Burtless, an economist at the nonpartisan Brookings Institution who was not involved in the research. “The stagnation of living standards began so much earlier than people think,” he said.

Trump Was 41% Of All News Coverage In His First 100 Days

Donald Trump did the news media a favor by giving it a single subject to drive or support viewership and readership recently. 41% of all news stories over Trump’s first 100 days were about him.

According to the Harvard Kennedy School Shorenstein Center on Media, Politics, and Public Policy the report covered these media: “news reports in the print editions of The New York Times, The Wall Street Journal, and The Washington Post, the main newscasts of CBS, CNN, Fox News, and NBC, and three European news outlets (The UK’s Financial Times and BBC, and Germany’s ARD).” In other words, the cream of U.S. and Europe print and broadcast media.

The study found:President Trump dominated media coverage in the outlets and programs analyzed, with Trump being the topic of 41 percent of all news stories—three times the amount of coverage received by previous presidents. He was also the featured speaker in nearly two-thirds of his coverage. Republican voices accounted for 80 percent of what newsmakers said about the Trump presidency, compared to only 6 percent for Democrats and 3 percent for those involved in anti-Trump protests.

European reporters were more likely than American journalists to directly question Trump’s fitness for office. Trump has received unsparing coverage for most weeks of his presidency, without a single major topic where Trump’s coverage, on balance, was more positive than negative, setting a new standard for unfavorable press coverage of a president. Fox was the only news outlet in the study that came close to giving Trump positive coverage overall, however, there was variation in the tone of Fox’s coverage depending on the topic.

Since Shoppers Aren’t Going To Stores, JCPenney Wants To Sell Linens To Hotels

Looking around its stores for something else to sell that isn’t clothing, JCPenney is entering a new business. After noticing large online orders for home goods placed by what turned out to be hotels, the company has decided to launch an actual sales team that will visit and sell to hotels.

After all, hotels that are just opening or that are refreshing their look need mattresses, blankets, pillows, sheets, towels, curtains, and blinds, all of which you can find at JCPenney.

In its announcement, the department store chain also points out that it sells uniforms, and the large and small appliances used to furnish extended-stay suites and corporate housing. For many of those items, it has its own brands and suppliers, though it could theoretically also use that supply chain to make custom products for large hotel clients.

“Our broad assortment of private brands in soft home give us a unique cost and value advantage in this new and exciting space,” CEO Marvin Ellison said in a statement. The “exciting” part is probably the prospect of selling hundreds of towels in a single transaction.

Driverless Cars Could Lead To Job Losses Of 300k A Year, But Fear Not The Robot Apocalypse: Goldman

The rise of artificial intelligence and robotics, and such things as autonomous autos and automatons, has given rise to fears of mass unemployment in the U.S. and across the globe that everyone will be out of jobs besides people like Mark Zuckerberg who will have us work as indentured servants on his click farms.

To consider if these concerns have any real basis, Goldman Sachs examined two key data – unemployment rates and productivity growth – and concluded that the fears are irrational, and any impact could be limited to retail and transportation.

“The technological advances of recent decades do not appear to have resulted in faster productivity growth or more intense disruption across occupations and industries, much less mass unemployment,” the investment bank concluded in a research note titled, “Driverless Cars and the End of Work? Not So Fast.”

Unemployment rate has dipped to 4.4% and measured productivity growth has been very weak, it pointed out. Goldman analyzed employment data for 22 occupations from the Occupational Employment Statistics and for 121 private industries from the current employment statistics. During 1990-2003, the biggest job losses occurred in textile and durables manufacturing and in the period 2004 to present, they occurred in varied sectors hit by digitization including department stores and publishing. But the main takeaway, the bank said, was that “job market disruption has been lower recently than at any previous point since at least the early 1990s.”

Warren Pollock-Patriot Trump Must Go On Offensive

The Tens Of Millions Of Forgotten Americans That The U.S. Economy Has Left Behind

The evidence that the middle class in America is dying continues to mount. As you will see below, nearly half the country would be unable “to cover an unexpected $400 expense”, and about two-thirds of the population lives paycheck to paycheck at least part of the time. Of course the economy has not been doing that well overall in recent years. Barack Obama was the only president in all of U.S. history not to have a single year when the economy grew by at least 3 percent, and U.S. GDP growth during the first quarter of 2017 was an anemic 0.7 percent. During the Obama era, it is true that wealthy enclaves in New York, northern California and Washington D.C. did thrive, but meanwhile most of the rest of the country has been left behind.

