David Shulman is a retired Wall Street executive who is now a senior economist at the UCLA Anderson Forecast. He is also affiliated with Baruch College (CUNY) and the University of Wisconsin.

The economic news has been pretty darn good of late. Employment is up and consensus estimates are looking for about 200,000 new jobs to be reported for February this Friday on top of the 241,000 jobs created in January. The unemployment rate is coming down, consumer confidence is up, and automobile sales were at a 15 million run rate in February, the highest in five years. What’s not to like?

Make no mistake, the economy is getting better, but we shouldn’t be misled by the seasonally adjusted data the government reports. Why? Normally economic activity is constrained in the winter months by cold weather, which limits outdoor work and at times prevent people from getting to work–think construction and office closings. The government’s statisticians adjust the data to reflect this very real phenomenon.

However, the National Oceanics and Atmospheric Administration just reported that we experienced the fourth warmest winter in history. Compared to last year, this winter has been absolutely balmy with the national average temperatures six degrees and five degrees warmer than last January and February, respectively. All of a sudden the seasonal adjustment factors which are looking for winter weakness don’t work the way they are supposed to as the unusually warm weather makes it look like the economy is going into over-drive.

In terms of the automobile sales, just think of what winter is normally like. Most folks in the Midwest and Northeast have to brave sub-freezing weather and snow just to get out of the house, much less go to an automobile dealer. On top of that who really wants to treat a new car with a strong dose of rock salt on its undercarriage? But with mild weather, it is far easier to think about buying a new car in February rather than wait until April. Thus I suspect the automobile sales data represent a shift in demand rather than new demand for motor vehicles.

Similarly the warmer weather made it easier for people to get out of their house to go shopping and to eat out at restaurants. It is no surprise that most retailers reported stellar sales in February. Some observers thought that retail sales would have been crimped by soaring gasoline prices. To be sure high gasoline prices have been a negative, but this factor has been offset by plummeting natural gas prices and reduced volumes of both natural gas and home heating oil. For many consumers in the Northeast, natural gas heating bills are down 20-40 percent this year, and that goes a long way to pay for higher gasoline prices at the pump.

As a result I suspect we will get a somewhat more sober picture of the economy with the March and April data. My guess is that we will get some “payback” in the form of a slower growing labor market and somewhat weaker consumption. The consumer side of the economy will still be growing, but it won’t look as strong as it does now. Indeed, by May, with home heating costs no longer offsetting higher gasoline prices, we might once again hear talk of another slowdown.

Source

Full article

via NY TIMES 

PRACTICAL TRAVELER

Including More in All-Inclusives

Brett Affrunti

By MICHELLE HIGGINS

Published: March 7, 2012

MENTION the words “all-inclusive resort” and thoughts of bad buffets, watered-down drinks and wristband-wearing guests doing the conga may come to mind. But all-inclusive resorts, which have traditionally included basic accommodations and meals, are reinventing themselves with chic rooms, sophisticated restaurants, butlers and activities all wrapped into one price.

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Many hotel brands are also offering all-inclusive options for travelers who want to know exactly what their vacation will cost. For example, the Fairmont Mayakoba, an upscale resort just south of Cancún, recently introduced its first inclusive meal plan with the “appetite for luxury package,” which starts at $499 a night, per couple, and covers the room, two children five years or younger, bike rentals and unlimited food and beverages.

In the last year, at least two Starwood resorts, the Westin Resort & Spa, Playa Conchal in Costa Rica and the Sheraton Bijao Beach Resort in Panama, have gone completely all-inclusive with meals, accommodations and children’s club all covered under one price — a first for the company. The pricing direction was largely “a response to demand for more vacation packages from our customers,” said Trip Barrett, a vice-president for Starwood’s Latin America properties.

The new breed of all-inclusive resorts can be particularly attractive to travelers looking for one-sum vacations in these uncertain economic times. “There’s a psychological effect here,” said Scott D. Berman, head of the hospitality and leisure division at PricewaterhouseCoopers, “to know your vacation is already paid for and you’re not going to be opening your wallet every five minutes à la carte.”

