Small Business Optimism Drops, Joe says malarky!

Posted by CotoBlogzz

Rancho Santa Margarita, CA  –  According to National Federation of Independent Business (NFIB) September was another month of low expectations and pessimism for the small-business community, with the NFIB Small Business Optimism Index losing 0.1 points and falling to 92.8. The recession-level reading was pulled down by a deterioration in labor market indicators, with job creation plans plunging 6 points, job openings falling one point and more firms reporting decreases in employment than those reporting increases in employment. Since the commencement of NFIB’s monthly surveys in 1986,  the Index has been below 93.0 a total of 56 times; 32 of which have occurred since the recovery began in June 2009.

If  you watched the Vice-presidential debate last night, Joe Biden might refer to the NFIB's study as  "malakry"

However,  NFIB chief economist William Dunkelberg said about the elections:  “Everyone is waiting to see what happens, especially small-business owners who have a lot at stake in the outcome—which could mean higher marginal tax rates and more deficits, OR lower marginal tax rates and less government. Small-business owners are reporting that the political climate is a reason not to expand—second only to the economy, which is only keeping up with population growth. And so, in the meantime, owners are in maintenance mode; spending only where necessary and not hiring, expanding or ordering more inventories until the future becomes more ‘certain.’”


Some other highlights of  NFIB's September’s Optimism Index include:

•    Capital Expenditures: Small-business owners are still in “maintenance mode,” with the frequency of reported capital outlays over the past six months falling 4 points to 51 percent.

•    Sales: Weak sales continue to be an albatross for the small-business community.

•    Job Creation: Job creation plans showed that small-business owners created fewer jobs in September than in the two previous months.


As Joe Biden might say, who are you going to believe the malarky in the NFIB's study,  or crazy uncle Joe?

President Houdini, the Employment Magician

 by Chriss Street

All great magicians employ misdirection to create miraculous illusions, leaving their audiences stunned and confused.  President “Houdini’s” miraculous creation of 873,000 jobs in the month of September magically drove down the national unemployment rate from 8.1% to 7.8%, just as absentee voting begins.  The trick left Republicans and economists equally befuddled, since the last time a similar monthly jobs increase appeared was June of 1983 when the economy was growing at an astronomical 9.3% annual rate.

But looking behind Barack the Great’s smoke and mirrors reveals that the President’s highly controversial July suspension of the “workfare” requirements that welfare recipients must actually do real work to be counted as employed seems to have dramatically reduced the U.S. Labor Department’s unemployment rate. 

  

The Bureau of Labor Statistics publishes two monthly surveys that measure employment levels and trends: the Current Population Survey (CPS), also known as the “household survey”, and the Current Employment Statistics (CES) survey, also known as the “payroll survey”.   With most economists estimating the current U.S. economic growth at an anemic 1.5%, it seemed ludicrous that the Obama Administration could report a monthly gain of 873,000 jobs in the household survey, just short of the all-time record 900,000 jobs gain in June of 1983, when under President Ronald Reagan the economy was growing 6 times faster at 9.3%.  In fact, the same household survey report showed a recessionary slide of 195,000 jobs in July and another 119,000 decline in August.  Adding to the suspicions regarding the credibility of the household survey, the more reliable “payroll survey” that tracks the rate of jobs growth through IRS withholding data was unchanged from last month.

After the report, the internet “blew-up” with conspiracy theories that the employment numbers must have been consciously manipulated by the U.S. Labor Department to help the President’s reelection odds.  Even the highly-respected former CEO of General Electric, Jack Welch, tweeted: “Unbelievable jobs numbers..these Chicago guys will do anything..can’t debate so change the numbers.”

Like all spell-binding illusions, the real set-up for this phenomenally great employment report was engineered back on July 12, 2012, when the Obama Administration announced an Executive Order that eliminated President Bill Clinton’s highly-praised workfare reform that required welfare beneficiaries to get real job in order to continue to receive payments.  According to former Clinton Advisor Dick Morris, in 1996 Senate Republican Majority Leader Trent Lott stated: “I don’t want anyone going to a truck drivers’ school that advertises on a matchbook cover and avoiding work.”  The Republicans included 42 U.S.C. § 615(a)(2)(B) in the Temporary Assistance for Needy Families (TANF) reform legislation to make sure every states’ welfare recipients were required to work in a real job and also inserted section 607 to prevent future secretaries of Health & Human Services (HHS) from waiving the real workfare requirement.

