Category Archives: Economy

Coincidental Numbers – The Sequester Explained

Apparently, the end of the world is nigh.

Come March 1, 800,000 federal employees will be furloughed, policeman and fireman will no longer respond to emergencies, teachers will be fired, parents with children will be turned away from daycare centers, and old people will be left to die in the streets.

Something called the “Sequester” will strike the US and life as we know it will end.

Let’s go to the numbers, shall we?

The 2013 budget for the United States Federal Government is $3.803 trillion (or $3,803 billion).

The amount of spending cuts mandated by the sequester is $85.4 billion.

Let’s translate that back to human scales.

Imagine that your annual household budgeted spending was $38,030 dollars.

And let’s further imagine that you and the missus decided that for reasons inexplicable you needed to reduce your total annual spending by $854. Clearly, this would be a family crisis of epic proportions.  That would amount to $16.42 per week in cuts. If you’re in the habit of hitting Starbucks on the way to the office, you might have to forgo the pleasure of overly-priced coffee on three of the five days of the week.

Imagine now that either you, or your spouse rebelled against this harsh austerity. Imagine that instead of cutting back on the lattes, you announced that because of the budget cuts, you were going to have to euthanize the family pets.

Here’s the really maddening and tear-inducing irony. The 2013 sequester cuts amount to  2.245% of the Federal budget.

And not 60 days ago, the insanity that was the payroll tax holiday expired for all wage-earning Americans. Do you know what sort of immediate pay cut we all faced? That’s right. Two percent. 2%.

Obama & the Congress put together a budget deal to avoid the fiscal cliff and the brilliance-inside-the-beltway assured us that it was oh-so-good and responsible and only imposed a 2% cut in Americans take-home wages. And we all grumbled a bit when we first saw it, made a few adjustments and moved on.

But asking the federal government to cut their spending by 2.245%?

Clearly, an outrageous and unreasonable demand. Which will have dire consequences for the entire US economy.

Which the 2% cut in wages to American workers clearly did not have.

Because government economists! That’s why!

Why must you be so unreasonable?

Why Is Gasoline Consumption Tanking?

This is the scariest economic chart I’ve seen in quite a while.

I am convinced that the latest unemployment numbers misrepresent the current state of the economy. There has been a large decrease in the number of people “in the labor force” (self-reported, estimated via survey data). The number of people employed is at historic lows. The number of people under-employed is at a historic high. The number of people who have become discouraged and are no longer looking for work is at a historic high.

And now, there is this alarming report on gasoline consumption.

I suspect the mainstream media will be using the word “unexpectedly” in the next few months.

A large tip of the hat and a referral for a thorough discussion to Charles Hugh Smith and his blog at www.oftwominds.com -> Why Is Gasoline Consumption Tanking?.