But travelers need to do their research. While most all-inclusive resort offerings are covered in the price, expect to pay extra for special services and amenities like spa treatments, premium drinks and late-night baby-sitting. And while practically every place claims to have something for everyone, you can still end up feeling out of place if your travel style clashes with other guests. “I’ve been to several cheap all-inclusives that cater to ‘everyone’ — not just families — and I can’t count the number of inebriated pool-goers, partying-all-night-in-the-room neighbors and lap-dancing waitresses I have encountered,” Kyle McCarthy, editor at FamilyTravelForum.com, wrote in an e-mail.

To help you figure out if an all-inclusive might be right for you, here is a sampling of new or recently redone resorts that go beyond the usual buffet spreads and bland accommodations.

FOR FAMILIES

Club Med Sandpiper Bay, Port St. Lucie, Fla.

Standout Features Thirty new rooms designed for families with two bedrooms and one and a half baths, a children’s art studio created with the Pop artist Romero Britto and a Le Petit Sports program, which introduces young children to sports through storytelling and games on pint-size tennis and golf courses.

Beyond the Basics In addition to the usual meals and water sports, you get children’s programs for ages 4 months to 17 years, including a “baby restaurant” and teenagers’ hangout.

What’s Not Included Evening child care; spa treatments at the Club Med Spa by L’Occitane; excursions like airboat rides on Lake Okeechobe.

Cost From $1,064 a person a week to $2,135 a person a week. Children (2 to 16) pay half rate.

FOR THE SPA-OBSESSED

The BodyHoliday, Saint Lucia

Standout Features A recently renovated skin-care clinic, featuring Thalgo products and a couple’s treatment room, and a newly expanded water-sports center, which offers water-skiing, sailing, tubing, snorkeling and windsurfing. There is also a dive shop with a training center.

Beyond the Basics A daily 50-minute spa treatment, farm-to-table meals, fitness classes and wellness and weight-loss programs ranging from archery to “cellulite flushing.”

What’s Not Included Premium drinks, restaurant specials, scuba diving sessions, specialty spa treatments and appointments on day of arrival or departure and off-site adventures like mountain biking.

Cost From $450 a person a night.

FOR PARTIERS

ME Cancun, Mexico

Standout Feature s Five restaurants, seven bars, including the refurbished Rose Bar, which features Bali beds (day beds with white linen roof coverings) and misting fans, and the Beach Club, with an Infinity pool and D.J. jam sessions. The resort, which became an all-inclusive property last year, hosted the MTV series “Real World” in 2009 and features the Real World Suite with a pool table and removable stripper pole. A corner of the resort was recently designated the Chill Out Zone, a music-free area with large daybeds for guests who simply want to relax.

Beyond the Basic s Live D.J. performances are held each weekend. This spring, popular D.J.’s will periodically host day and night pool parties and D.J. Labs for guests who want to learn the art of spinning.

What’s Not Included Premium coffee and most premium liquors; private beach dinners; beachside Bali beds; off-property excursions like visits to nearby archaeological sites; and with few exceptions (guests staying in suites get a treatment) the spa, which features a coed hydrotherapy zone with whirlpools and showers that shoot water from various angles.

Cost From $298 a night for two people.

FOR ECO-MINDED FAMILIES

Sandos Caracol Eco-Resort & Spa, Playa del Carmen, Mexico

Standout Feature s Last year the resort overhauled most guest rooms, installing water recycling systems, solar water heating, low-energy air-conditioning, and wooden furniture made from forests certified as responsibly harvested. A water park with 17 slides uses rain capture and filtration systems to help conserve water.

Beyond the Basic s From May to October guests can participate in a sea-turtle release program. There is also an on-site freshwater swimming hole, mangrove swamps and Mayan ruins to explore just steps from the resort.

What’s Not Included Spa treatments, scuba diving, premium liquor, and off-site excursions like deep-sea fishing.

Cost From $188 a night for two people sharing a room, including all taxes, fees and tips.

FOR COUPLES

Sandals Emerald Bay, Great Exuma, Bahamas

Standout Features After a multimillion dollar renovation in 2010, this property — which was formerly a Four Seasons — offers a milelong private cove beach, seven à la carte restaurants, an 18-hole Greg Norman championship golf course and a 17-acre marina in case you want to bring your yacht.

Beyond the Basics Seaside villas come with private butlers.

What’s Not Included Treatments at the 29,000-square-foot spa, private cabanas, off-site excursions, greens fees and marina slips.

