Monday, April 28, 2008

Newspaper Circulation Is Down 3.6%.

The newspapers' decline goes on. Overall circulation is down 3.6%. While a competing medium's decline may be welcome news to the Postal Service, it is not a sanguine sign of health in the ad market.

Advertising has become more cyclical with each passing decade. With the economy in recession since last summer and a large mess to clean up after the financial excesses of the financial excesses of the last decade, do not expect a quick rebound.

Thursday, April 24, 2008

Might the Fed Pause on Its Headlong Rush Into Inflation?

Today's Wall Street Journal has a page one analysis of the decision facing next week's meeting of the Federal Open market Committee. Will the FOMC consider the inflation dragon that is looming larger and larger? Greg Ip tells us "The Federal Reserve is likely to cut its short-term interest rate by a quarter of a percentage point next week -- but then may be ready for a breather."

So far the run on the dollar and the inflation's reemergence has not engaged the
Fed's attention. The more's the pity. With imports at 17 percent of U.S. GDP, a 10 percent drop in the dollar is equivalent to a $240 billion dollar tax hike. An extra one percent on the CPI takes $138 billion out of Americans' purchasing power, about as much as the stimulus package adds.

Vincent Reinhart, a former Fed Director of Monetary Affairs and now with the Heritage foundation tells us the problems facing our monetary mavens. The tittle of his commentary reveals the larger global issues that confront us: "Behind the Food-Price Riots."

Monday, April 14, 2008

The Wall Street Journal's Take On the Coal Plant in Western Kansas

The Wall Street Journal editorial page has weighed in on the state's decision to deny the Sunflower Electric Cooperative to build a coal plant in Western Kansas. Listen to Joe Rago editorial writer for the Journal:

Wednesday, April 09, 2008

America's Inflation Slayer: the Dollar Crisis? "We're in it."

Paul Volker tells us what no one is willing to say, least of all at the Fed: there is a run on the dollar. The editors of the Wall Street Journal agree: "Mr. Volcker, a former Fed chief, has a well-earned reputation for straight talk, but there is always strong institutional pressure not to second-guess one's successors at a place like the Federal Reserve. This makes his speech to the Economic Club of New York all the more remarkable for the sharp questions he raised about inflation, Fed independence and moral hazard."

In that speech, Mr. Volker, who defeated double digit inflation in the U.S. during his chairmanship from 1979 to 1987, was asked whether he was still predicting a dollar crisis. He responded, "You don't have to predict it. We're in it."

The Journal's editors put this in context: "On the dollar, Mr. Volcker's blunt talk of crisis is a welcome tonic to the devaluationist consensus that now dominates Washington. The world has been staging a run on the greenback, with damaging results if it continues. Mr. Volcker noted that when "concerns about recession are rife," the central bank will be tempted to "subordinate the fundamental need to maintain a reliable currency" to the impulse to shore up a flagging economy. The danger is that you lose both battles, as the U.S. did in the 1970s, and wind up with stagflation."

Having paid such a price to kill the dragon of inflation that debilitated the U.S. economy in the 1970s, it would be tragic to resurrect that monster today.

Dreamliner Delayed

John Flowers in the Wall Street Journal tells us that "Boeing Inc. announced another delay in delivery of its much troubled 787 Dreamliner, which has experienced a series of setbacks caused largely by work that had to be done on the final assembly line after it wasn't handled at supplier factories as planned.

The carrier said first flight now won't take place until the fourth quarter, not the most-recent target of the second quarter. First delivery has also been pushed back some six months to the third quarter of 2009 instead of first quarter. That schedule now targets approximately 25 deliveries in 2009, down from October's 109. The company didn't update the forecast in January, when it pushed back 787 targets.


Monday, April 07, 2008

In the Financial Times, Charles Wyplosz, a professor of economics at the Graduate Institute in Geneva, argued that the U.S. Federal Reserve is overreacting and using tools that will not achieve its goals. Specifically, "If Mr Trichet thinks the US Federal Reserve is overreacting, he has a point. Economic conditions surely call for medicine, but the speed and scope of monetary easing is unheard of.

"More worrisome is that it may not be the right medicine. One ill is the bursting of the housing bubble, which is partly the consequence of the subprime folly of past years. Driving the interest rate to the floor will not solve the problem.

"Another ill is the continuing difficulty faced by banks as a consequence of reckless lending and poor investment judgment. The rebound of anxiety in the past few days amply demonstrates that massive easing of monetary policy is not working.

"The banking problem calls for surgical treatment, not interest rate Band-Aids. Certainly, surgery may result in bank failures. The time for administering painkillers will come after the operation, not before. Right now, the Fed is delaying the day of reckoning and, in the process, exporting the US’s problems by adopting policies that, intentionally or not, weaken the dollar."

Read Professor Wyplosz's complete commentary.

Friday, April 04, 2008

The March Employment Report Confirms We are in a National Economic Recession

The unemployment rate is up to 5.1 percent. America's payrolls fell by 80,000 jobs from February. The evidence is building that we are in a recession.

Wichita's job market continues to diverge from the nation's. Earlier this week, the Bureau of Labor Statistics reported that our unemployment rate declined to 3.8 percent in February.