Relevant and even prescient commentary on news, politics and the economy.

Weekly Indicators for July 15 – 19 at Seeking Alpha

by New Deal Democrat

Weekly Indicators for July 15 – 19 at Seeking Alpha

My Weekly Indicators post is up at Seeking Alpha.

There were a number a changes among the short leading indicators this week at the margins, in a somewhat surprising direction. Since I’ll be posting my semi-annual updates of my short and long term forecasts over the next week or two, there is a lot for me to think about!

Anyway, as usual, clicking over and reading should be educational for you, and also rewards me a little bit for the effort I put into this enterprise.

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Bill Black says what if…

(Dan here… Via Real News Network, Bill Black discusses the what-ifs of President Trump’s policies in a spectacular contrast to current expectations…providing. a jumping off point from what we expect from the way it is framed now. I assume the complex interalationships of the wealthy elites (let us see how the Epstein case unwinds for another aspect) plays an important but not so well known role in this drama.  I find his thought his conclusions dismaying if even somewhat accurate.)

BILL BLACK: Sure. The question I ask in the article is why did Trump choose to be so spectacularly unpopular? Because had he done what he promised and had a true middle class tax cut that gave, for example, $5,000 a year to the typical middle class household, he would be spectacularly popular. And almost certainly they would have–the Republicans would have retained control of the House, and quite possibly they would have gained seats in the House. And of course they would have gained seats in the Senate. And Trump would be well positioned for re-election. He would have greatly expanded his base, and he would have paid off to his base, as well. And you know, convinced them that backing him was exactly the right thing.

And that’s the biggest thing. But also, if Trump had done what he promised and had a true infrastructure bill, where he spent $2 trillion on infrastructure, he would have divided the Democratic Party.

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Eliminate The Debt Ceiling

Eliminate The Debt Ceiling

Several days ago in WaPo, Catherine Rampell published a highly reasonable column calling for eliminating the century-old US debt ceiling, something no other nation has ever had, a position supported by a wide array of economists including such a conservative GOP stalwart as the recently deceased Martin Feldstein, a former CEA Chair for Reagan.  I have made numerous posts here on this in the past, but the issue is hot again as once again the debt ceiling is being rapidly approached.

The latest story is that the “adults in the room,” Treasury Secretary Steven Mnuchin and Speaker of the House Nancy Pelosi, may be very near an agreement to raise the debt ceiling, Reportedly Pelosi has been open to eliminating the ceiling, but in the current circumstances I certainly understand why she might be wanting to secure a two year agreement to preserve funding for social safety programs crazy right wingers want to use the debt ceiling issue to trash as well as holding off any shutdowns this fall.  This is what used to be known as “good government,” but in the current environment, even this apparently reasonable deal, which also has no non-economic sideshows involving abortion or whatever, may yet not pass.  Pelosi says it must be agreed to by tomorrow evening if it will get passed properly by Congress before they all go on leave and the government might run out of money in early September (corporate tax payments have been way down due to Trump tax law).  Eliminating the ceiling would avoid all this bs, but this is not the moment for that.

This is definitely a weird and unprecedented situation.  For over a century we have had this completely indefensible debt ceiling, which has been raised so many times it is not worth counting, and when the WH and Congress have been controlled by the same party, it has been no big deal, although obviously that is what we need to get rid of the damned thing.  However, historically, when there has been split partisan control the game has been the WH pushing raising the ceiling while the opposition party in Congress has made lots of complaining noises and often made demands for raising it.  The problem this time is that the major power broker of the administration, Acting Chief of Staff Mulvaney, was part of the tea party fanatics in the House who when Obama was prez tried to block raising the ceiling.  Apparently at times he and Trump have indulged in fantasies that if there is a default he could personally control which agencies get funded and which do not.  This is not true, and maybe they are figuring it out, but Mulvaney has said nothing, and Trump must pass on this.

If he messes up the deal, it will be all his fault, as his own Treasury Secretary has cut it with the Congressional leader of the opposition party in the House, with reportedly the toadish GOP-controlled Senate ready to go along.  He may or may not have figured out that triggering a shutdown did not help him, but if he thinks triggering a default will not be worse, this will be a big mistake, to put it mildly.

Barkley Rosser

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Fox News Is Calling The Persian Gulf “The Arabian Gulf”

Fox News Is Calling The Persian Gulf “The Arabian Gulf”

Yes.  For centuries throughout the entire world that crucial body of water has been called “the Persian Gulf,” even though in 1935 the nation of Persia changed its named to “Iran.”  I became aware several decades ago when I was in Saudi Arabia that they have a really big fuss that it should be called “the Arabian Gulf.”  I think maybe their fellow Arab GCC members have been supporting this nonsense as well, but nobody else did, certainly not the US.

