The Economy Guy

After yesterday’s dramatic uptick in stocks, they went sideways today.  Interest rates continue to trend downward.  Gold is trending upward.

The Euro is gaining against the Dollar as it has risen 14 cents from the recent Euro low.

Oil and gasoline have broken out of their trading range to the upside, and this can be interpreted that oil will be more expensive, and gasoline prices will be going up in the near future.  Only another recession will bring them back down.

In the news today…..

Geither says unemployment to up, then down – and this is to be anticipated as the economy gets stronger.  The Secretary of the Treasury actually thinks our economy is getting stronger.  Anyway, his rationale says that as the economy gets stronger, and jobs are created; more people will come back onto the ranks of the unemployed, and that will push the unemployment rate higher (“for a couple of months.”)

Mexican American War – and the telegraph tax was started in 1848 to pay for this war.  It was supposed to stop after the war.  But, if you look at your telephone bill each month, you will find this same tax – naturally, it has changed its name.  Conclusion – a tax hangs on forever.

Arizona SP 1070 – is more than just a law to get the federal government to stand up to its duty to enforce existing laws.  It is actually a major threat between the US and Mexico.  A little history first:

The capital of North America was in question when the US was founded – as it could be in the US, or it could have been Mexico City.
Thomas Jefferson understood this and ordered the US to make the Louisiana Purchase which expanded the US all the way to New Orleans.
The Mexican border was only 200 miles away from New Orleans at that time, and was the major threat to the US.
Mexico had a much bigger army than the US.
However, the major problem that Mexico had was that there were few Mexicans living in Texas, and not much Mexican population south of the Rio Grande (Rio Bravo in Mexico) – only desert and mountains – the major population centers being much further south.
Texas Independence (with the battles of the Alamo and San Jacinto) gave the US breathing room from the Mexican threat.
President Polk started the Mexican-American War that resulted in the Gadsten Purchase which gave today’s border with Mexico.
That settled the issue in the mid-1800s with Mexico, but not the problem now faced in the Southwest – desolate land and little population.
Mexico and the US encouraged Mexicans to move north into that territory to populate the land – it was in both their interests.
That created the situation we have today.
Mexicans living in remote areas of the US – like Chicago – are isolated and really don’t count in the big scheme of things.
Mexicans living in borderlands which was previously Mexico have deeper roots, and therefore much greater emotional ties to the land and to their “rights.”
One unspoken fear is that today’s situation will result in the era of 1830 – 1840 and the desire to move this Southwest back into Mexico.
Today’s situation in the Southwest is no different that the Scots moving to Northern Ireland – the problems it created were never really settled.
Another example, is the mass migration of Jews into Israel – as the existing Palestinians felt their culture was destabilized.
Today’s mass migration from Mexico into the Southwest and California is not a natural migration.  It is destabilizing and changes the cultural character of the area, and it causes massive tensions.
The Arizona initiative is being treated as an internal US problem when in reality it is a dialogue between the US and Mexico – and this aspect is being ignored by our politicians.
Bank Failures – are predicted to hit 1000 before we get to the end of the “recession” according to the FDIC.  We have had only 280 bank failures since 2008 so far, so we have a long way to go.  The best way to understand the problem is to see the FDICs idea of how many banks are in trouble.  That number is growing, and hasn’t stopped growing as the economy gets worse.  This is just another window into the US economy, and it isn’t a very pretty picture.

FED Rumors – are saying the FED may start next week with new quantitative easing by buying US Treasury bonds.  The result if they do this action will be lower interest rates in the longer dates bonds (10 year and 30 year).  It will sure be interesting to see if this happens as it will be a sure sign that the FED thinks we are headed to a double dip recession.  Tune in to see what really happens.

Tonight’s Dinner Conversation……

Energy – and not just simple known solutions (solar, wind, wave, etc.) to our energy problems – BUT THE solution to the entire world’s energy problems.  What’s that?  FUSION – using the method of producing energy that the sun uses – a hydrogen bomb, in other words.  This has been the holy grail of energy seekers for the past 50 years, but has been out of the grasp of humanity as of today.  Yes, some experiments have produced fusion, but it lasted only a very short time – less than a nano-second.  We need to have continuous fusion that can produce energy that is usable to produce electricity.

Who’s doing it?  The rest of the world – and headed by Europe and the EU (who give 45% of the money required for the project) in particular.  And here is the problem:

Is this a noble pursuit – yes, definitely.
Where is it located – in the South of France (as France beat out Japan for its location as the EU gave most of the money – politics as usual)
How much will it cost? – great question.
Initial estimate – 10B Euros was the first estimate – 5B for the building construction, and 5B for the machinery.
Current estimate – 15B Euros just for the building.
CHOKE – but the Europeans will probably agree with all other members to put up the extra cash.  And, it will be agreed this week.
But, if the building hasn’t been completed, how close could the experiment be to producing fusion?  As the top scientists of the world agree, fusion is always 30 years away.  (I hope you got the hopelessness of that statement.)

So, why are these nations spending so much money, that could be spend on current “green” technology?  Here is what I think:

It’s an honorable endeavor
From the EU perspective, it produces real jobs in Europe,
All the money stays in Europe
If it is successful, it will solve the biggest problem that Europe has today – paying for its imported energy.
How much is that bill?  400B Euros each year – and most of it going to Russia.
So, in the end, it becomes a decision to try to work Europe out of its energy dependency.
Where is the US in the this project and where is the US in trying to get out of its energy dependency?  No Where – that’s where.  Remember that the US position starts in Congress – and it’s time to throw all the scumbags out.  This is just one other reason.

Here are the closing numbers for today:
Dow Jones 30 Industrial – 10,636 (down 38)
10 Year Treasury Bond – 2.91% (down 0.05%)
Euro – $1.3232
Gold – $1185 (up $2)
Oil – $82.41 (up $1.07)
Gasoline – $2.19  (up $0.03)