The Opinionator : economy

Did Stimulus Checks Really Boost the Economy?

Shannara Johnson — Tue, 29 Jul 2008 14:18:00 GMT

It's over and done with - on July 11, the last stimulus checks designed to circulate through the U.S. economy and give it a much-needed boost, poured into American bank accounts. Now all we had to do was spend, spend, spend... just like Mr. Bush told us to. After all, it's our patriotic duty.

But has it worked?

"Stimulus checks boost spending," reported the New York Times on June 27. "Consumer spending rose by a nine-month high of 0.4 percent in May, with $48 billion in federal tax rebate checks lifting personal income and savings, the Commerce Department reported this week. At the same time, personal income rose by 1.9 percent, up from 0.3 percent in April, while the personal savings rate increased by 5 percent, the highest reading since March 1995, the report said."

Out of curiosity, this week I did a private little survey among friends, relatives and coworkers, as well as in a few message forums on the Internet.

I posted the simple question, "What did you do with your stimulus check?"

53 people replied, and even though this small number is by no means representative, I found the results quite telling. [Note: I allowed for multiple answers, since one check may have been spent on different items.]

Of all the responders, 30% did not receive a stimulus check. Of those, 68.7% said they were not eligible, 12.5% hadn't filed a tax return, and 12.5% stated that their checks had been seized to pay for back taxes and other government arrears.

Of those having received a check, only 29.7% set out to stimulate the retail business. A whopping 43% said they put all or part of the money into a checking or savings account (21.5%), invested it or bought precious metals (13.5%), or kept it in cash under the proverbial mattress (8%).

For 45.9%, all or part of their stimulus check went toward utility bills and car repairs (29.7%), property taxes (5.4%), rent/mortgage (10.8%), and other living expenses (5.4%).

For some, the extra money has just been a welcome band-aid to make it through another month. One of the surveyed stated laconically, "I planned on buying shoes and other meaningful things, but by the time the check came, my financial situation was so desperate that it just filled the hole for this month." Another noted that "it saved my butt from going under at that particular time."

Even among those who bought "stuff," 54.5% spent some or all of the money on "sensible" things, such as home repair/improvement or necessary household items. 72.7% said they spent at least some of the money on fun or luxury items.

The National Retail Federation (NRF) reports that one-fifth of parents have saved at least a portion of their stimulus checks for back-to-school shopping. Back-to-college spending is expected to drop 7% this year.

"College students are learning a hard lesson that when economic times are tough, fun purchases take a back seat," said NRF President and CEO Tracy Mullin in a press release. "While students will still be buying school supplies, they will scale back spending on clothing, electronics and dorm furnishings."

By and large, that's a far cry from the piles of flat-screen TVs, computers, iPhones, clothing and jewelry the Bush administration and our congressmen expected to fly out the stores.

Bloomberg tells us that "the effect of the tax rebates is already fading." Retail sales rose a less-than-forecast 0.1% in June. J.C. Penney's same-store sales decreased 2.4% percent in June, a result that, while better than the company's own forecast, was worse than analysts' estimates.

Maxwell Clarke, chief economist at IDEAGlobal Inc. in New York, told Bloomberg: "Whatever support you're seeing for the economy, it's probably going to be short-lived. What's going to keep the consumer spending beyond the rebate checks?"

Why, another wave of rebate checks, of course. Congress is already working on it: the sequel to the $100 billion package, if it passes, would likely be in effect by October, with checks being sent out early next year. Better luck next time? I doubt it.

IMF to Dig into America's Financial Closet

Shannara Johnson — Mon, 30 Jun 2008 11:30:00 GMT

And they are sure to find a skeleton there. Heck, they'll probably find a mass grave.

Last Thursday, the German magazine Der Spiegel broke the news that the times of U.S. exceptionism are over.

"Officials with the International Monetary Fund (IMF) have informed Bernanke about a plan that would have been unheard-of in the past: a general examination of the US financial system. The IMF's board of directors has ruled that a so-called Financial Sector Assessment Program (FSAP) is to be carried out in the United States.

