Sunday, April 29, 2018

Spinning Wheel



What goes up must come down, spinning wheel has got to 'round.... and that defines the economy.



And the rent is always due and across the country in the designated "it" cites which Nashville claims to be the rent has risen at rates not equivalent to wages.  So in turn people buy houses so they can offset that with equity and the idea that savings are built into the real estate as thanks to Flip shows on HGTV we know that you can make money from homes by putting in some renovations and then viola you are cash rich.  Wasn't that the 2008 crisis?  True today Banks are not  lending money at the level they were in those days, just ask Wells Fargo about that, one billion doesn't go as far as it used to.  But we have people over paying for real estate, they are likely financed on flexible mortgage rates as those are still easier to get than a fixed 30 year loan as to qualify you have to have stable job with stable wages and few have said jobs, ask those Teachers about that one.  So the banks usually find the 5-year balloon one most effective and in turn the rates and terms can be re-written to adjust the rates to the current fed rate. Interest rates for them go up so in turn they literally pass that buck onto you. Its how it works.  Remember when they used to encourage savings accounts with competitive interest rates? You would save money they would pay you a portion of the money the banks lent out.  For those in current times that means the bank would give you a 4% interest on every $100 bucks you put in savings/time certificates and money market accounts to encourage you to both save and in turn fund the bank.   The Bank would loan the money at say 10% on every 100 and they would keep the 60% profit for them to fund the bank.  Gosh sounds easy right?  Then the idea of free lending from the Federal Reserve meant that banks could borrow from the cash cow for 0% so they had no imperative to share that with you and in turn savings accounts and money markets went to 0.1% interest making savings utterly useless.  And besides they were giving out those fabulous credit cards for 3.99% interest making borrowing and buying so much easier. Then over time that became 8.99% and in turn you kept borrowing versus saving as the rent is always due.  Funny at the same time your wages never went up in the equivalent percent but hey I can live off cheap credit!!!

And all of this ironically parallels the idiocy when it comes to funding education and in turn the ridiculous costs of college making debt that you can NEVER escape from a lifetime of indentured servitude to banks.  It is like the Hotel California, you can graduate out but never leave.


I should do all blog posts around song lyrics being I live in Nashville y'all!  But the current student debt level is almost akin to the national debt and that  too is going to rise like the Cumberland did in 2010 nearly drowning Nashville.

The average wage is still 45K despite massive job growth.  And while people wet themselves over this in the "It" city it is not keeping up with the cost of living.  Housing prices here are higher than than the average wage, the cost of commuting will rise as we will once again see gas prices rise and in turn the reality is that when most of the job growth is in the service sector many of these jobs will go unfilled as people will move and move out when the balance to their budget is challenged with the reality of living in an expensive city.

In the meantime the wet dreams of Amazon coming to a city near you is making those in charge of housing and development think that maybe this may not be the second coming as they desire as even Nashville not known for scratching their heads and thinking are doing just that if this mammoth river decides to come to town.   

 **For the record Amazon should wait until after the midterm elections as here in Tennessee we have a new Sheriff coming and all deals may not be in ink until after that time. And frankly Haslam has not been a big backer of this and I have not heard of our current Mayor (well until May 1 and that may too change) as a big cheerleader of this as the Slattern was.

The South has been the most active recruiter of manufacturers to relocate here and not because of a highly trained and skilled workforce but because of a myriad of laws that enable them to do to avoid paying taxes and in turn pay wages.  The right to work means right to pay less that unions in other states have managed to keep wages up to reflect the cost of living and include other essential benefits such as Medical Insurance and Pensions because again we know most people fail to save for retirement and Social Security is always one step away from some GOP nutfuck's need to stop entitlement spending! And here in the South the word union is fighting words!

