GDP report: U. S. economic growth revised sharply lower + ‘Caution’ for the future

Captain Rick: The U.S. economy grew significantly slower in the second quarter than the sluggish pace reported in August. Q2 GDP was revised to 1.3%, down from 1.7% reported in August. This came as a surprise to most economists. It wasn’t surprising to me. What I found surprising is why last months Q2 GDP estimate was increased to 1.7% from the previous 1.5%. So, I am not surprised to see that it fell back to 1.5% and more. The surprised economists are already busy forecasting GDP will come in at 1.9% in the third quarter. Perhaps they will be equally surprised when it doesn’t. I should mention that 1.9% is still well under what is needed to break even. I believe economists need to retire their dart boards and start paying better attention to what is really transpiring around our world, as I have been doing for many years. It helps take the surprise out of things.

Gross domestic product (GDP) is the broadest measure of the nation’s economic health. 3% economic growth, represented by the red line in the chart above, is necessary to provide enough new jobs to keep pace with U.S. population growth. America has fallen short in all but two of the past three plus years. This means that the percentage of eligible workers who are working continues to drop almost every month. Real unemployment is continuing to increase, in spite of the bogus and meaningless unemployment percentages the U.S. government publishes each month. America’s unemployment rate is currently published to be 8.1%, but the real number is actually about twice that…and rising, not falling.

I am saddened to say that I do not see anything on the horizon that is going to raise America continuously up above that red line, where we need to be to enjoy a healthy and growing economy, for the next several years, perhaps 2017 or beyond. Even the Fed, the IMF and other global financial authorities predict similar sluggish growth through 2015.  Europe appears to in recession or close to it. U.S. growth of 1.3% is knocking on recessions door.  China’s economy is slowing quickly as a result of economic sluggishness in the West. This paints an anemic image of America’s economic health., with a global ripple effect.

I caution local and state governments to exercise fiscal restraint and filter out some of the local growth hype that is beginning to surface. Some of it is beginning to closely resemble fuel for another financial bubble…not real growth. It will be much smarter to put some funds in a ‘piggy bank’ for a ‘rainy day’ than to spend all of the receipts as fast as we can while the sun appears to be shining brightly.

I urge federal legislators to address the ‘Fiscal Cliff’ ASAP. This does not mean coming up with another political compromise to ‘kick the can down the road’ for another year. It means finding a real solution to reduce Americas debt NOW! Every time we postpone a proper ‘fix’, we bring our nation much closer to the real ‘Financial Cliff’…the one that will have the power and magnitude to reduce the United States of America to a third world country. How America handles this monumental problem will affect the entire world for decades to come.

Fiscal Cliff: What the heck is it? … How will it affect us?

Captain Rick: The ‘Fiscal Cliff’ is a monumental financial challenge that faces the U.S. and all Americans on January 1, 2013. $7 Trillion in tax increases and spending cuts will begin. The only thing that can stop them from taking affect is for congress and the president to come to an agreement before January 1, 2013. That is not likely with America’s current slate who are in gridlock. A change of faces in D.C. as a result of the November election could improve matters.

Short of a miracle to break Washington D.C. gridlock, on January 1, 2013 the $7 Trillion ‘Fiscal Cliff’ will take place. This is what I anticipate:

Defense will be cut $55 billion in 2013, 10%. I believe our defense department is overloaded with inefficiency and waste beyond 10%. Perhaps this will help our defense department to become more efficient in the expenditure of tax payer funds.

Non-defense will be cut $55 billion in 2013, 10%. Non-defense includes education, Medicaid, food inspections and air travel safety and Medicare. Perhaps this will help all of these departments to become more efficient in the expenditure of tax payer funds.

Bush era tax cuts will end. These tax cuts were stupid and reckless and should never have been implemented. In view of the poor state of the American economy, they should end.

Obama’s Payroll tax holiday will end. The Social Security tax rate reverts to 6.2%, up2%. This tax cut was stupid and reckless and should never have been implemented. It has robbed the Social Security trust fund and shortens the time before the fund become insolvent. This reduction was stealing promised receipts from Social Security trust fund of all elderly Americans. This tax holiday must end.