But now here it is, and I had noticed in some other US media outlets recently. Is this yet another payoff to the murderous Saudi Crown Prince Mohammed bin Salman (MbS) for funneling piles of money to Jared Kushner and the Trump Organization?  I mean, Fox News does what Trump and his flunkies want.  So, not only are we not punishing MbS for his awful war in Yemen, which even the UAE is now getting out of, not only are we not punishing him for ordering the assassination of a US-based journalist, Jamal Khashoggi, but, heck, Trump through Fox News and I am not sure who is trying to change the name of this body of water from its historical origin to kiss the ass of this disgusting murderer.

Oh, there is also the matter that Trump has gotten himself off into a totally anti-Iran schtick, with his withdrawal from the JCPOA and his imposition of massive sanctions on Iran.  But this looks like an attempted permanent punishment.  Frankly, I hope the rest of the world does not go along with this bs, but in the US, I fear he may have succeeded, so many people are so ignorant.

Barkley Rosser

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This is my oldest son the weekend of the Apollo moon landing.

The whole country was glued to their TVs that week.

Figure 1

The TV was about the state of the art 50 years ago and my brother, the photo journalist, took the photo.  In  the pre-digital era he mostly worked in black and white.

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A Voice from England

Trevor and I worked together on the supply of antennae for keyless go automobiles including Chrysler, Mercedes, BMW, Skoda, etc. I had met him while working in Germany as the Purchasing Manager for North America. He was representing a German/Czech company.

I spent time traveling around Germany, Switzerland, and the Czech Republic. Partook of Czech Budweiser beer which is many steps up from the American version. We have been exchanging words on the situations and conditions in England, Europe, and the US. It sounds as bad as the US; although, I would like to think we are far worse than what Europe is experiencing. This exchange was started with a short comment I made on Facebook:

A few racist remarks by the Pres and suddenly the imprisonment of immigrants seeking asylum from violence in their homelands is forgotten along with the poor conditions under which they are being held.

The squad of four is tough enough to take the abuse. They have heard worse. We should be angry at Republicans and Trump’s purposeful comments in an attempt to deflect our attention from the crisis on the southern border and his continued abuse of people.


We live in scary times, some comments by your President and our possible new Prime Minister seem to echo the 1930’s in Europe!


My English associate, I am sure you and your country men and women will rid yourselves of Boris as soon as you can do so. For us, it is a bit more difficult as we have actors of democracy placing party and politics above country and the general welfare of this country. We do not make much of a safe or dependable ally in the world today either.


I sincerely hope so, I see too many parallels with the rise of Hitler in our current European political environment, calling for sovereignty and blaming immigrants for the ills of a nation are not the way forward. But this kind of rhetoric appeals to the less thoughtful amongst us. I listen to people telling us that the UK must leave the European Community because of their control over us, but 95% of the legislation put before the European Parliament during the last 5 years was voted through with very close to total support of the UK MEP’s. I am watching the most divisive split of the UK driven by the media and a few MP’s who appear to be stupid. It is just unbelievable, you could not make it up. Then we have Trump who appears capable of gross stupidity, and has crowds cheering him and chanting for democratically elected senators to be sent home! It is all very scary!

I trust you are well!


I have been reading and watching. This is highly unusual for Europe in this age. Hungary appears to be off the rails also with Orbán as is Poland too. Radicals have also reappeared in Germany, And the US has its blood and soil marchers who are further radicalized by the stupid remarks of our President. Politicians of his party are condoning his racist hatred which empowers and mobilizes others to do stupid things. It has gone beyond verbalization.

Yes, yes, blame the poor and the weak, the different culture and color, who come to America having other languages and looking for safe haven amongst us. Instead they are portrayed as a class level lower than the poorest of the white American, taking advantage of our economy. This has kept the population from concentrating on the disproportionate, and growing, distribution of wealth and income in the US. For the lower white class, an allowed luxury, a place in the hierarchy and a sure form of self esteem insurance.

The political economics of it have certainly led to bad and violent reactions towards immigrants. We are not a small country. At the most only 10% of our land mass is occupied. New people keeps our median age lower, which is good for labor, and most have assimilated into society over the generations.

I am hoping with “a little patience, we shall see the reign of witches pass over, their spells dissolve, and the people, recovering their true sight, restore their government to its true principles (Jefferson).”

This bastard occupying our presidency must go.

Perhaps a couple of more Budweisers in Prachatice to dull our thought on the current events????


I wrote this to a Brexiteer friend who I just cannot believe fails to see the reality.

Yes a difficult area as the public are not fully informed, however, there is already far too much anti immigration feeling in this country, it is clear that without immigrants our NHS would not function. The media has a great deal to answer for, during the last 20 plus years they have printed distortions and blatantly biased articles against immigrants, and indeed against the EU.