"As part of the assessment, the Fed, the Securities and Exchange Commission (SEC), the major investment banks, mortgage banks and hedge funds will be asked to hand over confidential documents to the IMF team. They will be required to answer the questions they are asked during interviews. Their databases will be subjected to so-called stress tests -- worst-case scenarios designed to simulate the broader effects of failures of other major financial institutions or a continuing decline of the dollar."

Der Spiegel called the IMF's action "nothing less than an X-ray of the entire US financial system."

Bush has thus far stalled the FSAP, which one-third of IMF member countries have already undergone, says Der Spiegel. "For seven years, US President George W. Bush refused to allow the IMF to conduct its assessment. Even now, he has only given the IMF board his consent under one important condition. The review can begin in Bush's last year in office, but it may not be completed until he has left the White House."

Good for him. And he'd better be far away on his rumored Paraguayan estate when that happens. Otherwise - with the undoubtedly abysmal picture that's going to result from the IMF's examination - he could find his domicile surrounded by an angry lynch mob.

Bernanke, though, will still be in office by the time the IMF is finished with the U.S., in ca. 2010. He must be sweating at the thought already, maybe hoping for a way out by an act of God... a heart attack, a stroke, anything.

Amazing, by the way, that a German magazine broke the story. It's going to be interesting to see how long the American lame-stream media, which for months have insisted that everything is A-OK in this country and better times are just around the corner, will take to pick up on this breaking news. Watch your news web sites, but don't hold your breath.

[By the way, if you recently read anything by our Casey Research visionaries Doug Casey, Bud Conrad or David Galland, you already know what the IMF will find and the potential extent of the calamity that's brewing on the horizon.

If you want to know how to protect yourself, check out Casey's brand-new publication, The Casey Report, our spinoff of the International Speculator. The Casey Report deals with big-picture economic trends and the many ways you can protect your assets and profit from the crisis. I've seen the inaugural issue (it's not published yet) and I can tell you, it's pretty spectacular.

Tomorrow, July 1, we will officially split the International Speculator and The Casey Report. So if you can manage to sign up TODAY, June 30, as a current subscriber to the International Speculator you will get both the IS and the new Casey Report as a two-for-one. It's a really good deal, I'd say. And as always, there's a 3-month, 100% money-back guarantee if you don't absolutely love it. Here's the link: http://www.caseyresearch.com/crpmkt/crpSolo.php?id=118&ppref=OPN118EA0608A]

[Add-on 7/2/08: I just heard that we're extending the two-for-one another month as a special introductory offer -- so you have until July 31 to "git 'er done."]

Tent Cities: The New American Poverty

Shannara Johnson — Fri, 11 Apr 2008 15:20:00 GMT

Just a few months ago, I heard of a tent city in Los Angeles for the first time—home of the poor, down-trodden and, in recent times, of people who lost their homes to foreclosure.

This week my attention was captured by more of the same news. It seems that there are tent cities springing up all across the country. And in the wake of the developing recession, they are more and more populated with the working poor, people who hold a job but can’t afford decent housing.

Tent cities are not a new phenomenon; an article on Wikipedia, for example, mentions four tent cities, in St. Petersburg, FL, Seattle and King County, WA, and Toronto, Canada. But these are just the tip of the iceberg.

Yesterday, George Ure of www.urbansurvival.com posted numerous emails from subscribers who reported about tent cities in or near their hometowns. For obvious reasons, there are more tents to be found in the southern parts of the U.S. than in the northern, but by and large it appears that we’re looking at a trend here.

Some of the camps have been “adopted” by local churches, and some municipalities, like the city of Olympia, WA, recently passed laws recognizing and regulating tent cities. But most American cities, trying to keep the sight of blight away from tourists and well-do-to residents, have cracked down on the camps, dissolving or moving them to other, less visible places.

A March article by Digital Journal reported that “Southern California has seen a massive increase in resident in its tent city, housed on vacant land between railroad tracks and the airport. The camp sprang up in July of ’07 with 20 residents, and now boasts over 200 and is growing daily as the region east of Los Angeles continues to experience massive foreclosures. Most residents live in tents, some in mobile homes in various states of disrepair, their possessions crammed in with them or spread out on the ground.”