Unemployment benefits will revert back to the old norm of 26 weeks, down form the current 99. It worked for the better part of the last century. It can work again. The solution to put America back to work will not be accomplished by providing long term unemployment benefits. We need a plan to grow our economy, which will create new jobs.

Medicare Doc Fix expires. Payment to care providers will drop 2%. This is not a problem for people on original Medicare…only those that subscribe to the plans offered by the insurance companies…ones I think should be put out of commission or figure out a way to provide Medicare for the same price the government pays for original Medicare…without the 20% subsidy the insurance companies are receiving now.

The bottom line is that America has been floating on so much fat for so many years. We can and should give up the fat. The ‘Fiscal Cliff’ will have a large impact on those who abuse tax dollars. It will have a minimal effect on honest, hard-working Americans.

It is no secret that America has been living ‘high on the hog’ … well beyond its means for many years. The time has come to pay the price. We either do it now in a constructive manor or pay a much steeper price later…one that could convert the United States of America to a third world country in the not to distant future.

Gilbert Council PROPER VOTE: NO to Utility Bill Advertising

Gilbert, Arizona Council Meeting: September 6, 2012

Item 38: AGREEMENT – consider waiving the bidding requirements and approve Agreement No. 2012-1308-0072 with Share My Stamp for utility billing advertising for the period of September 10, 2012 through January 31, 2013, and authorize the Mayor to execute the required documents.

Item 40: POLICY NO. 2012-06 – consider approval of Council Policy No. 2012-06 related to utility billing advertising.

Councilmembers who cast the PROPER VOTE of NO:

 Victor Petersen

Captain Rick: After listening to council testimony, I asked Victor for clarification of his vote on this item.  His response:

Victor Petersen: On Item 40, I sincerely struggled. As I went through the list of items that would be prohibited from advertising, I realized that my preference would have been to allow firearms to advertise and disallow the others. However, I had to be honest with myself that if I were to do that I would be projecting my personal and even religious values on others through the use of the public power with which I have be entrusted. I felt that would be wrong. John Locke, who brought forward the concept of the basic individual rights of life, liberty and property, also said that “a man has property in himself.” In fact, this is the basis for all other property rights. If a man doesn’t own himself, how can he own anything else? If a man owns himself, he has the right to do with himself as he pleases. In short, it is not the proper role of government to protect us from ourselves. In fact, that would be a violation of our basic rights. In voting as I did on this item, I was trying my very best to honor the fact that each individual has property in his or herself, and that they would determine the kind of advertising they would receive through the exercise of that right in their purchasing choices. Also, I believe in free markets where we treat all businesses the same. Eliminating some businesses from being able to advertise is another example of government picking winners and losers.
Item 38 was simply the execution of Item 40, and I felt it was most consistent with my efforts on 40 to oppose 3

Captain Rick: I found Victor’s words to be on common ground with my principles. I beleive his words are also in the best interest of all citizens of the United States and of my town of Gilbert, Arizona.  I have awarded Victor with 1 PROPER VOTE for items 38 and 40 which are displayed on my Gilbert Council PROPER VOTE scorecard (link below).

The Gilbert Council PROPER VOTE Scorecard:

https://atridim.wordpress.com/gilbert-council-scorecard/

CATERPILLAR lowers profit and revenue forecasts for 2015

 Captain Rick: Smart companies have long range planning foresight. Caterpillar, the world’s largest earth-moving equipment manufacturer, one of America’s largest remaining manufacturing firms and listed on the Dow Jones Index is one such company. As a mechanical engineer, I followed the trail of this great company over the past half century.

Caterpillar’s CEO Douglas Oberhelman announced at an industry conference in Las Vegas on Monday that the economic slowdown has been sharper than the company anticipated. I suspect much of this relates to the significant manufacturing slowdown in China, as a result of shrinking economies in Europe and the U.S. As I reported in my blog entry on September 19, 2012, Caterpillar over estimated potential growth in China and made significant production cutbacks at its Chinese excavator plant. Monday’s announcement caused Caterpillar’s stock to slide to 87, a 7.42% loss year to date. I applaud Caterpillar for keeping a realistic eye on the future, considering the serious economic challenges facing our world. 

