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CHALLENGE
THE PREMISE

Newsmakers

LATEST FEATURES

Issues, News and Views


NEIL GORSUCH
JOINS SCOTUS




Gorsuch
Sworn In
April 10, 2017




A Tremendous Day for
sound jurisprudence and
our Constitution!



Watch the swearing-in
and savor the prospect of
a Supreme Court Justice
who will defend our
Constitution:




Below is our rating of
Supreme Court justices
based upon judgement of
their fidelity to the
Constitution:


As the chart illustrates,
there are too many rogue
justices on the Supreme
Court. These appointed,
life-term judges take it
upon themselves to
arbitrarily unilaterally and
autocratically over-rule the
will of the people. They are
the equivalent of tyrants.

It is crucial to our
Democracy to fill all open
seats on all Courts, as
they arise, with true-to-
the-law judges. With
originalist, textualist
judges who apply the law
as passed by the
representatives of the
people.

It is NOT the role of judges
to over-rule laws they just
happen to dislike. As
Gorsuch said at the
ceremony:

"A judge who likes every
outcome he reaches is
very likely a bad judge..."



Gorsuch
Confirmed
April 07, 2017






A Supreme Court seat
opened with the passing of
Antonin Scalia just months
before the 2016 election.

President Obama
nominated Merrick Garland
as a replacement, but
Senate Majority Leader
Mitch McConnell (R-KY)
blocked the nomination,
claiming that the voters
should decide.

Elections have
consequences. Democrats
were certain they would
hold the White House and
regain the Senate in 2016,
thereby giving them full
control of the nomination
process.

But the GOP held the
Senate, and won the
White House, against
all predictions.
Republicans campaigned
on the Supreme Court
issue, and won.

And that's why Democrats
lost the Supreme Court
nomination: because they
didn't win the election. The
people spoke. As it should
be.



Gorsuch
Nominated
January 31, 2017




President Trump has
nominated Neil Gorsuch to
the United States Supreme
Court. View the
proceedings at the White
House:


As the President so
appropriately remarked at
the nomination ceremony:

"I have always felt that
after the defense of our
nation, the most important
decision a president of the
United States can make is
the appointment of a
Supreme Court justice.
Depending on their age, a
justice can be active for 50
years and his or her
decisions can last a
century or more and can
often be permanent."


We anticipate that Neil
Gorsuch will be an
outstanding Supreme
Court Justice, just like
Antonin Scalia, the great
man he will replace.

Neil Gorsuch: a judge who
understands both what a
judge's role is; and what a
judge's role is not.

IMPORTANT ISSUES FACING AMERICA

2018/12/19 - Are you weary of the Mueller investigation? Tired of Comey? Bored of Cohen? Fed up with the injustice and politicization of the DOJ? Are you wondering when, or even if, the mainstream media will ever regain its collective mind and cover topics that are actually important to America, and relevant to its citizens?

So, in the interest of the spirit of giving in the holiday season, Chalprem herewith gives you a survey of the most pressing issues facing our nation, the topics the media ought be focused on in the new year and through to the next election.

CHINA
China is the number one existential threat to the United States. It was never terrorism, and it isn’t now - China was and is, and we took our eyes off the ball while we were distracted by the shiny object of Al Qaeda and ISIS.

China was the greatest and longest lived of the world’s superpowers, except that its fall happened just as the United States was emerging as a nation. We have no history, or national consciousness, of a great Chinese power. But they sure do. And they want it back.

Over the past two centuries China had devolved into a mess, and we were only too happy to help them sort things out. We gave them a lot more than an inch, but now they are taking a lot more than a mile. They have their own "manifest destiny" in mind.

The General Secretary of the Communist Party of China, Xi Jinping, is the personification of this mercantilist predatory revanchist regime. They are Communists, and to Communists, every economic endeavor is a zero-sum-game. For every winner there is a loser. So if we gain, then by definition they must be losing. There is no win-win. Thus, we must lose, so that they can win.

President Trump is absolutely right to tighten the screws on China. The time was ten years ago but Obama was a disaster. So the time is now. China must be held to trade policy that is free, fair and reciprocal. And if they are unwilling to cooperate with the global community – and that is not in their nature – then they must be shunned by the global community.

This is going to be a long, hard fight, but the global community desperately needs China to transform from a malevolent actor to a cooperative one.

