American Household Debt Almost Back at Pre-Recession Levels
The Federal Reserve Bank of New York’s Center for Microeconomic Data has released its reading for the level of household debt for the fourth quarter of 2016. As the headline suggests, the debt levels keep rising. Top drivers were shown to be auto debt, credit card debt levels and rising student debt.
Total household debt in the fourth quarter of 2016 was up 1.8%, or by $226 billion, reaching a level $12.58 trillion. What should stand out about this report is that this is a mere $99 billion under the peak household debt that was hit in the third quarter of 2008. In percentages, that is just 0.8% shy of the record.
Debt levels rose across all debt products. The New York Fed showed that there was a 1.6% rise in mortgage balances, but that was the smallest of the group. Debt balances rose by 1.9% in auto loans, rose by 2.4% on student debt balances and rose 4.3% on credit card balances.
Mortgage balances are understandably the largest component of household debt. This was up $130 billion at $8.48 trillion at the end of 2016 versus the prior quarter. The balances on home equity lines of credit were almost flat, having risen just $1 billion to $473 billion. Mortgage originations were $617 billion, the highest level since the beginning of the Great Recession.
'March is a done deal' for the Fed's next rate hike, Peter Boockvar says
The Fed's first interest rate hike of 2017 is likely to come next month because of inflation indicators and Fed Chair Janet Yellen's congressional hearing, analyst Peter Boockvar told CNBC on Thursday.
"I think March is a done deal. I think Yellen in her nice, soft, clear way said it was a done deal. And I think yesterday's CPI number clinched it," the Lindsey Group chief market analyst said on "Squawk Box."
The Bureau of Labor Statistics reported Wednesday that the Consumer Price Index jumped 0.6 percent in January, the largest increase since February 2013. The number reflected rising prices on gasoline and other goods, indicating rising inflationary pressures.
Boockvar said the market's expectations are not fully adjusted for a rate hike because the Fed's reputation has become that of "the boy who cried rate." "They've trained the markets not to believe when they're going to raise rates," Boockvar said, adding that Yellen would be well served to give the market a stronger indication if she anticipates a March hike. The Fed's next policy meeting is March 14-15.
Heritage Foundation Blames Obama Admin. for America’s Economic Decline
The Heritage Foundation minced no words in commenting on its latest Index of Economic Freedom: America’s continuing decline is all Obama’s fault:
America’s standing in the index [now in 17th place, the lowest in history] has dwindled steadily during the Obama years. This is largely owed to increased government spending, [increased] regulations, and a failed stimulus program that enriched the well-connected while leaving average Americans behind.
For the ninth time in 10 years, America’s index has lost ground. Coming in above 80 in 2008, the United States' current index is barely above 75, tying it with Denmark, and just above Sweden and Latvia. But the latest rating places it way behind the United Kingdom (76.4), Canada (78.5), Australia (81), Switzerland (81.5), New Zealand (82.7), Singapore (88.6), and Hong Kong (89.8).
Heritage names “large budget deficits and a high level of public debt” as contributing to the continuing decline in America’s economic freedom, keeping it in the middle category of “mostly free” into which it first fell in 2010. Added Heritage: Registering its lowest economic freedom score ever, America continued its string of discouraging trends in the 2017 index. Obama’s Washington-first, government-centric approach to policymaking has inflicted long-term damage to U.S. economic growth.
Michigan workers hate NAFTA but love robots
Lou Dobbs: Corporate America Waging 'Frontal Assault' on Trump
Fox Business Network host Lou Dobbs thinks the mainstream media has dropped the ball covering two of the more important yet under reported stories of the Trump Presidency —corporate America and voter fraud.
In a Q&A with The Washington Post, Dobbs said the Ivanka Trump-Nordstrom dustup fronted a much larger story. "Kellyanne Conway making a remark about the Ivanka stuff ignores what I think is a real frontal assault from corporate America and individual CEOs against this president," Dobbs told the Post.
"We have not seen that in the history of the country, and it is going utterly unreported," Dobbs said. "Corporate America [is] taking on the White House individually in ways we've never seen before."
Dobbs, host of "Lou Dobbs Tonight" on Fox and former longtime host on CNN, also said the media is taking the wrong tack on Trump's claims of massive voter fraud; the infamous 3 million to 5 million who allegedly voted illegally.
The True Cost of a ‘Living Wage’
With the election of Donald Trump, the chances that the federal minimum wage will be raised are now slim to none. But the drive for a hike in the wage floor, especially after recent increases have come at the state, city and company level, will likely not end anytime soon.