Gilbert Council PROPER VOTE: Eliminate special discount fee structure for non-profit use of facilities

Gilbert, Arizona Council Meeting: September 6, 2012

Item 35: FEES – conduct hearing and consider adoption of a Resolution establishing special event and block party permit fees and terms.

Councilmembers who cast the PROPER VOTE of YES:

Victor Petersen, Eddie Cook

During the meeting I heard these important words from Councilmember Victor Petersen: “What is the percentage of cost recovery for non-profits? I want 100% cost recovery.” Victor requested an amendment to the item to eliminate category 1 and the differentiation between profit and non-profit. Victor and Eddie were the two who cast the PROPER VOTE of ‘Yes’. I invited Councilmember Victor Petersen to expound for this presentation. Victor replied:

Councilmember Victor Petersen: It seems so strange to me that we have seen efforts by the very people who want to encourage economic development by giving advantages to specific commercial interests also want to continue to give special advantages to non-commercial interests. In either case, the approach is unfair; government is picking winners and losers. The correct solution is to allow everyone to compete in a free market with government treating everyone the same. We should allow consumers to decide who to support and businesses to decide how to best meet those demands. Free markets, with protection of property rights, are the best guarantee of economic prosperity.

The Gilbert Council PROPER VOTE Scorecard has been updated: https://atridim.wordpress.com/gilbert-council-scorecard/

View a video of this council meeting. Watch the discussion leading up to the vote at marker 1:49: http://www.youtube.com/watch?v=C6eI_lwuCPI&list=UUIihJKywVrauxsDmWtwpXYg&index=8&feature=plcp

“Papers please” provision of Arizona’s SB1070 Immigration Law now in effect … what does it mean?

Captain Rick:

The most controversial part of Arizona’s SB1070 Immigration Law took effect on Tuesday, September 18, 2012 when U.S. District Court Judge Susan Bolton signed the order. It dissolved the injunction she issued over two years ago blocking Arizona from enforcing key provisions of SB1070. Tuesday’s action was prompted by the U.S. Supreme Court ruling in June that said she was legally incorrect in enjoining the section which requires police to question those they have stopped if there is a reason to believe they are in the country illegally. It also said there was no evidence that the Arizona law conflicted with federal law.

SB1070 requires that the law must be enforced consistent with existing anti-discrimination laws, but it does allow someone’s race to be considered as a factor, though not the only one, in determining who to question. Arizona law enforcement officers have had this ability as an option prior to SB1070, but what SB1070 does is makes it mandatory for police to ask for “papers” if they suspect the person they have stopped for another reason could be in the country illegally. Currently police can choose to not to raise the question and release those stopped after rectifying the reason for the original stop. Under SB1070, police are required by law to raise the issue. That is a significant change of law. Arizona is now the first state with a “papers please” law.

President Obama’s recent action potentially gives “papers” to a new class of up to 1.4 million of the 12 million illegal immigrants in the United States who were brought here illegally as children, who can apply for “deferred action” status to be allowed to remain in the U.S. This is largely dependent on Obama’s reelection. If upheld, they will be not be affected by this new Arizona law, however the remaining 10+ million illegal immigrants who venture onto Arizona roadways and are stopped for a violation will.

A big question remaining … what will be the response of the federal government when Arizona police begin increasing the number of illegal immigrants referred to them? Will the federal government “turn its head” a bit farther and simply ignore a greater number of illegal immigrants?  Will the federal government increase deportation or build new prisons to house them? Will the U.S. Legislature pass stricter immigration laws and place more emphasis on securing the border … or will it continue its current course of basically “turning its head” on the whole matter … leaving the states to fend for themselves, paying the heavy costs of illegal immigration as has been apparent in recent years.

Other states are expected to adopt similar legislation in the coming months and years as the ramifications of this new Arizona immigration law plays out on the roadways of Arizona, in the courts and in the United States Legislature.

