Federal Reservations

“The Federal Reserve Bank of Cleveland reported today that its latest estimate of 10-year expected inflation is 1.34 percent. In other words, the public currently expects the inflation rate to be less than 2 percent on average over the next decade.

The Cleveland Fed’s estimate of inflation expectations is based on a model that combines information from a number of sources to address the shortcomings of other, commonly used measures, such as the “break-even” rate derived from Treasury … [visit site to read more] or compare Credit Card Rewards and Best Credit Cards

Originally from DailyMarkets.com

Peter Krauth writes: If you really care about your financial future, here's something you need to know. It's about a story that received almost zero coverage from the mainstream press. I can't say that I am surprised. It involves gold.

Originally from The Market Oracle

Just over a week ago in an article I published here in Big Government: “New California Budget Crisis May Torpedo November Tax Increase Initiative.” The article illuminated how State Controller John Chaing had shocked California’s spendthrift politicians by announcing the State would be out of cash beginning March 8th and would miss up to $5.4 billion in vendor payments through May 1st. The timing of the Chaing announcement was disastrous for state politicians; because it destroyed any hope that Governor Jerry Brown’s $6 billion tax increase initiative on the ballot in November would pass.

Now it appears that Brown successfully lobbied for California to get $6 billion in cash and siphon off a total of $18 billion from the $25 billion mortgage settlement with the five largest U.S. banks, who were accused of fraud in the handling of foreclosures and loan modifications. But as Franklin Center Fellow, Steven Greenhut asks in a deliciously sarcastic article: “Why should a taxpayer in Houston or Wichita bail out irresponsible California homeowners, banks and the state’s public employees’ retirement fund?” Greenhut highlights that the mortgage settlement money is really just another accounting entry, because the real source of cash to fund the “Left Coast” is “implicitly via Federal Reserve/Government coffers.”

Most Americans still snarl about crony capitalism when they think of multinational banks taking $1 trillion slurp of taxpayer’s hard earned cash and then paying themselves record bonuses, while hiking fees and cutting off borrowers. But with the United States President and Congress solemnly telling Americans healthy banks were key to our future, most Americans gritted their teeth and came together to bail-out of banks, insurance companies, and other financial firms.

When the good people of the other 49 states learn the terms of this bail-out, I believe they also come together. But this time they will be showing their fangs and carrying pitch forks! With only 13% of the GDP of the United States, California gets 72% of the settlement proceeds. Undoubtedly, the five national banks will pass 100% of the cost of this settlement on to all their customers nationally. Consequently, 87% of the increased bank fees will be paid by other states increases to bail-out California’s insolvent budget.

Kamala Harris, California’s Attorney General, claimed the settlement may help roughly 250,000 California borrowers by requiring the banks to cut mortgage debt amounts and extend $2,000 payments to homeowners who already suffered foreclosure. But Greenhut points out that powerful interest groups, like the California Public Employees’ Retirement System, which had nothing to do with individual mortgage holders being unfairly foreclosed upon, carved off a piece of the settlement money to bail-out some of their investment losses on real estate speculation that resulted from bad advice.

According to the L.A., a 17-month investigation recently found that some of that bad advice came from Federico Buenrostro Jr., the former chief executive of the $250 billion California public employee pension fund. It seems that he and , and a couple of his pension Board buddies were recently accused of pressuring subordinates to invest billions of dollars of pension money with politically connected firms and strong-armed a for a $4 million in fee to be paid to consultant Alfred J.R. Villalobos, who later hired Buenrostro.

Most Californians refer to Jerry Brown as left wing, but I think he just proved he is more left brained. Left brain thinkers excel in math, language studies and logic problems. Since the banks that settled only control or own only 7.3% of all outstanding single-family mortgages, every time Brown wants to increase spending, he just needs to do another “settlement.” After all, California bank customers only pay 13% of the settlement costs, while the State gets 72% of the proceeds. Either Brown is a very smart or the other 49 governors and their Legislatures are really stupid.
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Originally from Big Government

Just hours after winning the Florida primary, Mitt Romney let loose a potential gaffe that turned what should have been a rallying moment for Republican supporters into an uncomfortable position of having to defend the man that is likely to face Obama in the general election.

If taken out of context, which the media is very adept to doing, Romney’s comment, “I’m not concerned about the very poor” sounds heartless and indefensible. In fact, that is exactly how many conservative commentators reacted.

