Posts Tagged ‘economy’

by lizard

An article that first appeared in The Atlantic two years ago seems to be getting some recent attention again. Maybe it’s because the absurd premise of Millennials being The Cheapest Generation keeps warranting derisive reminders that Millennials aren’t buying shit because they’re fucking broke. Instead of acknowledging that, we get crap like this:

In a bid to reverse these trends, General Motors has enlisted the youth-brand consultants at MTV Scratch—a corporate cousin of the TV network responsible for Jersey Shore—to give its vehicles some 20-something edge. “I don’t believe that young buyers don’t care about owning a car,” says John McFarland, GM’s 31-year-old manager of global strategic marketing. “We just think nobody truly understands them yet.” Subaru, meanwhile, is betting that it can appeal to the quirky eco-­conscious individualism that supposedly characterizes this generation. “We’re trying to get the emotional connection correct,” says Doug O’Reilly, a publicist for Subaru. Ford, for its part, continues to push heavily into social media, hoping to more closely match its marketing efforts to the channels that Millennials use and trust the most.

All of these strategies share a few key assumptions: that demand for cars within the Millennial generation is just waiting to be unlocked; that as the economy slowly recovers, today’s young people will eventually want to buy cars as much as their parents and grandparents did; that a finer-tuned appeal to Millennial values can coax them into dealerships.

Perhaps. But what if these assumptions are simply wrong? What if Millennials’ aversion to car-buying isn’t a temporary side effect of the recession, but part of a permanent generational shift in tastes and spending habits? It’s a question that applies not only to cars, but to several other traditional categories of big spending—most notably, housing. And its answer has large implications for the future shape of the economy—and for the speed of recovery.

There should be an entirely different assumption here, but it would be too troubling for the people who want to sell cars and houses: Millennial buying behavior reflects their reality of debt and service-sector job opportunities serving lunch to smug Baby Boomers who were born into opportunity and decided to tear the whole thing apart then blame the kids.

Some of the recent reactions to this article include a post featured on Moyers & Co. by Donovan Ramsey, who has this to say:

It’s not about smart phones, selfies or social media. Millennials aren’t making some of life’s biggest purchases because we’re broke. As James Carville might say, “it’s the economy, stupid.”

Reading the money pages of popular publications as a millennial can be infuriating. Every other article seems to stumble through clumsy speculation about my generation’s financial decisions, as if they’re so mysterious.

A recent article for The Atlantic calls millennials “The Cheapest Generation” and expends more than 2000 words to explain “why Millennials aren’t buying cars or houses, and what that means for the economy.”

“The largest generation in American history might never spend as lavishly as its parents did — nor on the same things,” it reads. “Since the end of World War II, new cars and suburban houses have powered the world’s largest economy and propelled our most impressive recoveries. Millennials may have lost interest in both.”

The word “debt” appears only once throughout the entire piece.

Closer to home, Dan Brooks chimed in with a post pointing out that Christmas is over and work still sucks:

Merry Kristmas, Kombat! kids. The holiday is over, but sloth persists. There is no Combat! blog today, because I need to re-metabolize insulin and do a little paying work. Fortunately, the rest of the internet continues apace. If you’d like to become enraged, the New York Times is hosting a Room For Debate on whether it’s smart for millennials to delay adulthood. Nearly all the respondents acknowledge that young people aren’t getting married and buying houses because the job market is terrible and real estate prices are absurdly high, but they go on to suggest that a generation is opting out of adulthood anyway. While we’re characterizing whole generations, I’m going to say that it’s a very Baby Boomer thing to be born into the best economy in American history, wreck it, and then damn your children for not wanting to own homes and work high-paying jobs. Those of you who like your broad statements a little more quantitative are encouraged to consider the four charts the defined the economy in 2014, including the alarming convergence in assets of the wealthiest .1% of Americans and the “bottom” 90%. Can you believe that 90% of this country opted out of getting rich? Neither can I.

Always the optimists, Zerohedge has a guest post about how we just enjoyed the last Christmas in America and another about the destruction of the Middle Class nearing the final stage. From the first link the author offers a little recent historical perspective on how we’ve gotten through the last few decades with energy and technology:

The economic stagnation, despite various stock market rallies and false starts, essentially lasted 10 years, from 1973 to 1982.

The malaise had a happy ending: huge new oil fields were discovered in Alaska, the North Sea, West Africa and elsewhere, ushering in a renewed era of cheap, abundant petroleum. President Reagan re-set Social Security for a generation and introduced a lower taxes, higher permanent deficits ideology that is now accepted as the only possible way to sustain the Status Quo: deficits don’t matter, even when they reach the trillions, because our good friends the Gulf Oil Exporters and Asian exporters will buy all our debt forever and ever, keeping interest low forever and ever.

