Economic Stories of Relevance in Today's World -- February 17, 2013

Retail sales growth slows as higher taxes kick in - Reuters - By Lucia Mutikani - February 13, 2013 - Retail sales barely rose in January as tax increases and higher gasoline prices restrained spending, setting up the economy for only modest growth in the first quarter.                      The Commerce Department said on Wednesday retail sales edged up 0.1 percent after a 0.5 percent rise in December.                       The small increase suggested the expiration of a 2 percent payroll tax cut on January 1 and higher tax rates for wealthier Americans were hurting the economy.                          Still, economists said consumer spending was unlikely to buckle given rising home values, moderate job growth and rallying stock market prices. Stocks have surged in recent months partly on stronger than expected corporate earnings...                     Consumer spending growth is expected to pull back from the fourth-quarter's clip as households adjust to smaller paychecks and gasoline prices march higher. Prices at the pump have increased 30 cents a gallon so far this year.                           Estimates for consumer spending growth in the first quarter currently range between 0.7 percent and 1.8 percent.                           While some economists were encouraged that consumers had maintained purchases despite a reduction in their disposable incomes, they cautioned sales could remain weak over the next months.                    "By no means are we completely out of the woods when it comes to the impact of higher taxes," said Michael Feroli, an economist at JPMorgan in New York. "Evidence from past episodes suggests it could take up to two quarters for spending to fully adjust to new tax realities."                        A softer pace of consumer spending is expected to limit GDP growth to a 1.8 percent rate this quarter, according to a Reuters poll of economists. For the year as a whole, economists expect growth of just 2.3 percent.


Mortimer Zuckerman: By Any Measure, the Jobs Disaster Continues - Wall Street Journal through Zero Hedge -  - February 15, 2013 - Jobs! President Obama has set a record. In his speech to Congress on Tuesday, he uttered the word "jobs" more than in any of his previous four State of the Union addresses. His 45 mentions were more than double the references to any of the other policy ambitions encapsulated in his speech by such words as health, education, immigration, guns, deficit, debt, energy, climate, economy, Afghanistan, wage, spend or tax (the runner-up).                     If only the president's record on unemployment were as good.                       After four years America remains in a jobs depression as great as the Great Depression. But the crisis isn't seen in that light because the country isn't confronted daily by scenes of despair like the 1930s photographs of bread lines and soup kitchens and thousands of men (very few women then) waiting all day outside a factory in a forlorn quest for work.                      But the jobless are still in the millions across the land, little changed in their total since the 1930s: 12.3 million today officially fully unemployed compared with 12.8 million in 1933 at the depth of the Depression.                     Yes, the U.S. population is much larger now, but 12 million out of work still means 12 million lives devastated. And that number masks the true vastness of the modern disaster.                       The jobless today are much less visible than they were in the 1930s because relief is organized differently. Today in the "recovery," the millions are being assisted, out of sight, by government checks, unemployment checks, Social Security disability checks and food stamps.                       More than 48 million Americans are in the food-stamp program—an almost incredible record. That is 15% of the total population compared with the 7.9% participation in food stamps from 1970-2000. Then there are the more than 11 million Americans who are collecting Social Security checks to compensate for disability, also a record. Half have signed on since President Obama came to office. In 1992, there was one person on disability for every 35 workers; today it is one for every 16.


U.S. Stocks Fall as Wal-Mart Tumbles Amid Economic Data - Bloomberg BusinessWeek - Lu Wang and Leslie Picker - February 15, 2013 - The Standard & Poor’s 500 Index fell, snapping three days of gains, as Wal-Mart Stores Inc. tumbled and investors weighed economic data.                 Wal-Mart slipped 2.2 percent amid the worst sales start of a month in seven years. Agilent Technologies Inc. fell 5.2 percent after cutting its full-year forecast. CBS Corp. climbed 4 percent after forecasting growth in licensing fees and an increase in its share buybacks. MeadWestvaco Corp. rallied 13 percent after Nelson Peltz’s Trian Fund Management LP took a stake in the packaging company.                       The S&P 500 fell 0.1 percent to 1,519.79 at 4 p.m. in New York. The Dow Jones Industrial Average gained 8.37 points, or 0.1 percent, to 13,981.76. About 6.7 billion shares traded hands on U.S. exchanges, 9.7 percent above the three-month average, as options on stocks, equity indexes and exchange-traded products were set to expire. The market is closed Feb. 18 for Presidents Day.                        Wal-Mart’s sales slowdown “is a sign that the consumer is not as ready to come back as maybe Wall Street was hoping,” Terry L. Morris, who helps oversee about $2.6 billion at Wyomissing, Pennsylvania-based National Penn Investors Trust Co., said by phone. “Maybe the market is a little ahead of itself at assuming better growth than what’s actually there.” ...                    Wal-Mart, the world’s largest retailer, dropped $1.52 to $69.30. Sales slumped this month as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News. The numbers “are a total disaster,” Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives. 


