WASHINGTON (AP) – Consumers spent at a lackluster rate in November as their incomes barely grew, suggesting that U.S. households may struggle to sustain their spending into 2012.

The Commerce Department says consumer spending rose just 0.1 percent in November, matching the modest October increase. Incomes also rose 0.1 percent. That was the weakest showing since a 0.1 percent decline in August.

(more…)

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Download Podcast | iTunes | Podcast Feed

On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to discuss the latest consumer spending numbers, China’s push to corner the market on rare earth minerals, and Solyndra as the perfect example of Obamanomics.

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.

Related Links:

Prices Rising, But Spending Slows as Income Posts Drop
Employers hit by unemployment tax hikes
Rare Earths Fall as Toyota Develops Alternatives
DEMINT: Venture socialism
Venture Socialism: the Logical Endpoint of Obamanomics
Energy Department Is No Venture Capitalist
Crony Capitalism: $737 Million Green Jobs Loan Given to Nancy Pelosi’s Brother-In-Law
Chu takes responsibility for a loan deal that put more taxpayer money at risk in Solyndra

Follow Brad on Twitter
Follow Ben on Twitter
Follow Francis on Twitter

From the Associated Press:

Consumers spent less on autos, clothing and furniture to leave retail sales unchanged in August.

The lack of growth suggests households became more cautious during wild stock market fluctuations and increased fears about the economy.

The Commerce Department also said Wednesday that retail sales were slightly weaker in July than first thought. They rose just 0.3 percent, down from the initial reading of 0.5 percent.

Auto sales fell 0.3 percent in August. Sales at clothing stores declined 0.7 percent. Gasoline sales rose.

(more…)

American political fortunes have long been tied directly to the economy… so you would think that politicians would do a better job understanding how to improve the economy.  We know consumer demand is down – because consumers don’t have the money or home equity they used to have.  That alone is keeping the economy down.  Businesses, however, are said to have money but they are not spending or investing it.  Why? Because for them it’s the early 1920’s all over again.

Our so-called brilliant, Nobel Prize-winning President, for months, has exhorted American businesses to hire employees and invest – as if wishing for an economic recovery would make it so.  Recently, however, Democrat and mega-businessman Steve Wynn told the country – and Obama, if he was listening – why cash rich business is not hiring and investing.  According to Wynn, “this administration is the greatest wet blanket to business, and progress and job creation in my lifetime . . . those of us who have business opportunities and the capital to do it are going to sit in fear of the President . . .”

President Calvin Coolidge used to say, “The chief business of the American people is business.”  Even so, business doesn’t invest just for fun – they invest for profit – and they don’t invest if they think the risk of not making an acceptable profit is too high.  I wrote “acceptable” because business weighs the fact that even if they make money, it will be taxed.  As such, a business must decide not only if it will be able to make a profit, but will the profit be so much that it would be worth the trouble/risk after taking taxes into consideration.  Keep in mind business knows that it carries all of the downside risk and that government will take a good portion of any upside.  If at some point the risk gets too high, business investment and spending is stalled.

Today, Steve Wynn, and much of American business, believes that the risk of not making a decent profit is too high for several reasons.  For instance, business doesn’t see sufficient consumer demand – so they don’t stock their shelves or expand production as they otherwise might.  Regulations and the threat of more regulations are so high that they hold back money to pay for future costs.  Taxes and the threat of higher taxes are also high – and that too causes business to hold back spending in order to pay those future taxes.  As a result, business investment and spending is stalled.

(more…)

While driving home Friday, I had the miserable experience of listening to a financial journalist being interviewed about the anemic growth numbers that were just released.

I wasn’t unhappy because the interview was biased to the left. From what I could tell, both the host and the guest were straight shooters. Indeed, they spent some time speculating that the economy’s weak performance was bad news for Obama.

What irked me was the implicit Keynesian thinking in the interview. Both of them kept talking about how the economy would have been weaker in the absence of government spending, and they fretted that “austerity” in Washington could further slow the economy in the future.