(And if they drop the ball, then the Federal Reserve prints money and buys trillions of dollars of Treasury bonds. Sweet! We don’t need any external buyers, just the Federal Reserve creating money out of thin air.)

Then the U.S. created and launched two revolutionary technologies which both created new wealth around the globe: the personal computer (microprocessor and cheap RAM) and the Internet (TCP/IP, Ethernet, and the commercialization of Tim Berners-Lee’s World Wide Web with free browsers) spawning the generation-long boom of the 1980s and 90s.

Those “saves from stagnation” were one-offs; there will be no more supergiant energy finds, nor any equivalents of the Internet expansion cycle.

That’s just an opinion, of course. Maybe the next technological breakthrough will be in energy. I’m still hoping there is some value in this planet that will motivate a more evolved species of extra-terrestrials into intervening because this house of cards can’t stand forever.

The other piece posted at Zerohedge comes from Tom Chatham via Project Chesapeake and does such a great job framing the ongoing financial crisis in a succinct, easy to understand manner that I’m going to repost most of it here:

The events of the past few months seem astounding when taken in all at once. The plan to destroy the U.S. dollar and the American middle class is moving at an ever increasing speed.

At the recent G20 meeting the nations agreed that bank deposits would no longer be considered money. These bank deposits become the property of the banking institution and as such can be used any way the bank wants. This means that any money you deposit in a bank now is no longer yours but makes you an investor in the bank and subject to lose that money if a banking crisis takes down the bank.

The spending bill just passed by congress makes the American taxpayer responsible for any derivatives loses that banks may suffer. These derivative holders now have first priority when any funds are paid out and depositors are relegated to last place. FDIC insurance will have to pay out these funds but it has no where near enough money to pay the more than 300 trillion in losses that will be suffered in a banking crisis. That means any depositor has little hope of getting anything back. In order for depositors to get anything back massive money printing would have to take place making any payout amount to only pennies on the dollar.

And if you don’t think there is any danger of a banking crisis in America you may want to keep in mind that the Treasury Dept. has recently ordered $200k worth of 72 hr emergency kits for dispersion to every major bank in America. These are known by many as bug-out-bags and are used to support individuals when disaster strikes and they have to care for themselves for the first few days of crisis.

New legislation now gives pension plans the ability to cut benefits to pensioners in the future making the future welfare of these people uncertain. They say it is necessary to prevent these funds from going bankrupt. It will “apply to multi-employer pensions, where a group of businesses in the same industry join forces with unions to provide pension coverage for employees. The plans cover some 10 million U.S. workers,” You may be happy to know this will not affect congressional pensions, as long as they are funded by the taxpayers.

The sanctions being placed on Russia are beginning to destabilize the world in many ways. The sudden drop in oil prices will send ripples through many foreign nations and cause an already tense situation to become highly flammable. It seems this is what is wanted to provoke a new world war and hide the complicity of bankers and politicians in the coming destruction of the economy.

For the past few years those elite with knowledge of the coming monetary destruction have been putting their fiat dollars into any hard assets they can find. The recent record prices paid at auction for collectables is just one more indication that those in the know are moving into hard assets as fast as they can to preserve their wealth.

This diversification includes precious metals and land as well. I believe when there are no more metals or suitable properties available for purchase, these entities in control of this game will pull the plug and let everything collapse. Those holding fiat paper, electrons or other paper promises will be devastated as those assets evaporate into thin air.

You may feel some security knowing you have a good job but among the deposits that disappear will be billions in commercial accounts that belong to businesses. When these businesses lose this money, many will likely close destroying many jobs in the process. This will send ripples through the transportation, production and distribution system when it happens. In an economy made up of 70% consumer spending, this will be fast and devastating to those with few resources to fall back on when it happens.

There are three lessons that many people will learn in the coming months. If you do not have it already you may not be able to get it. If you do not have it physically in your hands you do not own it. If you cannot protect it you will not have it for long.

Maybe we should look on the bright side, the terrorists didn’t stop America from watching “The Interview” so good things are happening. And some people, like UM graduate and Obama toadie, Jim Messina, are helping the economy by buying a 2 million dollar house through some anonymous trust.

Kids, if you want to have nice things like your parents, try and be more like Jim Messina.

