Only Two Choices

Q.  What's the difference between Democratic economists and Republican economists?

A.  Democrats like Keynesian economics,while Republicans like Supply-side economics.

Q.  What's the similarity between Democratic economists and Republican economists?

A.  Both love budget deficits but strongly deny it!

Q.  How do they justify such budget deficits?

A.  Republicans use deficits to make the economy better, while Democrats use deficits to keep the economy from getting worse.

Q.  Do either Republicans or Democrats ever reduce the national debt?

A.  No.  (Bill Clinton was the rare exception.)

Q.  How long will we keep hitting ourselves in the head with a hammer?

A.  I don't know . . . until we kill ourselves?

Q.  How will we know when the political system is broken?

A.  Don't you already know?

ZOMBIE APOCALYPSE ?

Pacific Investment Management Company (PIMCO) is a giant, well-respected bond firm.  However, their latest market commentary actually made me laugh.  They see continued economic growth, unless there is a ZOMBIE APOCALYPSE.

The flow of economic data in the U.S. is remarkably positive, and it has been joined by a flow of positive economic data around the world.  This is an extremely rare situation, where most of the world is enjoying solid growth.

They also believe the Republican tax cut will stimulate the economy slightly in the short term (maybe a modest 0.3% next year), but like myself, they believe it will stimulate the economy at the wrong time and only create inflationary pressures in the long term.  This will cause long-term interest rates to increase.  PIMCO would encourage you to refinance your mortgage now.

In other words . . . investors should continue to enjoy the ride!

Mystery Manipulator (s)

I believe the U.S. intelligence agencies, that the Russians meddled in our presidential campaign last year, and think it deserves further examination.  Unfortunately, any discussion of this subject gets mixed into a discussion about potential involvement by the Trump campaign.  Whether anybody from the campaign colluded is a separate issue from the Russian meddling.  Forget collusion and stay focused on Russia trying to mold public perception!

Separately, the Federal Communications Council (FCC) was proceeding to shut down net neutrality.  Part of that process is to solicit feedback from the citizenry.  Apparently, there were two million fake responses.  Literally thousands of dead people apparently sent emails from the grave.  It's not funny.

I can understand what Russia gains from the U.S. electing a Russia-friendly president, but I don't see what the Russians gain from a regulatory agency transferring control of the internet to cable companies and other internet service providers.  This makes it possible that someone besides Russia is trying to mold public perception.

You may argue that molding public's perception of what they need is done everyday by the advertising industry, and you would be correct, but this is different.  Somebody was trying to mold public policy at the FCC.  Who and why?

Some may argue that non-Fox news is all fake news, but is public opinion becoming fake-public opinion?  If public opinion is polluted, why should politicians pay any attention to it?

If Proctor & Gamble can tell you the best soap, what is wrong with the Russians telling you who would be the best president.  What is wrong with a mystery manipulator encouraging you to surrender control of the internet?  The mystery is the problem.  As Justice Brandeis said a century ago "sunlight is the best disinfectant."

Keep digging . . . 

And, You Are . . . ?

Long ago, my father told me not to discuss politics or religion, because people take offense so easily.  I cannot ignore politics in my profession, but I never write about religion.  But, sometimes you read something so amusing that it has to be shared.  During a recent sermon, I learned churches and synagogues have too many of the following individuals:

Mrs. Eve Environmentalist, who tells us to be gluten-free, vegan, organic, tree-hugging, hemp clothed, and drive a hybrid.

Mr. Adam America, who tells us to work hard, start-up a business, go from rags-to-riches, honor the flag, do military service, and sing the national anthem.

Mr. Sam Community Service, who tells us we must do social work, pet-adoption, save-a-starving child-in-Africa, and make a difference.

Miss Patty Pious. who tells us we must do church-on-Sunday, prayers-at-night, grace-before-meals, prayer-warriors, and must share-our-testimony.

Mr. Jim Social Justice, who tells us we must march, protest, advocate, resist-the-man, dismantle patriarchy, and fight oppression.

Since there are too many of these individuals, I wonder what type of individuals are too few?

