Panic, But Slowly

The economy has been expanding since the start of 2010. It hasn’t been rapid, and It’s only now enough to absorb the workers who need jobs, but it’s real. It’s only natural for economists to ask, “When does it end?”

That’s not because they are extremely un-fun people. It’s their job. Recessions are a much bigger problem when no one sees them coming, and history shows that we never really see them coming. And that economists are always worried about the next recession, but we don’t really listen to them.

So is it time to panic? As Groucho tells us, “There’ll be plenty of time to panic later.”

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Yes, Not Again

In celebration of a decade of Barataria, I have to present another repeat.  This is from March 2008.  It’s an interesting time in that it was six months after the stock market peaked and six months before the financial collapse became obvious.  One of the great themes of Barataria since this time has been how we’ve seen it all before and we’re about to see it again.  The real story here isn’t that I called it at this time – it’s that so few people saw what was obvious as it happened around us.

Imagine that a new technology comes along that spawns a whole new industry. Not only is this industry a revolution in how people lead their lives, it’s immensely popular and generates a big pile of cash. The field starts out wide-open with many small entrepreneurs, but gradually they become rich as they are bought out by a few big players. Soon, the industry has consolidated and re-investment slows dramatically. Those who made big money start to put it into real estate, specifically in Midtown Manhattan, Florida, and Los Angeles.

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Fear Doesn’t Glitter

“All money is a matter of belief.”
– Adam Smith

Gold is taking a solid beating these days. It’s been slipping for a while, but when China revealed that it’s reserves were less than believed it really fell – quickly slipping below $1,100 per ounce when one mysterious trader dumped everything. It’s now more than a third off its 2010 peak and nearly everyone believes that it’s doomed to slip below $1,000 per ounce by the end of the year.

What happened? Isn’t gold the ultimate money in an unstable world? The short answer is no, and this has as much to do with the rise of the US Dollar as anything. But in the end gold is not as much a form of money as it is a barometer of fear – a commodity that appears to be in much shorter supply today than it was just a few years ago.

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Not Hiring, but not Firing

Where are the jobs? Job creation has been the hot economic topic since the big downturn in 2008. The sooner we have full employment the sooner demand for goods and services will turn around and there will be a net upward pressure on wages. But in 2015 the rate of increase in jobs has slowed somewhat, barely hitting 200k net every month from a solid run of 220k the year before. What happened?

The data is even more confounding when you look at the net good news on jobs – that initial claims for unemployment per week are at an all-time low as a percent of total jobs. We’re not creating jobs as fast as we should, but we also aren’t losing them. Along with a large backlog of unfilled job postings there is substantial evidence that something is wrong. Is it a skills gap? Or something else?

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Sitting on Cash

If you’re like most people living paycheck to paycheck, you have a simple problem at the end of the month – not enough cash. There’s nothing to be embarrassed about here – it’s a common problem that is faced by a large number of families as the economic recovery struggles on.

But if you’re an S&P 500 company, you may have a different problem – too much cash. Not precisely too much cash on hand, that is, since that’s never a problem. You may have something like cash sitting around somewhere in the world that you have trouble bringing home to make use of the way you want to.

Therein lies the problem with this economy – not that there isn’t enough to go around, but that it isn’t going around.

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