Wednesday, December 14, 2016

All you need to know about the economy


Money supply reporting is broken up between transaction money and savings money. Transaction money is available for transactions.  Savings is not.  Savings is inert.  Sequestered.  Imprisoned.

The purple line is savings.  The blue line is transaction money.  Actually it is the turnover of transaction money.  Both are rates of change from one year ago.

The turnover of transaction money means that in a given period of time a dollar will be spent x number of times.  The more times the better.  Five dollars spent once in a week is the same as one dollar spent five times in a week.  Turnover represents the stock of money times the turnover.

When money flows out of savings it flows into transaction money.  When money flows into savings it flows out of transaction money.  It is easy to see in the chart the inverse nature of these money flows.


In the early 90s there was a massive outflow of savings into transaction money where it flowed into dot com companies.  Flowing there was investment, which is much better than flowing into consumption.  Thus there was a great economic boom.  Until everyone realized the economic boom was false.  Then they started flowing what money they had left in their transaction money accounts back into savings accounts.  This resulted in a great crash, both in the economy and the stock market.

Then the next cycle came along and there was a great outflow from savings into transaction money that then went into buying houses.  Flowing there was investment, which is much better than flowing into consumption.  Thus there was a great economic boom.  Until everyone realized the economic boom was false.  Then they started flowing what money they had left in their transaction accounts back into their savings accounts.  This resulted in a great crash they called the great recession.

In our most recent cycle, savings has been slowly flowing into transaction money as seen on the right side of the chart.  The problem, one I cannot prove, is that many people have limited savings with which to flow out of into transaction money and what transaction money there is goes to consumption.  Additionally, it was thought that by increasing the wealth of some people via something called QE, which is magic only nobody wanted to call it that for fear of being considered superstitious, but we all secretly know, these fewer people would flow their money from savings to transactions.  The problem is the wealth is mostly an increase in the value of their house and the value of their stock holdings as opposed to actually having more money.  That is called the wealth effect. It means these fewer people should flow more money from their savings to their transaction accounts.  These fewer people didn’t do it.  They deny knowing anything at all about some damn magic.


So here we are, suffering from their failure to believe.

Friday, December 9, 2016

bubble bubble not a bubble Q3 2016


We are not in a bubble.  This is the wealth effect the Federal Reserve intentionally created so people with wealth would spend money and help grow the economy.


It is part of the Magic.

1 year Treasury & Fed Funds rate 12/8/16


It isn't .50 or higher but it is probably close enough for the Fed to raise rates on Wednesday .  They sure have been trying to talk up the market yields as they really really want to raise the Fed Funds rate.  Probably for credibility reasons.

Tax receipts, negative cash flow, fiscal stimulus November 2016


Calendar your to date November 30, 2016.  I knew they would hit a trillion dollars of negative cash flow.

Cumulative Tax Receipts
Calendar year to date
Oct
Nov
Dec
2016
2,362,167
2,553,759
2015
2,304,985
2,497,852
2,803,236
2014
2,176,054
2,353,864
2,660,454
2013
2,018,433
2,189,716
2,456,383
2012
1,827,437
1,979,817
2,233,516
2011
1,714,698
1,860,368
2,082,137


Percent tax receipt growth year to year
of cumulative tax receipts
2016
2.5%
2.2%
2015
5.9%
6.1%
5.4%
2014
7.8%
7.5%
8.3%
2013
10.5%
10.6%
10.0%
2012
6.6%
6.4%
7.3%

Growth in cumulative tax receipts in 2016 is only 2.2% higher than in 2015.  This is a proxy for the economy.

Cumulative Negative Cash Flow in dollars
Calendar year to date
      Oct
      Nov
      Dec
2016
883,279
1,025,628
2015
na
685,588
780,444
2014
585,185
653,573
789,467
2013
723,385
784,419
919,238
2012
1,038,527
1,146,605
1,209,786
2011
968,491
1,085,280
1,197,721


FISCAL STIMULUS
Cumulative Outflow percent of tax receipts
Calendar year to date
     Oct
Nov
Dec
2016
137%
140%
2015
na
127%
128%
2014
127%
128%
130%
2013
136%
136%
137%
2012
157%
158%
154%
2011
157%
158%
158%

Got that?  They spent 40% more than they took in.


Tuesday, December 6, 2016

Core Cap Ex October 2016




These charts show that the economy is sluggish.  From a year ago, below, orders are less by 4.2%. and have been contracting for a long time.




Thanks to Boeing and the military, overall it looks better.



But the consumer is either not buying goods from the US, which he isn't, or he is saving money and just not buying, which is also true.  Savings would not increase so much if savers got more interest income on their savings.  And there should be an environmental and wage equity tariff on imports.







Saturday, December 3, 2016

What, me worry? - SS, Medicare, Medicaid


I know, I am weird.  I read federal government financial statements.