The lack of education, the idiocy here boggles the mind.  Yesterday I spoke with a neighbor who is both a Nashvillian and Black who offered to help me with my groceries. During this time I told him that the school across the street had 14 kids arrested a week ago for assaulting a Cop and a Teacher,  that one kid brokea window in the Principals office and that is he not glad his attempt to resuscitate the gardens located there failed as that school has many problems.  (There were famous community gardens once located there and have all the elements to do so again and he was willing to start the project, invited me and others to join him - I knew better so I refused - and in turn the school did nothing to build this effort.  Not shocking but this pales into the risk that I find  every day when I walk into these schools and I am afraid of the kids here.  The rising violence by teens, the never ending gun violence associated with it and in turn my doubts to believe that the Police are capable of handling a massive crisis given their need for a 33 plus hour manhunt for a boy 1-1/2 miles away from the source of the manhunt.  And that he was found behind a school with over 1000 kids (yes that is the size of our elementary schools) and only one cop in a vehicle out front.  Hello Parkland anyone?   Add to that the car theft by the maniac under investigated gives me concern about how the Police respond to crime here despite all the posturing.  All of this conversation is why he is walking away from me meaning he did not want to have this conversation and stopping on the street and  yelling out "You have a gun don't you? If not get one."  What do you say to that?  Really that is the solution.  And when I asked how I was supposed to do this as I cannot carry a piece when I go to schools my source of fear.  He continues, "But you feel safer anytime else."  End scene.  And yet my same conversation with my white neighbor was civil and no mention of guns but serious concerns about what defines law enforcement and safety in Nashville.  And for the record his girlfriend is black and from Nashville but even she has decided to spend more time in Missouri where she owns a home.  Missouri. Missouri is better than Nashville? Okay then.

But wages and workforce here are very segregated and divided as well. My neighbor and I who had the civilized conversation discussed the like likes like philosophy that dominates the labor forefront and that is another reason why his girlfriend left as she could not find work that simply paid her enough for her skill set and she found few options that would enable her to stay here.  We talked about the Coffee shops and Restaurants we frequent and I know of only one or two faces of color in each and in turn how despite it being an it city who is it depends on many other factors given the supposed shortage of service workers.  In other words go to the new high end hotel, Bobby, see a black face behind the coffee bar? No but in the back of the house doing the heavy lifting, no doubt.

There are two economies in America and the second one is as divided as the first only the spoils are really parsed out in very select ways.  There is a divide among the one percent but regardless of one being a billionaire versus a millionaire the tax benefits are just that benefits. It is the difference for one to have a third home versus one having a really nice second home.  The reality is that the one-percent has "people" to manage money, prepare taxes and take advantage of those loopholes and other means that enable the wealthy to offset expenses. And again using my favorite expression, access and availability are two different things when it comes to the have and have nots, the rich have access and availability to power, to position and to those who can get that ladder firmly in place to secure said rung on that ladder.   To the poor that would mean access to health care but it is not available when you cannot afford it so you go to the Minute Clinic versus a Primary Care Provider.

I am not sure we are quite at the precipice yet but I feel it coming.   I have planned to be out of here by 2019 and that may be just about the time as we start kicking into gear for the next Presidential election. Regardless of your politics this will be an ugly election cycle and the balls being tossed in the air means one will eventually fall.




The silent recovery: how much longer can America’s long, slow boom last?

If it lasts till 2019, it will have run for a decade. But this upswing, marked by weak growth and inequality, is not a normal one

Larry Elliott
UK Guardian
Sat 28 Apr 2018

It all started in the summer of 2009. Barack Obama was six months into his presidency and desperate for some good economic news. The US had just suffered its deepest post-war recession, unemployment was heading for 10% and Washington had been forced to bail out the banks.

But in June of that year, the world’s second-biggest economy turned the corner. A recovery began that has continued uninterrupted ever since. At the end of this month, the US will have enjoyed its second-longest period of economic expansion in history, beating the upswing under John F Kennedy and Lyndon Johnson between 1961 and 1968.

By next summer, if nothing untoward happens, Donald Trump will be able to boast that the US has beaten the record 10-year period of growth between the end of the Gulf war in 1991 and the 2001 dotcom bust. Expect a flurry of self-congratulatory tweets from the White House.

The reasons for America’s recovery are simple. Interest rates were cut quickly and aggressively by the country’s central bank, the Federal Reserve, and kept at rock-bottom levels for seven years. The Fed also pumped trillions of dollars into the economy through the process known as quantitative easing – buying bonds to expand the money supply.

Swift action was taken to clean up the financial system so that the banks could start lending again. Obama announced a modest package of tax cuts and spending increases. Lessons were learned from the mistakes of the Great Depression in the 1930s, when demand was sucked out of an already weak economy and banks were allowed to fail.

Taken together, the measures got the US slowly moving again. It helped that the authorities in Beijing were simultaneously using even more aggressive measures – big infrastructure projects and expansion of credit – to stimulate the Chinese economy.
Obama passed a package of measures in 2009 to go alongside the Fed’s drastic rate cuts.

The subsequent recovery has been long but, by American standards, weak. Traditionally, the US has recovered sharply from downturns and had several years of fast growth. In the 1960s, for example, the US economy grew by 4.9% a year on average while in the 1990s it expanded by 3.6% a year on average. The average during the current expansion is 2.2% and it is the first business cycle since the second world war in which there has not been a single year of growth above 3%.

