Realizing the “truth” behind the recovery, but not the “why”
Nothing special happened on Friday. The Dow lost 21 points. Gold gained 7, to bring it back over $1,200.
Here at Markets and Money our annoying forecast is that gold will fall. So will stocks.
It’s annoying because 1) both have been going up…and 2) we still think you should go with gold anyway.
In short, what we’ve expected for the last six months hasn’t happened – another big drop in equity markets…another powerful wave of fear…and another sell-off in gold. But heck…we can wait. Things always seem to take a surprisingly long time to happen. Then, when they finally happen, you’re surprised at how fast they happen.
After 18 months and $2.5 trillion in counter-cyclical budget deficits, people have begun to realize that the ‘recovery’ is a flop. What they haven’t realized – yet – is why. But, it’s summer…no one is doing too much thinking now. Obama went for a vacation in Maine. Hillary married her daughter. Economists are fishing.
Well, we can hope!
Meanwhile, Fannie Mae posted its 12th straight quarterly loss. The Post Office is losing $3.5 billion in the third quarter. Social Security is in the red.
The New York Times reports:
Over all, the nation lost 131,000 jobs last month, according to the Department of Labor, which also said that June was far weaker than previously indicated.
Private employers added 71,000 jobs last month, but those figures were overtaken by the 143,000 cut as the Census wound down. It is also about half the number that economists say is needed to simply accommodate population growth, so the tepid job increases cannot begin to plug the hole created by the loss of more than eight million jobs during the recession. The unemployment rate, in fact, remained stuck at 9.5 percent in July.
Government figures released last week confirmed that the American economy slowed in the spring, and the latest jobs numbers suggested that the weakness continued into the early summer.
Some economists are talking about the risk of a “double dip” recession, and the political stakes for the Obama administration are rising as the midterm elections tick closer.
In remarks made while visiting Gelberg Signs, a small business in Washington, President Obama acknowledged the uneven pace of the economic revival.
“The road to recovery doesn’t follow a straight line,” he said. “Some sectors bounce back faster than others. So what we need to do is push forward. We can’t go backwards.”
Yes, dear reader…we are pushing forward. Obama, Geithner, Summers – none seems to have a very clear idea of what we are pushing forward towards. You may want to forward this message to them. For it is fairly clear to us: we’re headed into a long spell of de-leveraging. Not many jobs? Slow consumer spending? Falling house prices? Tumbling stock market? Zombie-like, shuffling economy? Get used to it! The US economy continues its Great Correction. More below…
We went to another wedding on Saturday. The affair began in a large medieval church at 4PM… Then, on to the bride’s family house – an old, stone farmhouse that had been very well restored, with tennis courts, a pool, gardens…
We enjoyed cocktails from 5:30 to 9…and then sat down to dinner. There were about 30 tables of 10 people each. There were speeches by the two fathers – the groom’s and the bride’s. Diners listened. They laughed. Then, the roar of the crowd gradually overwhelmed the speakers. Jokes were told that we couldn’t quite hear.
“This is classic,” said our dinner companion. “In a big tent like this, it is impossible to hear the speeches, so people begin talking among themselves…then, even those who could hear before can’t hear. Pretty soon, no one is paying any attention to the speakers.”
“Yes,” said another person at our table, “the group is too large. But this is like most weddings in this area. I mean, weddings of a certain class of people. Most people in France don’t get married like this. This is an important wedding for the area.”
It was the third important wedding we’ve been to so far this summer.
“And it’s so nice to see people get married in the traditional way,” she continued. “You know, half the children born in France today are born to women who aren’t married. I don’t know where this trend is going. Some of them, of course, are in stable, long-term relationships that are supposed to be just like being married. But I don’t believe it. I think that if people don’t get married, they’re just not as committed. They run into a rough patch – and what couple doesn’t? – and they go their separate ways. And what is going to happen to the country? With half the people growing up without traditional families? We just don’t know, do we?
“Did you hear the sermon at the Moreau’s wedding last week? I thought it was particularly good. He made the point that a real wedding…that is, a real marriage…is not just a contract between two people. It’s a contract with God. It’s blessed by God himself…by the community…by nature. Even if you are not exactly a believer, you can understand that marriage is not like a MacDonald’s franchise. You get into a business deal and you can decide for yourself what the terms are. But who really decides what the terms are between men and women? We don’t even know…certainly not at the beginning of a marriage…and not even at the end. We discover them as we go along.