So, would a minimum wage hike destroy jobs, as its opponents claim, or would it combat poverty, as supporters argue? The answer is, of course, yes.
Let’s start with the reasoning behind raising the minimum wage — namely, that it’s only fair that a minimum wage be a “living wage.” A person working full time at $7.25 per hour earns $15,080 annually before taxes. After paying federal income and payroll taxes, state income taxes, sales and excise taxes, real estate taxes (directly or through rent) and other taxes and fees, spendable income falls to about $12,000.
In 2015, the poverty level for an individual was $11,770 annually and $24,250 for a family of four. In other words, the minimum wage is the minimum needed for one person, living in an average cost region, to slip out of poverty. For families or those residing in higher-cost areas, it is a poverty wage.
Auto union courts Tesla workers, amplifies 'buy American' message
United Auto Workers President Dennis Williams said on Thursday the union is contacting workers at Silicon Valley electric car maker Tesla Inc (TSLA.O), and plans to boost efforts to convince U.S. consumers not to buy vehicles built in other countries, including those sold by the Detroit automakers.
The UAW leader also used a meeting with reporters to praise President Donald Trump for calling on companies to produce more products in the United States, and promising to rework the North American Free Trade Agreement. But Williams said he disagreed with Trump's order temporarily barring travel to the United States from seven Muslim-majority countries.
"It's very dangerous to single out individual groups based on religion," Williams said. "It's un-American." Some UAW members were stranded overseas by the ban before it was stayed by a federal appeals court, Williams said.
Williams' comments highlight the political challenges facing U.S. labor leaders as they confront a Republican president who shares their skeptical views on free trade and values U.S. manufacturing, but whose policies on other issues are contrary to union principles. "I'm interested in some of the things he's doing," Williams said. "I'm very concerned about some of the things he's doing."
Study Finds Trump’s Wall Could Pay For Itself More Than 8 Times Over
In a blow to left-wing amnesty advocates who say President Donald Trump's proposed border wall would be fiscally irresponsible, a new study out from the Center for Immigration Studies has found that President Donald Trump's proposed border wall only has to stop about nine to 12 percent of all illegal alien border crossers to pay for itself over the next 10 years.
In fact, the amount of money the United States would save by preventing illegal immigration at the U.S. border over next ten years could end up paying for the border wall about eight times over, according to this analysis.
CIS noted that according to data from the National Academies of Sciences, Engineering, and Medicine (NAS), the average illegal alien who crosses the border creates a net drain of about $75,000 over the course of their lifetime in the United States. This is often caused by the fact that most illegal alien border-crossers have little to no English language skills, low education levels and are usually unskilled workers.
Though they may work and even pay taxes over the course of their lives, they end up using more in taxpayer-provided services and benefits than they ever put into the system – and that’s without factoring in the cost of their U.S.-born children.
China’s $3 Trillion Countdown Clock
It’s very difficult to think of a really important economic issue today that is not also a geopolitical issue. The geopolitical becomes the economic. For every economic issue discussed, there’s a geopolitical face to it, and vice versa. You really need to mash up the two together.
One of the biggest convergences today between economics and geopolitics is China’s three trillion dollar countdown clock. The first that needs to be made is that this problem used to be a four trillion dollar countdown clock, and it’s now down to three trillion. Currently, numbers have that figure slightly below three trillion when evaluating China’s hard currency reserve position. Any country has a currency reserve. Think of it like a savings account, to make it really simple. You stick it in the bank, or a brokerage account, and that’s your savings.
Countries are not that much different than individuals. They make money, and they spend money. A country that exports more than it imports is going to have a trade surplus. China is an example of this.
China sells considerably more to the world than it buys. They get paid predominantly in U.S dollars and the excess is what has been built up in the Chinese economy and its reserve position. Over a twenty year period, by the end of 2014, it had the largest reserve position in the history of the world. It was slightly more than four trillion dollars. While not all of it was in dollars, a majority was.
This Is One Of The Big Reasons Why So Many Families Are Feeling Extreme Financial Stress
When the cost of living rises faster than paychecks do year after year, eventually that becomes a very big problem. For quite some time I have been writing about the shrinking middle class, and one of the biggest culprits is inflation. Every month, tens of millions of American families struggle to pay the bills, and most of them don’t even understand the economic forces that are putting so much pressure on them. The United States never had a persistent, ongoing problem with inflation until the debt-based Federal Reserve system was introduced in 1913. Since that time, we have had non-stop inflation and the U.S. dollar has lost more than 98 percent of its value. If our paychecks were increasing faster than inflation this wouldn’t be a problem, but in recent years this has definitely not been the case for most Americans.
