... and It Keeps Getting Worse ...

Quite possibly the most important element of any economy is whether or not people have a job. 

Well, not to say that it was entirely unexpected, but unemployment has gotten worse, especially here in California, where, the U.S. Department of Labor reports, is back up to 12 percent, second-highest in the nation, exceeded only by Nevada.  Nationally, unemployment is down a tick, to 9.1 percent, from 9.2 percent in July.  And to be clear, these numbers don't include the discouraged and under-employed, which would likely add another ten points or so to that, at least in California. Totalled, that's almost a quarter of the workforce.

The unemployment rate for African-Americans is even higher, as nationally, 15.9 percent of blacks are without work.  Evidence for this could be seen in Georgia today, where, according to ABC News, "thousands camp[ed] out in their business suits and office heels and brav[ed] the tormenting heat in Atlanta to stand in line for a job fair" sponsored by the Congressional Black Caucus.  Authorities had to treat 20 people for heat exhaustion. 

To make matters even worse, Bank of America, one of those Corporations once called, "too big to fail", announced plans to cut up to 10,000 jobs in it's endeavors to restructure.  This is on top of roughly 2,500 job cuts already this year for BofA.

On the brighter side (in an attempt to find a brighter side, amidst such bleak news of late), to be sure, unemployment isn't as high as the national rate everywhere.  North Dakota's unemployment is at a meager 3.3 percent.  Nebraska's is only 4.1 percent.  And South Dakota's stands at 4.7 percent.  Only thing is, there are more people in California than there are in all three states combined.  Maybe the reason why there are so many unemployed, is because so few people want to live there.

Bad News All Around

Generally, single, significant current events are recorded in these posts, but in the search for the one significant event for today, we are at a loss.  Generally, it's all bad.  Thus, its general negativity is what makes it significant.

Here is a list, however brief, of the major news items today:

--Last night, Asian stock markets dropped: the Nikkei (Japan) lost 1.3 percent; the Shanghai Composite (China) lost 1.6 percent.

--Europes' major indexes tanked:  the Stoxx Europe dropped 4.8 percent; the DAX (Germany) dumped 5.8 percent.

--The Dow shed 419 points, losing another 3.7 percent.

--408,000 new unemployment claims were filed last week, up 9,000 from the week before, and 8,000 more than expected.

--The Consumer Price Index (CPI), which measures inflation, was up .5 percent in July; Gas alone was up 4.7 percent.

--There are renewed fears of another global recession.

--A flash mob was formed in Germantown, Maryland to raid a local 7-Eleven.  It only took a few minutes, and they made off with hundreds of dollars of goods.  Police are at a loss as to what to do to prevent it from happening again.

--Dozens of Isrealis were either killed or injured in a series of roadside attacks near the Israeli-Egyptian border.

Although the list above is primarily econocentric, there just seems to be a sense, an intuition, if you will, that the future isn't looking so bright these days.  Even my girlfriend feels sad, for no apparent reason.  So much of the news today is ... so grim.

Those who studied U.S. History, might recall in those studies, how, weeks before the Japanese Imperial Navy attacked Pearl Harbor, a number of people are recorded to have felt a strange sense of foreboding.  They intuited that something, some catastrophic event was about to take place, though they knew not what.  Those who experienced that foreboding could certainly attribute it to certain causes--Europe was already in the midst of another Great War, and many felt that it was only a matter of time before United States serviceman would be called and shipped east. 

Perhaps it is merely because the economic news is so bleak; or perhaps that news itself is rarely positive, and that we see more of that negativity since beginning to research more of it for the purposes of this blog; but whatever the cause, we can relate, today, to the generation that witnessed the attack on Pearl Harbor, and their odd sense of coming calamity.  We certainly hope nothing catastrophic is on the horizon, that this intuition is misconstrued, or that it is merely a passing phase of dread in the attempt to understand the causes of current tragic events.  Yet, if the sum of today's news is any indication of a bleak future, we would do well to prepare for it, however we can.

Who is this Bernanke guy?

We felt that yesterday's post regarding the differences of opinion regarding Ben Bernanke warranted further examination into the subject matter.  After all, does anyone really know who this guy is?  And what exactly did he do that would warrant calling such acts "treasonous"?  Well, as historians are wont to do, we've been doing some research.

Back in 2002, in one of his first speeches as a member of the Board of Governors of the Federal Reserve System, (a.k.a., "The Fed"), Bernanke outlined his views on the cause and the economically debilitating impact of deflation on the U.S. economy, and the available and plausible measures the Fed could take to prevent it from happening.  This speech would come to be known as the Bernanke Doctrine.  In short, the measures he proposed to combat deflation are all geared toward the singular purpose of maintaining a constant rate of inflation of 1-3 percent via measured increases of the money supply and graduated reductions of interest rates.  If inflation exceeded 3 percent, the Fed could raise interest rates (to slow the actual injection of money into the economy); if it dropped below 1 percent, it could increase the money supply (a.k.a., "Quantitative Easing").  If interest rates got to zero, the fiscal authorities of the government could then step in to use more unconventional methods, like broad-based tax cuts, or even the acquisition of "existing real or financial assets."

Call Bernanke what you will, he is nonetheless a man of his word.  In 2008, two years after his ascendency to Chairman of the Board, when the recession hit, and inflation dipped as low as .1 percent, the Fed bought up roughly $1 billion in bank debt, Treasury Notes, and Mortgage Backed Securities (with newly printed money).  In 2010, with an inflation rate averaging about 1.5 percent, the Fed bought roughly another $600 billion in Treasury notes (with even more newly printed money).