“Marriage is just not something people figure out for themselves…or invent. People – men and women – do not create themselves. Nor do they create the kind of unique and inexplicable union that takes place between them. It’s something that was not designed by us. And it’s not something we can improve upon. Marriage is a divine thing, not a man-made thing. “
*** Now…back to the zombies.
The more we think about it, the more we see zombyism creeping, slouching, sneaking into everything.
Here’s The New York Times, reporting on legions of former employees…still drawing blood from the taxpayers’ veins:
There’s a class war coming to the world of government pensions.
The haves are retirees who were once state or municipal workers. Their seemingly guaranteed and ever-escalating monthly pension benefits are breaking budgets nationwide.
The have-nots are taxpayers who don’t have generous pensions. Their 401(k)s or individual retirement accounts have taken a real beating in recent years and are not guaranteed. And soon, many of those people will be paying higher taxes or getting fewer state services as their states put more money aside to cover those pension checks.
At stake is at least $1 trillion. That’s trillion, with a “t,” as in titanic and terrifying.
The figure comes from a study by the Pew Center on the States that came out in February. Pew estimated a $1 trillion gap as of fiscal 2008 between what states had promised workers in the way of retiree pension, health care and other benefits and the money they currently had to pay for it all. And some economists say that Pew is too conservative and the problem is two or three times as large.
..Stephen Pincus, a lawyer for the [Colorado state] retirees who have filed suit, estimates that the change will cost pensioners with 30 years of service an average of $165,000 each over the next 20 years.
Mr. Justus, 62, who taught math for 29 years in the Denver public schools, says he thinks it could cost him half a million dollars if he lives another 30 years. He also notes that just about all state workers in Colorado do not (and cannot) pay into Social Security, so the pension is all retirees have to live on unless they have other savings.
The average retiree in the fund stopped working at the sprightly age of 58 and deposits a check for $2,883 each month. Many of them also got a 3.5 percent annual raise, no matter what inflation was, until the rules changed this year.
Private sector retirees who want their own monthly $2,883 check for life, complete with inflation adjustments, would need an immediate fixed annuity if they don’t have a pension. A 58-year-old male shopping for one from an A-rated insurance company would have to hand over a minimum of $860,000, according to Craig Hemke of Buyapension.com. A woman would need at least $928,000, because of her longer life expectancy.
*** “I’m getting ready to build a house down there where I have a lot on the Chesapeake Bay,” said a cousin, visiting us here in France.
“But you can’t do anything without paying people off. I mean, the engineers and architects and environmental groups…they’ve all got their little deals. My shoreline has been washed away. In the 10 years that I owned the property, I’ve lost about 3 feet of shoreline. You know, boats go by…storms…tides…you always get a little erosion. It’s a section that is only about 20 feet wide, so I could easily fix it. Just take some rocks and build a breakwater or a bulkhead and let the wild grasses fill in behind it. But I can’t do it. I’d have to go through a whole process, and get an engineer’s report…and then get a permit. It will cost me thousands of dollars to fix something that I could fix myself for almost nothing. But everybody gets a little piece of the action…
“And now they’ve got these guys they call ‘Riverkeepers’… Sounds nice enough. They’re volunteers. They don’t get paid. They just keep an eye on the rivers and the bay…protecting against pollution and so forth. Some of my friends are “‘Riverkeepers.’ But they’ve become a big pain in the neck. Because they come around and watch whatever you’re doing. And you know they’re going to find something wrong. Something you didn’t know about. And then, they can get your project stopped…and maybe held up for years…while you pay engineers and lawyers to sort it out.
“And I’ll tell you something else they’re doing. They have a new rule that says you have to put in a dry well system that puts the rainwater from your roof back into the ground. So, you’ve got to get that as part of your building permit…including engineers’ drawings and so forth according to the specifications.
“But they don’t make any allowances for soil conditions. And down there, you can run into areas that are thick clay. You can put all the water you want into the ground, but it won’t go into the soil. It just sits there and backs up. I’ve seen some of these holes fill up immediately. Then, they are just big holes of water-soaked gravel.”
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