2012 February 08 | timiacono.com

They’re Hiring in North Dakota

North Dakota, with a population of less than 700,000, was the best place to be looking for work last year according to another Gallup survey deemed worth sharing today, outpacing even the Washington D.C. area labor market.

The Job Creation Index above is calculated by subtracting the percentage of employers who said they were more likely to let workers go from the percentage of employers more likely to hire and, in the case of North Dakota, those numbers were 8 percent and 42 percent respectively. Rhode Island had the lowest score of any state with just +4.

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Fateful Words from Ben Bernanke?

I didn’t watch Fed Chief Ben Bernanke’s appearance before the Senate Budget Committee yesterday, but there was an interesting exchange with Sen. Pat Toomey (R-PA) recounted in this Wall Street Journal story($) on the subject of the central bank creating market distortions that they may not be able to counter if and when sentiment changes.

At issue is the Fed’s continuing policy of bond-buying. While the central bank has stopped expanding its balance sheet with new asset purchases, it is engaged in a plan to sell short-dated Treasury bonds and replace them with a like amount of long-dated government debt. The result? Ten-year Treasury borrowing rates are around historic lows, and with them, mortgage rates.

For Bernanke, this is by design, not accident. He told Toomey a significant aim of the Fed is to gobble up enough risk-free Treasury debt so that investors are forced into riskier investments that will in principle generate better levels of growth.

“We don’t want to go too far,” Bernanke told the committee. He said the Fed was “very attentive” to signs that its stimulus was in the process of generating imbalances, and added the central bank had “greatly expanded” its surveillance of financial markets, in a bid not too be caught off guard.

“The effects of Fed policy, independent of all the other factors, on Treasury rates [are] modest,” Bernanke said. The bigger problem is investor confidence in future government borrowing. “Rates will rise eventually, and if investors were to lose confidence in U.S. federal fiscal policy, there is nothing the Fed can do to stop those rates from rising”.

If memory serves, it was Ken Rogoff (of This Time is Different fame) who observed that, throughout history, there is virtually no warning for when the bond market turns on a nation’s sovereign debt (so much for the Fed’s “attentiveness”) and, when combined with Bernanke’s warning above that there’s little they’ll be able to do under those circumstances, this sets the stage for one monster U.S. sovereign credit crisis somewhere down the road.

Confidence (and Credit Card Usage) Soar

The big question now is that of sustainability – what happens in the months ahead – but, since the crisis over the debt-ceiling increase was (temporarily) solved last summer and the jobless rate began to turn down, we ‘Mericans have become an optimistic bunch and this Gallup survey provides the latest confirmation.

And optimistic ‘Mericans tend to borrow and spend, more of that being confirmed in yesterday’s report on consumer credit that showed another monthly gain for outstanding credit card balances after declining steadily for years after the 2008 financial creisis and recession. Jake has details on that in this item at EconomPicData.

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Wednesday Morning Links

MUST READS
Proposed bank settlement dealt a setback – Washington Post
Banks Paying Homeowners to Avoid Foreclosures – Bloomberg
Frustrations soar as Greeks seek elusive bailout deal – Reuters
Eurozone crisis live: Greek bailout talks delayed again – Guardian
Opinion: It’s Time To End the Greek Rescue Farce – Spiegel
Credit-Card Borrowing Surged Over Holiday Period – WSJ
Bernanke-Led Economy Proves Critics Clueless About Fed – BusinessWeek
Why China’s housing market will slow, not collapse – CNN/Money
China releases plan to create 45 million jobs – China Daily
Gold standard believers are anti-government: FBI – Commodity Online
Ron Paul’s Flinty Worldview Was Forged in Early Family Life – NY Times
The Sad Spectacle of Obama’s Super PAC – Robert Reich

MARKETS/INVESTING
Oil rises above $99 after US crude supply drop – AP
Gold on solid ground as Greece lifts euro – Reuters
Bottom to Natural Gas at long last – Peter Brandt
Investing for Inflation (and Deflation) – WSJ
Three Phases of the Rally to Watch Out For – CNBC
Brent-WTI spread wider on Iran fears and US supplies – Sober Look
Hong Kong’s 2011 gold exports to China more than triple – Reuters
Yields trump capital gains – Dividend strategies are working – MarketWatch
India,Iran reach oil payment deal without gold – BullionStreet
Silver: The Bastard – Commodity Online

ECONOMY/WORLD/HOUSING/BANKING
Economic Confidence Climbs for Fifth Straight Month – Gallup
Business cycles, interest rates, and NGDP – The Money Illusion
Chinese Electricity Consumption Fell Massively In January – Business Insider
As Growth Slows, India Awakens to Need for Foreign Investment – NY Times
Merkel Approval Climbs to Highest Level Since 2009 Re-Election – Bloomberg
China to help first-time home buyers – MarketWatch
Mortgage mods in 2011 down 40% from prior year – Housing Wire
Fannie Mae: Outlook for Home Prices Rises Again – WSJ
Fed’s REO-to-Rental Experiment Begins – Housing Finance
Sessions Criticizes Fed’s Lack of Foresight – WSJ
The Fed’s Quasi-Fiscal Policies – Mises
Bernanke’s Anti-Stimulus – Cato

 
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