Choice of Altars

Hillsdale College is a well-respected conservative think-tank in Michigan.  A good friend gave me one of their recent policy opinions to read, which I did gladly.  The gist of it was that the problem with Democrats is that they worship at the altar of identity politics, dividing America instead of unifying it.  The writer argued Democrats are less patriotic than Republicans.  That may be a fair criticism, but it is not a new one.

The Republicans have been criticized for worshiping at the altar of ideology, i.e., if something works in theory, it must therefore work in practice.  An example is the belief that human behavior can be dictated largely by taxes.  Personally, I cannot imagine many normal people actually quitting a job, selling their house, leaving their friends, and moving his family to another state just because of taxes.

Despite this difference between the parties, there is one huge similarity, which is largely ignored.  The majority of both parties don't believe in Keynesian economics nor Supply-side economics.  They believe in Austrian economics, i.e., that budget deficits do indeed matter, contrary to what former Vice President Dick Cheney counseled President George W. Bush.  They don't believe that deficit budgets are required when the economy is good.  They don't believe that tax cuts are necessary when the economy is good.

A Non-Theory

When I was taught the "scientific method" long ago, I recall the arduous process of moving an idea from hypothesis to theory to principle.  While I don't have time to go through that lengthy process, I do have a hypothesis.

While the stock market invariably over-reacts, it over-reacts to different news, depending on where it is in the cycle.  During bear markets, the stock market largely ignores political news and over-reacts to economic news.  During bull markets, it largely ignores economic news and over-reacts to political news.

During bear markets, politicians can't do as much damage to the stock market as they can during a bull market.  Conversely, economic data is considered less of a risk during a bull market, leaving politicians as the primary risk factor.

Another distinction is that economic data can predict the future, while politicians cling to the past.

Bitcoin, Bitcoin, and Bitcoin

After months of 24/7 saturation coverage, you can recall that certain exhaustion you feel the day before an election.  You have hope, because the election is the next day.  Still, you can barely tolerate coverage for another 24 hours.  That's the way I feel about bitcoin!

In the business media, coverage has been bitcoin, bitcoin, and bitcoin.  That one crypto-currency began trading in the futures market yesterday, and the world did not end.  In fact, bitcoin was up nicely but only on low volume.  It is a triumph for the "true-believers" of bitcoin.  For myself, it is just one step closer to a potential financial crisis.  The total value of bitcoins is now about $300 billion and rising.

So many questions, so much hype:

1.  Bitcoin solves what problem?  That's assuming you are not a criminal needing money that cannot be traced.

2.  Doesn't the world have too many currencies already?

3.  Money can already be wired around the world in minutes, without the wild price fluctuations of bitcoin.

4.  While there are a finite number of bitcoins, there is no limit on the number of other crypto-currencies. (There are already a hundred such currencies.)

5.  It is not like gold, that you can touch.  There is no collateral.

6.  It is not backed by or guaranteed by any government anywhere.

If you desperately want the "cocktail party" bragging rights of owning bitcoin, I wouldn't buy more than one.

The accounting behind bitcoin is called blockchain and may have great value, but must first demonstrate some ability to be audited.  Patience is recommended.

Tomorrow, my prediction is that business media coverage will still be bitcoin, bitcoin, and bitcoin.  Of course, I'm praying for an election- ANYTHING - to silence the constant, breathless coverage of bitcoin?

What bubble?

More Technology = Less Privacy

Being a sports fan offers a fun opportunity for both competition and silliness.  American football fans are no different.  As a long-suffering fan of the Dallas Cowboys, I have a Cowboys jacket, a Cowboys sweatshirt, a Cowboys tee-shirt, a Cowboys watch, and even a pair of Cowboys underwear (TMI).  But, the Cowboys' reach for profits has reached new heights with the sale of drones, complete with the Cowboy logo for only $69.95 this holiday season.

Unfortunately, it is not funny.   Drones are dangerous toys - dangerous to privacy.  While the overall construction industry is booming, the association of pool builders has reported that drones are a primary reason for the decrease in the building of swimming pools.  The privacy of your backyard is just one more privacy right to lose.