Cost From $770 a person a night.

Here’s why I believe that the current high price of oil is not enough to derail the U.S. economic recovery.

“BAC – Merrill Lynch senior economist Michelle Meyer appeared on Bloomberg TV with a cautious outlook on both housing and fiscal tightening.

In particular, she said that fiscal tightening is one of the biggest threats to U.S. economic growth, and that fiscal drag could amount to as much as 4 percent if lawmakers don’t change their current policies.

“Yes, we understand that there’s momentum right now. We’re encouraged by some of the labor market indicators, but we’re not yet convinced. And given the amount of fiscal tightening, we think there will be another uncertainty shock.”

She qualified that a 4 percent shock isn’t her team’s baseline policy—it is really something like 2 percent—but added, “There’s the possibility of even larger tightening if you don’t see policy.”

Watch her full interview below:

PARIS/FRANKFURT (Reuters) – France is prepared to switch allegiance from Spain to Luxembourg in the battle for a seat on the Executive Board of the European Central Bank, according to diplomatic sources, an appointment that would tilt the balance towards anti-inflation traditionalists.

Spain, Luxembourg and Slovenia are in a three-horse race to replace Jose Manuel Gonzalez-Paramo when the Spaniard leaves the ECB at the end of May.

Since the ECB flooded banks with cheap money for a second time last week, some of its policymakers led by Bundesbank chief Jens Weidmann have expressed alarm that the dramatic loosening of lending policy will fuel imbalances in the euro zone and stoke inflationary pressures.

The ECB hawks’ bargaining position could be further bolstered if Luxembourg’s central bank chief, Yves Mersch, wins the race.

French President Nicolas Sarkozy backed Spain to keep its seat on the ECB board before Madrid put forward the ECB’s top lawyer Antonio Sainz de Vicuna as its candidate.

Since then the veteran Mersch, who has one of the strictest anti-inflation stances among ECB policymakers, has entered the race for the post which manages the ECB’s day-to-day business.

Sources said France was now backing him rather than Sainz de Vicuna as part of a grand deal on top jobs at European institutions, which could see France bag the European Bank for Reconstruction and Development.

ECB board members are chosen by euro zone governments rather than the central bank itself. A decision may be made as soon as Monday at a meeting of euro zone finance ministers before being rubber stamped by heads of government at a later date.

Birinyi thinks we all could be surprised and see 1700 on the S&P by year end…

“Europe’s economy contracted in the fourth quarter as investment declined by the most since 2009 and exports and consumer spending dropped.

Gross domestic product shrank 0.3 percent from the third quarter, the European Union’s statistics office said today, confirming an estimate published on Feb. 15. Exports fell 0.4 percent after a 1.4 percent gain in the previous three months, while household spending declined 0.4 percent and investment dropped 0.7 percent.

While Europe is facing its second recession in less than three years, the economy shows “tentative signs of stabilization,” European Central Bank President Mario Draghi has said. ECB efforts to pump cash into the economy have helped ease concern about a credit crunch and won governments time to agree on measures to contain the debt crisis.

“The region is still facing major headwinds, notably including increased fiscal tightening in many countries and markedly rising unemployment,” said Howard Archer, chief European economist at IHS Global Insight in London. “Despite some recent overall improvement in euro zone surveys and evidence that Germany is returning to growth, we doubt that the euro zone will be able to avoid further contraction in the first quarter of 2012 and very possibly the second.’”

Read more

Read here:

The news is very straightforward. China will cut its target for economic growth this year to 7.5% from the 8% goal that’s been in place since 2005, Premier Wen Jiabao told the annual meeting of the National People’s Congress today.

But what does it mean?

Financial markets have decided that a lower-growth target means China’s leadership is forecasting lower growth. That conclusion is one reason that stock markets were down around the world Monday — from a 1.4% drop in Hong Kong’s Hang Seng Index to a 0.8% decline in the German DAX to a 0.6% slide in the S&P 500 ($INX -0.39%) Monday afternoon. (China’s GDP climbed by 8.9% in the fourth quarter of 2011 and by 9.2% for the full year. That was down from the 10.4% growth in 2010.)

But I think the market’s conclusion doesn’t fit well with all the other policy statements that accompanied the setting of a lower growth target.