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By CFS

“Weak”, “dismal”, “bleak”, “punishing”, “horrific”.  These are just some of the headlines that graced newspapers over the last couple of days regarding the recently released June employment report.  This comes amid the corporate media’s attempt to set the narrative of a weakening economy.  But if you take a long-term look at historic employment numbers, the latest is not much different.

While the jobs report shows that only 18,000 new jobs were created in June, such low numbers happened many times throughout the fraudulant “booming” Bush years.  The blog Jesse’s Cafe American did a wonderful job of anaylizing the numbers.  Click the graph in order to enlarge the image.

Once the economy was on the road to recovery in 2003, the jobs report came in at roughly the same numbers no fewer than 5 time before the onset of the latest recession.  In fact, the trend in employment is generally in line with trends in 2005, 2006, and 2007.  Even in a good economy, because of the cyclical nature of hiring, bad jobs reports crop up on a fairly regular basis.  Is the jobs report good? Obviously not.  But is it the end of the world? No, it is but one of many cogs ever in motion within the economy.

You’ll see little of this type of actual analysis being done from mainstream commentators.

And of course, potential Republican candidates took no time in attacking the President over his handling of the economy. Perhaps the most ludicrous reaction came from Republicant Presidential hopeful Gary Johnson, calling for an immediate elimination of the corporate income tax and  immediate spending reductions of $300 billion.

Sorry Gary, but multi-national corporations aren’t just going to throw away 20 years of investment in a supply chain that stretches across the globe just to give little ‘ol Americans manufacturing jobs once again.  Hey Gary, was that a hail mary to try and get your name to actually show up in the Republicant polls?

BCFS

Just ignore anything thing that comes out of a politician’s mouth when discussing oil prices, whether that politician may be President Obama or Denny “I do believe I fell off my horse” Rehberg.  For that matter you can also ignore Faux News’ claim that financial speculation is the key culprit of high oil prices because the reality is that the main driver behind oil prices is a lack of sufficient supply.

The Oil Drum has a great analysis (which continues in the comments) up at their site that comes to this very conclusion.  It’s a long, and a very technical post, but well worth the read.

The basic problem the world is facing in the short-term is that the great oil exporters aren’t so great anymore.  You see, the major exporters have been massively developing their countries over the last 20 years trying to diversify their economies away from a dependence on oil exports.  This has strangely had the reverse effect of making their economies more reliant on oil.

In 2005 total world exports were 40.8 million barrels per day (mbpd) as compared with 35.7 mbpd in 2009, a  12.5% decline in only a matter of 4 years.  While data might not be available for 2010, the news only gets worse.  Both Russia and China have instituted export restrictions so as to support their domestic economies.  This will lead to a further reduction in total oil exports.  The news out of Russia, being the world’s second largest oil producer, does not bode well for the oil importing countries of the world.  Add in the fact that Saudi Arabian oil production peaked in 2005 and Russia peaked in 2007.  No country can replace these two producers and so the decline in world exports will continue and with it prices at the gas station here in America will continue to rise.

Two additional variables complicate the situation.  The first is political.  Already the Arab Spring is effecting oil exports coming out of the Middle East.  But on-top of the unrest directly leading to reductions in oil production regimes that are desperate to hold on to their power are already starting to spend oil revenue on social programs with the aim to buy the silence of their populace.  That leaves less money to invest in future oil production and will lead to an otherwise faster decline in production.

The second, is the economic principle of diminishing returns on investment.  This is an economic fact that was drilled into my head in economics class.  Usually, this principle is couched in the terms of labor vs. capital.  Each additional laborer produces a certain amount of profit, add too many workers and that rate of return decrease and will eventually go negative.  Same with capital.

Energy markets are subject to the same principle but in a slightly different manner.  The principle here is “energy returned on energy invested” (EROEI).  Back in the day when oil was first discovered, the EROEI was in the range of 30-50, meaning for every unit of energy expended in production, 30-50 units of energy were actually produced.  Now however, we are down to the point of extracting oil at an EROEI under 10, with tar sands right about 5.  So we are reaching the point of having to expend a lot more energy and money to get just a little bit of energy in return.

Now, You can take this principle and expand it a bit further.  Lets take for example infrastructure investment, in this case our national highway network.  Because this type of investment is public, the return on investment would be the total economic activity spurred by said investment, ranging from the construction jobs created directly from the investment to the development of real estate on former farmland and the sale of cars that fill up said highways.