In addition, I know of no pilots who think more drones will make flying safer.  Drones are dangerous toys - dangerous to air travelers.  Already, some states have found it necessary to make flying a drone while drinking alcohol a crime.  But, who cares?  There is profit to be made in selling drones!

While the loss of privacy from drones is tiny compared to the loss of privacy by Google, it just proves, once again, that the pursuit of profit overwhelms the right to privacy.

Shame on the Cowboys and other corporations that enable the loss of your privacy . . . for their profit!

Sorry, Cowboys, but honesty is another form of tough love!

Fond Reunion

Absence makes the heart grow fonder, even for economic data.  While the monthly jobs report is not the most instructive economic report, it has long been the most popular and has the most short-term impact on the stock market.

Today's report continued a long string of good reports, with 228 thousand new jobs being created last month, more than the 195 thousand that pundits expected.  The unemployment rate remained unchanged at 4.1%, near a seventeen year low.  Average hourly earnings inched up 0.2% last month and 2.5% over the last year, which is not bad.  The Labor Force Participation Rate remained 62.7%, which is unchanged.  The only negative was that the U-6 level or long-term unemployed inched up to 8.0%.

Because of the dislocations caused by the terrible hurricane season, the monthly jobs report for the last three months have been tainted and confusing.  Finally, we got a clean, traditional jobs report, and it was a good one.

Normally, a good report decreases the probability of the Fed increasing interest rates, but I don't think that is true this time.  The Fed is committed to removing monetary stimulus, because the economy is strong and doesn't need it.

So, why do we need a tax cut if the economy is already strong enough that the Fed is raising rates?

A Little Wine Is A Good Thing, Just Like Inflation

Arguably, the oldest living Libertarian is Alan Greenspan, who is more famously known as Chairman of the Federal Reserve immediately prior to the Global Financial Crisis of 2008/9, when he argued for loose governmental regulation, particularly of financial institutions.  As any good Libertarian would, he believed that people would always act in their own best interest, and it is not in the best interest of bankers to destroy their financial institutions.  Therefore, bankers would be prudent, instead of working to maximize their short term compensation plans.

He now believes the new tax bill, which is pending in joint committee, will not increase growth but will cause stagflation to return.  I agree with one of his points, i.e., that the decreased spending should occur first and then a tax cut later.  Our national debt is far more dangerous that a GDP growth rate of "only" 3 percent.

But, he uses the Keynesian argument to reach his conclusion on inflation.  Deficit spending increases the demand for goods & services, making buyers "bid up" the prices of those goods & services.  The alternative argument is Monetarism, which believes that inflation is "everywhere and always a monetary phenomenon."  In other words, increasing the money supply causes inflation.  They like to say that the available supply of goods & services will "soak up" all the available money.  Inflation can be controlled by decreasing growth in the money supply. 

While decreasing the balance sheet is not exactly the same as decreasing the growth of the money supply, it is certainly analogous, and that is what the Fed is currently doing.

I don't think Mr. Greenspan is correct, but I hope he is.  Moderate inflation cures many ills, at least for a short period.  The Fed has been trying to increase inflation for years and failed.  So, I'm not overly worried about inflation . . . for now!

Shiny Objects

Readers will recall that I predicted in March that President Trump would be impeached.  Today's news only makes me more confident that it is true.  Only a resignation could preclude the impeachment.  But, I mourn for the country, because impeachment is an agonizing experience and is bad for the country.  It will not make us any less partisan.  If it must be, then I pray we pull the band-aid off quickly and get it over with!

With respect to the stock market, it will always over-react, and this is no exception.  With today's announcement, the market plunged before recovering somewhat.  Once the market realizes that a President Pence is more stable than the current president and once the market realizes this news doesn't make a recession any more likely, then the market will stop over-reacting.  Until then, fasten your seat belt!

Remember:  Focus on corporate earnings, not politics -- which are shiny objects distracting us.

Thru The Looking Glass

When I was a young economics student, I was fascinated by economic cycles.  Wouldn't it be great to be an investor with full knowledge of the next recession?  Those cycles ranged from 4 years to 52 years and had exotic names like Juglars and Kondratieff.  However, regardless of the cycle you choose, we are late and should have already had a recession by now.  In other words, we are overdue for a recession!