At 1.4% a year, employment growth has also been modest. America’s hire-and-fire culture has meant workers can be laid off in large numbers during recessions and then taken on again during the subsequent recoveries. In the 1980s upswing, for instance, jobs growth averaged 2.8% a year.

Nor has the recovery followed Kennedy’s dictum that a rising tide should lift all boats. Half of the growth during Obama’s presidency went to the top 1% of US households, with the lack of real income growth for middle America helping to explain both the muted nature of the upswing and the discontent that propelled Trump to the presidency.

Dario Perkins, managing director of global macroeconomics at the research company TS Lombard, says the US is not alone in having experienced a long period of growth. “Among the developed economies, Australia, Sweden, Germany and Canada all have expansions that match or surpass the US achievement. And if we extend the analysis to the emerging economies, we find several countries with even more impressive performances.”

Europe, which suffered a double-dip recession and only began a sustained pick-up in 2013, is the one part of the world where the recovery looks relatively immature, Perkins says.

All upturns come to an end sooner or later and the fact that it is now almost nine years since the US emerged from recession has inevitably led to speculation about when and how the next downturn will arrive.

The International Monetary Fund is worried by Trump’s protectionist rhetoric, with its chief economist, Maurice Obstfeld, warning at its spring meeting earlier this month that there was a risk of the global trading system being torn apart.

Keith Wade, chief economist and strategist at the investment firm Schroders, believes Trump is trying to extract concessions from China before the US midterm elections this November rather than seeking to start a trade war.

Nor does he think there is a high probability of the US being derailed by a hard landing for the Chinese economy caused by the collapse of its credit bubble.

That leaves two remaining triggers. Perkins says that there are only scattered signs of the trends that normally develop in the late stages of an economic cycle – firms running up against capacity constraints, rising inflation and excessive investment. More likely, he thinks, the end will come – as it did in both 2001 and 2007 – with the popping of an asset-price bubble. “Recent history suggests any problems are more likely to start in the financial sector and with central banks tightening policy and asset prices high by historical standards, this is surely the area to watch over the next 12 to 18 months.”

The 1960s upswing eventually came to an end when the economy ran into inflationary problems amplified by the cost of the war in Vietnam and Johnson’s Great Society welfare programmes. Dean Baker, from the left-leaning Centre for Economic Policy Research in Washington, says there is no real evidence that the US economy is reaching its supply limits and that the concerns expressed over the impact of Trump’s tax cuts for the budget deficit are overblown.

But the Fed might see it differently. Wade says the US central bank has a tricky task in raising interest rates without triggering a sharp downturn and that its dilemma is made worse by the fading impact of the fiscal boost after 2019.

The good news for Trump, he says, is that the record for continuous economic expansion will be broken next year. The bad news is that the “festivities in the White House might be somewhat muted as the president faces the prospect of fighting for re-election during a recession”.
Recovery in three charts

A dramatic cut in interest rates and a $1 trillion government rescue package prevented the US economy falling off a cliff in 2008 and kept inflation from falling below 1%. But efforts to boost inflation back above 2% only achieved momentary success in 2012. Nevertheless, the US central bank, the Federal Reserve, has increased the cost of borrowing four times since 2015 and plans several more rises this year. White House economic advisers expect President Trump’s tax cuts to push GDP growth to 3% in 2018 – but they are a one-off fiscal boost that Fed policymakers are supposed to ignore when making their plans.

It’s clear that the US recovery since 2008 is among the most consistent and sustained, compared with its predecessors. But to say it is lacklustre is to underplay how weak it is, especially when the extra efforts of the government and the central bank are considered. The rapid expansion in the early 1960s during the Kennedy and Johnson presidencies was by far the strongest, followed by the boom under Ronald Reagan, which ended in recession before the recovery credited to Bill Clinton in the 1990s.

US wages have waxed and waned during each of the postwar recoveries except for the most recent one, which has seen wage rises remain low for almost the entire period. It was expected that tech giants like Apple, Amazon and Google would spur a turnaround that filtered down to the rest of the economy. However, Amazon and Google, as in the UK, have played a bigger role in boosting transport for their goods and the low-grade jobs that go with the sector, than high-paying engineering jobs in the IT business. Economist Robert J Shapiro says automation in the internet age has been one
of the biggest factors depressing wages.



Again the river runs through it....  Amazon has flesh eating fish beneath the surface.  








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