First, Wen did not change any of the previous language about economic and monetary policy. The government will maintain a “proactive” budget policy and a “prudent” monetary policy. Nothing there to indicate any change in course tied to the 7.5% target.

Second, the government’s announced growth policies were actually slightly less pro-growth than expected. The money supply target was set at 14% — slightly below the median forecast of 15% among economists surveyed by Bloomberg. The growth target for fixed-asset investment was set at 16%. That’s below the 18% forecast by economists. Coming in with targets for less stimulus than forecast certainly isn’t what you’d expect if China’s leaders were indeed worried about a hard landing for the country’s economy.

Third, the heads of China’s big state-controlled banks are still talking about growth in new loans similar for 2012 to that in 2011 and about further reductions in the bank reserve ratio by the People’s Bank. Here again this is business as usual.

Maybe the big banks haven’t read the memo sent down from Beijing.

Or maybe the change in the target doesn’t mean what the markets have decided it means.

I can think of two alternative explanations.

Alternative explanation #1: Cutting the growth target to 7.5% is an insurance policy for the new leaders that will start taking over the reins in October. Hey, if after setting the growth target at 7.5%, it comes in at 8% or 8.5%, then the new leadership takes office riding a wave of economic success. Think of the new target, then, as an attempt to lower expectations.

Alternative explanation #2: The lower target has nothing to do with any actual forecast for China’s economic growth in 2012. Instead it’s a sign to local leaders that they have more leeway to implement needed economic reforms without getting a black mark on their records if growth doesn’t meet the previous 8% target.

China’s leaders — or apparently a majority of the current nine-man Politburo at least — have spent the last year talking about the need to rebalance China’s economy. The goal would be an economy less dependent on exports and spending on fixed assets such as real estate and infrastructure and more dependent on growth in the consumer sector.

The big problem with that plan — especially if you’re a local leader accustomed to being graded on hitting Beijing’s growth target — is that implementing the new plan is risky. Local leaders know how to generate numbers under the current economic model that show 8% or better growth. But hit the target while shifting to model based on growth in consumer spending? Exactly how do you do that?

By lowering the goal to 7.5%, Beijing gives local leaders more room for error — and that should encourage them, the thinking in Beijing might go, to implement the new policies.

How do investors decide which of these three explanations is correct?

I think we’ll get a good indicator when China announces consumer price inflation for February. Along with cutting the growth target for 2012 to 7.5% from 8.0%, the government also kept its inflation target for 2012 set at 4%.

On the surface, keeping that target at 4% would seem to tie the hands of the People’s Bank on further reductions in the bank-reserve ratio and a first cut in its benchmark interest rate. After all, inflation climbed back to 4.5% in January, putting a halt to months of steady decline from the July peak at 6.5%. If inflation is headed back up, or even if it’s stuck at 4.5%, the central bank won’t be able to do very much to stimulate the economy. You’d think, then, that if China’s leaders were worried about economic growth in 2012 that they’d have cut the bank some slack by raising the inflation target.

But many economists have noted that the January inflation number was distorted by the early Lunar New Year holiday. They’re expecting that the official data to be released on Friday will show that inflation has dropped back in February to 3.4% or so. That would give the People’s Bank plenty of room to stimulate the economy even with a 4% inflation target.

Of course, Beijing’s leaders already know what Friday’s announcement will say. If the inflation number comes in significantly below January’s 4.5% — and especially if it comes in below 4% — I think that’s a sign that China’s leaders think they’ve got plenty of tools for making sure that growth doesn’t slow more than they desire. And that the 7.5% target isn’t a signal of a hard landing in China but of confidence that the country’s economy has enough momentum to tackle the rebalancing that it needs for the long run.

NEW YORK (Reuters) – Stocks fell on Monday for the second straight session and the third in the last four trading days, led lower by basic materials shares after China trimmed its growth target for 2012.

The S&P 500 index opened lower and data showing the U.S. services sector expanded in February at its fastest pace in a year did little to stem the decline.

The benchmark S&P 500 is up 8.5 percent so far this year on investor expectations for a recovery in the U.S. economy, a containment of the euro zone’s debt crisis and the belief that China will avoid a hard landing in its current economic cycle.

China, the world’s second-largest economy, lowered its 2012 growth target to an eight-year low of 7.5 percent and made expanding consumer demand its top priority, as Beijing looks to shrink the economy’s reliance on external spending and foreign capital.