With 1.4 million of the two million families receiving TANF payments not actually in real jobs, Obama took heat for changing the work rules.  The Heritage Foundation warned:

“in the past, state bureaucrats have attempted to define activities such as hula  dancing, attending Weight Watchers, and bed rest as ‘work.’ These dodges were blocked by the federal work standards. Now that the Obama administration has abolished those standards, we can expect ‘work’ in the TANF [welfare] program to mean anything but work.”

Presidential candidate Mitt Romney, a former governor, howled “the linkage of work and welfare is essential to prevent welfare from becoming a way of life.” Republican Congressional leaders screamed the waiver was a “blatant violation of the law” by allowing states to substitute “vocational educational training or job search/readiness programs” to “count as well” in meeting the work requirements. 

But as the heat dissipated and the campaign news cycle moved on, President Houdini was positioned to triumph.  No one knows just how many of the up to 1.4 million TANF welfare recipients have now been re-designated by the states government as “employed”, but isn’t it just magical how 873,000 people started working last month.  Is Barack Obama really the new Ronald Reagan?

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China's New Stimulus Will Unleash Inflation

 

by Chriss Street

We have been warning that China’s current economic slowdown signals that the country China has entered the “Middle Income Trap” that will mark the end of the nation’s 30 years of 10% compounded annual growth.  With inflation having already driven Chinese wages up to uncompetitive levels, manufacturing and construction activities are plummeting.

  Desperate to try to stave off up a spectacular increase in unemployment, China just announced another massive public works stimulus program to try to revive to at least the 8% growth rate necessary to create enough jobs for the millions of young people entering the workforce each year.  Although shoveling cash at the problem might have delayed a recession after 2008, new stimulus cash will ignite a vicious round of inflation and fail to drive sustained economic growth.

China’s gross domestic product (GDP) growth has fallen from 8% to 3% over the last year according to Xinhua News Agency.  Consistent with a slowing economy, China’s reported consumer prices only rose by 2.7% for each of the last two years.  But official inflation rates notoriously understate the inflation the people suffer, since the government subsidizes key goods and services such as utilities, energy and public transport that make up a big chunk of the consumer price index (CPI).

The actual inflation the Chinese people have been experiencing is on a tear.  The rental price for an apartment in the southern China industrial city of Guangzhou rose 10% in the last year according to Centaline Property Research.  Starbucks, which is opening one new store every four days, raised prices by 8% this year to an equivalent of $4.20 for a “tall latte”.  Food prices are just beginning to accelerate as “official food prices index” rose in August at a 12% annualized rate.  Over the last year, private-sector wages have risen by 18.3%, many provinces have granted workers double-digit compensation increases, and a survey of 4,242 employers by Manpower Group reports labor conditions remain tight.

The Central Publicity Department of the Communist Party of China recently disclosed that from 2005 to 2010, urban residents’ income surged to 137% higher than rural dwellers and continues growing 10 times faster.  With rural migrants comprising one third of the 665 million people living in Chinese cities; any economic decline would cause massive unemployment for these “temporary” workers.

The 2008-2009 Great Recession caused exports to shrink over 50%.  China’s leaders panicked that 100 million migrants might become unemployed and ordered an epic $586 billion of stimulus spending on state owned enterprises (SOEs), driving new investment as a percentage of the economy from 42% to 50% of GDP last year.

The problem is that no country can be productive enough to reinvest 50% of GDP in new manufacturing plants, capital equipment and infrastructure without eventually creating immense overcapacity and a staggering level of non-performing loans.  Chinese productivity has actually declined, since private sector companies have not been eligible to receive stimulus loans and grants.

A significant amount of the spending also was systematically squandered in kickbacks and outright theft.  According to CNN, in 2011 four bridges collapsed from mudslides in the span of a week.  At a bridge near Chongqing, a city of 32 million, 40 people fell 460 feet to their deaths.  Investigations uncovered kickbacks, thefts and money used to build a hostess bar.  Philosopher John Stuart Mill warned of crony capitalism 150 years ago:

“A government with all this mass of favors to give or to withhold, however free in name, wields a power of bribery scarcely surpassed by an avowed autocracy, rendering it master of the elections in almost any circumstances but those of rare and extraordinary public excitement.”

The last stimulus was so big it funded a 50% increase in crude steel capacity, doubled aluminum capacity and tripled cement capacity.  China now dominates the world with 46% of steel, 41% of aluminum and 60% of cement production capability.  This new industrial might furnished the materials to build dozens of sleek empty airports, with 45 more planed; a new bullet-train system, wracked lately with financial, corruption and safety scandals; hundreds of highways, to nowhere; thousands of colossal government buildings and numerous residential ghost towns, that will never be inhabited.