DEBT
The Federal Debt is probably the #2 existential threat to America. The debt continues to grow, and interest on the debt makes up an ever increasing share of our spending. People and businesses get into debt death spirals, and so do governments - you take on more debt just to pay the interest on old debt, and as you take on more and more debt, you get charged an ever-increasing rate of interest on that ever-increasing debt load. The debt death spiral.

The United States government has a spending problem is close to putting us into a debt death spiral. In spite of a growing economy which ought to be reducing strains on our finances, spending just keeps going up and up. And even though our economy is growing at a solid pace, spending is growing even faster, and our debt is growing even faster than the size of our economy.

The fact is clear: Congress simply cannot help itself. Even the Republican House majority elected in 2010 on a platform of fiscal prudence couldn’t help itself. So there is absolutely zero chance that Nancy Pelosi’s hardcore leftist tax & spend caucus will do anything but help itself to the national treasury.

President Trump absolutely must put his foot down. Tell Congress that he will only sign into law spending bills that fall under a cap. Any spending beyond a preset limit will not get signed, and a government shutdown is a foregone conclusion.

Taking a hard stand against excessive spending will also help with interest rates. The Fed is concerned about excessive fiscal stimulus, and if spending was brought under control the Fed would be less inclined to raise interest rates.

INTEREST RATES
Rising interest rates is clearly an issue for the national economy. The Fed,
as we pointed out last month, seems to be on a futile quixotic campaign to raise interest rates in order to defeat an inflation problem that does not exist, and in the process might tragically plunge the economy into recession. A recession that will undoubtedly be known as the #PowellRecession.

Janet Yellen's Fed made a major mistake in raising interest rates far too late, and now Jerome Powell's Fed is compounding the error by raising rates too quickly - too frequent, in increments too severe.

What would be wrong with raising rates 1/8% at a time every 6 months, rather than by 1/4% every 3 months? The fact is that the economic ship changes course very slowly, and Powell may already created the sand bar upon which the economy will run aground next year. But he won't know until it is too late. Then, after dooming millions to misery, he will cut rates and take credit for saving our economy. Horrible.

Worse, it is not clear that Powell even knows what causes inflation. He seems clueless at times. In his press conference today he stated he will keep raising rates as long as the economy is growing. Except that growing economies don't cause inflation. Deregulation is an example of an excellent Trump policy that is both conducive to growth, while simultaneously exerting downward price pressures. How someone in Powell's position doesn't see that is absurd.

President Trump is correct in the sentiments he has expressed regarding the Fed and rates, but wrong in using Twitter to make these complaints. A regular meeting between Fed and Administration officials to coordinate policy would be helpful to avoid the current situation of ineffectually pulling in opposite directions and offsetting magnitude.

There are many sources of volatility in our economy and the markets - good things such as deregulation, but also bad things such as oil price volatility, geopolitical risks, and necessary evils like the trade spat with China. Powell should not be adding fuel to the fire by rapidly and recklessly raising rates.

The topic of inflation, interest rates, and the potential damage that could be done to the economy and the well-being of Americans would be a good one for the media to displace the Mueller nonsense. Yet you know the fake news media will be unfair to the President, and oppose him just for the sake of opposing him, while being devoid of any understanding of the economic implications of what they would be blabbering about.

KOREA, IRAN AND VENEZUELA - THE REVISED AXIS OF EVIL
The Kim regime represents an existential threat to the United States. From a nuclear attack, to an EMP (Electro-Magnetic Pulse) device, to a cyber-attack on our power grid, we are vulnerable to malevolent regimes such as Kim Jong-un's dictatorship.

Chalprem has the longstanding view that Korea's northern regime is dangerous and that reintegration of the breakaway northern territory into the Republican of Korea is a highly desirable geopolitical objective.

So, fast forward a couple of months to the beginning of March, when huge tariff increases are due to be imposed on imported Chinese goods. What if no deal has emerged, that the Chinese seem intent on slow=walking the process until they run out the clock on the Trump Administration?

President Trump's political life expectancy is a matter of doubt. Can he survive to the end of his first term? If he does, can he be re-elected? And if he is re-elected, can he survive to the end of his next term?

Both of these aspects - Chinese foot-dragging, and Trump's unstable political status - would be immeasurably aided by a termination of the Kim regime. The President sorely needs a game-changer, and there's nothing like a war to change the game.