From a purely political position, the criticism is reasonable. Romney effectively handed Democrats a shiny set of brass-knuckles to use against, not only him, but the Republican Party in general as being out of touch with every day Americans. As NRO’s David Kahane put it, “In the Fight of the Century between the Apologetic Oligarch and the Tribune of the Folks, who do you think the fans will be rooting for?” In other words, Romney unwillingly played into the class-warfare meme that Obama has wrapped himself in.

Jonah Goldberg says there are risks with Romney because he has yet to show he has mastered the art of the “stump” even after close to decade of practice.

These are examples of criticism on the face of the issue. Other conservative commentators chose to hammer Romney on his acceptance of the welfare state, and no doubt relished at the opportunity to attack him before having to reluctantly support him in the general election. To this group, not only did Rommey make the mistake of choosing his words poorly, he also spoke of the welfare state as status-quo. Erick Erickson at Red State, and Mark Levin, are charging Romney of the same class-warfare tactics Obama and the Democrats use. Furthermore, from his choice of words Romney effectively endorsed poverty as a thing to be accepted instead of engineering ways for them to lift themselves up out of poverty. Alas, a New England, Rockefeller, Republican.

… Mitt Romney said he wasn’t concerned about the poor. The poor, after all, have food stamps and Medicaid. But don’t worry. If the safety net is broken, Patrician Mitt Romney will fix it so the poor can stay comfortably poor (E. Erickson).

In an environment such as politics, perception is key. After all, there is a saying that is usually applied to politicians “Once you learn to fake sincerity, the rest is easy.” So maybe Romney does have a sincerity problem. But if sincerity is faked, which it usually is, why bother to do it? After all we have a president totally comfortable faking sincerity, and one who took Rousseau’s thought “the more obscure and uncertain the cause, the greater the effect: the greater the number of idlers one could count in a family, the more illustrious it was held to be” and won the presidency with it.

Romney’s full comment was a little deeper than some of the reactions suggested.

I’m not concerned about the very poor. We have a safety net there. If it needs repair, I’ll fix it. I’m not concerned about the very rich. They’re doing just fine. I’m concerned about the very heart of America, the 90-95 percent of Americans who right now are struggling.

It isn’t my job or even my concern to defend Romney by putting a positive spin on his comments. However, his remark did not cause this conservative to react negatively. I heard what he was saying loud and clear. It isn’t the duty of a president, Congress, or state governments to pull people up out of poverty. In fact, one could argue convincingly when those things are tried, poverty increases and wealth declines. So what we do have in place is a safety net for those who are down. It isn’t a permanent residence, it’s an interim position. The focus should always be growth and capital. When the economy is well, so is America’s labor force.

The economy is the engine that drives mobility because as long as our economic system rewards success and punishes failure (such as life) no station in life is monolithic. There is nothing destined in America.

Mobility is not limited to the top-earning households. A study by economists at the Federal Reserve Bank of Minneapolis found that nearly half of the families in the lowest fifth of income earners in 2001 had moved up within six years. Over the same period, more than a third of those in the highest fifth of income-earners had moved down. Certainly, there are people such as Warren Buffett and Bill Gates who are ensconced in the top tier, but far more common are people who are rich for short periods.

Very well then, Romney’s concern shouldn’t be with the poor. His concern should be with those who help drive the economy. Those who buy and produce, start businesses, buy homes and cars and hire employees. With a growing economy comes a rising tide of activity. And it’s from this activity that allows the poor opportunities to pull themselves up out of poverty. For lack of better words, the horse really does come before the cart. Or better, a physician is only concerned with a patient insofar as he can help cure the aliment. That is Romney’s position. Conservatives would do well if they thought more and reacted less.

We can belly-ache and lash our faces from grief and despair over the plight of the poor, or we can actually do something about the conditions for which there are so many poor among us.

Originally from Big Government

"I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.” ~ Thomas Jefferson ~

Originally from The Market Oracle

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On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the Fed’s interest rate announcement, the divided cultural experiences of America’s upper and lower class, and whether or not “the American way of life” still exists.

We’re brought to you as always by BigGovernment and Stephen Clouse and Associates. If you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

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Originally from Big Government

The Dow rises on the Fed's interest-rate news.

Originally from Fool.com: The Motley Fool

As the Republican presidential hopefuls slug it out debate after debate, and sound bite after sound bite, and President Obama endlessly drones on from the sidelines with his mantra that the wealthy must pay their fair share (according to CBO and IRS data, the top 10% of households pay more than 70% of all federal income taxes and nearly 50% pay none) we are reminded of Sir Winston Churchill’s assessment of Democracy.  “It is,” he said, “the worst system there is except for all the others that have been tried.”