The rise of the likes of Farage and Trump with their, in my view distorted views of the world, claiming they only want to reclaim their countries for the people is dangerous rhetoric, I thought that with the end of the Second World War we had moved on from demonizing and blaming particular races of people for damaging a country.

Indeed there is the moral dilemma of ensuring that we do not create poverty, but our current crop of politicians has spent and is indeed spending multiple millions of our tax money on foolhardy adventures, HS2, PFI and yes Brexit. These same politicians, whilst cosseted in their parliamentary roles have made costly decision after costly decision without a care for those in genuine need.

Universal Credit is an absolute fiasco, it is causing immense levels of poverty for both indigenous British people and immigrant alike, just look at the rise in food bank use, also consider the absolutely appalling numbers of children living in poverty. The claims of children unable to go to school as they have no shoes are true, just ask my daughter who works for a charity.

I am no socialist or indeed liberal, I believe in freedom for the individual to make the best of their lives, I also believe in the free market. But, and this is a big but, I also believe in helping those in genuine need, the low paid workers who contribute much to society for little reward. For example those earning the UK minimum wage who are trying to feed and house themselves.

So I do not believe in squandering tax £’s on vanity projects, or things like PFI, or as I said earlier Brexit, the bill to date on this alone is in excess of £900 million in the last financial year, with 5,000 civil servants diverted from their real jobs and numerous fat cat consultants from the big four consultancy practices creaming £ millions of Tax £’s. All whilst the self-serving egotistical politicians argue amongst themselves about a deal that needs to be agreed by 27 other countries.

You can tell that I feel very strongly about the situation to which the media has misled us, I am ashamed of my country when I see homeless people on the streets, and when I see the use of food banks increasing on a daily basis, and when I hear that we have staggering numbers of children living in poverty. This is supposed to be the 5th largest economy in the World, but our politicians are squandering our Tax pounds without a care for their country.

Me: I do not believe in mislaying the people I get to know while traveling. We have issues globally and similar concerns by the sane.

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June consumption was strong, while production was weak

June consumption was strong, while production was weak

Tuesday morning’s retail sales and industrial production releases for June are consistent with my take that the consumer sector of the economy is doing OK, while the production sector remains in trouble.

Let’s start with retail sales.

Retail sales are one of my favorite indicators, because in real terms they can tell us so much about the present, near term forecast, and longer term forecast for the economy.

This morning retail sales for June were reported up +0.4%, while May was revised downward by -0.1%. Since consumer inflation increased by less than 0.1% last month, through the magic of rounding, real retail sales also rose +0.4%. The strength of the past two months means that YoY real retail sales are now up +1.7%.

Here is what the last five years look like:

Next, although the relationship is noisy, because real retail sales measured YoY tend to lead employment (red in the graph below) by a number of months, here is that relationship for the past 25 years, measured quarterly to cut down on noise:


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House’s SECURE Act and the Senate’s RESA Act

Congress has been busily working on a much-needed way to improve Middle Class savings and growth over the span of their employment to boost their retirement.

Dueling bills to restructure IRAs and 401ks appear to be redundant. Better known as the “Setting Every Community Up for Retirement Act” (SECURE Act) H.R.1994 and the Senate has a similar bill, the “Retirement Enhancements and Savings Act” S.792 (RESA). Both bills were passed with bipartisan support.

For the ultra rich? A major outcome of the Trump tax bill were tax breaks for the wealthy and corporations. Besides much of the resulting income increases going to 1% of the household taxpayers, the same 1% were given the ability to shelter large amounts of income in gifts to their heirs. It is a great time to be rich in income and have the ability to shelter it by making gifts of it to your heirs’ tax free!

A little history on why Congress might take this up

From 1979 to 2017, the average annual income for the 1% of the household taxpayers has increased 156%, the top 1 hundredth of 1% income increased 343%, and the average American’s income did not increase at all. In spite of increased education from 1970 when half of Americans 25 years and older had a high school degree compared to today when the proportion of Americans having a college degree tripled, income has been stagnant for much of America. Even with the increased education, as Nick Hanauer in a recent Atlantic on this topic stated, the “Education is Not Enough” or was not enough to build, to build a vibrant middle class. Nick is also reiterating what Tom Hertz said in 2006 in his article; “Understanding Mobility in America.”

“The first aspect is the question of intergenerational mobility, or the degree to which the economic success of children is independent of the economic status of their parents. The second aspect is the short-term question of the amount by which family incomes change from year to year. One very clear conclusion is children from low-income families have only a 1 percent chance of reaching the top 5 percent of the income distribution versus children of the rich who have about a 22 percent chance.”