Xi Jinping and the Communist extremists in his totalitarian regime would of course be furious if war broke out on the Peninsula, but if we're sitting here without a deal in mid-March, then it should be clear that China does not take us seriously, and they are just playing games.

One thing is certain, it would be a lot more comforting to listen to the media celebrate the actual demise of Kim Jong-un's Presidency, rather than blithering about their hard-sought-after demise of Donald Trump's Presidency.

IMMIGRATION
How did the Republicans not manage to get the border wall built when they controlled the White House and both chambers of Congress?

It's just another reason why the outgoing House Republican losers deserved to lose.



INFLATION, THE FED... AND THE COMING POWELL RECESSION?

2018/11/16 - It's important to understand what inflation is, and what it is not. Price inflation is a general rise in price levels. On the other hand, a supply event, a demand event, or policy event, that leads to a rise in the price of a particular good or service, or group of goods and services, is price escalation.

Suppose for example that a government mandates an increase in wages. The increase in an employer's costs will be passed through to its customers. The resultant price increase is price escalation, and it is caused by a policy event. Yes, the event does cause prices to rise, but in this case it is not inflation, it is escalation.

If OPEC were to cut its oil production, you would expect the price of oil to rise, and you would expect the impact to ripple throughout the economy. But again, neither the rise in the price of oil nor the subsequent price ripple, however, are inflation; they are escalation.

Imposing tariffs on certain goods will cause the prices of those goods to rise, and so will the prices of products made from those goods. Again, this is not inflation, this is escalation.

Inflation is a monetary phenomenon. Money is a lubricant to our economy that eliminates the difficulties of matching supply and demand in a barter economy.

Suppose a butcher desires bread from a baker, but the baker does not need the butcher's meat, rather, he needs candlesticks, the maker of which needs meat, not bread. Even though this small "economy" is capable of producing all the goods and services demanded by its population, it grinds to a halt because no trade possibility exists where each of the two sides can supply what the other demands.

The answer to this dilemma, of course, is money. The butcher has some money which he uses to buy baked goods; the baker uses the money he got from the butcher to buy candlesticks; and the candlestick maker uses that money to buy meat from the butcher.

If there is too little money in the system the transactions will be small. The butcher will only be able to buy a small amount of bread, and will be forced to wait until he sells some meat to the candlestick maker before he can buy more bread. So the economy moves slowly through several rounds of small transactions until the supply and demand are cleared.

On the other hand if there is too much money, then prices will inflate. If the butcher seems to have an ability to pay more for bread, the baker, who has a limited amount of bread available for sale, can be expected to raise his prices to match what the butcher might be willing to bear.

The job of a monetary authority - in the case of the United States, the Federal Reserve - is to ensure that there is sufficient money supply to conduct the nation's business, but not so much that prices becomes unstable. This is known as the Fed's "Dual Mandate": full employment, and price stability.

Note that inflation is caused by excessive money, and it means that there is a general rise in the prices of goods and services throughout the economy, not just the goods related to a specific input that has experienced some type of event, or "shock" as economists like to call it.

Money is like oil in an engine, it allows the machine to run smoothly. But beyond that, more oil provides no marginal benefit, it just adds weight and wastes space. Same with money, once there is enough to keep the economy rolling, more money causes price inflation until the relative monetary excess dissipates. The Fed cannot make the nation wealthier by printing more money, it can only create inflation.

The Fed controls money supply and is tasked with a responsibility to manage general price-level inflation; it is most certainly not tasked with the responsibility to control prices of specific items, such as oil. The Fed is simply not equipped to efficaciously manage escalation, item-specific shock-induced price increases. And without the appropriate tools or weapons, it should not even try to do so.

But what happens when there are a number of events – when there is significant policy instability – causing many prices to increase simultaneously, making it appear that there is general price-level inflation when in fact there is none? The answer is, a Fed policy disaster in the making.

Consider the case of an increase in the minimum wage – the broad economic impact is less labor demanded at that new higher minimum. Fewer people will have jobs, but those that manage to keep theirs will get the higher wage; and consumers will pay higher prices for less of the product.

In such a case a Fed rate hike will not cause that new higher minimum wage to come back down, however, it will cause a general economic slowdown and loss of employment throughout the economy, with those managing to hold on to their jobs in this second round of cuts this time receiving a lower wage.