Institutional investors have not been fooled by China’s stimulus spending.  China’s Shanghai stock market has plunged by -86% since 2008, and it remains the only major stock market in the world that is down this year.  The last Chinese stimulus program delayed a Chinese recession for the last three years, but it made China less competitive by destroying the private sector, creating massive over-capacity of state-owned-enterprises and inflating away Chin’s historic wage advantages.

The new “Five-Year Plan” stimulus promises to increase the consumer share of the economy; but a close inspection reveals China continues to try to grow their economy on export-led industrialization and an under-valued currency.  In the short run, the investment boom will fuel inflation misery for the population, but price inflation and overcapacity will inevitably lead to a deflationary cycle.

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Obama Unites the Extreme Left and the Extreme Right

By Chriss Street

Back in September of last year in an article titled “Revolution on the Left to Overthrow President Obama Begins,” I predicted that there would be a political “coup d’état” against the President by the extremist wing of the Democratic Party. Led by the prestigious Roosevelt Institute, Democrat affinity groups — such as union households, women and young people have been quietly trying to decapitate the President’s re-election campaign so that his plummeting re-election prospects did not drag down other Democrats in the 2012. These rebels believe President Obama political triangulation away from hard core liberal orthodoxy in favor of the crony capitalist interests of GE, Goldman Sachs and others, explains why Democratic Party affiliation fallen to a “22-year low of only 31%.”

The initial chorus of 45 liberal leaders, including former Presidential candidate Ralph Nader; Princeton Professor Cornel West; Chris Townsend of the United Electrical Workers of America, and President Emeritus Brent Blackwelder of Friends of the Earth have been actively undermining the Obama’s re-election campaign by speaking out and rallying financial support for Democrat Congressional candidates from “various fields and areas where the President either has either failed to stake out a progressive” position or where he had “drifted toward the corporatist right.” This growing populist movement refuses to use Obama’s name, and instead emphasizes: “His administration has tilted too much toward Wall Street; we need policies that empower Main Street.” President Obama has been forced to respond by endorsing of gay marriage and suspending deportations of illegal immigrants. These actions have been a source of joy to the left and adulation from the liberal media, but they are rapidly eroding his support among independents voters and are motivating Republicans to overcome their initial suspicions about Mitt Romney’s commitment to the true conservative cause. A recent USA Today/Gallup poll regarding opinions about the American Dream demonstrates how the President’s radical swing back to the left is affecting his re-election bid: “Among partisan groups, Democrats today are the most upbeat about the financial opportunity available to the next generation, but only on a relative basis. Less than half of Democrats (48%) are satisfied with the opportunity for the next generation to live better than their parents, compared with 37% of Republicans and 35% of independents.


Democrats are also significantly more likely than Republicans to feel satisfied with Americans' willingness to work hard to get ahead, 59% vs. 47%. At the same time, Republicans are a bit more likely than Democrats to be satisfied with the opportunity a poor person has to get ahead through hard work, 56% vs. 50%.”
But once an inter-party civil war has begun, new converts seem to pop-up to fan the flames of rebellion. Robert Unger, one of Barack Obama's former professors at Harvard Law School, filmed a YouTube video that is commanding big viewership by demanding: “President Obama Must Be Defeated In The Coming Election” because “He has failed to advance the progressive cause in the United States.” He must lose the election in order for “the voice of democratic prophecy to speak once again in American life.”

Unger acknowledges if Republicans wins the presidency; "there will be a cost ... in judicial and administrative appointments," but "the risk of military adventurism" would be no worse under a Republican. Under Obama "the Democratic Party proposes no new direction." He will continue to: "Give the bond markets what they want, bail out the reckless so long as they are also rich, use fiscal and monetary stimulus to make up for the absence of any consequential broadening of economic and educational opportunity, sweeten the pill of disempowerment with a touch of tax fairness, even though the effect of any such tax reform is sure to be modest." Unger lists his complaints of Obama as:

•His policy is financial confidence and food stamps.
•He has spent trillions of dollars to rescue the moneyed interests
•He has left workers and homeowners to their own devices.
•He has delivered the politics of democracy to the rule of money.
•He has disguised his surrender with an empty appeal to tax justice.
•He has reduced justice to charity.
•He has subordinated the broadening of economic and educational opportunity to the important but secondary issue of access to health care.

The humor is that Professor Unger’s progressive complaints are virtually the same list of indictments of the Obama Presidency that will be made this week at your local Tea Party meeting. It appears that Barack Obama has uniquely managed to unite these two book-ends of extreme American political ideology against a common enemy, himself !!!



 If you would like Chriss Street to speak to your organization, contact chriss@chrissstreetandcompany.com Chriss Street’s latest book: “The Third Way” is now available at www.amazon.com


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