Dying Dollar? Why US Currency Is in Danger - CNBC through Yahoo - Jeff Cox – February 14, 2013 - The U.S dollar is shrinking as a percentage of the world's currency supply, raising concerns that the greenback is about to see its long run as the world's premier denomination come to an end.                 When compared to its peers, the dollar has drifted to a 15-year low, according to the International Monetary Fund, indicating that more countries are willing to use other currencies to do business...                                        "If the dollar loses status as the world's most reliable currency the United States will lose the right to print money to pay its debt. It will be forced to pay this debt," Bove said. "The ratings agencies are already arguing that the government's debt may be too highly rated. Plus, the United States Congress, in both its houses, as well as the president are demonstrating a total lack of fiscal credibility."                                 Bove is not the only one sounding the reserve currency alarm, though the issue has fallen off the front pages as hopes for a sustained U.S. recovery have taken hold and the stock market has surged to near-record highs...                            The dollar's seemingly precarious status is why Pento remains bullish on gold and believes the dollar's demise as the premier reserve currency could end even sooner than Bove predicts -- perhaps by 2015.
"Five to 10 years -- that would be an outlier," he said. "I would say 2015, 2016, that would be the time when it becomes a particularly salient issue. When we're spending 30 to 50 percent of our revenue on debt service payments, we enter into a bond market crisis. The dollar starts to drop along with bond prices. That would set off the whole thing."
     

Stop Freaking Out About The Sequester -  Business Insider - James Pethokoukis, American Enterprise Institute - February 15, 2013 - he past four years have seen a level of US government spending and debt unmatched outside of World War Two. The early 1980s period is the only contender. From 2009-2012, spending as a share of output averaged 24.4%. During that same period, annual budget deficits averaged 9.1% of GDP. From 1982-1985, federal spending averaged 22.9% of output, annual budget deficits 4.9%.                       Yet despite all that spending and debt, the US has actually been experiencing a period of sharp fiscal consolidation since the end of the Great Recession (reflected in the above chart). Economist Mike Darda of MKM Partners:

Despite a widely held view to the contrary, there has been a passive fiscal tightening under way for three years in the U.S. Although the federal spending/GDP ratio exploded during the recession, it peaked near the business cycle trough in mid-2009 and began to recede in 2010. There has been no net growth in total federal expenditures since mid-2010. As a result, the U.S. fiscal deficit has fallen to about 6.5% of GDP from a peak of 10.4% in late 2009.

America's financial downfall: Citizens now desperately raiding 401(k) plans to pay bills long before retirement - Natural News.com - JD Hayes - February 17, 2013 - Is chronic, slow economic growth and rising poverty the new normal for America and Americans? Unfortunately, for an increasing number of people, the answer is yes.                         According to recent reports, a large and growing portion of American workers who are having trouble making ends meet because of rising costs are being forced to raid their retirement accounts for non-retirement needs, "raising broad questions about the effectiveness of one of the most important savings vehicles for old age," The Boston Globe said.                        In fact, more than one in four - a staggering 25 percent of workers - with 401(k) and similar retirement savings accounts are now using them to pay current bills, new data indicates.                          The monetary figure is alarming: A quarter of the $293 billion deposited in such accounts each year is now being drained via loans, withdrawals and out-right cash-outs, "undermining already shaky retirement security for millions of Americans," the paper said.



The Dangerous Partnership Between Big Business and Government - againstcronycapitalism.org - February 14, 2013 - It looks like people are getting hip to how insidious and incestuous crony capitalism is.                   Big business and big government work hand in glove. From GE to GM to Goldman Sachs to Bank of America to Berkshire Hathaway to Monsanto to Barr Labs everyone is feeding at the taxpayer trough.  Add in the giant media conglomerations and one has an unholy alliance which would make Darth Vader proud.                      “Come to the dark side, big business. We shall rule the universe together.”...                  


Fewer bees a threat to world's almond supply - USA Today - February 16, 2013 - In an almond orchard in California's Central Valley, bee inspector Neil Trent pried open a buzzing hive and pulled out a frame to see if it was at least two-thirds covered with bees.                          Trent has hopped from orchard to orchard this month, making sure enough bees were in each hive provided by beekeepers. Not enough bees covering a frame indicates an unhealthy hive — and fewer working bees to pollinate the almond bloom, which starts next week across hundreds of thousands of acres (hectares) stretching from Red Bluff to Bakersfield.                         "The bloom will come and go quickly," said Trent, who works for the Bakersfield-based bee broker Scientific Ag Co. "The question is: Will the almond seeds get set? It depends if you have enough of a workforce of bees."                             That has growers concerned as nomadic beekeepers from across the country converge on the state with their semi-trucks, delivering billions of bees to the orchards for the annual pollination. Most almond trees depend on bees to transfer pollen from the flower of one tree variety to the flower of another variety before fertilization, which leads to the development of seeds...                        Since it was recognized in 2006, colony collapse disorder has destroyed colonies at a rate of about 30% a year, according to the U.S. Department of Agriculture. Before that, losses were about 15% a year from pests and diseases. No one has determined its cause, but most researchers point to a combination of factors, including pesticide contamination, poor nutrition and bee diseases.
                       This year, experts say, the die-off has been as high as 40% to 50% for some beekeepers.                             "We have smaller populations in the hives and higher winter losses," said Eric Mussen, a bee specialist at the entomology department of University of California, Davis. "Bees across the country are not in as good a shape as last year. When you stress them far enough, the bees just give in."

There Will Be No Economic Recovery. Prepare Yourself Accordingly. -  Stefan Molyneux