The point is that poor economic policy needs to be corrected with good economic policy. Monetary policy does not counteract poor economic policy or other economic or geopolitical shocks. The tools of monetary policy should be used to correct monetary inflation, and not used to correct price escalation caused by shocks or their ripple effects.

Consider a second case, the hyper-regulatory approach of the Carter and Obama Administrations. Regulations have the effect of driving up costs both directly on the regulated products, and indirectly on goods and services made from those regulated products. The ultimate impact is that fewer goods and service will be produced, leading to economic slowdown, loss of profits for investors, reduced employment for workers, and higher prices for consumers.

These higher prices, however, are not inflation, and a monetary response by the Fed, such as raising interest rates, will not only NOT solve the problem of the high cost of regulatory compliance, it will compound the predictable "unintended consequences" of lower profits, loss of jobs.

Back in the economic dark ages of the 1970's there was a now totally-debunked economic theory, frequently referred to as the Phillips Curve, that there was a trade-off between inflation and unemployment, and that you had to pick your poison – high unemployment was the cost of low inflation, or, high inflation was the price of low unemployment.

That theory was debunked by arguably the worst President in the history of the United States, Jimmy Carter, whose stagflation – a stagnant economy coupled with double-digit inflation – proved you did not in fact need to pick your poison, you could enjoy both, together, at the same time! Hurrah! Yes, you can have a peaceful coexistence of high unemployment and high inflation.

Fortunately, President Reagan's supply-side policies of less regulation proved that the exact opposite was also true – that low unemployment and low inflation could coexist, that we could experience falling inflation even in a red-hot economic environment.

President Trump has proved that Reagan's deregulatory policies were no fluke. After years of regulatory overburden courtesy of President Obama, Trump's deregulatory agenda had ignited economic growth without triggering inflation. The economic impact of deregulation is higher efficiency, output, profits, employment, wages, and, lower prices. Regulation results in stagflation; deregulation results in prosperity.

That is not to say that regulation is inherently evil, it's not. Every game has its rules, and without some rules there is no game. You need some rules to create the game, but there comes a point where a game is ruined by too many rules, and or the inconsistent or pedantic enforcement of those rules. And the problem with bureaucrats is that they are paid to make rules. And more rules, and to keep making rules.

And it is not a question of whether any of these rules are necessarily bad, but just that the sheer volume of regulations becomes a burden that cannot be borne, an economic millstone, an affliction that sucks the life out of the entrepreneurial spirit. Government bureaucrats have absolutely no conception of the existence of "entrepreneurial spirit", they quite naively destroy that spirit, and indeed the economy, while genuinely believing that they are actually doing something that passes for "good". They don't know that they don't know.

Left wing legislators erect a multitude of offices, and send hither swarms of officers to harrass the people and eat out their substance.

But we digress. Regardless of any other aspects, Reagan/Trump deregulation and the consequential emancipation of the entrepreneurial spirit is an economic superfood that engenders a strong economy without inflation. The last thing we need is a fossil from the Phillips Curve epoch to misinterpret the strong economy as a necessarily inflationary environment and feel provoked to invoke a regime of monetary cooling.

Yet Fed Chairman Powell seems intent upon performing his best Don Quixote impersonation, misinterpreting some unrelated benign phenomenon as a mortal enemy deserving of his utmost misguided efforts to conquer. Yes, we see prices going up on various items, but these are related to item-specific price shocks, not general inflationary pressures, and therefore the solution is not monetary policy. Any attempt at a monetary solution will be a counterproductive failure.

All of which begs the question, if monetary policy is not the solution to non-monetary price escalation, then what is? Got any better ideas, Einstein?

And the answer is yes, depending on the problem, but generally the dichotomy of the Carter-Reagan years teaches us that the solutions are market-based supply-side policies. Free markets are the democratic result of transparent economic realities of scarcity and need, and that the people are ill-served by governments delusional of their ability to dictate alternative positive outcomes.

Take oil as an example. Ten years ago, in the years and months leading up to the Great Recession, $140 oil was creating what was being the called "The Greatest Transfer of Wealth in Human History", with that wealth being transferred from us, and being transferred to the terror states of OPEC. If that sounds bad it's because it was, it should come as no surprise that "The Greatest Transfer" was followed immediately by "The Great Recession".

Fortunately, OPEC's high prices and profits triggered our dynamic free enterprise economic system to innovate, to develop and deploy high-tech oil extraction capabilites called "fracking", and the result is we've increased our oil output by over 120% in less than 10 years.

