Mish's Global Economic Trend Analysis |
- Small Business Optimism Sinks On "Precipitous Decline in Hiring Plans"; Is Lack of Credit an Issue?
- Venezuela’s Hyperinflation Anatomy; Army Storms Caracas Electronics Stores; Total Economic Collapse Underway; Could This Happen in US?
- Moody's Warns of Scranton Bankruptcy; Fitch Downgrades Chicago Citing Pension Problems; Liberal Fantasyland
Small Business Optimism Sinks On "Precipitous Decline in Hiring Plans"; Is Lack of Credit an Issue? Posted: 12 Nov 2013 03:58 PM PST The National Federation of Independent Business (NFIB) reports Small Businesses Optimism Takes a Tumble largely due to a precipitous decline in hiring plans. Fall arrived literally this month, as small business optimism dropped from 93.9 to 91.6, largely due to a precipitous decline in hiring plans and expectations for future small-business conditions. Of the ten Index components, seven turned negative, falling a total of 27 percentage points. The stalemate in early October over funding the government as well as the failed "launch" of the Obamacare website left 68% of owners feeling that the current period is a bad time to expand; 37% of those owners identified the political climate in Washington as the culprit—a record high level.Is Lack of Credit an Issue? The short answer, as I have commented numerous times before, is "no". Credit Markets Six percent of the owners reported that all their credit needs were not met, unchanged from September. Twenty-eight percent reported all credit needs met, and 53% explicitly said they did not want a loan. Only 2% reported that financing was their top business problem. Twenty-eight percent of all owners reported borrowing on a regular basis, down 2 points and a record low. A net 6% reported loans "harder to get" compared to their last attempt (asked of regular borrowers only), up 1 point from September. The net percent of owners expecting credit conditions to ease in the coming months was a seasonally adjusted negative 8 percent, 1 point worse than September. A surprising result in an economy with the most aggressive monetary policy in history.Commentary by Chief Economist Bill Dunkelberg Typical of the reporting by the "mainstream media" on the economy, CNN (Your Money, Nov 2) asserted that stingy credit was dragging down the small business sector; no mention of the impact of Washington antics. Banks are once again being blamed for the slow recovery, not the Administration's policies (or lack thereof). However, only 2% of NFIB members cite credit and interest rates as their top business problem, and a record 66% expressed no interest in a loan, obviously due to their dismal view of the future of the economy. It's not a problem of credit supply; it's a lack of credit demand due primarily to poor economic prospects. Consumer sentiment is sympathetic to that notion as optimism posted declines in October, signaling that customers are less optimistic as well.For numerous charts and other analysis, please see the 23-page NFIB November Report. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Posted: 12 Nov 2013 10:17 AM PST A total economic collapse in Venezuela is now underway. In a futile battle against high prices, President Nicolás Maduro ordered the military to enforce an order that the Daka electronics chain reduce its prices to October levels. The store did not comply and the result was chaos. Bloomberg reports Army Storms Caracas Electronics Stores, Shoppers Follow The government-ordered military occupation of a Venezuelan electronics chain has brought out a reserve force in its wake: a line of shoppers that stretched for three blocks from a store in eastern Caracas today.Venezuela Sinks Deeper Into Hyperinflation The Financial Times reports Venezuela Sinks Deeper Into Hyperinflation Prices rose 5.1 per cent in October, the second highest monthly increase in over three years, according to the the Central Bank of Venezuela (BCV).Path to Hyperinflation 1. In May of 2009 Chávez Seized Assets of Oil Contractors after which Chavez stated "our people will never again be anyone's slave". 2. In June of 2010 Venezuela Nationalize U.S. Firm's Oil Rigs. "A former soldier inspired by Cuba's Fidel Castro, Chavez has made energy nationalization the linchpin in his 'revolution'. He has also taken over assets in telecommunications, power, steel and banking." In May of 2012, USA Today reported Venezuela's PDVSA oil company is bloated, 'falling apart'. Beatriz Rodriguez sits in a long line under a sweltering sun, waiting for state oil company Petróleos de Venezuela to deliver cylinders of natural gas she uses to cook her family's meals.3. As with all government takeovers, output plunges and costs soar. 4. In March 2013, Venezuela devalued the Venezuelan bolivar by 46.5% and created a new currency exchange control regime. 5. On November 5, 2013 Venezuela tightens control of foreign exchange President Nicolas Maduro is tightening control of Venezuela's foreign exchange system and intensifying the pursuit of currency speculators that the government accuses of waging an "economic war" against his rule. 6. Army seizes goods, imports dry up, merchandise unavailable at any price. Currency collapses additional 90% on black market. Total Economic Collapse Underway The army can raid stores precisely once, after which imported goods will not be available at any price. Oil export revenues have plunged, while costs soared following the nationalization of the oil industry. Amusingly, Chavez billed the takeover as his greatest success. For now, meat and produce availability will depend on whatever the government can confiscate from local growers. However, agricultural products will not last long because fertilizer and feed will vanish at government set prices. A total economic collapse is at hand. Hyperinflation a Political Event Please note that hyperinflation is a political event, not a monetary one. In the case of Venezuela, a series of incredibly stupid political errors is behind the collapse of the currency. Political error is the root cause of every hyperinflation. For an historical country-by-country analysis of hyperinflation events please see Reader Questions On Hyperinflation; Would Printing $50 Trillion Tomorrow Do Anything?. For further discussion of hyperinflation theory vs. practice, including an analysis of absurd calls for US hyperinflation, please see Hyperinflation Nonsense in Multiple Places. US Hyperinflation calls have been, and remain nonsensical. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
Posted: 12 Nov 2013 12:20 AM PST It is truly pathetic watching politicians flop like fish out of water trying to prevent something that was clearly inevitable long ago. Please consider Moody's warns of bankruptcy in Scranton as city faces $20 million budget gap. Moody's warned investors that Scranton could be facing the threat of default or bankruptcy thanks to a $20 million budget gap for the fiscal year that begins Jan. 1. Scranton has more than $195 million in outstanding debt, according to Moody's.Tax Hike is Pure Idiocy The numbers say everything that needs to be said. It is absolutely impossible for Scranton to dig out of this hole, I do not care how much taxes are raised. All tax hikes can do is harm more working class citizens for the benefit of undeserving public union workers. Liberal Fantasyland Whatever judge awarded the police and fire workers $28 million is an idiot or a genius, depending on his or her intent. If the intent of the ruling was to make it clear to everyone on the planet that the only solution for Scranton was bankruptcy, then the judge succeeded. If as I suspect, the judge actually thought police and fire fighters would receive $28 million, then the judge is living in liberal fantasyland. Fitch Downgrades Chicago Citing Pension Problems Yahoo!Finance reports Fitch downgrades Chicago bond ratings Fitch dropped the rating from AA- to A- on $8 billion in general obligation bonds, backed by property taxes.Scranton is several steps deeper in the hole than Chicago, but the problems are quite similar. Neither city can possibly pay pension promises. Mike "Mish" Shedlock http://globaleconomicanalysis.blogspot.com |
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