And unfortunately inflation is starting to accelerate once again. In fact, it is being reported that inflation rose at the fastest pace in four years in January…
The prices Americans pay for goods and services surged in January by the largest amount in four years, mostly reflecting a rebound in the cost of gasoline that’s taking a bigger chunk out of household incomes.
The consumer price index, or cost of living, rose by a seasonally adjusted 0.6% in January, the government said Wednesday. Meanwhile, our incomes have been incredibly stagnant. In fact, we just learned that median household income did not go up at all during 2016.
Failing Dam Is a Symbol of U.S. Infrastructure
The sorry state of American infrastructure is once again our focus. This time the peg is the Oroville Dam in California. It is the U.S.'s tallest dam, and it is in trouble. An emergency spillway was damaged, causing evacuation of 188,000 Californians.
State and federal officials ignored the warnings of environmental groups who for more than a decade have been asking them to reinforce the dam’s spillway. As regular readers know, failing infrastructure is a theme I've pounded on again, again and again.
How did we get to this sorry state? The short answer is partisan politics, informed by bad ideology and a focus on little more than the next election.
Does anything reflect the state of American short-termism more than the slow, inevitable decay and eventual failure of key components of our transportation, electrical, water and sanitation systems? These are the most basic services government provides. The inability to do what so many other developed nations do so much better is why I have called each of the past 10 Congresses “the worst ever.”
Gold notches highest finish in more than 3 months
Gold futures scored back-to-back gains Thursday, sending prices to their highest finish in more than three months. “The dollar is weaker, Treasury yields are down and stocks are lower,” said Michael Armbruster, principal and co-founder at Altavest. “That is a nice trifecta for gold.”
The yellow metal’s gain on Wednesday snapped what had been a four-session fall stoked by expectations that the dollar would rise on heightened expectations for U.S. interest-rate hikes, following two days of testimony this week on Capitol Hill from Federal Reserve Chairwoman Janet Yellen.
Some analysts, however, believe that gold’s modest near-term gains look vulnerable as U.S. equities remained near record highs amid optimism for the Trump administration’s plan to deliver tax reforms.
“The move [higher for gold] may have reflected profit-taking after markets exhausted the week’s Fed policy-defining news flow,” said Ilya Spivak, strategist for Daily FX. “Jitters ahead of a coming G-20 foreign ministers’ meeting—the first to be attended by members of the Trump administration—may have encouraged a cautious disposition.”
It Might Be Time To Be ‘Underweight’ Gold
Congress debates: Should tax dollars be used to buy junk food?
The House Agriculture Committee debated Thursday whether taxpayers should pay for sweetened beverages through the Supplemental Nutrition Assistance Program, but when the five expert witnesses were asked if soda has nutritional value, not one said yes.
Still, only one of the witnesses, Angela Rachidi, who studies poverty for the American Enterprise Institute, a business-oriented think tank, advocated restrictions for candy and soda now paid for by the program. She said restrictions would prompt retailers to make healthier alternatives available.
Others argued that the cost of implementing restrictions would be prohibitive and have limited value.
“Cashiers end up being food police at check-out time,” said Leslie G. Sarasin, CEO of the Food Marketing Institute, a retail grocery industry association. Delays at check-out counters in an industry with small profit margins would cost retailers, and even drive them out of the program, she said. “It would create real havoc,” she said.
Fed President Admits US Banks Have Only "Half The Equity They Need"
In a scathing editorial published in the Wall Street Journal today, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, blasted US banks, saying that they still lacked sufficient capital to withstand a major crisis.
When you’re applying for a mortgage or business loan, sensible banks are supposed to demand a 20% down payment from their borrowers. If you want to buy a $500,000 home, a conservative bank will loan creditworthy borrowers $400,000. The borrower must be able to scratch together a $100,000 down payment.
But when banks make investments and buy assets, they aren’t required to do the same thing. Remember that when you deposit money at a bank, you’re essentially loaning them your savings. As a bank depositor, you’re the lender. The bank is the borrower. Banks pool together their deposits and make various loans and investments.
They buy government bonds, financial commercial trade, and fund real estate purchases. Some of their investment decisions make sense. Others are completely idiotic, as we saw in the 2008 financial meltdown. But the larger point is that banks don’t use their own money to make these investments. They use other people’s money. Your money. A bank’s investment portfolio is almost entirely funded with its customers’ savings. Very little of the bank’s own money is at risk.
