The Fall of Santa

It’s been a good Thanksgiving.  I have a new project in mind, plus I have some work to do tomorrow.  I hope you enjoy this repeat from 2012 as we start the Holiday Shopping season!

When, what to my wondering eyes should appear,
But a miniature sleigh, and eight tiny reindeer,
With a little old driver, so lively and quick,
I knew in a moment it must be St. Nick.

There has to be more to it, doesn’t there? Doesn’t this “Santa” guy have some ulterior motive?

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Thanksgiving Deliverence

Thanksgiving is a truly great American holiday. It is a time when people from all over the world blend their traditions into one religious holiday celebrated by Christians, Jews, Moslems, and every other faith alike. To give thanks is universal, and what better way to celebrate deliverance to a land that to many is indeed the Promised Land.

But why is it in November? The very first day of Thanksgiving was held right after the harvest, on a day very similar to the Canadian Thanksgiving on October 12th. Why is it on a Thursday? The answer is that the nation itself was delivered from the horrors of war and recognized by the Treaty of Paris, owing a bit of time for the time it takes to cross the Atlantic and bring the joyous news. It was indeed a time to be thankful – but the story has the Hand of Providence all over it.

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Black Friday Psychology

Black Friday. It’s worth $59B in sales this year, if you believe the projections. More importantly, it’s a financial and cultural reference point, the day when the Holiday Shopping Season officially starts.

But Black Friday is really a state of mind.

The psychology of the day is what matters most, as the excitement and crowds fueled by a small number of loss leaders gets people to spend far more than they otherwise should on other not-so-great deals in the stores. That’s how shoppers are manipulated by a system that sees them as nothing more than pawns to be used up on a game where the take on one day is really just a way of keeping score.

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One Week to Go

One week from now, the holiday shopping season fires up in a big way. Predictions for how good or bad it will be have been all over the place, ranging from a net drop in spending according to Morgan Stanley to a record-bursting rise if you believe accounting firm Deloitte. It’s been impossible to figure which was more likely, although Barataria staked a claim to the stronger end before anyone else. We’re starting to get some data in and it looks like the optimists were right. This might be a good year after all.

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The Year Everything Changes

2017 is still over three years away, but we can already say a lot about it. We know that there will be a new President, although it’s not clear yet which party has the edge this far out. It’s likely that whoever is elected she (as it well could be) will try very hard to take the partisan edge off of Washington and get things done. There may even be a new Congress by then with a completely different configuration. But as big as the political changes are likely to be, the real change will be away from Washingtoon.

That will be the year that the peak Baby Boomers, born from 1952-1959, hit 65 years old and start to retire. Ahead of them are at least 15 million Boomers who will have passed that threshold, with probably 10M or more retiring. With slow growth inflation should still be low and unemployment will suddenly and sharply decline. The Millenial Generation will hit the workforce (and the electorate) in a big way. Combine that with the rising optimism coming on slowly and the boom should fire up.

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Point of No Return

Low interest rates are a good thing, right? They are if you are a borrower, but not if you are a saver. People salting money away for retirement right now are getting almost no return on their savings, thanks in large part to a zero interest rate policy (ZIRP). Banks can borrow money from the Fed with no interest, so why would they pay interest on ordinary deposits, CDs, or any other money making instrument?

There is a lot of talk about the Fed’s policy of quantitative easing, which currently is performed by buying $85B in mortgage backed bonds every month. They may or may not start “tapering” to zero sometime in the near future. Beyond that, at some point interest rates have to come off of the peg of zero that they have been at since 2008, but that’s even further into the future. And the implications are vast.

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The Immigration Solution

Barataria has noted before that there are three great forces weighing on the economy today: business cycles, globalization, and demographics (the retirement of the Baby Boom, already starting). Business cycles don’t last forever, and this particularly destructive one should end about the same time the heart of the Baby Boom starts to retire in 2018. The latter is a genuinely double-edged sword, providing opportunities for young people to fill the jobs that open as the burden of retirees on public assistance grows. There is still the potential for a great period of economic expansion in the 2020s if we can manage the downside effectively.

As with everything in economics, a growing economy makes everything easier. But how can we grow the economy through this period if there is a shortage of workers? The missing part of this Managed Depression is, as always, the important policy changes that will set us up for the next economy once this phase of the business cycle is over. One part of this pending in Congress, held up by partisanship, is immigration reform.

In other words, the challenges of globalism present one solution to the challenges of demographics.

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