Today, there are approximately 205 million working age Americans, and close to half of them have no financial cushion whatsoever. In fact, a new survey conducted by the Federal Reserve has found that 44 percent of Americans do not even have enough money “to cover an unexpected $400 expense”…

Nearly eight years into an economic recovery, nearly half of Americans didn’t have enough cash available to cover a $400 emergency. Specifically, the survey found that, in line with what the Fed had disclosed in previous years, 44% of respondents said they wouldn’t be able to cover an unexpected $400 expense like a car repair or medical bill, or would have to borrow money or sell something to meet it. Not only that, the same survey discovered that 23 percent of U.S. adults will not be able to pay their bills this month…

Just as concerning were other findings from the study: just under one-fourth of adults, or 23%, are not able to pay all of their current month’s bills in full while 25% reported skipping medical treatments due to cost in the prior year. Additionally, 28% of adults who haven’t retired yet reported to being grossly unprepared, indicating they had no retirement savings or pension whatsoever.

Why America's department stores are in free fall

An already bad year for department stores is getting worse, said Lindsey Rupp at Bloomberg. After a lackluster holiday season, "every major chain in the industry" has reported disappointing quarterly sales. Macy's reported that its quarterly profits fell 38 percent, to $71 million, from the same period a year ago. Kohl's, Nordstrom, J.C. Penney, Dillard's, and Hudson's Bay Co., which owns Saks Fifth Avenue and Lord & Taylor, all reported steep declines in same-store sales. The crushing results added a new layer of urgency to department stores' efforts to slash expenses. Macy's, for example, already has plans to close 100 underperforming stores, eliminating some 4,000 jobs, and executives say more closures might be necessary. Department stores, it seems, have a new mantra: "How quickly can we cut?"

Macy's has become the new poster child for the retail apocalypse, said Abha Bhattarai at The Washington Post. The shopping malls that the store once anchored have been hollowed out by the rise of e-commerce, leaving the chain stuck with piles of unsold inventory and acres of pricey real estate. This year, Amazon is expected "to usurp Macy's as the country's largest clothing retailer." Meanwhile, consumers who still shop offline are increasingly headed to off-price chains like T.J. Maxx. By Macy's own estimates, two-thirds of its most loyal customers and 70 percent of millennials shop at discount retailers every month. "Another issue: The company tends to sell run-of-the-mill products that shoppers can find more easily — and often more cheaply — elsewhere."

"America's long-standing love affair with shopping at malls and department stores may be nearing an end," said Chris Isidore at CNN. So far, 3,300 retail store closings have been announced this year, with analysts predicting that 2017 will see the most closures since the recession.

Employment at department stores fell 46 percent between 2001 and 2016 — even more than in beleaguered industries like coal mining (32 percent) and factories (25 percent). The mall as we know it is doomed, said Hayley Peterson at Business Insider. Macy's is already "morphing into a discount store" by rolling out self-service shoe departments and new clearance sections.

Danielle DiMartino Booth of Money Strong LLC

Americans Are Paying $38 to Collect $1 of Student Debt

The federal government has, in recent years, paid debt collectors close to $1 billion annually to help distressed borrowers climb out of default and scrounge up regular monthly payments. New government figures suggest much of that money may have been wasted.

Nearly half of defaulted student-loan borrowers who worked with debt collectors to return to good standing on their loans defaulted again within three years, according to an analysis by the Consumer Financial Protection Bureau. For their work, debt collectors receive up to $1,710 in payment from the U.S. Department of Education each time a borrower makes good on soured debt through a process known as rehabilitation. They keep those funds even if borrowers subsequently default again, contracts show. The department has earmarked more than $4.2 billion for payments to its debt collectors since the start of the 2013 fiscal year, federal spending data show.

The findings, gleaned from the bureau’s analysis of about 600,000 borrower accounts, come as the Trump administration weighs a shakeup of the government’s student loan program. For years, defaults have mounted despite the improving U.S. economy and the money invested in collecting education debt. Education Secretary Betsy DeVos pledged earlier this year to “do a better job” than the Obama administration at managing the department’s loan contractors. Last week, DeVos suggested that the feds should “start afresh.”

Officials at the CFPB say the government should reexamine whether the loan program, and the lucrative contracts it bestows on private firms, is working for the millions of Americans struggling to repay their taxpayer-backed student debt.

Nearly 70 Percent Of Residents Can't Afford To Buy A Home In Calif.: Study

Nearly 70 percent of Californians could not afford a median-priced home in the state during the first three months of this year, the California Association of Realtors reported this week. According to the report, 32 percent of households could afford to buy a $496,620 home ― the median price in state ― during the first quarter of 2017. That required a yearly income of $102,050 and monthly payments of $2,550, tax and insurance included. The association assumes that the buyer puts down 20 percent and got a 30-year mortgage with a fixed interest rate of 4.36 percent.