Between 2004 and 2008 23,300 miles of additional roadway were built in America.  Now the first 23,300 miles that were built in the system way back under Truman contributed much more to the economic prosperity of our country than the last 23,300 miles.  Why is that?  It’s because of all that previous investment.  Not only is that last 23,300 miles a marginal amount at this point compared with all that previous investment,  but all those thousands of miles already built require a lot of investment each and every year just to maintain.  All the maintenance required to keep up that old investment takes away from the ability of a nation to invest in new infrastructure.

This same phenomenon is occurring in places like Saudi Arabia.  Once you’ve gotten to all the easy oil, you have to spend an increasing amount of money just to tread water.  From The Oil Drum:  Saudi Arabian oil officials met with Halliburton to discuss plans to boost their oil-directed rig count by roughly 30%.

According to a Saudi oil official interviewed by Reuters, the investment in new drilling rigs “is not to expand capacity. It’s to sustain current capacity on new fields and old fields that have been bottled up.” (1) This news on its own should be troubling as it infers that the Kingdom is facing significant declines on currently producing fields. Even more troubling is the recent statement by another senior Saudi oil official that the Kingdom “expects oil production to hold steady at an average of 8.7 million barrels per day to 2015.”

Increasing investment by 30% just to stay barely above water.

Drill-Baby-Drill!

BCFS

So… My better half is contemplating purchasing a new vehicle, which means that I get to have some fun doing internet research and reading car magazines on possible options.  She decided that she wanted better gas mileage than her current Subaru provides (28 mpg), and I convinced her that she if she wanted a significant improvement that she should go with a diesel, specifically a Jetta TDI (used or new).  The only problem it seems is that you can’t find a diesel car within 500 miles of Missoula: of course you can find hundreds of diesel Chevy Silverado 3500s.  The dealers seem to think that they wouldn’t sell which means that the closest diesel cars are embargoed in Seattle, Denver, or Salt Lake City.

This isn’t the only barrier that crops up when you want to get your right foot on the gas pedal of a diesel.  Prices of diesels in the used car market have significantly risen in the last half decade as fuel economy suddenly became important to people.  Used Jetta TDIs routinely go for several thousand dollars above their suggested blue book value making a slightly used TDI almost as expensive as a brand new one.  A diesel Jetta is the “cheap” option as many of the other diesels available in America are European luxury models.

And that gets me to my question of the day… Where the fuck are the American diesels?  Half of all cars sold in Europe are diesel.  If you want to buy an American made diesel vehicle in this country you have a lot of option that look like this:

Other than that you have to go with a European manufacturer if you want a car and not a truck.  Audi has 4 diesel models available in the US; BMW 3; Mercedes 7; Volkswagen 7; GM 0, Ford 0; Chrysler 0.  And Audi, BMW, and Mercedes cars aren’t exactly cheap and so aren’t feasible for most Americans to purchase.

Petrol prices are once again averaging $4/gallon and are nearing the record high reached in 2008 and yet the mix of cars available in America has changed very little even in the face of rising prices spanning the last decade.  As of 2008, the average passenger vehicle in America got 25.6 mpg compared to 25.1 mpg in 2001.  That’s American innovation for you.

But this being America, we like big sweeping plans to solve issues, the simple solutions are just plain boring.  T. Boon Pickens has his idea for converting the American passenger vehicle fleet to natural gas and Obama wants us to believe that plug-in hybrids and electric vehicles (EVs) are the technological answers to our commuting nightmares.  Both of those options might be viable long-term solutions to our dependence on oil to drive our economy, but in the short-term neither really makes all that much sense.

The problem with both EVs and NGVs is that they both require whole new systems of distribution and manufacture to develop.  We are talking about investments in the trillions of dollars here to undertake the necessary research, develop new, scalable manufacturing techniques, convert factories, and build the distribution system that will allow Americans to plug-in or fill up their car with natural gas.

Diesel doesn’t require any of that.  The distribution system is already in place.  American car makers might have to spend $50,000 grand buying an advanced diesel car from Europe and reverse-engineering the engine but that’s about all the research they would have to undertake to catchup with European manufacturers.  And diesel cars could show an immediate impact on fuel efficiency, often providing two or three times the fuel efficiency than gas engines currently in use in America.