“That spooked everybody this morning. It started over in Asia, flowed right to Europe and flowed right over here,” said Ken Polcari, managing director at ICAP Equities in New York.

“The fact is they are guiding a little bit lower to control their inflation. It is not necessarily the end of the world, but it gave people a reason to take some money off the table.”

Materials shares, sensitive to signs of slowing in China’s commodity-hungry economy, dropped and were the biggest drag on Wall Street. The S&P materials sector index (REU:GSPMI) fell 1.6 percent, with Freeport McMoRan Copper & Gold Inc (NYS:FCX) off 3.8 percent at $40.45.

The Dow Jones industrial average (DJI:DJI) shed 14.76 points, or 0.11 percent, to 12,962.81 at the close. The Standard & Poor’s 500 Index (MXP:SPX) dipped 5.30 points, or 0.39 percent, to 1,364.33. The Nasdaq Composite Index (NAS:COMP) lost 25.71 points, or 0.86 percent, to close at 2,950.48.

During the session, the S&P 500 briefly dipped below its 14-day moving average – a line it has held for the last 50 sessions in an impressive run.

“A judge has cleared the way for an Alabama county to move forward with the largest municipal bankruptcy in U.S. history, overruling Wall Street claims that state law didn’t allow the county to file the case.

U.S. Bankruptcy Judge Thomas E. Bennett issued his order late Sunday, allowing Jefferson County, the state’s largest county, to remain in bankruptcy as it attempts to sort out more than $4 billion debt linked to borrowing for the county’s sewer system.

Bennett’s decision could be reviewed by the 11th U.S. Circuit Court of Appeals, which already has been asked to consider another question in the case….”

Read More

What about Stockton CA ?

“Increasingly, millions of older Americans cannot keep up with even basic living expenses, according to new research.

Seniors in the Northeast and Southeast are the hardest hit, but in none of the 50 states do median incomes rise enough to meet the Elder Index, a comprehensive measure of what it takes to finance basic living costs, reports Washington, D.C. think tank Wider Opportunities for Women.

With a median income gap of $10,248, seniors in Massachusetts are more likely to face economic insecurity than in any other state, followed by seniors in D.C., New York, Hawaii, Connecticut and New Jersey….”

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Rising gasoline prices have helped to curb China’s consumption for the start of this year….

“China pared the nation’s economic growth target to 7.5 percent from an 8 percent goal in place since 2005, a signal that leaders are determined to cut reliance on exports and capital spendingin favor of consumption.

Officials will also aim for inflation of about 4 percent this year, unchanged from the 2011 goal, according to a state- of-the-nation speech that Premier Wen Jiabao delivered to about 3,000 lawmakers at the annual meeting of the National People’s Congress in Beijing today…”

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Some nice graphs over at the WSJ.

via 

WASHINGTON, D.C.(CBSDC) – For many Americans, the lamentation of rising gas costs is nothing new. It’s an everyday reality to see prices at the pump going up.

But now, those looking to get away from it all may encounter further troubles doing so, thanks to gas price hikes that have the potential to curb holiday travel and drive up the cost of plane tickets.

Travel buffs are just beginning to solidify their spring break and summer vacation plans. As they do, comparison shopping may show that such hikes have already started to take their toll on the cost of airfare.

“[R]ising jet fuel costs put significant cost pressure on the airline industry,” Steve Lott, vice present of communications for Airlines for America told CBSDC. “Regarding fuel, it was the airline industry’s largest expense in 2011, representing 35 percent of total costs. In 2011, the price of jet fuel reached a record high of $3.00 per gallon for the year.”

He continued, “It is even higher for the first two months of 2012.”

Cynthia Brough, director of public relations for AAA, said that as jet fuel costs go up in tandem with gas prices, the consumer could expect to pay more for their flight.

“As with any business, if [an airline] pays more for fuel and operational costs, they need to pass that cost on to the consumer,” she told CBSDC. “There have been [similar] effects in the past.”

Though the illegality of price signaling prevents airlines from discussing numbers, Allison Steinberg, senior media analyst for JetBlue Airways, told CBSDC that there are steps taken to try to stave off the potential effects of rising gas prices.