Gilbert Council PROPER VOTE: Vote of ‘NO’ to Not Use Federal Grant Money to fund bike and pedestrian facilities

Gilbert, Arizona Council Meeting: September 6, 2012

Item 20: GRANT– consider authorizing application of Grants from the US Department of Transportation’s Congestion Mitigation Air Quality Program for congestion mitigation and air quality improvements related to bicycle and pedestrian facilities, intelligent transportation systems and Particulate Matter-10 paving.

Councilmembers who cast the PROPER VOTE of ‘NO‘:

Victor Petersen, Eddie Cook, Jordan Ray

During the meeting I heard these important words from Councilmember Victor Petersen: “It breaks my heart that we continue to ask the federal government for money when they are so bankrupt, its out of control. If it’s a critical thing we can’t do without, or is highly urgent…otherwise I think we can wait for them and try to fund them ourselves, rather than to ask for more money from the federal government.”

Those words rang a bell in my heart. They accurately summed up the how I feel about the terrible fiscal situation in America with it facing the ‘Fiscal Cliff’ very soon. I invited Councilmember Victor Petersen to expound for this presentation. Victor graciously replied:

Councilmember Victor Petersen: “I can’t, in good conscience, ask the federal government for money when they have none to give. On the receiving end of grants, it’s easy to say that if we don’t spend it here, they will just spend it somewhere else. However, on the giving end of the grants, where we are agree that most of the problem lies, it’s just as easy for them to say that they aren’t actually spending the money; they are just making it available to the local governments. If the locals don’t need it, they won’t spend it. At the end of the day, no one is willing to take responsibility and that is the problem. Well, we are responsible for that which is in our control, and we can stop asking for the money. There are a lot of other considerations on this issue that deserve addressing, but for the sake of brevity, I will leave it at that.”

Captain Rick: Victor’s words ‘hit the nail on the head’ and were well said. During the meeting, I heard a statement by a council member who voted ‘yes’ that I found a bit troubling: ”This is one of the few funded mandates from the federal government.” The federal government is broke. It has no money to mandate Gilbert to spend. We all need to realize the federal spending party is over. America is facing the ‘Fiscal Cliff’. If we do not address it head on now, we will soon witness America becoming a third world country. Gilbert should set a fiscally responsible example for America, not follow the federal government’s path to destruction.

I have updated the Gilbert Council PROPER VOTE Scorecard to show the new totals:  https://atridim.wordpress.com/gilbert-council-scorecard/

Watch the discussion leading up to the PROPER VOTE at marker 1:33

FedEx, Caterpillar and others feeling the pain of China’s slowing economy

Captain Rick: The sluggish economies of the U.S. and Europe are having a direct effect on China’s economy, all working in unison to amplify the global financial crisis. FedEx, the world’s largest air package shipper says the impact on China’s economy is far bigger than most have estimated. FedEx has trimmed the number of planes carrying shipments into the United States.

Caterpillar, the worlds largest maker of earth-moving equipment, has slowed production at its main Chinese excavator factory, including a two month shut down and cutting work hours. Caterpillar is exporting most production out of China as a result of overestimating sales potential in China. Many other companies are also effected. The report continues …

For more info, read the above Fortune Report:  http://finance.fortune.cnn.com/2012/09/19/fedex-china/

Gilbert Town Council PROPER VOTE Scorecard

This is a voting record of the Town Council of Gilbert, Arizona. I have viewed every council meeting since becoming a Gilbert home owner in 1997 so that I would stay informed.

In August 2011 I began scoring the controversial votes made by the council. I consider a PROPER VOTE to be one that is truly in the best interest of Gilbert citizens …  one that is fiscally responsible and free of politics and private agendas. I keep track of the scores on what I call my Gilbert Town Council PROPER VOTE Scorecard. I share my ongoing results on the Gilbert Council Scorecard page that appears at the top of at the top of my blog: https://atridim.wordpress.com/gilbert-council-scorecard/

Chicago teachers strike could make negative blow to jobs report and dampen Obama’s chance of reelection

Captain Rick:

Unions in America have well outlived their benefit. Over the past half century I have witnessed thousands of good paying manufacturing jobs shipped overseas because of union pressure for higher wages and benefits. The fact is that there are lots of people in other countries that will willingly do the jobs that America thinks do not pay enough. Now that unions have destroyed most of the manufacturing jobs, they are attacking the only ‘meat’ left…the service jobs, which include teaching, police, fire and other government jobs. The unions figure that these jobs cant be shipped overseas so they are safe territory to strike with demands of higher wages and benefits.

