By the time you read this the first Democratic debate has probably already happened. I hope you enjoyed it!
There is a tradition here at Barataria of predicting the news before it happens, which is to say at least outlining what is likely to happen within reasonable boundaries. It’s more like a weather forecast than a news forecast. So let’s take a stab and see what we can reasonably expect from the debate itself and the news going forward.
Mostly sunny with a high in the 70s. No, it’s more complicated than that …
The torment continues in Syria, if anything accelerating. The conflict appears to be burning through the remaining areas of the nation creating another refugee crisis on top of the one that has already swamped neighboring nations Jordan, Lebanon, and Turkey. Europeans are now forced to deal with it.
Into this a new combatant, Russia, has started bombing. The conflict has only intensified as a result. Where will this go?
The short answer is that there is apparently no end in sight simply because the nature of the conflict has an ability to morph as more and more of those involved have an interest in creating chaos. Syria is devolving into the kind of scorched battleground reminiscent of the Thirty Years War of 1618-1648, which is in itself an example of history not quite learned.
With Kevin McCarthy (R-CA) dropping out of the race to become Speaker of the House, the level of chaos in Congress has hit a new height. It’s hard to imagine what comes next in this intractable situation as nearly every option has become open – including the longshot possibility that a bi-partisan group of centrists might soon be in charge.
Will this open the floodgates and see something get done or will the gridlock become even more set in stone for the next year? Like the weather, everyone likes to complain about it but no one seems to do anything about it. But next year could be the year that Democrats actually do something and take control – of both the Senate and the House. This is actually possible if we seize the moment.
The Feds are about to run out of money.
No, we’re not talking about a government shutdown – that was avoided when yet another continuing resolution was passed to keep it operating through December. After that we have no idea what will happen. What we do know is that the Federal Highway Trust Fund is set to expire on October 29 unless a new bill is passed, which hasn’t been done yet.
Unlike the larger federal budget the attention this is getting is scant at best, so the possibility that it will be lost in the shuffle is pretty high. The implications are rather vast because federal funding is what keeps highway construction moving along. Without it, everything might grind to a halt as early as November.
Last Friday the monthly Bureau of Labor Statistics (BLS) Employment Report came out, and it was lousy. Instead of an expected gain of 200k jobs it came in at 142k – a miss of 58k or 29%. The reaction in the financial press was swift and conclusive – there is no way the Fed can raise interest rates given this weakness. But there’s a bigger problem with the report than that.
It honestly can’t be believed.
It’s fashionable to say that the BLS cooks these reports to get the results they want and that no one should believe the government reports in general. That’s a general paranoid delusion that is utterly unreasonable all around. But the reports can’t be taken as pure gospel when they don’t come in exactly where they should be because there is no way they can possibly be as accurate as is demanded.
Because of a death in the family, I have to run a repeat. This is from 2012, when things looked a lot more bleak than they do now. I’m running it without any updates because that 2012 perspective is interesting. Things are better, but not a ton better. Good enough? Not yet, but will it be?
Imagine you are in a space ship hurtling toward a black hole. You might try to turn the ship around and fire the engines full force. The problem is that the blast from your engines only adds mass to the black hole, making its gravitational pull even harder. What do you do? Fire the engines harder to try to hit escape velocity?
That may sound like a silly analogy for our ecnonomy, and it is definitely far from complete. But as the brilliant John Mauldin discusses in his “Thoughts From the Frontline”, the black hole of debt is posing some very unusual economic problems. This “singularity” is, simply put, a place where the normal equations that describe the universe of economics no longer apply. What can we do when everything we know no longer works?