The result is that now nearly energy independent, and we pay a Made in America price with Made in America benefits – when the price of oil goes up American producers benefit, and when it goes down American consumers benefit. Either way, we are no longer at the mercy of Mideast terror states, there is no longer a transfer of wealth to terror states that use the money to topple office buildings, or murder journalists, or threaten the obliteration of Israel.

Fracking is a supply side solution, increasing the quantity of oil supplied to the market which not only increases economic activity, incomes, and employment, it also keeps the price of oil down which is not only good for consumers, it further induces economic activity. Take note – lower prices and lower unemployment, both at the same time. Take that, Phillips!

But there are other supply side solutions to consider. The quantity of a good or service supplied can be incentivized either by reducing impediments, or by initiating and/or expanding incentives. Tax and tariff reductions are supply-side solutions. Productivity gains and technological innovation reduce costs and thus make a product more widely accessible to a broader range of consumers.

Consider Henry Ford's assembly lines. Initially, cars were hand built by teams in a single spot, one at a time. This was inefficient, and so cars were expensive, few were sold, and few workers were employed. Ford's labor saving assembly line techniques reduced costs to the point where cars were affordable to the mass market, so output increases and many were sold, wages and profits rose, employment increased – again, while prices fell and consumer utility flourished. A routine example of supply side solutions doing what they do.

On the other hand, strict labor regulation and enforcement disincentivizes hiring. Think about it - why would you ever hire someone you'd never be allowed to fire?; Meanwhile, reducing legislation and enforcement incentivizes hiring by businesses. Again the impact of all these supply-side solution is that they increase the output of the economy while simultaneously relieving price pressures.

By the same token, proposals like a guaranteed annual income are among the worst policy choices a government or a society can make. People will do what you pay them to do, so if a government offers to pay people to not work, then not work is what people will do. This is bad for a person's character, it is bad for employers who need the labor, it is bad for a society that needs their production, it is bad for governments that need taxpayers rather than taxtakers, and it is bad for consumers who will have to pay more for the goods and services those hand-out recipients would have produced.

Paying people to not show up for work is an anti-supply policy, and thus ranks among the stupidest policy proposals ever conceived by the left, but this should come as no surprise, the Democrats are wrong about just about everything.

But again we digress. This is about inflation versus escalation. Monetary policy cannot effectively combat about price escalation caused by suply or demand events or misguided policy decisions, and any attempt to invoke a monetary solution for a non-monetary problem will only make a bad situation worse. It should seem axiomatic that destroying demand for oil by destroying the economy does not seem to be a wise monetary response - if there can even be one - to OPEC production quota reductions.

There are many forces at work at his time, some at cross-currents with each other, serving to destabilize the economy. Tax cuts and federal deregulation are serving to provide us with non-inflationary economic growth. But the tariff war with China, while strategically crucial, is also creating price escalation in the short run.

Besides the federal government, blue state labor market meddling has the effect of reducing both supply (through, for example, easy welfare) and demand (through, for example, higher minimum wages), while driving up costs and prices. The ongoing oil price-discovery between American frackers and OPEC is creating unpredictable price volatility.

The economy is currently solid and growing owing to favorable supply side policy, but at the same time a number of unrelated shocks are causing noticeable price escalation. It has the look of a classics Phillips Curve set-up – low unemployment with high inflation – but it isn't. It is a strong economy with benign inflation but pockets of escalation. Yet the Fed seems intent on raising rates solely out of servility to the Phillips Curve ideology, when its best course of action is probably to do nothing, and make clear that it intends to do nothing.

The Fed must take great care to differentiate monetary price inflation from non-monetary price escalation. A resolute attempt by the Fed to control non-monetary price pressures using monetary policy will generate collateral damage to the economy – and accompanying human suffering and misery – far out of proportion to the benefits of its policy objectives, even if those objectives could be attained, which isn't even probable.

The Fed cannot control escalation, it can control inflation. Our fear is that the Fed is currently mistaking escalation for inflation, and will fight a destructive losing battle against forces outside its responsibilities and beyond its abilities. The cure would be far worse than the disease.




Analysis


January 03, 2019 - Signs of the looming Powell Recession are everywhere.

Yesterday we saw a surge in weekly jobless claims from 216,000 to 231,000. And the ISM (Institute of Supply Management) manufacturing index plunged from 59.3 last month to 54.1, much lower than the expected print of 58.