WRONG! This plan will fail and it will take what is left of good paying American jobs and make them history. This strike is so big (and stupid) that it most likely will effect the federal Jobs Report which already demonstrates that American jobs are on life support. President Obama, who supports unions and accepts significant financial support from them, might find himself out of office in November because of them.

The above is a photo snip is from: http://money.cnn.com/2012/09/17/news/economy/chicago-teachers-strike-jobs-report/index.html?iid=Popular

Some interesting excerpts:

NEW YORK (CNNMoney) — As it drags on for a second week, the Chicago teachers strike is so large it could distort national economic statistics, including the Labor Department’s key monthly jobs report.

About 26,000 teachers and support staff are striking in Chicago, demanding higher pay, better job security and changes to a new evaluation system.

The strike’s timing is key, in that it coincides with the period in which the government collects data for the national jobs report.

Last month, that report showed the economy added only 96,000 jobs. The number was seen as weak, posing a challenge for President Obama as he faces re-election.

September’s report could look far worse if the strike continues.

Federal Reserve launches QE3

This report contains a great 90 second video of QE3 and lots more: http://money.cnn.com/2012/09/13/news/economy/federal-reserve-qe3/index.html?iid=Popular

Captain Rick’s Response: The entire Fed policy of ‘Quantitative Easing’ is wrong, especially this QE3 gigantic purchase of Billions of mortgage debt, of which the liability will be passed on to all responsible mortgage paying Americans. The Fed is acting in desperation because our leadership DC is ineffective. I hope the November election will replace the majority of incompetent legislators that currently represent us. The fix for the problem is to have our legislators fix our National Debt which is heading for the ‘Fiscal Cliff’. Agree/Disagree…Sound off and reply!

Some interesting excerpts I found in the report:

NEW YORK (CNNMoney) — The Federal Reserve announced plans to unleash more stimulus Thursday, in its third attempt at a controversial program to rev up the U.S. economy.

The policy, known as quantitative easing and often abbreviated as QE3, entails buying $40 billion in mortgage-backed securities each month. The end date remains up in the air, as the Fed will re-evaluate the strength of the economy in coming months.

The Fed is wasting no time. The purchases begin Friday and are expected to add up to only $23 billion for the remainder of September.

Meanwhile, the Fed will continue its existing policy known as Operation Twist. Together the two programs will add $85 billion in long-term bonds to the Fed’s balance sheet each month.

In addition, the Fed also indicated that it plans to keep short-term interest rates at “exceptionally low levels” until mid-2015. Previously, the Fed had forecast rates would remain low until late 2014.

Bernanke also admitted that the Fed alone is not strong enough to fix the job market.

“I want to be clear — While I think we can make a meaningful and significant contribution to reducing this problem, we can’t solve it. We don’t have tools that are strong enough to solve the unemployment problem,” he said.

In implementing QE3, the central bank does not use taxpayer money to buy bonds. Rather, it expands the U.S. money supply and electronically credits banks with more funds.

Some excerpts I found significant:

Is there a potential bond bubble now? Absolutely.

If the Fed weren’t buying and if the Chinese achieved their trade goal, ceasing to have a current account surplus (as they have said in their five-year plan) … they will not have the ability to buy our bonds. In fact they would have to sell bonds if they want to go around buying other things.

In a similar fashion, if the Japanese economy begins to pick up, they could also be in a position where they’re no longer buying our bonds.

Put all that together, and you could see interest rates returning to more normal levels. This spills over into equity markets, and if longterm bonds go up, mortgages go up, and the housing market gets hurt.

We would all be the victims.

