The Mess That Greenspan Made - Part 415

The Super Committee’s Lowest Hanging Fruit

The deficit reduction supercommittee was in the news again after a public hearing yesterday and anonymous sources allowed interested observers to piece together the conclusion that, with a November 23rd deadline quickly approaching, they’re not making much progress. If they do manage to get a majority vote for some sort of a plan, it will almost surely include a giant step toward financial repression in the form or rejiggering the official inflation calculation to produce a lower number (and, hence, smaller cost of living increases for government entitlements), the subject of Dean Baker’s HuffPost commentary yesterday.

If anyone still questioned who owns Washington, the Congressional supercommittee charged with reducing projected deficits by $1.2 trillion seems determined to end any doubts. According to press accounts, both Republicans and Democrats on the committee support a plan to reduce Social Security benefits by 3 percent.

The benefit cut is being justified by claiming that the current cost-of-living adjustment exceeds the true rate of inflation. In fact, the Bureau of Labor Statistics index that measures the cost of living of the elderly indicates that the current adjustment understates the rate of inflation experienced by retirees.

There should be no doubt, this is a proposal for cutting Social Security benefits; it has nothing to do with making the cost-of-living adjustments accurate.This contempt for the 99 percent coupled with protection for the 1 percent is the reason Congress has an approval rating of 9 percent. When both parties in Congress work against the interest of the overwhelming majority in order to protect a tiny elite, it is not surprising that most of the country would return the contempt.

Coupled with savings from winding down the wars in Iraq and Afghanistan, smaller increases for social security and other government programs due to an inflation calculation that produces lower inflation should get the super committee a long ways toward their $1+ trillion goal. Look for these two items to be an integral part of their plan, that is, if they are able to come to an agreement on the rest of it.

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Econo-Bloggers Pessimistic on U.S. Economy

According to the latest survey from the Kauffman Foundation, top economics bloggers in the U.S. (of which yours truly was one) have a very dim view of the economy, only half of the respondents seeing employment growth in the next three years with their survey responses providing all the input for the dismal word cloud below.

Full results are available in this report(.pdf) where one will learn that almost two-thirds of respondents said the government is too involved in the economy and political party affiliation is not what one might expect of a group heavy on economics professors – 39 percent independent, 19 democrat, 8 republican, 34 not disclosed.

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Wednesday Morning Links

World leaders’ acute crisis – Washington Post
Greek PM faces showdown talks with Merkel, Sarkozy – Reuters
Greek Cabinet Backs Call for Referendum on Debt Crisis – NY Times
EU Leaders Will Tell Papandreou No Alternative to Cuts – Bloomberg
Greek vote sets off ‘pandemonium’, engulfs Italy – Telegraph
The Greek referendum: Voting away your debts – Economist
Fed Lays Ground for More Large-Scale Asset Purchases – BusinessWeek
Fed preview: More stimulus unlikely for now, but watch Europe – LA Times
Banks retreat on fees but they won’t surrender – MarketWatch
Super Committee: Gridlock Again on Taxes, Spending – Fiscal Times
Government inflated college loan bubble, Obama isn’t fixing it – NY Post
The Wrong Inequality – Brooks, NY Times

Oil near $93 as EU plans talks on Greek debt vote – AP
Gold rises on deepening euro zone crisis – Reuters
Despite Losses, Investors Stick With Paulson – DealBook
Major Asset Classes Performance Update – Capital Spectator
After Manager Miscues, Bond-Fund Investors Playing Catch-Up – WSJ
Gold fallson both fundamentals and technicals – Commodity Online
Why Gold Mining Shares Are Lagging The Gold Price – Perth Mint
Silver to face the wrath of the ‘Death Cross’ ? – Commodity Online
“Allocate 25% to Gold Bullion”, says Faber – Profitimes
Oil’s Endless Bid – Pragmatic Capitalist

Food Stamp Participation August 2011 – Paper Economy
How Jobless Benefits Became Twice as Generous – NY Times
UK recovery slowest in 100 years despite 0.5pc growth – Telegraph
Striking Euro Gold (and Silver) – Project Syndicate
The miracle of the German labour market – voxeu
Expect a lot more trade intervention – China Financial Markets
More than half a million ‘baby pensioners’ in Italy – Financial Post
Fannie Mae serious delinquencies lowest since 2009 – Housing Wire
Bloomberg: Congress caused the mortgage crisis, not the banks – NY Capital
Millions of homeowners eligible for foreclosure review – CNN/Money
QE3 proximity to be gauged by Bernanke conference – MarketWatch
Fed Takes Collateral Damage in MF Global Meltdown. – WSJ


Xtranormal Does the Eurozone Bailout

Spotted over at the Daily Capitalist was this XtraNormal interpretation of the most recent European bailout agreement, one that, given all the carnage in financial markets in recent days, doesn’t sound nearly as funny today as it probably did over the weekend

I’ve yet to dig into any of the details of how the 440 billion euro EFSF (European Financial Stability Fund) was supposed to be “levered up” to over a trillion euros without some heavy lifting from fractional reserve banking or credit derivatives and, according to the views expressed above, this job is easier said than done.

Life in Williston, North Dakota

The folks at CNN/Money have been running a series of stories about life in Williston, ND, ground zero for the Northern U.S. energy boom.  Last week it was this story about how local strippers can make more money than pole dancers in Las Vegas. This week comes a report about how local college kids are finding the lure of six figure truck driving jobs impossible to resist, putting their education on hold or slowing it to a crawl.

‘My students make twice my salary’

Jim Stout, an English professor at Williston State College in Williston N.D., started losing some of his best students to the oil fields last year.

It was too hard to compete: The students could either spend thousands of dollars on a college education or earn $100,000 a year working on the rigs, performing maintenance on oil wells or driving trucks.

“At some point they decide, ‘Well, college will always be here … but the oil boom won’t,’” he said.

One engineering student dropped out of college last winter to take a job boiling the water used in hydraulic fracturing. In just two weeks, he made $5,000, according to Lance Olson, a science instructor at the college.

With an extreme housing shortage, some suspect that a recent spike in enrollment at Williston State was due to oil field workers taking the minimum number of class credits in order to qualify for inexpensive student housing.

We were through there last fall and had a heck of a time finding a hotel room. With hunting season now in full swing, I wouldn’t be surprised if there’s not a single hotel room available in the whole state during the entire month of November.

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