This morning China's PBOC responded to their slowing economy by loosening monetary conditions, as they should, by lowering reserve requirements on lenders in order to enhance liquidity.

Meanwhile our Fed Chairman Jerome Powell, facing the same scenario, has inexplicably been engaged in monetary tightening, in spite of the headwinds and diminishing economic prospects.

We actually shouldn't say "inexplicably" because in fact Powell has been explaining, it's just that every time he tries to explain, the Dow drops another 500 points because the markets hear all over again that Powell doesn't know what he's talking about.

Later this morning the most recent three - and possibly worst three - Fed chairmen will be on a panel discussion in Atlanta, where they will have plenty of opportunity to finally speak sensibly, or continue to talk nonsense. Has the Fed woken up yet, or should you put your Sumo Suit on in the hopes of surviving the crash?




January 02, 2019 - China's 2019 has gotten off to a crummy start. And, actually, that's good for us.

China's economy is showing more and more signs of slowing, possibly into contraction. On Monday we learned that their December closed out with a Manufacturing PMI going under water at a 49.4 reading.

This morning another China Manufacturing PMI came it at 49.7, another negative reading, since, in these indices, 50 means 0.

So, you would think that these bad numbers would push our markets higher since it forces China to negotiate and puts us in a better position for a full, fast, favorable and fair resolution to the people of Earth's trade dispute with China.

But no, stock futures are down over 1% this morning on the "bad" news, which is actually should be seen as good news.

Let's be clear: regardless of the immediate market reaction, a slowing economy in China puts pressure on Xi and his predatory totalitarian socialist ("Xicialist"?) agenda. And pressure on Xicialism is a good thing for the people of Earth.



December 31, 2018 - Ask not for whom the Powell Recession cometh - it cometh for thee!

We close out our less than glorious 2018 with growing concern that our less than glorious Fed Chairman Jerome Powell is needlessly forcing us into recession.

This morning the Dallas Fed released its survey numbers, and they were bad - the General Activity Index plummeted to -5.1 from +17.6 last month.

The Dallas drop follows declines in all the other regional Fed surveys: Empire State (to 10.9 from 23.3), Philly (to 9.4 from 12.9), Kansas City (to 3 from 15) and Richmond (to -8 from 14).

The Chairman seems to reject the "dual mandate", and rather, seems obsessed with inflation alone, even when none exists. He seems desperate to prevent inflation at all costs.

And it appears that it will indeed cost us everything.



December 17, 2018 - The federal debt - our debt, that's you & me - is spiraling out of control.

Over the past 12 months through November, the federal government has spent $883 billion more than it has taken in, an increase of 29% over the $685 billion deficit it was running in the previous 12 months.

Governments ought to be running surpluses during good times, and our economy has never been better. So why are we running such a massive deficit, and what will we do when the economy slows, and revenues languish while expenses surge?

You can blame the outgoing Republican congressmen for this debacle. Since winning the House in 2010 on a platform of fiscal prudence they did nothing but spend, spend, and spend some more.

In March they passed a $1.3 trillion spending package, and now we reap the fruits of that malevolent malfeasance. Those Republicans (in name only) fully deserved to lose the House, they earned it. Good riddance.

The proverbial drunken sailors would be embarrassed by the fiscal flatulence of the outgoing Republican losers.



December 14, 2018 - China's economy shows signs of continued weakening and wilting under the Trump tariffs, according to a trio of economic indicators released last night.

The Communists reported year-on-year Retail Sales increase of 8.1%, their lowest number in 14 years; and Industrial Production came up well short of expectations, clocking in at a surprisingly soft 5.4% annual increase.

Only Fixed Asset Investment met expectations at 5.9%, and that was only with the help of massive additional government investment in infrastructure, in which they have already over-borrowed to over-build. So why not over-borrow even more to over-build even more?

More and more it seems that China really does need us more than we need them; and that their interests would be best served by coming clean and doing fair and free trade deals with other nations based on reciprocity rather than revanchism.

And if not, the Pooh could really hit the fan in March if the 25% tariffs are imposed.



December 12, 2018 - The CPI was released this morning and the number is... Zero. Nothing. Nada. No inflatino last month.

The Fed seems committed to grinding the economy to a halt, in an attempt to eliminate inflation that does not exist. Kind of like déjà vu all over again, haven't we been here before...?

