While the private-sector is drowning under a perpetual recessionary storm, U.S. regulatory agencies are flourishing. "If the federal government’s regulatory operation were a business, it would be one of the 50 biggest in the country in terms of revenues, and the third largest in terms of employees, with more people working for it than McDonald’s, Ford, Disney and Boeing combined," writes John Merline of Investors.com.
Warren Buffett (left), better known as the Oracle of Omaha, earned $40 million last year and paid $7 million of it in taxes. But in his editorial in the New York Times on Sunday, he claimed that he doesn’t think he’s paying enough, and neither are his friends. So he’s asking the SuperCommittee to stop “coddling” him and his friends, and raise their taxes as part of the deficit reduction scheme they are hatching.
Finally, some good news about the economy, from an unlikely place: North Dakota. CNNMoney reported that while the United States' economy grew at less than 3 percent last year, North Dakota’s grew by more than 7 percent. And with national unemployment over 9 percent, in North Dakota it is just over 3 percent (and hasn’t touched 5 percent there in more than 20 years).
An analysis just released by the Federal Reserve Bank of San Francisco concludes that most of what Americans spend on consumer goods, electronics, clothing, sneakers and the like, stays in America. Surprisingly little comes from China after all. Say the authors:
The latest report from the Board of Governors of the Federal Reserve System confirms what every sentient being already knows: The economy is in the dumper, with little improvement expected. The report used words like “considerably slower,” “deterioration,” “flattened out,” “weak,” and “depressed” to describe current conditions, and it even noted that excuses such as bad weather and the earthquake in Japan “appear[ed] to account for only some of the current weakness in economic activity.” (Emphasis added.)
The stock market is in freefall once again, evoking specters of 2008. As one fund manager told the Wall Street Journal on Monday, “the sense of déjà vu is almost sickening.” The storied Dow lost more than 600 points Monday following huge declines late last week, appeared to get its footing yesterday, then plunged more than 500 points today. All over the world, markets are taking stock, so to speak, of the burgeoning debt crisis in the United States and Europe, and fearing the worst.
With gold bouncing up from $1,668 an ounce on Friday, August 5 to $1,778 on Tuesday, August 9, it was the biggest three-day rally since the start of the great recession in 2008. At the same time, the equities markets were falling precipitously, losing over 600 points on the Dow on Monday alone. What is the connection?
On Friday, Standard & Poor's kept its word and downgraded the U.S. credit rating for the first time in history — from AAA to AA+. The action came because the debt bill passed last week is not considered stringent enough to stabilize the debt crisis. Treasury Secretary Tim Geithner (left) has already railed against the credit agency, saying it has shown “terrible judgment” in its decision, but some are using the rating downgrade to call for Geithner’s resignation, a move that Geithner had already been considering. At the behest of President Obama, however, Geithner has decided to stay for now.
Standard and Poor’s was blunt in its assessment of America’s deteriorating financial condition when it announced Friday night that it was cutting its credit rating on United States’ Treasury securities from AAA to the second-tier AA+, with a negative outlook.
Moody’s announcement on Tuesday that it would retain its AAA rating of U.S. government sovereign debt as a result of the debt-limit agreement came with a warning: The government must rein in spending or risk a downgrade anyway. The deal “virtually eliminated the risk of [a] default,” but the agency warned that “Should the new mechanism put in place by the Budget Control Act prove ineffective, this could affect the rating negatively.” Moody’s added that it wanted to see the United States lower its debt-to-GDP ratio, now approaching 100 percent, to around 73 percent by 2015, and then gradually move the ratio lower.
The compromise bill that emerged Sunday night from behind closed doors is being loudly trumpeted in an attempt to persuade recalcitrant conservatives in both houses to vote for something — anything — in time to avoid the August 2 deadline.