So what?

It is hard to over-emphasize the importance of how unhinged the economy became during the global financial crisis of 2008/9.  The heroic actions of the Fed, which I strongly support, overhauled the economy in general and the stock market in particular.  Economic cycles became obsolete, as our highly capitalistic economy became a managed economy.  Because the Fed recognizes that it has pushed us into a strange new world, they are attempting to slowly dis-engage, restoring capitalism a little bit each month. 

The Fed controls monetary policy but not fiscal policy, which is controlled by Congress and the President.  America fought the greatest recession since the Great Depression with one hand tied behind our back.  The Fed did their job, and Congress did nothing.  Now that the Fed is withdrawing slowly, Congress is finally attempting to do something to fight the global financial crisis of 2008/9.  The Pentagon is often accused of fighting the last war, and Republicans now are doing the same.  I would have applauded the pending tax bill if they had done it in 2008/9.

Wall Street had adjusted to an impotent Congress and has been positively giddy that Congress may not be impotent after all.  Wall Street should be reacting to corporate profits, not politics.

Speaking of profits, there is one economic cycle that may still be useful.  As a percent of GDP, corporate profits increase during the recovery phase before peaking and then decreasing.  Corporate profits have reached historic highs but so has the GDP.  As a percent of GDP, corporate profits have stopped growing.  That does not mean a recession is close or worrisome.  But, it should temper our expectations for continued growth in the stock market.  Everybody knows the market cannot rise 30% year-after-year.  Unfortunately, if we only grow 10% next year, it will feel lackluster.  It shouldn't!

Chicken . . . or Egg?

Consumer confidence has reached the highest level in seventeen years.  The stock market has hit record highs.  Is that a coincidence or a real relationship?

Almost all economic data is related to other economic data.  But c onsumer confidence is more closely related to the level of unemployment than the stock market.  When jobs are plentiful, consumer confidence is higher.  Likewise, plentiful jobs indicate the economy is good, which also helps drive the stock market upward.

There is also a class distinction.  The stock market reflects the attitude of the upper income levels, while consumer confidence more closely reflects the attitude of the middle class.  Either way, it looks like it should be a good holiday season for retailers.  (One worrisome sign is that the savings rate has been decreasing for over a year.  To finance a holiday spending spree, consumers are likely to rely on their addictive credit cards, which favors financial stocks.)

Such economic data does not change greatly over a short period of time.  Both the stock market and consumer confidence have enjoyed a fairly steady improvement since 2009.  And, there is no sign of the next recession, especially during this holiday season.  So, enjoy! 

Very Bad Timing

I am a Supply-side economist . . . some of the time.  I am a Keynesian economist . . . some of the time.  And, I am an Austrian economist . . . some of the time.  There is a time and a place for each of the three major schools of economics.

Supply-side economics and Keynesian economics are useful for "jump-starting" a moribund economy.  Austrian economics is best for long-term management of the economy.

The good news is that the economy is doing well right now.  While there are always predictions of doom, there is no strong economic predictor of a recession in the foreseeable future.  The economy does not need to be "jump-started" right now. 

The current tax proposal would have been great in 2008 . . . but not in 2017.

Even worse, some salesmen are pulling numbers out of their imagination.  Secretary of the Treasury Steve Mnuchin is one of my favorite Cabinet officials, but he is overly-zealous in his sales pitch.  Repeatedly, he says the tax cut "will pay for itself."  Supply-side believers argue that a tax cut will so stimulate GDP that increased tax revenue will flow from increased economic activity.  They call this "dynamic scoring," and it works . . . some of the time.

According to Mnuchin, the $1.5 trillion tax cut will be replaced by the additional $1.5 trillion of new tax revenue from the newly-stimulated economy.  The non-partisan Wharton Budget Model predicts the tax cut will add at least $1.4 trillion and maybe $1.7 trillion to the debt.  Even the highly-partisan supply-side believers at the Tax Foundation believe the tax cuts in the House version will add $1.08 trillion to our national debt, while the Senate version will add $516 billion to our national debt.  Either way, even Supply-side "true-believers" cannot believe Mnuchin's numbers. 