The reason why so many question the soundness of such a policy of seemingly uninhibited money-printing, is that, once inflation peaks over Bernanke's 3 percent, interest rates must then be increased (to keep the inflation in check), which in turn could stall the debt-based economy (as anyone who witnessed the prime rate increases in the 70's could attest).  Moreover, such a massive stimulus of money could lead to hyperinflation and complete monetary collapse, as has been the ultimate fate of every fiat currency in history. 

Not to say that this is going to happen, but let it now be no surprise that even the very possibility of it is likely to upset people.

Perry, et al. and Obama Clash over ... Bernanke

Republican Presidential candidate Rick Perry, who announced his candidacy while the rest of the Republicans were debating in Iowa, today voiced his opinion of Ben Bernanke and Quantitative Easing.

"If this guy prints more money between now and the election," said he, "I dunno what y'all would do to him in Iowa but we would treat him pretty ugly down in Texas. Printing more money to play politics at this particular time in American history is almost treasonous – or treasonous in my opinion."

Michelle Bachmann then reiterated her anti-Fed stance, explaining that, "the Federal Reserve is not subject to transparency. The Federal Reserve has made terrible, grievous errors."

Most interesting is that Ron Paul, who earlier this year grilled Bernanke, and who has been anti-Fed since the days he was a Libertarian, said ... nothing.

White House Press Secretary Jay Carney chastised Perry for his remarks, explaining, "when you’re running for president you have to think about what you’re saying, because your words have greater impact.  We take the independence of the Federal Reserve quite seriously.”  Obama himself was more willing to "cut him some slack."  After all, "he's only been [campaigning for President] for a few days now."

Though this may appear to be an early and relatively minor skirmish within the context of the 2012 Presidential Election, it highlights one of the most significant differences of opinion between all the candidates and political parties, in the role and function of the Federal Reserve.  In the broader perspective, it also touches upon the question regarding the role the federal government should play in assuring economic growth and stability--i.e., should government be proactive, and provide "stimuli" of cash into the economy (with the help of loans by the Fed through printing more money)?  Or should government remain "hands off," and let the free market right itself?  However one answers that question determines how they view the Federal Reserve, Ben Bernanke, and Quantitative Easing.

Obama's Approval Ratings Lowest Ever

President Barack Obama's job approval ratings have dipped to the lowest ever in his administration.  Just 39 percent of those polled approve of his performance, while 52 percent disapprove.  Interestingly, such figures come close to matching those of the last Democratic Party President, Bill Clinton, when they were at their lowest.  Back in 1993, roughly six months into his administration, Clinton had a 40 percent approval / 49 percent disapproval rating.  Neither Obama nor Clinton, however, have ever matched George W. Bush's lowest rating, which was around 25 percent, just before he left office.

As to why exactly Obama's ratings are so low, the Gallup Research website explains that, "with the exception of a dramatic national or international event, it is usually difficult to pinpoint the causes for the short-term ups and downs in a president's job ratings. In the current situation, it is reasonable to assume that several events of the last few weeks have played a part in depressing the public's approval of Obama. These include the widespread public disapproval of the way Washington handled the debt crisis, a substantial drop in the public's confidence in the economy, and last week's gyrations in the stock market."  This author would suggest that the jabs coming from the Republican campaigns in Iowa last week might have also have something to do with it.

Is Barack Obama really so bad?  What do you think?  All comments are welcome.

Sunday Summary

The rioting in Britain has settled down, now, which affords us an opportunity to examine some possible underlying causes of the event.  From a historical perspective, this needs to be done, for it allows us the opportunity to understand the zeitgeist from which such violence and destructive behavior springs.  Knowing that, we may be further able to address possible remedies, as well as possible methods of prevention.

Sometimes riots are quite clear-cut in their causes.  Anyone who was anywhere around Los Angeles in the spring of 1992, when local African-Americans rioted after 3 LAPD officers were acquitted of charges of police brutality of Rodney King, understood that L.A. blacks were lashing out at what they considered the racial and social injustices in their neighborhoods.  It was indeed brutal.  53 people were killed.  Thousands more were injured. 

However, the causes of the rioting in England aren't so clear.  Though it started in Tottenham, North London, after an organized protest against the the shooting death of Mark Duggan by Metropolitan Police Service officers, thanks to light-speed communication like Twitter, the violence quickly spread to other parts of London, then to cities farther north of London.  That Mark Duggan was a black man is irrelevant, as the rioters consisted of people of all colors.

Wikipedia summarizes that "commentators have attributed the causes of the riots to factors including high poverty and unemployment, the growing gap between rich and poor, gang culture, and the lowest social mobility in the developed world."  But, could the riots be due to merely socioeconomic factors?  Or, as it was posited earlier in this blog, was it just England's disaffected youth having their say?

In an insightful online article in England's Financial Times, Gautam Malkani compares and contrasts the underlying psychology of the violence of the riots to that fictionalized in Anthony Burgess' A Clockwork Orange.  In it, he suggests that, not unlike Alex and his "droogs," rioters were "revel[ing] in demonic violence to stave off the demon of boredom," as "many rioters in London and other cities were laughing as they looted. [...] Like football hooliganism, the violence was recreational--a day out in a Nietzschean theme park."

Malkani also suggests that consumerism may have played a role in the looting.  "In place of the traditionally anti-capitalist stance of previous youth counter-cultures came reports of rioters in low-end fashion retailers, engaged in the new practice of 'trying before you loot.'  This form of extreme consumerism meant that, by the end of the week, the biggest bogeyman was our culture of rampant materialism and instant gratification."

With that, it appears that we have at last discovered the apparent causes of last week's violence and destruction in Britain:  socioeconomic disaffection augmented by consumerism run amok.  Almost makes one long for the simpler days of race riots.  Almost.