In the end, diesel isn’t the answer to our oil-dependence (and talk of our energy addiction would make this post too long) as we are going to run out of crude anyway.  What diesel can provide is a bridge between today and whatever system comes along in the future… whether that may be flying cars or living in termite mounds.

dscn0082

by problembear

last time i lived out here milltown market was finky’s foods and diamond dave tended bar at harold’s club and presided over the local royal order of squid as their grand poo-bah…

the mill was in full swing with champion’s parking lot nearly crammed with every conceivable pickup truck and battleship sedan you could imagine. reagan was in his second term and things were pretty ok for a little forgotten town on the outskirts of missoula….

the hellgate winds are settling down to a mild frosty lash accross the face today as i pull into the gravel parking lot of harold’s club. i notice for sale signs on several rigs parked in front. a soft tail harley with low miles, toyota 4×4 with high miles and lots of hard stops, a pontiac sedan circa late 80’s for 450.00 or best offer…

the mayor of milltown is hunched over his cup of mid-day morning coffee at the bar..”never touch booz ’til 5″ he booms when he sees me come in.         i order a glass of bud and we settle into chairs arrayed around a round table which appears to have been made out of an old sign. it says:

Harold’s Club

we cheat the other guy and pass the savings on to you.

downtown Milltown MT

walter (not real name) is retired at 66 years old but he appears to look much younger. married to shirley (also not her real name) she is talking with the bartender while we conduct the press conference as they call it. Walter has a lot more color left in his greying beard than mine. he is a busy man so we get right to it:

  • Q. what do you think of the new president so far?   
  • A. dunno, wait and see what happens, i guess. i voted for mccain but shirley voted for obama. he’s ok so far.
  • Q. your office is by proclamation rather than by vote i gather?
  • A. every so often somebody gets the title of mayor of milltown. don’t really know how it happens.
  • Q. do you realize that mayor john engen is extremely jealous of your position as mayor of milltown?
  • A. laughs. i’ve heard that.
  • Q. seriously, how is the economy going for milltown?
  • A. bad. but we’re kind of used to bad around here. ever since champion closed down in ’93 it has only gotten worse. but we stack firewood. freeze game and berries, help each other out. we get by somehow.
  • Q. what do you feel about obama’s chances to turn things around?
  • A. don’t put much stock in politicians myself. look. i was a cat-skinner for a road construction outfit in juneau alaska back in the sixties. i was right near the bay the day the tidal wave hit after the eathquake. it feels like that. i was sitting in a crummy waiting for the other guys to park their rigs when i looked down and saw the water recede a couple of feet from the shoreline in just a couple of seconds time. i remember saying uh-oh…we started that crummy and drove up that mountainside so fast we broke some springs…watched the wave just wash all our bull-dozers and buckets out to sea. it was something to watch. that is what it looks like to me right now. kind of hopeful but the water just receded a little so waiting for the other shoe to drop.
  • Q. so lots more unemployment in store for montana?
  • A. kids around here have the survival skills of their parents so we’ll get by but yeah- hell yes. it is going to shock people when they see how many jobs we’re going to lose in the next several months.
  • Q. how are your kids doing?
  • A. Eric is married to a great woman who has a good job at the university with benefits and eric’s job at albertsons looks ok for now. David is a welder. divorced with two kids to support so he is getting worried. i suppose all the kids are on edge right now, though.

at mention of the kids shirley sidles up to the table. her eyes twinkle at the mention of the grandkids. she shows me photos.

  • Q. when did you move here to milltown?
  • A. right after the alaska earthquake. met shirley in ’66 while i was bumming around the woods catskinning. we met at a dance right here in Harold’s Club. used to have really nice bands here. she made an honest man out of me so i settled down and the mill hired me on and worked there for 32 years. retired in 96.
  • Q. how did they treat you?
  • A. champion was ok but stimson sure stuck it to us every way and in every opening they could find…then they left a mess here…
  • Q. any hope for some new beginnings here with the cleanup and the dam removal?
  • A. at first, i was against the dam removal but shirley eventually talked me into the good sides. the boys are excited about the whitewater park the state is building so yeah, i guess so. sure. it’s good to see folks save our bridge between west riverside and milltown. there used to be talk about a huge shopping center and lots of new houses which i wasn’t too crazy about. in some ways the economy might just slow things down enough to let us have something nice here.
  • Q. there is a special meeting this week called a roundtable put on by the Bonner/Milltown Community Council at Bonner school Wednesday night at 7:00pm. are you going?
  • A. sure we always go to local stuff if for nothing else but to get a chance to BS with the neighbors and catch up on the gossip.
  • Q how do you feel about the council’s job so far?
  • A. i think there have been some missteps for sure like not allowing the public to speak last spring but that is ironed out so i guess they are doing the best they can.
  • Q. well walter i sense that you need to get back to your shop welding that part on your snowplow blade so just one last question; are you hopeful about america’s future.
  • A. hell, yes.

 dscn0084

empty parking lot of the bonner-stimson mill closed down permanently last may… 




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