We believe the 2012 presidential election season, which really began last summer, is, as Sir Winston opined, the worst, but, we would hasten to add, also the best given the clear choices in direction the President on the left and the candidates on the right provide.  These are not the run-of-the-mill choices with which Americans are always presented at election time.  We are faced with truly transformative choices; choices that only a vibrant democracy could possibly provide.

President Obama represents a textbook example of one side of the Liberal/ Conservative divide. That is, collective equality versus individual liberty.  Domestically, President Obama is a strong proponent of a centrally managed, distributive economy and a muscular government forcefully asserting its regulatory authority over a wide swath of American business activity and personal life, greatly expanding its entitlement agenda and aggressively taxing (1) earned income (middle and upper), (2) capital and (3) returns on investment (dividends).  Perhaps, that’s the America to which a majority of Americans aspire.  We don’t think so.

As the nation watches and listens to the spectacle, which constitutes the race for the Republican nomination many spectators, especially among the Democratic left, are, we believe, misreading the edginess and the stridency of the on-going Republican free-for-all as a reflection of uniquely Republican temperament.  We beg to differ.

Recent polling data indicates that 87% of all Americans believe we will fall into another recession within the next two years, and nearly 75% of all Americans believe we are headed in the wrong direction.  Only six percent of the people approve of the job their national legislature is doing. These polls tell us that the electorate has a collective bad feeling about the economic outlook for the country, and that they feel that neither the Administration nor our Congress is taking us in the right direction.  Even more disturbing, a recent Gallup Poll finds that 50% of Americans believe that government has gotten too big and now represents an immediate threat to individual liberty. Gallup also finds that Americans, on average, believe that 51 cents of every dollar the government spends is wasted.

While the Republican debates are providing an impressive, indeed an exhaustive, array of positions and opinions that, at first blush, might seem a colossal free-for-all in the marketplace of ideas, Republicans are not the only voters watching and listening.  Independents and, not a few, disappointed Democrats are part of the surprisingly large viewing audiences these debates are attracting.  Some, no doubt, tune in to scoff at the verbal give and take of what is, essentially, political theater. Others representing that strong swath of voters described by the polling data referenced above tune in to ponder the conflicting messages to determine if they find greater comfort or confidence in what they hear from any of the these candidates compared to what they have been hearing and experiencing from Washington.

Among the Republicans, we have an array of candidates each of whom stresses his or her conservative credentials (they want to promote economic growth at home, reduce taxes on all Americans, and support our allies abroad) while also offering interesting and significant variations on the conservative agenda.  Their message is largely informed by the pervasive discomfiture poll after poll has begun to detect within the American body politic.

Mitt Romney is touted as the most electable of the Republican candidates.  Romney is clearly a man of substance (although he could have been sent into the fray from central casting). He has an impressive record of business success as CEO of Bain Capital, and has demonstrated substantial leadership skills.  He was drafted to rescue the failing and scandal-ridden Salt Lake City Olympics and swiftly and successfully turned around the mess the original organizers had left.  He was a successful Republican governor of one of the nation’s most liberal states.  His signature accomplishment, RomneyCare is also his biggest headache (no pun intended). While it can be argued that ObamaCare largely apes RomneyCare, Romney’s retort is that because it made sense for Massachusetts, doesn’t mean it should be imposed nationally.  He is pledged to repeal ObamaCare immediately upon entering the oval office.   The art of compromise was essential if he was to govern the democratically controlled Bay State, and his willingness to compromise and his skill at working a legislature made up largely of the political opposition has become an albatross he must carry as he fights for his party’s nomination.  Correctly or incorrectly, Romney (and Huntsman) are viewed as the most centrist of the Republican candidates, which may be a major plus in the general election, but which is a distinct negative in the fight to become their Party’s standard bearer.

Rick Santorum, whose campaign momentum has soared after fighting from single digits to a virtual draw with Romney in Iowa, has the wind at his back. He has been articulate and unequivocal on a wide range of issues.  He is an orthodox conservative, socially, fiscally (earmarks aside) and politically.  While all of the Republican candidates give the obligatory nod to being pro life, Santorum goes a step further. No exceptions! A zygote resulting from forcible rape must be allowed to develop to term.   It is the rapist who should be punished, he says, not the egg the rapist fertilized. Well, no one can argue over his pro-life bonafidies.