When the true-believers don't believe, neither should you.

Non-Binary News

News from Fox News is considered true-news by Republicans.  Democrats consider most news from Fox News as fake-news.   This is the partisan perspective, and it is unfortunate that we take such a binary view of news.  It is far too multi-faceted for binary views.  There are more than two perspectives.

All the major news sources -- Fox, CNN, MSNBC, networks, etc. -- are overly U.S. centric.  There a big world outside the U.S. that gets too little coverage.  Yes, there is CNN International, British Broadcasting Corporation (BBC), even PBS.  There is also al Jazerra and Russia Today (RT) but their bias is easier to recognize than finding their station in the cable line-up.  This is the geographic perspective of news.

Now, there is another perspective -- the age perspective.  Republicans and Democrats view the world thru a partisan lenses.  Millennials have a different view that neither Fox nor non-Fox stations recognize.  They want their own lens and now have "newsy news".  Originally launched in mid-America Missouri in 2008, it has been acquired by E.W. Scripps & Company, which turned it into a network this year.

Just as baby-boomers view the world differently from the "Greatest Generation," the Millennials view the world differently than the older generations.  They have a refreshing look at how to present news.  (Locally, it is channel 136 on the Cox line-up.)   Of course, since it is non-partisan, Republicans and Democrats will both label "newsy news" as fake-news. 

Maybe, it's not??

Happy Thanksgiving!

I was not captain of my high school football team, nor did I ever date a cheerleader.  Long ago, I accepted the reality that I would never be President of the United States, nor even an Army general.  That was fine for me but is not fine for many other people, unfortunately.

Wellschmerz is the German word for that emotional problem that develops when one realizes they will never reach their life goals.  It is more common in males and can be very debilitating.  Not infrequently, it leads to suicide.

Apparently, psychologists believe the cause was obviously unrealistic goals and that only the passage of time will solve the problem of Wellschmerz, but that time can be shortened considerably, by remembering a half-empty glass is still half-full and being grateful for the half-full.  It is important to be thankful for the half-full glass every day.  To all sufferers of Wellschmerz, our American Thanksgiving should be your reminder . . . to be thankful for something every single day!

Numerous studies have shown that being grateful provides a positive impact both in the workplace and in relationships.  Famously temperamental Mark Zuckerberg challenged himself to write a thank-you to a different person each and every day of 2014.

Can you write a thank-you note to any single person TODAY?

Tax Support

The S&P 500 has set 54 new all-time highs so far this year.  Most believe the elevated level of the stock market is due to the flooding of cash into the economy by the Fed since 2009.  That was an important factor but is decreasingly so, as the Fed reduces its balance sheet by selling off some of its bonds and raising interest rates..

More importantly, the stock market reflects higher corporate earnings, and those earnings are expected to continue increasing next year.  But, there is something else supporting the stock values right now.

A price normally reflects the supply and demand for that product.  If demand increases, buyers will bid up the price.  If supply increases, sellers will have to lower their price to sell their products.  The same is true for stocks.  If more people want a particular stock, it will rise in value.  If fewer people want that stock, it will fall in value.

Right now, there is a shortage of sellers in the stock market.  One reason is that sellers think prices will continue to rise.  Another reason is that they think their capital gains will be taxed at a lower rate next year.  Why sell it today and pay a 20% capital gains tax, when you can ride the increasing value and sell it in January, paying only a 15% tax?

The combination of higher expected corporate earnings next year and the reluctance of sellers to sell this year are both contributing to the 54 new all-time record highs.  If the stock market gets scary in January, don't be surprised . . . nor frightened.  

Present Shock ?

In his iconic 1970 book Future Shock, Alvin Toffler pointed out how the rate of change was increasing.  At first, it seemed to elaborate the obvious.  However, deeper analysis demonstrated that the rate of change was feeding on itself and would continue to increase at a faster and faster rate.  He argued that we need to increase the speed of our decision-making to accommodate the increased rate of change.  In the 47 years since then, I've seen nothing that suggests Toffler was wrong.