If they’re sitting there holding longterm bonds, the Fed is at risk of a capital loss. In a sense, that doesn’t matter. It’s a paper loss, they haven’t sold it, they’re just holding it — so I guess in that sense, there is no loss.

But their opponents in Congress will say the Fed just lost $200 billion and in an accounting sense, that will be true. It’s an extra risk that the Fed takes about its own longterm authority.

This is worth a read, Captain Rick

Party in Europe, but a hangover is coming

If you are following the debt crisis in Europe as I am, you will want to read this article: http://finance.fortune.cnn.com/2012/09/12/german-ruling-europe/?like=1&_wpnonce=77e4015c45

I have copied some excerpts to gain your interest:

But while the twin victories for the euro are worth popping a bottle of champagne, it isn’t enough to open an entire case. There were plenty of caveats in the German ruling that could cause some problems for the bailout down the road. And while the court gave the thumbs up to the bailout, they seem to have expressed some severe reservations to Germany’s role in a possible fiscal union with its eurozone partners.

This morning, traders across Europe nervously waited the decision by Germany’s highest court as to whether or not the eurozone’s largest member would remain its biggest booster. The court was considering whether or not it was legal for Germany to participate in the various eurozone bailout schemes, most notably the proposed 700 billion euro European Stability Mechanism. Those that oppose the bailouts believed that Germany had given up too much of its sovereignty to Europe and that the decisions made by their politicians to support the bailout circumvented German democracy. A “no” ruling would have been disastrous for the euro as it would have meant a German withdrawal from the bailouts, which some observers believed would be the final nail in the coffin for the common currency.

Euro rescue fund clears major hurdle

If you are following the debt crisis in Europe as I am, you need to read this CNN Money article: http://money.cnn.com/2012/09/12/investing/germany-esm/index.html

I have copied a few excerpts to ‘wet your whistle’:

NEW YORK (CNNMoney) — Europe’s latest rescue fund cleared a major hurdle Wednesday after a high court in Germany refused a request to block its ratification.

The German Constitutional Court ruled against a group of conservative politicians who requested an injunction that would bar Germany from ratifying the treaty governing the European Stability Mechanism.

The ESM board of governors will hold their first meeting on October 8, according to a statement from Eurogroup president Jean-Claude Juncker.

German Chancellor Angela Merkel welcomed the court’s decision, saying “it is a good day for Germany, it is a good day for Europe.”

The court’s decision is preliminary, with a final ruling on the legality of the ESM treaty expected later this year. But analysts say the court’s president has made it clear that the final ruling will not deviate from Wednesday’s announcement.

“Germany cannot allow the ESM to leverage itself up so that the potential German maximum liability could exceed the cap,”

Meanwhile, the court also supported the so-called fiscal compact that German Chancellor Angela Merkel and most other EU leaders signed in March.

The fiscal compact will become binding after 12 of the 17 euro area nations have ratified the treaty, according to Juncker. But it will not enter into force before January 1, 2013, he added.

One World Trade Center … “Freedom Tower” is rising to become the tallest building in North America

The Tribute in Light shines above the World Trade Center in New York and the Statue of Liberty, left, Monday, Sept. 10, 2012 in this photo taken from Bayonne, N.J. Tuesday will mark the eleventh anniversary of the terrorist attacks of Sept. 11, 2001. The tallest tower is 1 World Trade Center, now up to 105 floors. In the center is 4 World Trade Center. Photo: Mark Lennihan / Associated Press

The tower known as 1 World Trade Center, left, the National September 11 Memorial, bottom left, and 4 World Trade Center, right, are bathed in light, Tuesday, Sept. 11, 2012 in New York. Tuesday is the eleventh anniversary of the terrorist attacks of Sept. 11, 2001. The tallest tower, Freedom Tower, will be 1,776 feet tall, including its spire, a reference to the year of American independence. Photo: Mark Lennihan / Associated Press

A wonderful slideshow of great photos presented by the San Francisco Chronicle: http://www.sfgate.com/national/us/slideshow/Tour-of-World-Trade-Center-construction-site-48773.php