One of the main complaints about the Fed is that it is always late. They were raising rates for too long in the lead up to the last recession, they were too slow to raise rates after the last recession, and now have been raising rates rapidly and abruptly, and are continuing to raise rates event when they should already have stopped, or at least paused.

The Fed needs to put a hold on further rate increases at least until the spring - before the Powell Recession becomes a reality and Jerome Powell goes down as the second worst Fed Chairman ever.

The worst Chairman ever of course would be Janet Yellen, who waited far too long to begin slowly and gently raising rates... or would it be Ben Bernanke, who was raising rates in 2007 even as the economy was slowing, topping, and turning over...? Wait, we have been here before!

Good grief, not again...



December 10, 2018 - The Monthly JOLTS report (Job Opening and Labor Turnover Survey) for October was released this morning and the numbers continue to be strong.

For the third straight month the number of job openings has exceeded the number of job seekers by about a million. Yup, there are a million more job openings in America than there are Americans looking for work.

The number of job seekers from last week's Employment Situation report continues to hover around 6,000m,000, while the estimated number of job openings has been around 7,000,000 for several months running.
  • 2018/02: -628,000 (more job seekers than jobs)
  • 2018/03: + 48,000 (more jobs than job seekers)
  • 2018/04: +494,000 (more jobs than job seekers)
  • 2018/05: +594,000 (more jobs than job seekers)
  • 2018/06: +258,000 (more jobs than job seekers)
  • 2018/07: +797,000 (more jobs than job seekers)
  • 2018/08:1,059,000 (more jobs than job seekers)
  • 2018/09: +996,000 (more jobs than job seekers)(Final)
  • 2018/10:1,004,000 (more jobs than job seekers)(Prelim)

  • The President's policies continue to keep the economy strong.



    December 10, 2018 - The Atlanta Fed has updated its Q4 GDP estimate, reducing it to 2.4% based on Friday's soft Employment Report.

    The Atlanta Fed had been expecting a current quarter GDP as high as 3% in late October, but continued softening of data has diminished their perspective. The economy's pulse is slowing.

    Remember, this figure is a "nowcast" as opposed to a forecast - they are actually attempting to measure what is actually happening right now, as opposed to a forecast which predicts what might happen sometime in the future.

    Taking a person's pulse yields an insight of how they are doing right. The Atlanta Fed's GDPNow estimate is like taking the pulse of the economy, it says the heartbeat is slowing, right now.

    Will Fed Chairman Powell realize that his rate hike program is too aggressive? That the hikes have been too frequent, in increments too large?

    Today's JOLTS report, tomorrow's PPI report and Wednesday's CPI report will provide further indication of our short term economic prospects.



    December 07, 2018 - Uh oh. The Bureau of Labor Statistics released its Employment Situation report this morning and the jobs picture weakened substantially.

    According to the BLS, only 155,000 new jobs were created in November. That's not a bad number, but far fewer than have been created of late, and well below analysts' expectations.

    Are the effects of Fed Chairman Powell's interest rate hikes starting to take their toll? Will Powell continue his course of economic destruction even in face of benign inflation and a slowing economy?

    Apparently the markets believe the answer is NO. Futures initially responded with a "bad news is good news" uptrend, but markets have since headed south.

    The markets seem to believe that Powell will irrationally and blindly continue to raise rates regardless of anything, just so he can lower them later.

    That means all news is bad news. And that's bad news.



    December 03, 2018 - Can we win a trade war with China? What if the answer is actually "Yes"?

    Our manufacturing data continues to look pretty good. The Institute of Supply Management (ISM) released its Manufacturing Index for November this morning and it came in at a robust 59.3, somewhat higher than expected. Similarly, the Purchasing Managers Index (PMI) came in at a healthy 55.3.

    Meanwhile, over in China, things look a whole lot worse. Their PMI figures are on the brink of going backwards, coming in at only 50 for November after a meagre 50.2 in October. This may be an early indicator of potential economic contraction.

    Indeed, many economic forecasters are predicting that 2019 may be the slowest growth for China this century.

    President Xi may in fact be bluffing with a weak hand, a hand much weaker than many here in America think. And time may not be on Xi's side - the pressure on him will surely build if things get any worse.

    We tend to think of China as this unstoppable juggernaut, much like we thought of Japan 30 years ago. Could Xi's China be Japan 2.0?