During the last six years of the Obama Administration, we had political gridlock in Washington, primarily driven by the radicals elected due to gerrymandering.  I had hoped that the Republican takeover of all branches of government would have resolved the problem of gridlock, but it has not.  The radicals remain.

Now, I read the latest survey out of India, which is the world's biggest democracy, where 53% of the voters favor a strong-man form of government instead of democracy, just to break the deadlock and get things moving again.  Surveys in Indonesia and South Africa found the same thing -- exasperation with democracy.

The strong-man president of Turkey, Recep Erdogan, famously said "democracy is like a street car.  When you get to your stop, you get off."

It may be that we have out-lived the need for democracy, but many of us still have a romantic notion of what democracy can be and are reluctant to let it die.  The only way to save democracy is to increase the speed of decision-making or legislating in Washington.  How?

Happy 2018 ?

There is a difference between trust and respect.  For example, I have no trust for the giant investment house of Goldman Sachs but have great respect for them, especially their research.

Their latest forecast is (1) that the stock market should be as strong in 2018 as in 2017 and (2) that, if Trump doesn't get a "win" on tax reform, he will be too politically weakened to renegotiate NAFTA.

With respect to 2018, they note that worldwide economic growth continues to improve and that monetary policy remains very easy worldwide.  The biggest threat to this forecast remains policy errors, like a trade war.

With respect to Trump renegotiating NAFTA, they argue that he will have lost political strength, if he goes a full year without any legislative proof that he really can do anything to make America great again.  While NAFTA is a good thing, it does need to be updated, although President Trump might not be the right person to update it. 

"A Mind Is A Terrible Thing To Waste"

It started as a trickle and soon became a stream and now it is a river.  The current news coverage on sexual harassment has focused our attention on a low profile but very real problem.  This is a good thing!

First, there can be no justification or excuse for sexual harassment, but a little perspective is always helpful.

About 17 years ago, I worked with a woman who was both a good employee and a good person.  After she left the bank for a better job, I quipped that I would miss "her beautiful green eyes."  My boss then chastised me for "inappropriate language in the office."  If complimenting a person whom I had never touched and whom I was unlikely to ever see again was wrong, I did the only logical thing and thereafter avoided all unnecessary contact with women employees.

Vice President Pence does the same - he has no lunches alone with a woman and attends no parties without his wife if alcohol is served.

Extreme Judaism and extreme Islam both separate the genders as much as possible.  While it is difficult to believe that extreme religious beliefs are ever right, maybe they are not entirely wrong.

While sexual harassment is morally wrong, the shunning or marginalization of women is an economic wrong. 

A Weakening Euro ?

So, the central banks in the United States, Canada, and England have all started to raise interest rates, as part of their normalization after the global financial crisis.  The ECB says they will also -- someday.

Rising interest rates push that country's currency exchange rates up.  Since the ECB declined to raise rates last month, the euro has declined 2% against the dollar.  That's a huge move in one month.

The spread in interest rates between the U.S. and the ECB can be expected to rise, according to the futures market.  That spread is 151 basis points now but 200 basis points in twelve months.  That means the futures market expects the euro will continue to fall.

A weakening euro provides a tailwind to business in the ECB and a headwind to business in the U.S.  More importantly (?), that also means it will be cheaper to wait until next year before booking a European vacation.

6,100,000

Economists often advise people who cannot follow all the economic data each month to simply follow the monthly "jobs report" issued by the Department of Labor on the first Friday of each month, because the economy must be strong if the job market is strong.  It includes the normal monthly unemployment rate.

Some economists prefer the U-6 unemployment rate, which measures the long term unemployed.  Some politicians prefer the Labor Force Participation Rate, which measures how many people are not looking for work.  (Spoiler Alert:  Both numbers are much improved since the global financial crisis of 2008/9.)

The economic report I prefer to watch is the "Jolts Report" or Job Openings Labor Turnover Report.  Last month, there were 6,100,000 job openings in the U.S.  That is the most this century!  Businesses are finding it difficult to find qualified applicants.  If you cannot find a job now, you need to go back to school instead.  The jobs are out there waiting.