September 2016 has been released.  The quick look shows payroll taxes collected in September amounted to $93 billion.  Social Security outlays $77 billion.  Medicare outlays $69 billion.  Let me do the math for you.

$  93 billion in from Social Security and Medicare taxes
   -77 billion in Social Security outlays
  -69 billion in Medicare outlays
-146 billion out total
$ -53 billion

That is $53 billion more out than in.  Shortage.  Whatever.

Ok.  You say September was a fluke.  As it happens, September is the end of the federal government fiscal year.  So they have the 12 months in the statements also.

$1,115 billion in from SS and Medi taxes.  That reads, one trillion, one hundred fifteen billion dollars

   -916 billion out to Social Security
   -595 billion out to Medicare
-1,511 billion out for these two
$-396 billion

Do you mind if I round that up a little to $400 billion dollars short in fiscal 2016?  Do you know why you thought that the so called trust funds were solvent?

Down in the thick of the financial statements is the centers for Medicare and Medicaid spent $1.4 trillion for the year.  Last year they spent $1.3 trillion. That is a 7% increase.  Over the last couple of decades the annual increase has averaged 9% a year (according to Alan Greenspan).  So 2016 was better.

Lets say they can continue with only a 7% increase each year disregarding all the people turning 65 and going on Medicare, not to even mention the expanding Medicaid rolls due to the massive Mexican birth rate.

In 5 years the centers of Medicare and Medicaid will spend $564 billion more dollars in the year 2021.  If the trend is held at 9% then they will spend $754 billion more in the year 2021.


But not to worry.  Things always work out.  The increase can be paid for by increasing taxes, cutting the defense budget, or Magic ( https://lessclear.blogspot.com/2016/11/we-grew-up-in-magical-times.html ), or a combination of them all. And, the economy could grow really really fast over the next 5 years which would increase the tax income naturally.



Magic Not – California Pensions


Stanford U study says California public pensions are underfunded by $1 trillion.

If the pension plans earn 7.5% per year in the future then they are only underfunded by $282 billion, which is what is always reported.  But Calpers using 3.7% for future per year earnings rate and you get to the trillion dollars more that they need in the bank today to be able to full fill the retirement promises.  You didn’t know that Calpers uses a “market rate” which is presumably the rate of return they have actually been earning.

Here is the filthy scum lying rate of return always reported:


Here is the actual rate of return, thank you Stanford Institute for Economic Policy Research:


And this is what you get:   http://www.pensiontracker.org/




Sure it looks like Magic because they call it debt but it isn’t because there is no credit money created.  This is future transfer payments from some people to other people.  From tax payers to tax users.  What one gains the other loses.

Either you raise taxes and full fill your promises as a tax payer or you renege on your promises.  Or a combination of both.

An alternative is to put what cash the pension plans have into individual 401k accounts and be done ever more with public paying for other people’s retirement.  Myself, I never understood the logic of public employee privilege, including that of the heroes, the first responders.  They too should pay for their own retirement (and healthcare).


This is a political matter.  It is going to be ugly.  Where promises are constitutional amendments, the battle will be lengthy.  I have never heard of anything more ridiculous that making a constitutional guarantee for money.  But judges have and will rule that once a promise is made you cannot back down on it because it is in the constitution.  After all, judges are public employees.
 
I know how public employees feel from firsthand experience.  One, they have contempt for the private sector and look down upon them as people so low as to have to pay their own retirement and healthcare.  The other view is that private sector people have so much money, just look at CEO pay, and public employees should be able to have as good a deal.

My jobs report November 2016

There you have it.  Another November to November cycle completed.  Of course there will be revisions. These numbers are from table B1 not seasonally adjusted of the Employment Situation report or from FRED PAYNSA.

The average monthly job growth for 2016 was 190,000 jobs.
                                                           2015 was 233,000
                                                           2014 was 232,000
                                                           2013 was 209,000
                                                           2012 was 179,000

{click to enlarge}

The slow down is evident.  There are 2,277,000 more jobs than November a year ago which had 2,791,000 more jobs than in 2014.  To me it doesn't look that bad because I have not had high expectations.

Annual job growth, November to November, peak to peak.

2016   2,277,000
2015   2,791,000
2014   2,788,000
2013   2,505,000
2012   2,145,000
2011   1,946,000
2010      712,000
2009 -5,527,000 


One concern is that the number of part-time jobs spiked up..  That makes the numbers I present overstated because each part time job is counted as one job in the payroll survey. This will be good if more of these jobs are kept in the big January layoff.  I am just saying the payroll survey is overstate because of counting each part time job as one job and more so this November than usual.

Decembers are very close to Novembers.  The action starts in January.  The hope is that the layoffs are less deep than the January before.