“We continue to believe the best tools for managing the impact of fuel expense are operating a fuel-efficient fleet and using efficient operating procedures, such as single engine taxi,” she said in an email. “In addition, we continue to manage our fuel hedge portfolio as a form of insurance to help mitigate price volatility and protect JetBlue against severe spikes in oil prices.”

It may take more extreme measures for airlines to keep up, though. Lott added that, from the year 2000 to the middle of 2011, jet fuel prices rose 268 percent. In that same time period, domestic airfare costs reportedly rose 10 percent.

“Fares over the past decade have not kept pace with costs or the price of fuel,” he noted.

According to information provided by the AAA National Office to CBSDC, some airlines have already taken such action, replacing larger jets with smaller, regional aircrafts that are more fuel-efficient in nature.

Travel website Expedia.com confirmed that prices have gone up for flights in recent history. However, they additionally stated that ticket sales have increased as well.

“Despite the recent rise in gas prices, Expedia sees people still taking to the skies,” Jeremy Boore, travel analyst for Expedia.com, said to CBSDC. “With regards to flights, on some of the most popular routes, Expedia sees ticket growth outpacing average ticket price growth.”

According to their collected data, tickets between Los Angeles International and John F. Kennedy International Airports in the past 28 days have gone up in price by 1.7%, with sales up 14.1% in comparison with the previous 28-day period.

Other popular routes saw similar rises in both cost and consumption.

“[T]here is still demand for travel, all things considered,” Boore added.

All the same, consumer surveys and data collected last year indicate that some travelers did make the decision to avoid air travel, instead opting to go by car.

American drivers will still have to pay more to vacation, however, statistics offered by the U.S. Energy Information Administration show that, for the week starting Feb. 27, gasoline prices per gallon averaged out at $3.71.

That amount reflects a rise of 13 cents from the previous week, and 33 cents from the same week in 2011.

The past month has also been statistically more expensive at the pump than last February, according to numbers collected by AAA. The data collected and presented by their Daily Fuel Gauge Report shows that on March 1, 2012, the national average for a gallon of gas is $3.74. The same time last year, Americans paid just $3.39 per gallon.

The increase in cost can be attributed to a number of things, including dwindling supplies and increasing demand as summer ticks closer and the politics surrounding crude oil acquisition, especially in the Middle East.

Avery Ash, manager of regulatory affairs for AAA, said that gas prices do tend to rise slightly as March begins and winter draws to a close. But the rise seen recently is atypical in size, due to geopolitical influences.

“Last year … we saw escalating tensions in Libya and northern Africa, and that uncertainty impacted the market – most specifically, the removal of Libyan crude from the market,” he told CBSDC, adding that this year’s recent tensions in Iran have taken their toll as well. “This time of year we do see some upward movement, but the last two years have broken the historical norm in the magnitude of the increases.”

A combination of pent-up vacation desires and years of experience with balancing personal budgets has helped American travelers enjoy some time away all the same, even if they had to change their approach.

“[Travelers] did … budget more wisely, by perhaps visiting national parks for free as opposed to another venue of higher cost,” Brough said. “They changed the type of travel, but they still traveled.”

But as Nancy White, who also directs AAA public relations, observed in their end-of-year holiday travel forecasts from 2011, many Americans will prioritize travel over other expenses, especially if family and friends are involved in the trip.

“The heartstrings outweigh the purse strings,” she said, quoting a colleague. “People will do whatever they need to do to spend time with loved ones, making cuts in other areas of spending to accommodate travel plans.”

Read here:

The dark economic days of early 2009 — hundreds of thousands of jobs lost per month, the Dow sinking to 6,600, a sense of chaos — may now seem a distant memory. But the legacy of the deep downturn, and the economic policies forged in that crucible are still very much with us. And, so, too, are the debates over the response by the Federal Reserve and the Obama Administration. Was the stimulus too much or too little? Did the central bank exert itself excessively to aid Wall Street? And did the elite cadre of brilliant economic minds that flocked to Washington in 2009 accurately diagnose the situation and prescribe the appropriate cure?

In his timely, highly readable new book, The Escape Artist: How Obama’s Team Fumbled the Recovery, Noam Scheiber, a veteran Washington reporter with a solid background in economics, delves into these questions.

