Review Of The Events Of Yesterday

Let us review what happened yesterday as well as the most likely outcomes from those events.

The International Monetary Fund (IMF) issued a report claiming that if the Federal Reserve does indeed raise interest rates in a systematic manner in order to ‘normalize’, 20% of American corporations are at risk of defaulting on their debt.
The Federal Reserve did indeed reiterate that it intends to ‘normalize.’ Interestingly enough the Federal Reserve also suggested that it would use the balance sheet in order to combat the next recession.
It looks for all the world that the IMF just called ‘bullshit’ on Janet Yellen and the Federal Reserve. Goldman-Sachs issued a report whereby they indicated they had ‘less confidence’ that the Federal Reserve would raise rates.
I see four options for the Federal Reserve going forward:
1) Janet Yellen dismisses the IMF report and plunges headlong into ‘normalization.’ In this scenario, if the IMF is anywhere near correct in its’ assessment, perhaps as many as 1 in 5 American corporations default on their debt resulting in massive unemployment, a depression-like aura and American firm after American firm shuttering. This seems the least likely outcome, it is difficult to imagine that even Janet Yellen has arrived at that level of hubris. The only caveat to this would be if you happen to believe in a pure political play against Trump and the Republican congress whereby this path would force them to politically absorb massive and growing unemployment or use the Federal government to bail these corporations out. Hopefully not even Janet Yellen is cold-blooded enough for that kind of raw political calculation.
2) Janet Yellen and the Federal Reserve edge just tiny bit to the ‘normalization’ side – say raising rates to 1.0% and losing $250 billion off of their balance sheet. Yellen could then pause and rationalize the pause by claiming the ‘economy needs time to absorb’ the rate increase. I would think this the most probable outcome in that Yellen can claim she started the move to normalization while allowing the pause to continue until her term is expired. The danger to this approach is if even a small move toward normalization sets off the dominoes of catastrophe.
3) Janet Yellen and the Federal Reserve maintain interest rates at the current level and does not begin to unwind the balance sheet. The net effect of this is that the wealth transfer from the poor and middle class to the wealthy will continue, corporations and the government will continue to engorge themselves on cheap credit and GDP growth and employment continue to be near-static.
The logical eventual outcome of the third option is the monetization of debt – which path takes the United States into extraordinary poverty but may buy time for the existing players to get out of office with out having to say the dreaded words, “I am sorry, I was wrong.” Do not underestimate how important it is to these people to gracefully exit office without having to say those dreaded words.
All of these options are unpleasant and in all likelihood they end at the same place – they may simply take varying amounts of time to arrive there.
As I try to remind people – the last eight years we fixed nothing, we simply have injected continuous liquidity into the system in order to maintain solvency. Take away the liquidity and the situation returns to what it was in 2008-09 overnight.
Buckle up and pay attention…

My Trademark Infringing Nomination for Quote of the Day.

The other Insurgent owns the real estate called “Quote of the Day.” But, liberty champion Laurie Bratten’s dry observation has entrapped me into trespassing:

“Just because a legislator ‘has worked really, really hard on a bill’ is not a reason to pass it. I actually hear legislators using that as a reason to vote for legislation in committee and on the floor. Bills are not participation trophies.”

Indeed, Laurie. It’s like they don’t even know they are messing with state power that governs people’s freedom and choices.

Can Colorado Coal Comeback?

In all the tospy turvey roller coaster economic developments–business optimism and hiring are up but interest rates look to climb, credit might take a dive, and a debt crisis is looming–there is some bright news: Coal is coming back. Economist Stephen Moore writes in the Washington Times that Labor Department statistics show 11,000 new mining jobs just in March.

This is not only good news for the economy, it is like water in the desert for the hard hit mining industry. Candidate Obama famously promised to put coal power generating facilities out of business. His EPA worked hard to please their boss with among other things, the Clean Power Plan that imposed sweeping new rules and regulations on coal production and electricity generation. Candidate Clinton promised to finish the job.

President Trump, however, had different ideas. He saw cheap energy as key to keeping his promises to revitalize American industry. He also saw increased mining and coal related jobs as a quick boost to struggling local economies struggling with closing mines and factories and unemployed and underemployed workers. Like regions in the Appalachian east, Colorado mining towns have been hard it. In recent years, the Denver Post has written several stories about the collapse of coal mining and stagnant hopes at best for the industry. Particularly in light of the shale oil revolution and record gas production and low prices, prospects have seemed bleak.

Yet, coal is fighting back. The Trump administration has curbed plans to implement the EPA’s Clean Power power grab. With improved efficiency and lower costs, coal is muscling back into the mix. In its favor, some form of fossil fuel back up will be necessary for the foreseeable future for all “green” energy, because the wind doesn’t always blow and the sun doesn’t always shine. It’s important to note, too, that coal energy has to meet all applicable environmental standards. All the clean air and clean water regulations that have done much to clean up the environment since the heavy pollution up until the 1960s remain in force. Obama’s Clean Power Plan was not aimed mainly at toxic pollutants, but primarily at carbon dioxide emissions, based on a theory of catastrophic global warming.

That detour in the American economy has been detained. Coal and natural gas look to have an important role in fueling Colorado’s and America’s comeback.

Senators Bennet and Gardner Should Lead by Example not Gimmick



The federal government faces a partisan budget showdown and possible shutdown at the end of April. Posturing and game playing are thick in the air. But Colorado’s senior and junior senators have a bipartisan solution to cut through the gamesmanship…by upping the ante of gamesmanship. Their proposal as reported by Ernest Luning in the Colorado Statesman, is, in the event of a shutdown, to impose an hourly quorum call between 8:00 a.m. and midnight. Senators not dutifully appearing in the chamber could be subject to arrest by Senate Sergeants.

But, conditions on triggering enforcement make the proposal appear toothless. The measure activates only if a majority of senators is absent, and only if those present vote to direct the Sergeant to round up the truant Senators.
Senators Bennet and Gardner describe their handiwork to the Statesman thusly:

“Washington’s habit of turning routine responsibilities into manufactured crises has to end,” Bennet, a Denver Democrat, said in a statement. Maintaining that Washington dysfunction has grown under the Trump administration, he added, “Coloradans don’t shut their communities down because of a disagreement, and the Senate shouldn’t be allowed to do so either. This resolution would encourage Congress to avoid such a crisis and work to keep the government open.”
Gardner, a Yuma Republican, said he was proud to work across the aisle with Bennet on the proposal and called it proof that Coloradans won’t quit working for the American people, regardless of party.
“Coloradans expect their elected officials to do their jobs and work together to avoid shutting down the federal government,” Gardner said. “I urge my colleagues to support this legislation and prove we are a responsible governing body that will do whatever it takes to reopen the government in the event of a shutdown.”

Count this taxpayer unimpressed with the proposed austerity. Budget clashes reflect serious divisions in public priorities, schisms between the executive and the legislature, regional tensions, and a failure of leadership from the major players. The statesmanship and deal making necessary to break the logjams is unlikely to be on rich display in the buzzing senate chamber. More likely it will be in an office somewhere around a large table with representatives of both chambers, both parties, and both political branches hammering out an outline they can sell to their members and constituencies.

President Trump does not seem impressed by the bargaining leverage, his spokesman reportedly demurring: “We dn’t want to getinto which senators are being naughty and which are being nice.” The smirking call to “lock ‘em up till they do their job,” is not a serious proposal to bridge the gap. Maybe Senators Bennet and Gardner, who are reportedly respected and able operators could put steadying hands on colleagues’ shoulders and help bring people together.

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