Driverless trucks: economic tsunami may swallow one of most common US jobs
In April 2016, Uber announced the acquisition of Otto, a San Francisco-based startup that has developed a kit that can turn any big rig into a self-driving truck.
The Otto technology enables complete autonomy on highways: trucks can navigate, stay in their lane, and slow or stop in response to traffic conditions completely without human intervention. Otto’s equipment currently costs about $30,000, but that is certain to fall significantly in the coming years.
Otto is by no means alone. Massive automated vehicles are already commonly used to move materials for the Australian mining industry. Daimler, the German multinational company, has likewise demonstrated its own model, a giant 18-wheeler with a “highway pilot” mode available (meaning a driver has to remain present, prompting the head of the US branch to say that “tomorrow’s driver will be a logistics manager”). Another approach is to use automated convoys, in which self-driving trucks follow a lead vehicle.
It seems highly likely that competition between the various companies developing these technologies will produce practical, self-driving trucks within the next five to 10 years. And once the technology is proven, the incentive to adopt it will be powerful: in the US alone, large trucks are involved in about 350,000 crashes a year, resulting in nearly 4,000 fatalities. Virtually all of these incidents can be traced to human error. The potential savings in lives, property damage and exposure to liability will eventually become irresistible.
Is Trump at war with the intelligence community?
Fed Illusions or Economic Reality
Federal Reserve Chairperson Janet Yellen has been speaking this week to the Senate Banking Committee and the House Financial Services Committee, with everyone hanging on her every word. All the financial news media and other press outlets have covered her remarks, breathlessly waiting to see what the markets will do.
Well, they might have been doing this six months ago, but now we are seeing and hearing very little reaction from the markets. This non-reaction is evidence of what I have been writing about for several months—namely, the irrelevancy of the Federal Reserve. More importantly, to me it confirms what I’ve also been saying for so long—that we have had a market built primarily on false positives.
These false positives originated with central banks around the world and the Federal Reserve. Adding to this illusionary picture is the fact that many companies have been buying back their stocks, helping to drive up earnings while sales are declining.
Then there is the $4.2 trillion of debt that the Federal Reserve is continually rolling over as part of its quantitative easing, smoke-and-mirrors show. One thing that is always noticeably absent from most congressional questioning are concerns about the Fed’s exit strategy for this staggering amount of debt on the balance sheet. There is no exit strategy.
Nearly 2 million non-citizen Hispanics illegally registered to vote
A large number of non-citizen Hispanics, as many as 2 million, were illegally registered to vote in the U.S., according to a nationwide poll.
The National Hispanic Survey provides additional evidence for use by anti-voter fraud conservatives and bolsters an analysis by professors at Old Dominion University who say non-citizens registered and voted in potentially large numbers.
President Trump has announced he will appoint a task force on voter fraud headed by Vice President Mike Pence. He says he wants the investigation to focus on inaccurate voter registration rolls, which are maintained by the states and the District of Columbia.
“It is a fact and you will not deny it, that there are massive numbers of non-citizens in this country who are registered to vote,” White House adviser Stephen Miller told ABC News. “That is a scandal. We should stop the presses.” The little-noticed Hispanic survey was conducted in June 2013 by McLaughlin and Associates to gauge the opinions of U.S. resident Latinos on a wide range of issues.
OPEC Ready To Cut Deeper
OPEC is finding itself backed into a corner: the group, it appears, is prepared to extend the oil production cut agreement that is set to expire at the end of June and also increase the cuts, if inventories fail to drop to a specified level, sources from the group told Reuters
The agreement, which also involves 11 non-OPEC producers, including Russia, Mexico, Kazakhstan, Azerbaijan, and several smaller producers, envisaged taking off around 1.8 million barrels from the global daily supply. This means, according to the sources, that global stockpiles should shrink with 300 million barrels in the six-month period, to reach the five-year average. This, however, requires a compliance rate of 100 percent from all participants.
Reliable inventory data from all the countries taking part in the agreement is not coming soon and will likely still not be available when OPEC meets in May to discuss progress. Non-OPEC producers may also attend the meeting.
Meanwhile, loading data from Angola, currently Africa’s largest oil exporter and a member of OPEC, has revealed that the country plans to export 1.691 million bpd in April, up from 1.54 million bps to be exported in March. Production increased to 1.651 million bpd in January, well above Nigeria’s 1.576-1.604 million bpd.