From the outset, Scheiber argues, the willingness of the Fed and Treasury to go all out to save the financial system was not matched by a similar desire by the administration to pitch big ideas to help the real economy. One of Scheiber’s big scoops was the unearthing of a memo written by Christina Romer, the head of the Council of Economic Advisers, in which she argued that a stimulus of $1.8 trillion would be needed to return employment to healthy levels by 2011. But the memo never reached the president’s desk, in part because the dominant political advisers believed a measure of that size was a non-starter. “I think they missed an opportunity out of the gate,” Scheiber says. While the stimulus worked and helped get the economy back on a track of growth, it ultimately was a half-measure that disappointed. “They were right about the shape but didn’t give it enough oomph to get escape velocity,” for the economy, Scheiber says. (In the accomanying video, Scheiber joins me and my colleague Aaron Task to discuss his book).

Scheiber also delves into the personalities, conflicts, and egos that made up Obama’s economic team: Office of Management and Budget Director Peter Orszag, Romner, National Economic Council Chairman Laurence Summers, Treasury Secretary Timothy Geithner, economic advisers Austen Goolsbee, Gene Sperling, and Jason Furman, and the political powerhouse of Chief of Staff Rahm Emanuel and advisers David Axelrod and David Plouffe. At times, this Dream Team of advisers turned out to be a Team of Rivals. Scheiber conducted hundreds of interviews with all the key players, unearthing details about their arguments, policy preferences, and tennis games. As a result, with its reconstruction of meetings The Escape Artists reads like a Bob Woodward book — albeit better written and informed by a more sophisticated understanding of economics and policymaking.

Source

“Submitted by Charles Hugh Smith from Of Two Minds

If This Is Such a Strong Economy, Why Does This Chart Look Recessionary?

Is the U.S. really a post-oil economy?

One way to gauge the real economy is to look at charts of the GDP, wages, household debt and the price of oil; another way is to correlate all of these on one chart. The following chart (courtesy of frequent contributor B.C.) plots these four metrics thusly: GDP/(wages/household debt)/price of oil.

What pops out of the chart is what happens when oil spikes higher or declines. In 1973, the first oil shock sent the economy off a cliff. Conversely, when oil fell to $12/barrel in the late 1990s while wages were rising strongly, the plotline peaked, reflecting a strong economy.

In 2008, oil spiked to $140/barrel in 2008, household debt reached record heights and wages began stagnating, and the economy fell into a sharp recession. When oil plummeted back to $40/barrel in early 2009, the plotline spiked up.

When oil prices and household debt are high while wages stagnate or decline, the economy sinks to recessionary levels.

Here are B.C.’s observations:

This chart utterly discredits the economics profession and those who claim that the post-industrial economy (“deindustrialization” and “financialization”) is not oil-constrained and the service economy is what the rest of the world should adopt as the normative standard at $100+/barrel oil.

The current plotline is hovering just above the recessionary levels of late 2008. Does this reflect a strong economy, or one that is weak? If oil keeps climbing, what will that do to a visibly weak economy?

The Bulls are convinced that the U.S. has decoupled from the rest of the world and from the price of oil. This chart makes the opposite case: the price of oil matters, especially when wages are declining and household debt is elevated.”

Meanwhile those on food stamps rose to a new record. Up 384k last month alone….

“I’ll get us that oil from Canada,” Mitt Romney said in his victory speech after the Michiganprimary. He was referring to Keystone XL, the crude-oil pipeline that has become a top-tier campaign issue for Republicans.

Problem is, the tar-sands oil in that pipeline wouldn’t be coming to “us.” It would go directly from Canada to refineries in the Gulf region en route to export markets in Latin America and Europe. The U.S. would be used as little more than a transit corridor.

We’ve heard a lot about groundwater contamination near the completed portions of the pipeline — more than a dozen spills of the highly corrosive oil, including one near Kalamazoo, Michigan, that they can’t seem to clean up. Conservative Nebraskans became greens overnight when they learned the details of the project that will go through their state.

But the immediate effect of completing the Keystone pipeline (perhaps by 2015) is more surprising and counterintuitive.

The project would increase domestic oil prices by more than $6 a barrel and prices at the pump in parts of the country by about 20 cents a gallon. You read that right. At a time when rising gas prices threaten President Barack Obama’s re-election, the Republicans’ most ballyhooed remedy — a new pipeline — would make the problem worse….”

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