This was especially frustrating for me since I’ve spent years trying to get people to understand that money doesn’t disappear if it’s not spent by government. I repeatedly explain that less government means more money left in the private sector, where it is more likely to create jobs and generate wealth.

In recent years, though, I’ve begun to realize that many people are accidentally sympathetic to the Keynesian government-spending-is-stimulus approach. They mistakenly think the theory makes sense because they look at GDP, which measures how national income is spent. They’d be much less prone to shoddy analysis if they instead focused on how national income is earned.

This should be at least somewhat intuitive, because we all understand that economic growth occurs when there is an increase in things that make up national income, such as wages, small business income, and corporate profits.

But as I listened to the interview, I began to wonder whether more people would understand if I used the example of a household.

(more…)

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Download Podcast | iTunes | Podcast Feed

On today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech are joined by Francis Cianfrocca to talk about the latest consumer spending and savings numbers that came out this morning. Then Congressman Sean Duffy discusses debt ceiling negotiations, Democrat calls for tax hikes, and Obama’s overreach on Libya.

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.

Related Links:

Consumers Pulling Back on Spending as Inflation Builds
Obama Tries to Salvage Debt Talks as Party Leaders Bicker Over Meaning of ‘Tax Hike’
Debt Ceiling Negotiations Break Down Over Taxes
Medicare dominates Duffy’s town hall chat
Lawmakers send Obama message of discontent on Libya
Congressman Sean Duffy

Follow Brad on Twitter
Follow Ben on Twitter
Follow Francis on Twitter
Follow Congressman Duffy on Twitter

From Associated Press:

The economy slowed sharply in the first three months of the year as high gas prices cut into consumer spending, bad weather delayed construction projects and the federal government slashed defense spending by the most in six years.

The Commerce Department said Thursday that the economy grew at a 1.8 percent annual rate in the January-March quarter. That was weaker than the 3.1 percent growth rate for the October-December quarter. And it was the worst showing since last spring when the European debt crisis slowed growth to a 1.7 percent pace.

Federal Reserve Chairman Ben Bernanke and other economists say the slowdown last quarter is a temporary setback. They generally agree that gas prices will stabilize and the economy will grow at a 3 percent pace in each of the next three quarters.

(more…)

As we are about to enter year 5 of this ‘Great Recession’, I have been trying to remember how things were before 2007 and over the last few years, take an inventory of what I have seen and heard in my daily and professional life. Pearl Buck famously said, “If you want to understand today, you have to search yesterday.”

So, here is what I’ve found:

Surprisingly, it seems that almost everywhere I look jobs are being offered. ‘Help Wanted’ signs are creeping up both in store fronts and on internet websites. If you know where to look and you have the skills needed for this new economy, there is a job for the taking. I don’t know if unemployment checks are keeping potential workers at home, but there are opportunities out there.

Construction has been virtually nonexistent, while remodeling is certainly in vogue. Just about the only place I see construction anymore, is in very close proximity to one of those American Recovery and Reinvestment Act signs. Infrastructure spending has been the lifeblood of this industry but that can’t continue indefinitely.
What about the consumer? When the market tanked in 2007 and a lot of folks began losing their homes, jobs, and investment accounts, something happened to the American consumer: they stopped spending on things they didn’t need and they started to save.

People are now more conscious than ever about saving money. Clients in my CPA office generally say one of two things to me (or both): How can I make my money work harder for me and how can I keep more of my paycheck every month? I’ve heard these questions a lot over the years, and in good times it was followed with, ‘…because I want to buy a boat/vacation home/etc’. Now, people simply want to keep their homes and hopefully put their kids through college.

Is this a welcome development for the consumer-driven America? Not likely, but it probably should be. Last week I talked about how the Fed is hoping to use propaganda to trick Americans into spending more money in hopes that it will stimulate the economy.