In some of the more desirable parts of California, the average household would need an income of more than two times the state's average. In San Mateo, San Francisco, Marin and Santa Clara counties, you would need an income of around $267,000 in order to afford a home there, according to CAR. The median homes there range from $805,000 to $1.3 million.

Southern California wasn't any better. In Los Angeles County, you'd need an annual income of at least $99,830 for a median-priced home of $485,800, according to CAR. Only 32 percent of people there could afford to buy.

Los Angeles, however, was still more affordable other coastal counties in Southern California. In Orange County, a salary of $154,120 was needed to afford a median-priced home and only 21 percent of buyers can afford to do so. San Diego County required an income of $115,900 and only 29 percent can afford a home there.

Spate of store closures puts a wrinkle in teens' summer job plans

A summer spent folding and refolding sweaters at the mall was once a teen rite of passage. But as the end of the school year nears, young people hoping to find summer retail jobs must contend with a wave of shuttered storefronts and an industry in revolt.

Fourteen retail chains filed for bankruptcy protection through early April, nearly as many as filed all of last year, and a barrage of stores where young faces often greet customers — Wet Seal, The Limited, RadioShack, Rue 21, Payless Shoe Source, American Apparel, Abercromie & Fitch — have announced mass store closures.

Long a go-to for teens seeking summer jobs or their first shot at employment, retailers for years have been buckling under shifting consumer tastes and the rise of online shopping. But this year's store “meltdown,” as it has been called, has some worried that youth will lose out on a key early work experience that gives them foundational job skills.

The good news is that the meltdown is happening when the job market is strong and there are plenty of other entry-level opportunities. Strong summer hiring last year pushed total teen employment past 6 million, the highest it's been since 2008, according to the Chicago outplacement firm Challenger, Gray & Christmas. But John Challenger, CEO of the firm, worries that the shift from traditional sales floor gigs and toward the new retail jobs reality — at warehouses fulfilling online orders — may hamper teens in the long run because those jobs may be harder for them to get.

The Great U.S. Oil Export Boom

Once unthinkable, in December 2015 the U.S. decided to lift the nation’s 40-year ban on crude oil exports driven by a boom in domestic drilling and production. Until then, our crude exports just went to Canada, awarded an exemption to import U.S. petroleum.

Now, some 17 months later, the shift that the U.S. has brought to the global oil market continues to reverberate. The agreement between OPEC and some major partners like Russia to reduce production by 1.8 million b/d has allowed the U.S. to grab more market share of the ever-growing 97 million b/d global oil market.

With the surpassingly very high level of compliance for the cuts, the Middle Eastern crude benchmark Dubai has been strengthening, allowing more crude to flow west to east. Asia's refineries have jumped at this open arbitrage to buy more U.S. grades.

Since 2008, U.S. crude oil production has nearly doubled to 9.35 million b/d, helped by the rise in prices starting at the end of November. Yet, the shale oil that has been the basis of the revolution is a lighter, less viscous oil, and our immense 18.6 million b/d of capacity refining system is generally configured to process heavier crudes from the likes of Canada, Mexico, and Venezuela. This is basically why our imports still remain high, with crude intake reaching 8.6 million b/d last week.

Gold Somewhat Ignores Dollar Weakness

The precious metals complex rebounded as expected after becoming very oversold just a few weeks ago. The rebound has been aided by weakness in the US Dollar, which plunged roughly 2% over several days. However, upon further inspection Gold’s rebound has been entirely dollar-centric. Gold has remained weak in real terms and strength in the gold stocks and Silver has been rather muted. In short, the lack of much stronger performance in the face of US Dollar weakness bodes for increasing downside risk over the near term.

Gold’s recent strength has been driven entirely by Euro strength and not due to falling real interest rates, its primary fundamental driver. Macron’s win in France coupled with recent strength in European markets has supported what was an oversold and depressed Euro. This has supported Gold in US Dollar terms but only in those terms. As the chart below shows, Gold has been weak when measured against foreign currencies and equities.

The above chart shows that Gold remains well below its spring high near $1300 despite the US Dollar breaking its spring lows to the downside. In addition, Gold remains rather weak relative to foreign currencies and equities. The one hope for Gold would be a falling stock market and sustained strength in the Gold/equities ratio. While I expect that eventually, I do not think it is in the cards yet.

