Obamacare

Starting with the Asian markets this morning, it appear the roller coaster ride for markets continued overnight. Asian equities started the day trading weaker but shortly after the open though, all of Asia bounced off the lows following the previously noted surge in Chinese A-shares soaring more than 5% in a matter of minutes in what was initially described as a potential “fat finger” incident. As DB notes, alternative explanations ranged from a potential restructuring of the government’s holdings in some listed companies, to market buying ahead of a rate cut this coming weekend. All indications point toward a fat finger. The A-share spike has managed to drag other indices along with it though some gains have been pared. Yet for all the drama the Shanghai Composite soared... and then closed red. The region’s underperformer is the Nikkei (-0.75%). Elsewhere, the NZDUSD dropped 0.5% after a magnitude 6.8 earthquake struck the city of Wellington this morning. Looking at the US S&P500 futures are trading modestly higher at 1660. Looking ahead to today there is very little in the way of Tier 1 data to be expected. Housing starts/permits from the US and the preliminary UofM Consumer Sentiment reading for August are the main reports. The moves in rates and perhaps oil will probably offer some markets some directional cues.

While many Wall Street economists and strategists shrugged in the face of tin-foil-hat-wearing bloggers who suggested the disaster that is the part-time jobs receovery was due to The Affordable Care Act - of 953,000 jobs created In 2013, 77%, or 731,000 are part-time - epitomized best by Larry Kudlow and Deutsche Bank's ever-smiling Joe Lavorgna; it seems the drag on employers' hiring has now hit the mainstream media. As NBC Nightly News reports in this succinct clip, things are not going according to plan for the President's better bargain even as Fed's Bullard proclaims "clear improvement in labor markets." Perhaps he should watch TV this evening?

The percentage of Americans that are economically independent has dropped to a stunningly low level. What we have in America today is a situation where economic independence is being systematically eradicated and the government is increasingly being expected to provide our daily bread and to take care of all of us from the cradle to the grave. And once you become a serf of the state, it is very hard to resist anything the government is doing in a meaningful way.  After all, the money that you are getting from the government is enabling you to survive.  In essence, your allegiance has been at least partially purchased and you may not even realize it. At this point, the number of Americans that are financially dependent on the government is absolutely staggering, and it gets worse with each passing year.  Just consider the following statistics...

So is President Obama the worst President in history?

Every failing organization, from empires to school districts, responds to its embarrassingly visible failure by proclaiming one reform after another. To take but a few from a long list, China is "reforming" its hopelessly corrupt, debt-based central-planning economy, President Obama is "reforming" the Global Surveillance State (into a presumably kinder, gentler machine gun hand?), The European Union is "reforming" its banking sector and the overly complex U.S. Sickcare system is being reformed with 2,300 pages of additional complexity under the Orwellian title of Affordable Care Act (ACA), a.k.a. ObamaCare. The one dynamic that matters is of course left unsaid: the inability of the Status Quo to reform itself, i.e. undertake fundamental, systemic reforms. This inability has many facets but only one root: political sclerosis caused by entrenched, vested interests seeking to protect their perquisites and power. This is as true of local school districts as it is of entire states.

How would America ever survive without the central planners in the Obama administration and at the Federal Reserve?  What in the world would we do if there was no income tax and no IRS?  Could the U.S. economy possibly keep from collapsing under such circumstances?  The mainstream media would have us believe that unless we have someone "to pull the levers" our economy would descend into utter chaos, but the truth is that the best period of economic growth in U.S. history occurred during a time when there was no income tax and no Federal Reserve. We never needed a central bank, we never needed the IRS and we never needed an income tax.  America would be doing just fine without any of them. But instead, America chose to go down the path of collectivization and central planning, and now we are heading toward the biggest economic disaster in the history of mankind.

In May 22 testimony to the Joint Economic Committee of Congress, Fed Chairman Ben Bernanke issued another of many similar positive interpretations of central bank policy. Yet again, he continued to argue that quantitative easing has decreased long-term interest rates and produced other benefits. The Fed's polices have not produced the much-promised re-acceleration in economic growth. The standard of living - defined as median household income - has fallen back to the level of 1995. The best approach would be for the Fed to recognize the failure of QE and end the program immediately, thereby allowing price distortions in the markets to correct themselves. By ending the illusion that the Fed can take constructive actions, this might even serve to force federal government leaders to deal with the growing fiscal policy imbalances. Otherwise, debt levels will continue to build and serve to further limit the potential for economic growth.

President Obama recently stopped in Phoenix to deliver his latest diatribe on how he is going to fix the economy.  Yes, that is correct, another round of "campaign speeches" that, as has been the hallmark of this Administration to date, have generally wound up mired in an abyss of a broken congressional system.  What really struck me, however, was his comprehensive plan designed to further boost the housing market. Another housing bailout program is the last thing we need. It's time to stop trying to fix what is broken by trying to cure the symptoms rather than the disease.

Everybody in America wants health care - but most Americans seem to want someone else to pay for it.  In the United States today, the way that our system works is that the hard working, productive members of society pay for the health care of everyone else.  At least under socialism everyone gets the same benefits.  Our system of health care is a very twisted version of socialism where millions upon millions of very hard working people are forced to pay for the health care of others, but often can't afford to purchase decent health insurance for themselves. When you add it all up, the hard working, productive members of society are at least partially subsidizing the health care of well over half of all Americans while having to pay for their own health care at the same time. Needless to say, it isn't too hard to see who is getting the raw end of the deal.

If S&P had any guts it would lower the US another notch.

The man who in the first months of his reign took over the bankruptcy process turning it over on its head to benefit the state over centuries of established creditor rights (with GM, Chrysler and a whole lot of union votes), and who defined his entire first term by nationalizing the US healthcare system, who personally determined the cutoff for "wealth" at $250,000 per year (with the corresponding tax hike "benefits" to go with it), not to mention inheriting the George W. Bush personal surveillance apparatus and taking the nationalization of individual rights and liberties to a whole new level, has just decided to branch out and subordinate yet another two birds of distributed, efficient, global decision-making to his will: trade and patent law.

When the payroll report was released last month, the world finally noticed what we had been saying for nearly three years: that the US was slowly being converted to a part-time worker society. This slow conversion accelerated drastically in the last few months, and especially in June, when part time jobs exploded higher by 360K while full time jobs dropped by 240K. In July we are sad to report that America's conversation to a part-time worker society is not "tapering": according to the Household Survey, of the 266K jobs created (note this number differs from the establishment survey), only 35% of jobs, or 92K, were full time. The rest were... not.

The bottom line is that Americans are losing more and more of their medical freedom.  By 2015, so many workers will be trapped in the government-run health insurance exchanges that there will be no going back to the private plans we have today. At this rate, single-payer proponents will drive private insurance companies out of business, which has been their intention all along. Obamacare is a hodgepodge of new regulations, requirements, and penalties. Here are the ten most important points that doctors should tell their patients.

Trough-feeding debtism faces the need to clean up its detritus.  

Lump this into the mix with the challenges around energy, the instability of the global banking system, the high unemployment rates, particularly among the youth and interest rates at unsustainably low levels, it would be reckless to report that the world economy is either on the brink of or on the road to recovery. Gold is a finite resource, the Chinese central bank continues to acquire gold quietly and without declaring.....for now.

It’s worth repeating: In the shadow of this game, gold looks like a solid investment.