Ron Paul, a libertarian, who most liberals consider the archconservative among the Republican candidates is a crusader for individual liberty, as he believes the founding fathers intended when they crafted our Constitution.  He has, however, articulated a stand on a number of issues that would have made Abbie Hoffman stand up and cheer. Opium, cocaine, heroin, marijuana?  He explains that we got along for over 100 years without federal anti-drug laws, and nothing good has been accomplished since the feds stepped in. The feds should step out, he tells us.  Prostitution?  If it’s okay with the states, well, then, its okay.  Gay marriage? Why is that any of the Feds business? Don’t Ask, Don’t Tell? If a homosexual in the military is doing his or her job and not disrupting others, leave him or her alone. Abortion? Ron Paul strongly opposes abortion, but believes the issue is totally misplaced at the federal level.  He believes it is up to the individual states to allow or to abolish abortion.   He is a hard-money fiscal conservative who believes that paper money isn’t worth more than the paper on which it is printed if it isn’t backed by gold.  The supply of gold is, of course, fixed which places unrealistic limits on economic growth, accumulation of wealth and the funding of emergencies such as war and natural disasters.  Paul espouses not only a less expansive foreign policy, but also a policy tantamount to a retreat from history.

Newt Gingrich, after a somewhat poorly organized and sloppy beginning was catapulted to frontrunner status following a series of very impressive debate appearances. He has pledged to make firing Fed Chairman Ben Bernanke his first order of business upon assuming office, notwithstanding that the President has no authority to fire the Chairman of the Fed.  He is probably the best “idea man” in politics today, but has clearly been hobbled by an excess of overweight baggage.

Rick Perry presents a mixed message.  He has an impressive record as Governor of Texas.  Texas leads the nation in jobs creation, low taxes and strong economic growth.   He has shown a less conservative orthodoxy on immigration, offering in-state tuition to illegal immigrants, a practice frontrunner Romney refers to as providing a magnet that attracts illegal immigration. Perry also issued an executive directive (later withdrawn) making vaccinations for HPV mandatory for girls entering their teenage years.  He is smarter than his debate appearances would suggest, but he suffers from one too many “oops” moments.

Jon Huntsman, who has staked everything on a yet to materialize strong showing in New Hampshire, pledged in a recent debate, not to sign any “silly pledges”, a not-so-veiled, but risky rebuff to the anti-tax Norquist Pledge not to support any measure that raises any taxes.  His credentials as a successful business executive, a popular two-term governor and as a Chinese-speaking diplomat are impressive.  His ability, thus far, to inspire any sustained following or to gain any traction among Republican voters has, however, been less impressive.

Given the proportional allocation of delegates in the GOP nominating process, a decision on who will lead the Party seems a long way off.  That’s both a positive and a negative for the Republicans.  The seemingly endless energy, time and money the candidates are spending to diminish one another does little to advance the conservative cause.  The sooner the candidate cannibalization phase of the Republican selection process ends and the campaigns gets back to attacking the policies that have lavished trillions on programs and initiatives that have produced shamefully few, if any, positive results, the sooner the electorate can focus on the alternatives available to them through the 2012 election.  For the sake of the nation, the sooner, the better.

By Hal Gershowitz and Stephen Porter

Originally from Big Government

Don't hold your breath, says BNY Mellon currency strategist Michael Woolfolk.Yes, the euro EURUSD fell more against its U.S. counterpart, breaching $1.28, after ADP reported a jump in U.S. payrolls in December. Such strength in the dollar following better U.S. data suggested to some that the greenback could break a recent trend of rising when the outlook (including for the U.S.) looks bleak and stocks drop.   Intermarket's Ashraf Laidi, for instance, said U.S. data surprises could disrupt a 4-year trend of the U.S.. dollar falling when U.S. stocks rise.But Woolfolk doubts the greenback will start trading in lockstep with stronger domestic growth until the Federal Reserve changes its interest-rate policy, which has reduced benchmark rates to near 0%.

Originally from MarketWatch

With the S&P 500 heading toward the October lows on the Friday after Thanksgiving, the ever market manipulating central banks just had to do something. The decision was made on Monday, November 28 to provide a stealth bailout for European banks, and indirectly poorly managed sovereigns. Gerald Driscoll, the former Vice President of the Federal Reserve Bank of Dallas, penned an opinion piece which appeared in the Wall Street Journal on December 28. He stated in no uncertain terms:

Originally from The Market Oracle