Turning to the gold mining stocks, we see immediate downside risk as the miners appear to have completed their oversold bounce. Over the past few weeks GDX and GDXJ rallied 13% and 17% respectively and retraced a good chunk of their April decline. However, they now appear ready to decline into June and the upcoming Fed meeting. For the first time in months, GDX was unable to touch its 200-day moving average, which is already sloping down. Support for GDX is at $21 and $18-$19. Meanwhile, GDXJ peaked at its 50-day moving average and strong resistance at $34-$35. Its next strong support level is the December 2016 low.

Government pensions leave retirees, taxpayers in a bind

Underfunded pensions, mainly for government employees, are a disaster waiting to happen, and the concern about underfunded pensions is rising daily as the number of newspaper articles on the topic increases.

While most corporate employers shifted from pension plans to 401(k) plans after the early 1980s, governments still offer pensions to employees. Those pensions have left retirees and taxpayers in a bind that has fueled political battles while continuing to enrich investment consultants and managers. The result is that overly optimistic estimates of investment returns, which determine how much governments must pay to fund the balance, have left many plans massively underfunded even as the plan administrators and advisers who managed them received huge fees.

Those most likely to be hurt and hurt the most are retirees and taxpayers. The money to pay future retirement benefits to government workers such as firefighters, policemen and teachers comes from two sources: contributions made by governments to the funds, (from taxes) and investment growth. The more the funds’ investments grow, the less taxpayers must contribute.

To ensure that there will be enough money to pay retirees’ benefits later, contributions must come in every year, but the calculation of how much depends on future investment returns. Thus, the assumed future rate of return on investment is critical. The higher the assumption, the less taxpayers must contribute.

Cash Strapped Venezuela To Import Gasoline As

For over forty days, hundreds of thousands of Venezuelans have taken over the main streets and roads of the country to protest against the dictatorial Venezuelan regime. Since the protests started, forty-two people have been killed, 2,371 arrested and thousands injured across the country.

Falling oil revenues due to low international oil prices, as well as the institutionalized government corruption, caused yet more protests, with the government once again using tear gas, water cannons and pepper spray alongside its paramilitary force - the “colectivos” (the heavily armed civilian branch of the “revolution”).

Venezuela’s economic, humanitarian and political crisis hit critical levels at the end of March, when Venezuela’s president and the Supreme Court of Justice initiated a process that would deprive the opposition-led National Assembly of its legislative powers. It is worth noting that the present Supreme Court of Justice was deviously designated by the previous National Assembly just days before they finished their period, a move designed to make it completely obedient to the Venezuelan president. Two days later, in response to the outcry of the international community, in particular from the Organization of American States (OAS), the Supreme Court tried to step back from its controversial dictatorial decision through a presidential mandate.

On May 1st, President Nicolas Maduro announced on national television that he would call an assembly to rewrite the country’s Hugo Chavéz Constitution. It was the solution that the government found to pacify the protest against him, but the opposition rejected this solution as an attempt to avoid new presidential elections.

What is the future of the GOP health care bill?

Student debt forgiveness program may get axed by Trump administration

Here is a relatively easy way to get rid of student debt: 1) work for the government or a non-profit, 2) keep up with student loan payments for 10 years; and, 3) apply for the Public Service Loan Forgiveness Program, a federal government program that many former students currently rely on to solve their debt troubles.

But the Trump Administration on Wednesday signaled it may cancel the program in an effort to cut $10.6 billion from federal education funding. The Washington Post said in an article that it acquired budget documents, which are supposed to be released to the public next week, mentioning the cuts. There are no further details provided.

The Public Service Loan Forgiveness Program began in 2007. The Washington Post reports over 550,000 people are “on track to receive the benefit.” Ashley Coleman, assistant director of the Financial Aid and Scholarships office, is one of those people. She said if the federal government denies her the program, she may not be able to fulfill her dream of buying a house.

Coleman, who is $44,000 in debt, is shocked by the possibility of the federal government denying her the debt relief particularly after she is halfway through the 10-year-long commitment. Coleman graduated from University of South Dakota in 2010, and her employment at the University of Oregon allows her to qualify because UO qualifies as an employer to offer eligibility for PSLF. Coleman is frustrated because she would have chosen a different payment plan if she knew the program would fall through. Michelle Garibay is also a UO financial aid counselor, who graduated from Western Oregon University. Like Coleman, she is relying on the program to allow her to buy a house instead of paying off student debt.

NEWS to Disturb the Comfortable...

We don't tell you what to think,

but we give you something to think about.