(more…)

I’m understandably fond of my video exposing the flaws of Keynesian stimulus theory, but I think my former intern has an excellent contribution to the debate with this new 5-minute mini-documentary.

The main insight of the mini-documentary is that Gross Domestic Product (GDP) only measures how national output is allocated between consumption, investment, and government. That’s useful information in many ways, but if we want more output, we should focus on Gross Domestic Income (GDI), which measures how national income is earned.

Focusing on GDI hopefully would lead lawmakers to consider ways of boosting employee compensation, corporate profits, small business income, and other components of national income. Focusing on GDP, by contrast, is misguided since any effort to boost consumption generally leads to less investment. This is why Keynesian policies only redistribute national income, but don’t boost overall output.

The analysis in this video also helps explain why Obama’s so-called stimulus was a flop. The White House genuinely seemed to think a bigger burden of government spending was going to create jobs, but the real-world numbers show higher joblessness.

(more…)

As a professional scholar, Ben Bernanke devoted much of his academic life to studying the Great Depression. It is no surprise then, that the cause of the Depression was of particular interest to the current Fed chairman. In the end, Bernanke surmised that it wasn’t so much a particular action that caused the greatest economic downturn the world has ever seen, but a period of inaction, specifically, the time between the crash of 1929 and the beginning of FDR’s New Deal in 1933. He proposed that government was far too slow in taking steps to stabilize the economy and as a result, it took a massive public works program and World War to eventually jump-start the country.

Convinced as he was, when faced with a similar situation he was determined not to make the same mistake as his predecessors. In short, he was determined to stop the markets from failing. Together with Henry Paulson, they provided the framework for the $700 billion bailout of American banks, designed to infuse the market with fresh capital while making the US government a shareholder in the biggest financial institutions in the country.

Fast forward two years and a few things have changed. The majority of the $700 billion has been paid back but the spending hasn’t stopped, nor does Bernanke expect it to. In fact, he expects the United States to enter an extended period of recession, ala Japan since the 1990’s. Coincidentally, Bernanke is an expert of the Japanese economy as well, having studied the rise and fall of the Asian superpower and even lectured at their central bank about how they should have handled the bursting of their real estate bubble.

For a man who wields such an incredible power over the economy, much is expected and demanded. Without getting into my overall opinion of the Federal Bank, I want to talk about what the Fed is doing today to bring an end to this recession. Let me warn you, it is has little to do with real reform and everything to do with regulation and mind games.

(more…)

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Download Podcast | iTunes | Podcast Feed

In today’s edition of Coffee and Markets, Brad Jackson and Ben Domenech talk about Rahm Emanuel’s departure from the White House, the latest consumer spending numbers, and the upcoming college football weekend. We’ll also chat with Claire Berlinski about Margaret Thatcher and American economic policy.

We’re brought to you as always by BigGovernment.com and Stephen Clouse and Associates. We’d also like to let you know that we’ve set up a standalone site at CoffeeandMarkets.com for easier browsing of our past broadcasts.

You can subscribe to the podcast by following the links above, and if you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

Daily Caller: Rahm’s Departure, Plouffe’s Arrival
TNL: Tom Friedman Doesn’t Understand the Tea Parties
There Is No Alternative: Why Margaret Thatcher Matters
Read Claire Berlinski at Ricochet
Coffee and Markets Podcast Archive

From Robert Samuelson:

Confidence is crucial to stimulating consumer spending and business investment, and Obama constantly subverts confidence. In the past year, he’s undone some of the good of his first months. He loves to pick fights with Wall Street bankers, oil companies, multinational firms, health insurers and others. He thinks that he can separate policies that claim to promote recovery from those that appeal to his liberal “base,” even when the partisan policies raise business costs, stymie job creation or augment uncertainty — and, thereby, undermine recovery. His health care “reform” makes hiring more expensive to employers by mandating insurance coverage. The moratorium on deep-water oil drilling kills jobs; the administration’s estimate of employment loss is up to 12,000.