The Quit Rate seems to have stabilized at about 2.2%, which means 2.2% of the labor force quit their jobs last month.  That is the highest since 2007.  Because workers seldom quit without another job waiting for them, a rising Quit Rate means greater confidence among workers and is a good thing. Interestingly, the Quit Rate seems to have stabilized at this high level, as the average age of workers has continued to increase.  Older workers are less likely to quit than younger workers.  A younger workforce would have a higher Quit Rate.

The job market is great.  The stock market is great.  So, why do we need to stimulate the economy with a huge tax cut?

The argument is that the economy is only good, not great.  It is also argued that the job market is not truly great until average wages rise faster.  Another argument is that too many people are not in the workforce.  All of that is true, but I still don't see how a huge tax cut will help, while I do see clearly how another $1.4 trillion of national debt will hurt us . . . and our grandchildren.

Roses Are Red, Violets . . .

Let's see . . . GDP growth last quarter was unexpectedly high at 3%, unemployment is very low, stock market values are up . . . it is small wonder that the latest Consumer Confidence Index is the highest in almost seventeen years.  There is always another economic recession somewhere out there, but it is not visible on the horizon yet.

Watching for an economic recession is one thing, watching for a financial crisis is something different.  And, a financial crisis is much worse than a normal recession!

Those confident consumers have nearly stopped saving, down to 3.1% of income, which is down from 6% just two years ago.  The national debt continues to rise, credit card usage is up, and corporate bonds are being issued at a rapid rate (to lock-in low rates on money they may need in the future)  Total debt is rising.

Remember the Minsky Moment, named after the American economist, Hyman Minsky, who believes a debt balloon will continue to expand -- until it pops, producing a financial crisis.  It is very premature to start worrying about a financial crisis, but it deserves more attention right now than the economic data deserves.

The decision by the Chicago Mercantile Exchange (CME) to begin a futures market in bitcoins worries me, and I will be watching it carefully.  You should too!

Rhetorical Question

If you are one of my Democratic friends, please stop reading now.  You won't understand it and will have that silly "deer-in-the-headlights" look on your face.

If you are one of my Republican friends, I have long agreed that the news media has a Democratic bias, at least a 51% bias.  (However, since Fox-world has a 30% share of the news market, the Democratic bias cannot be more than 70%.)

So, if we suspend the first amendment and only allow Fox to report the news, will Donald Trump be a great President . . . or will he still be an egotistical egomaniac? 

Emotional Numbness

The President has declared opioid usage a national health emergency, and I applaud anything to help those people trapped in addiction.  Missing from the discussion, however, is the historical sweep of drug addiction.  There has never been a time in my lifetime that there was NOT a drug problem of some type.

As a boy, I remember my father making me watch a TV show about heroin.  Many decades later, I still recall one particular scene of an otherwise-upstanding young man literally laying in the gutter, while begging for more heroin.  As a teenage, I remember seeing "Reefer Madness" - a video showing marijuana as a killer of morals, which I was required to watch again in Army Officer Candidate School.  In college, the rage was LSD - a time of "turn on, tune in, and drop out."  Then, speed became popular - which would turn a lazy bum into a workaholic, until he collapsed.  The first time I saw coke, was on the hood of new Cadillac in Florida, as bankers swarmed to snort it.  Then, there was quaaludes and assorted other drugs that have crossed the stage since then and passed out of fashion.

My point is NOT that opioids are not a problem.  My point is NOT that opioid addiction is not a personal tragedy.  My point is NOT that addicts don't deserve help.  My point is that some other drug will take the place of opioids in the future.  Which drug will that be?  The most recent data from Colorado shows clearly that opioid usage has declined as marijuana has become legalized and used more regularly. 

My question is whether the drug is a cause or a symptom of another problem.  Because different drugs become fashionable at different times, I'm suspicious that there is a certain personality type that is prone to addiction.  Would it not make sense for psychologists to identify those people at an early age and begin treatment before they seek out drugs to deal with their problems?

Maybe, if Americans had taken Nancy Reagan's advice decades ago to "just say no," we would not have the opioid problem today.  But, we do!  Well-meaning admonitions like that won't give relief to those who need it.