A recent Reuters article about a tent city in Ontario, CA confirms the trend: “As more families throw in the towel and head to foreclosure here and across the nation, the social costs of collapse are adding up in the form of higher rates of homelessness, crime and even disease. While no current residents [of the camp] claim to be victims of foreclosure, all agree that tent city is a symptom of the wider economic downturn. And it’s just a matter of time before foreclosed families end up at tent city, local housing experts say.”

In light of the fact that the recession has only just begun, it is rather worrisome to see how far the country has already sunk. What will it be like in the throes of a really deep recession, or even, as some financial pundits—including Casey Research’s own Doug Casey—predict, a “Greater Depression”?

We live in “interesting times,” indeed.

Recession or Not? Look at the Oscars!

Shannara Johnson — Mon, 03 Mar 2008 19:30:00 GMT

Aside from the fact that the 80^th Academy Awards show will take its place in history as one of the most boring Oscar shows ever, I noticed another thing about it: all of the Best Picture nominees seemed exceptionally depressing and moody.

· No Country for Old Men, the winner, was described in reviews as “dark and haunting masterpiece.”

· There Will Be Blood, a movie about an evil and ruthless oil man; a Washington Post reviewer called it “a searing, apocalyptic and finally breathtaking drama.”

· Michael Clayton has a theme similar to Erin Brockovich, but with a much greater air of tragedy; George Clooney’s character looks grim and troubled throughout the movie.

· Atonement, the story of a woman seeking forgiveness for having ruined a teenage friend’s life.

· Juno, a drama about the struggles of a pregnant teenager.

You may ask what that could possibly have to do with a recession. In a word: everything.

As our resident investment guru Doug Casey, by nature a very observant man, notes in the just published March edition of the International Speculator, “A society’s mood is obviously reflected in its art, literature and movies…”

“I’m told hemlines are coming down,” he writes. “There definitely seems to be a correlation between skirt lengths and stock prices. Skirts were short during the ‘20s, the ‘60s, and in recent years – all times of boom. They were long from the ‘30s through the ‘50s, and then again in the ‘70s – times which ranged from grim to uncertain.”

(By the way, if you haven’t read the International Speculator yet, I strongly recommend you start right now. Check it out. < http://www.caseyresearch.com/learnMore.php?pubId=1>)

Back to the topic at hand: “grim to uncertain” sounds just about right to describe the situation in the U.S. these days… with millions of layoffs in an ever-growing sleuth of industries across the country, with oil at $102 at last count and food prices steadily climbing, and with a potential trip to the poorhouse for many of the holders of another 2 million ARMs due to reset this year. And let’s not forget the Forever War in Iraq and the very real possibility of a future war with Iran.

But do movies really reflect that mood?

Just for fun, I checked the Oscar nominees of March 2001, a time before the proverbial *** had started to hit the fan. The winner was Gladiator with Russell Crowe. The other nominees for Best Picture were: Crouching Tiger, Hidden Dragon, a martial arts/fantasy film; the sensual movie Chocolat; the aforementioned Erin Brockovich; and Traffic, a thriller about the drug trade. Gloom factor: 0 in 5.

It seems that in the first years after 9/11, the mood was still elevated, despite the WTC attacks. In 2002 A Beautiful Mind – a movie about a brilliant but bipolar scientist – won Best Picture. The other nominated movies were Gosford Park, a British whodunit film; In the Bedroom, a father killing his son’s killer in revenge; Lord of the Rings: Fellowship of the Ring; and Moulin Rouge, a bohemian musical. Gloom factor: 1-2 in 5.

In 2003 the big winner was the spirited musical Chicago, with co-nominees Lord of the Rings: The Two Towers; The Hours, a drama about three women of different generations; Gangs of New York and Polanski’s The Pianist. Gloom factor: 1-2 in 5.

2004 saw Lord of the Rings: Return of the King awarded with the Oscar. The other nominees were Seabiscuit (the story of a famous race horse), Lost in Translation (an awkward comedy with Bill Murray), Master and Commander (a historical naval flick) and Clint Eastwood’s crime thriller Mystic River. Gloom factor: 0 in 4.

Even though exit polls at the 2004 primaries showed that concerns about the economy took the top priority with voters, median home prices were up 9.1% from the year before, mortgage rates hit several record lows and all in all, things seemed a-OK.