All the education in the world may not make a bit of difference in upward mobility as Nick and Tom Hertz concluded unless the income and the status is already there. A successful middle class with good income has to be present.

What Congress is doing.

The House passed the SECURE Act with an almost unanimous bipartisan 2nd vote. Prior to the first vote, Republican NC Representative Patrick McHenry made a motion for an affirmative vote (page H4147) stating they stand together against the anti-Semitic BDS movement. How this applies to the average citizen’s IRA is beyond me. It is a tagalong to the SECURE Act with the hope it would pass. It lost with 222 in opposition.

A few things about the House “Setting Every Community Up for Retirement Act (SECURE).

• It lengthens the amount of time a person can contribute to an IRA beyond 70.5 years of age.
• Raised the required minimum distribution (RMD) age to 72 from 70 1/2 years old.
• Increased the Safe Harbor percent from 10 to 15%.
• Allowed long-term, part-time employees to contribute.
• Put in place an small employer tax credit for enrollment.
• Revised how benefits are paid out to a non spousal from 5 to 10 years (page H4234).
• Allowed automatic enrollment.
• Etc.

“The House SECURE Act would eliminate the current rules allowing non-spousal IRA beneficiaries to use (stretch IRA) minimum distributions (RMDs) from an inherited account over their own lifetime (and potentially allow the funds to grow for decades). With the SECURE Act, all funds from an inherited IRA would have to be distributed to non spousal beneficiaries within 10 years of the IRA owner’s death (The rule would apply to inherited funds in a 401(k) account or other defined contribution plan, too.).”

Other than the elimination of the Stretch IRA, these changes were needed and they will improve the amounts accumulated for retirement. As I mentioned earlier, much of America has not incurred the same income increases as the 1% or the 1 tenth of 1% of the household taxpayers. Pre-inflation YOY income growth for non supervisory Labor has been ~3%. Subtract out inflation of 2% and income has grown by 1% for much of America not leaving a lot to put into a 401k. I am waiting for the next shoe to drop of increasing the age of when people can take SS.

The Senate RESA bill is similar in content except for a provision buried in it taking aim at the Middle Class. The Senate’s RESA Act shortens the time period for non-spousal beneficiary withdrawal who have inherited an IRA with greater than $400,000 (IRA, Roth IRA or 401k). RESA exempts the first $400,000 inherited to a life time of RMD withdrawals and then it forces beneficiaries to cash out over a 5-year period any amount greater than $400,000. It could have tax implications if the amount over $400,000 was large or one’s income tax bracket was high.

As one reader pointed out, many people with 401Ks have less than $400,000 in their accounts when they retire. Then too with little growth in income occurring (mentioned earlier), one can see why people are not saving for retirement and why there is less in their 401ks.

Under today’s Stretch IRA rules, heirs of IRA owners were allowed to extend the taxable distributions of an inherited IRA over their lifetime, hence being called “stretch IRAs.” The proposed Senate bill labeled RESA—allows $400,000 of aggregated IRAs to stretch per beneficiary, but chops the cash-out period down to five years for the balance greater than $400,000.

What are the implications in the Senate bill? As I said it affects non spousal beneficiaries of the heads of families who have accumulated money greater than $400,000 over their lifetime to pass on as inheritance to their families. Non-spousal beneficiaries on inheriting sums of money greater than $400,000 could have a substance portion of the inheritance taxed by Uncle Sam and also end up in a higher tax bracket as a result. Ok, I said it enough times.

Similar would hold true for the House bill which eliminates the stretch IRA, does not have an exemption for 400,000 of inheritance, and forces a beneficiary to use up inheritance funds in 10 years rather than a lifetime or RESA’s 5 years. The proposed Acts do not impact spousal beneficiaries or minor children named as beneficiaries until pf a majority age, children with disabilities, etc.

The forced 5 year annual distribution of these savings and retirement plans by beneficiaries is the primary revenue vehicle (taxes) of RESA. Senate Finance Committee Chairman Chuck Grassley, (R-Iowa), who proposed the bill, said on the Senate floor recently that the RESA bill “is paid for” by this provision (as he takes his agricultural benefits resulting from tariffs).

No worries for the 1 percenters.

Back to the 1-percenters, Trump’s Tax Overhaul law doubles the estate-tax exemption to $22 million a couple and possibly avoiding taxes in dynasty trusts. The new law doubles the amount that can be passed to heirs without worrying about estate and gift taxes, to about $22 million for a married couple (redundant, I know). But the thresholds are in place only until 2025, and the ultra-rich are turning to a key tool — the dynasty trust — to secure the financial futures of their children, grandchildren, great-grandchildren, and beyond.

Assured wealth and income giving descendants a place on the ladder of mobility as being necessary to move upwards on that same ladder by Tom Hertz and Nick Hanaeur.

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