    Perhaps President Trump is right yet again. Maybe the time is right to force cheating China to clean up its act, stop playing the victim card, step up and behave like an adult, and play by the rules.



    November 20, 2018 - Oil continued its slide today with West Texas front month futures contracts closing below $54.

    This is a less good thing than it seems. Since the United States is now the world's #1 oil producer, low oil prices are not the kind of home run they were 50, 20 or even 10 years ago.

    Not only do excessively low prices cause economic damage and human misery in the oil producing parts of the country, low prices also make the prospects of oil investments less rewarding, thus curtailing capital outlays necessary for future production.

    Get it? Lower prices => lower reinvestment => reduced future production => less supply => higher prices. It's the boom and bust nature of the oil business.

    Stability in crude oil prices would be a good thing, and $60/barrel is a good compromise between producers and consumers.

    You may be wishing for low gasoline prices, but, like they say, be careful what you wish for, you may get it.



    November 15, 2018 - The EIA has released its weekly petroleum report and again it shows expansion of production and inventories.

    Daily crude production hit a new all-time record high of 11.7 million barrels per day, while inventories increased for the eighth consecutive week, this time by about 10 million barrels.

    Still, prices seem to be rising just a bit through the mid-50's after yesterday's small increase broke off a record 11 consecutive day decline in prices.

    The plunge in prices has been attributed to the Iranian oil sanctions - Russia and Saudi Arabia had increased production to meet expected demand, but the sanctions - and supply restrictions - have been much softer than expected.

    The run-up in production by the big-three appears to have overshot the Iranian pullback, leading to a temporary supply glut, a glut that could become more permanent if global demand continues to soften.



    November 07, 2018 - The price of oil continues to plummet, now at about $62/bbl, down nearly 20% from the early October highs around $77/bbl.

    The EIA once again reported rising US Production and inventories, with daily crude production now hitting a new all-time record high of 11.6 million barrels per day.

    Meanwhile, after hitting a 3-year low in mid-September, inventories have now increased for seven straight weeks.

    Seemingly, the increasing production is going straight into storage, seemingly creating a glut.

    Will the US economy continue to grow and absorb that production and inventory, or will prices continue to plunge? We'll see...



    November 07, 2018 - Election results continue to come in during the small hours of this morning from yesterday's mid-term elections.

    By and large the results have so far come in more or less as expected with surprisingly few surprises.

    The Democrats will gain control of the House of Representatives, which though expected, still dashes the faint hopes Republicans had of hanging on; while the underwhelming though workable margin will disappoint Democrats.

    On the Senate side, the Republicans will keep control and perhaps even gain a seat or two, which will disappoint both sides who at various times had hoped to make far greater inroads.

    So there you have it, in a nutshell - something for everyone to be even more pissed off at each other about.



    November 06, 2018 - The Monthly JOLTS report (Job Opening and Labor Turnover Survey) for September was released this morning and the numbers continue to be strong, though a bit weakened.

    The current number of job openings in the United States remained above 7 million for the 2nd straight month, and the excess of job openings over job seekers remained above 1,000,000, also for the 2nd straight month.

    Both of these numbers - total openings and net openings - were down, but just slightly, from the previous month's all-time record high.
  • 2018/02: -628,000 (more job seekers than jobs)
  • 2018/03: + 48,000 (more jobs than job seekers)
  • 2018/04: +494,000 (more jobs than job seekers)
  • 2018/05: +594,000 (more jobs than job seekers)
  • 2018/06: +258,000 (more jobs than job seekers)
  • 2018/07: +797,000 (more jobs than job seekers)
  • 2018/08:1,059,000 (more jobs than job seekers)(Final)
  • 2018/09:1,045,000 (more jobs than job seekers)(Prelim)

  • It's a good time to be a job seeker in Trump's America. These are "the good old days".



    November 02, 2018 - Team Trump delivers on jobs yet again: today's Employment Report for October shows an increase of 250,000 jobs. Think about it - a quarter of a million new jobs, in just one month. MAGA!

    The report also featured an increase in the labor force participation rate from 62.7% to 62.9%.

    The unemployment rate held steady at 3.7%, the work week remained stable at 34.5 hours/week, and wage growth clocked in at +0.2% for the month, and +3.1% over the past 12 months. The year-over-year increase from 2.8% last month could potentially touch off further inflation and interest rate fears, though initial market response has been somewhat positive.



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