The first noticeable change occurred in 2005, when Million Dollar Baby won, a boxing movie with tragic ending. However, the contenders were still of the more light-hearted kind: Aviator (the early years of Howard Hughes), Finding Neverland (the story of J.M. Barrie and how he came to write “Peter Pan”) and Sideways (a road trip comedy for wine tasters). Gloom factor: 1 in 4.

In 2006, Brokeback Mountain, a tragic story of two gay lovers, won the Oscar. The runner-ups were: Good Night and Good Luck (about the McCarthy era), Munich (the 1972 murders of 11 Israeli athletes at the Olympics), Capote and Crash (a movie about bigotry and racial stereotypes). Gloom factor: 2-3 in 4.

In 2007, The Departed won. The other nominees: Babel, Letters from Iwo Jima, Little Miss Sunshine and The Queen. Gloom factor: 3 in 5.

This year, as mentioned above, the gloom factor is 5 in 5. Can the mood get any lower? I’m pretty sure it can… and probably will.

Illegals Leaving the Sinking Ship?

Shannara Johnson — Fri, 15 Feb 2008 19:47:00 GMT

Q: How do you know that a nation’s economy is going to the dogs?

A: When the illegal immigrants pack up and leave the country.

On Tuesday, February 12, the New York Times reported that “The signs of flight among Latino immigrants [in Arizona] are multiple: Families moving out of apartment complexes, schools reporting enrollment drops, business owners complaining about fewer clients.”

Economists, business people and immigration groups conclude that “the weakening economy coupled with recent curbs on illegal immigration are steering Hispanic immigrants out of the state.”

Some states like Arizona, Oklahoma, Colorado and Georgia have started cracking down hard on illegal immigrants, often with unintended consequences. Construction companies relying on Hispanic laborers can’t complete their jobs; the Chicago Tribune reported that in Tulsa, OK, “splintered trees, downed branches and piles of wood [are] still littering nearly every neighborhood of this sprawling city two months after a devastating ice storm,” and many businesses catering to Hispanics have been boarded up.

Some illegal workers have moved to other states with less tough laws, like Texas. But many, it seems, are simply going home. What gives?

The significance of the state of the U.S. economy is conveniently downplayed in the mainstream media. But looking at the overall picture, at least two of the sectors that have kept illegal immigrants happily occupied have all but dried up.

The housing crash has left the construction industry in shambles. Nationwide, new home construction was down 24.8% in 2007, the second-biggest annual decline on record, exceeded only by a 26% drop in 1980. Many smaller builders have gone belly-up, and even the large ones are hurting. Toll Brothers Inc., the nation’s largest builder of luxury homes, reported that fiscal first-quarter revenue fell 22% year-over-year. And in December 2007, the NAHB/Wells Fargo Housing Market Index – a measure of builder confidence – sank to its lowest level ever.

The restaurant business, which has traditionally employed low-skilled workers as dishwashers and bus boys, is struggling as well. The National Restaurant Association’s performance index dropped to 99 in November 2007, to its lowest level since 2003. Fitch Ratings, a global ratings agency, predicts that “the entire U.S. restaurant industry will be challenged in 2008 by the weakening economy, growing pressures on discretionary income and rising food and labor costs.”

While the Federal Reserve is still contemplating a possible recession, dozens of financial pundits have recently declared that we are already in a recession, and have been for a while. Last year alone, 1,408,852 people lost their jobs due to mass layoffs, real wages have been stagnant for years, and oil and food prices have skyrocketed.

According to figures from the U.S. Department of Commerce from June 2007, the price for oranges has risen 19.8% year over year. Eggs were 19.5% more expensive than in June 2006, frozen juices and fresh whole milk had gone up 17.7% and 13.3%, respectively. As anyone who has ever double checked official government numbers knows, those are usually somewhat beautified – so the real figures could be much worse.

But we should always be willing to give the government the benefit of the doubt. Come to think of it, it might actually be a stealthy but effective strategy by our Neocon handlers to deal with the tidal wave of illegal immigration: turn the U.S. into a third-world country, and even the poor Mexicans won’t bother to come here anymore.