Obama’s proposal to increase taxes on personal incomes exceeding $250,000 ($200,000 for singles) is the latest example of his delusional approach. It satisfies the liberal itch to “get the rich.” Well, the rich and most other taxpayers will ultimately have to pay higher taxes to help close budget deficits. But not now.

Raising taxes in a weak economy doesn’t make sense.

(more…)

In this week’s edition of Coffee and Markets, featuring The New Ledger’s Francis Cianfrocca, we’re talking about the latest GDP numbers, Fannie and Freddie, and the challenges facing small businesses with Congressman Kenny Marchant of Texas. We’re brought to you as always by BigGovernment.com and Stephen Clouse and Associates.

Audio clip: Adobe Flash Player (version 9 or above) is required to play this audio clip. Download the latest version here. You also need to have JavaScript enabled in your browser.

Download Podcast | iTunes | Podcast Feed

You can subscribe to the podcast by following the links above, and if you’d like to email us, you can do so at coffee[at]newledger.com. We hope you enjoy the show.

Related Links:

TNL: The New New Economics
BusinessWeek: The Schizophrenic Economy
TNL: CBO’s New Report on Deficits
WSJ: The Democratic Fisc
Bloomberg: Few Solutions on Fannie Mae and Freddie Mac
TNL: Risk and Regulation

With no shock and awe and little pomp and circumstance, China has declared war on the world.  Having watched the Gulf Wars on CNN, Americans are accustomed to wars fought with jets, battleships, tanks and infantry.  We constantly are on the look out for foreign enemies on our soil and the vigilance of our citizens has thwarted numerous terrorist attacks.  Unfortunately, Americans are not accustomed to recognize international weapons of economic mass destruction.  In the modern world, exports, deflation and economic competiveness are weapons far more powerful than cruise missiles.

Naive to this new deadly threat, the US government has launched wave after wave of assaults on the competiveness of American business.  Healthcare and financial service “reform” is driving business operating costs higher and credit availability down.  The soon-to-expire tax cuts will result in the largest tax increase in American history.  It should not be surprising that China would use tactics akin to economic guerrilla warfare to attack when our nation is most vulnerable.

China’s supply of young workers entering the labor force is peaking this year and will decline by one third over the next dozen years due to decades of population control.  But big increases in rural farm productivity are pushing huge numbers of the young off the farms and into the factories on the coast.  With factory worker suicides rampant and labor striking over wage rates too low to buy food, China panicked last year and increased its money supply by a spectacular 40% to quell dissent.  Given the threat from a sinking economy creating a revolutionary environment at home, communist China chose to invade world markets by exporting almost 40% of its gross domestic product.

Statistics just released have obliterated any hope that a meaningful economic expansion is under way in Europe, Japan or the US.  Business confidence, factory orders, auto sales and consumer product purchases are plummeting.  Meanwhile, Chinese exports grew a blistering 22% rate for the second quarter of 2010.  With their exports equaling 5% of the world’s gross domestic product (GDP), China’s capture of another 1% of the world’s economy will force producers in other countries to cut employment by approximately 10 million jobs.

(more…)

If there’s anything that should convince China to become more capitalist, and put less faith in socialism, it is American progressives.

Yesterday Matthew Yglesias’ head shook violently and he barked out like Paul Krugman with Tourette’s :

…you could start musing allowed about how many we just won’t pay the Chinese the money we owe them. Or you could reflect on the fact that if the People Bank of China is determined to buy bonds and prevent the dollar from falling at all costs, then we may as well totally forget about the short-term deficit and just not collect any taxes at all for the rest of FY 2010.

Ladies and Gentlemen, I believe this marks the first time in modern history a liberal has suggested we stop collecting taxes.

Welcome to the naked liberal mind.  Technically, it shouldn’t shock us, Matt is just riffing off the subtext of Paul Krugman’s prescription for what ails us – massive inflation.  Liberal economics springs forth from this assumption: We just keep printing money to payoff Dem voters until our debts aren’t so big any more.

(more…)