Lunatic Fringe? Professional Left? Gibbs redefines the last refuge of a scoundrel

I just had to front page this one. Some things are so silly you just can’t let them pass and most liberal bloggerss are not giving Robert Gibbs a pass so why should we? The Hill interviewed Obama’s press secretary and caught him in one of his typical unhinged moments. Basically, we’re all not satisfied with the pro-corporate, results avoiding legislation that’s come out Washington for the past two years because we’re a bunch of ungrateful crazies. Name calling is always a great response to the valid criticism of Obama, Pelosi, and Reid’s ability to sell out every democratic idea to the highest bidder and basically pass Heritage Foundation policies while the right screams socialism and gains political momentum! What the hell kind of success is this? Or perhaps, I should say What fresh Hell is this? Robert Gibbs’ mouth needs to be sent on a permanent vacation. Hopefully, the same place where his brain has already gone.

The White House is simmering with anger at criticism from liberals who say President Obama is more concerned with deal-making than ideological purity.

During an interview with The Hill in his West Wing office, White House press secretary Robert Gibbs blasted liberal naysayers, whom he said would never regard anything the president did as good enough.

“I hear these people saying he’s like George Bush. Those people ought to be drug tested,” Gibbs said. “I mean, it’s crazy.”

The press secretary dismissed the “professional left” in terms very similar to those used by their opponents on the ideological right, saying, “They will be satisfied when we have Canadian healthcare and we’ve eliminated the Pentagon. That’s not reality.”

Of those who complain that Obama caved to centrists on issues such as healthcare reform, Gibbs said: “They wouldn’t be satisfied if Dennis Kucinich was president.”

So that’s the best he can do when defending extended illegal wire tapping, ramping up the Afghan War, selling out working class poor to insurance companies, and giving a few symbolic speeches then appointing commissions to study DADT while opposing gay marriage. And this administration is different how?

Here’s Glennzilla on said insults and said ‘progressive’ results-driven legislature the Dinocratic majority and president have achieved.

You may think that the reason you’re dissatisfied with the Obama administration is because of substantive objections to their policies: that they’ve done so little about crisis-level unemployment, foreclosures and widespread economic misery. Or because of the White House’s apparently endless devotion to Wall Street. Or because the President has escalated a miserable, pointless and unwinnable war that is entering its ninth year. Or because he has claimed the power to imprison people for life with no charges and to assassinate American citizens without due process, intensified the secrecy weapons and immunity instruments abused by his predecessor, and found all new ways of denying habeas corpus. Or because he granted full-scale legal immunity to those who committed serious crimes in the last administration. Or because he’s failed to fulfill — or affirmatively broken — promises ranging from transparency to gay rights.

But Robert Gibbs — in one of the most petulant, self-pitying outbursts seen from a top political official in recent memory, half derived from a paranoid Richard Nixon rant and the other half from a Sean Hannity/Sarah Palin caricature of The Far Left — is here to tell you that the real reason you’re dissatisfied with the President is because you’re a fringe, ideological, Leftist extremist ingrate who needs drug counseling …

Hold on a sec, I have to have my army of house servants bring me my next bong hit since I make so much money as a professional leftie whiner …

Matthew Yglesias says Gibbs needs to be drug tested himself.

Robert Borosage suggests Gibbs consider this.

The left isn’t the problem — the corporate wing of the party is. The left hasn’t gotten in the president’s way, for better or worse. It’s the corporate right of the party — the Blue Dogs and New Democrats — that have stood in the way. They joined with Republicans to weaken the recovery plan. Max Baucus did the dance with so-called moderate Republicans like Charles “death panel” Grassley that ate up the first year in useless negotiations. Blue dogs largely sabotaged energy legislation. New Democrats weakened already inadequate financial reforms. And the deficit hawks now sabotage needed jobs programs in an economy in big trouble. The problem with the left is that it has been too weak, not too strong.

Frankly, I suggest Gibbs consider this.

The New American Austerity

An interesting picture of the changing American consumer can be found in the post by Mike Mandel called “Where Americans are Spending More”. Conversely, it also shows where we are spending less. I compared some of my old budgets to my new ones and found that I’m not so far off the averages. The big consumption item these days is for telecommunications. Pets, Education, Childcare, and Health care expenditures are also on the rise. Some of these are undoubtedly due to bigger prices but they show that people are continuing to spend and not dropping their dollar commitments on some items.

Consumption cutbacks occur in areas like apparel. That’s actually not surprising because it’s cheaper than it used to be because all of the manufacturing has gone abroad to low cost labor country. Also, a lot wardrobe expenses aren’t a necessity for most people. The biggest drop in the list came from staying put. Less people are moving. Motor Vehicles also are on the big down list. That’s not surprising either since big consumer durables are the first to get hit in a recession and even the cash for clunkers can’t overcome that and a tough credit environment for ever. Sports and recreational vehicles have also lost some market power as well as video games and audio equipment. Again, not too much of a surprise because folks live with the old stuff longer during recession and tend to back off high end trips. Travel outside the U.S. has dropped too. My guess is that a lot on that list has to do with relative prices but I’m not a microeconomist so it’s just an educated guess.

Frankly, it looks like we’re engaged in a lot of nesting activity 0ther than jaunts to local restaurants for a night on the town. If you want to know what a typical American has spent money on for the last 30 years, look here. This study look at what folks have bought since Ronald Reagan was in office. It’s 30 years worth of folks keeping diaries on their household consumption.

Changes in the relative shares of average annual expenditures include:

• The shares of average annual expenditures allocated to food and to apparel and services declined over the 1984-2008 period. Food as a proportion of total expenditures decreased from 15.0 percent in 1984 to 12.8 percent in 2008, whereas apparel and services fell from 6.0 percent to 3.6 percent over the same period. See chart 1.
• Out-of-pocket healthcare spending rose from 4.8 percent of the total in 1984 to 5.9 percent in 2008. The increase in healthcare was driven by the increase in the health insurance subcomponent, which rose from 1.7 to 3.3 percent of total spending.
• The share of total spending represented by pensions and Social Security increased from 7.3 percent to 10.5 percent over the 1984 to 2008 period.
• Spending on shelter also rose over the 1984 to 2008 period, increasing from 15.9 percent of total spending to 20.2 percent. Shelter includes spending on owned homes, rental units, and vacation properties.

The shares allocated to vehicle purchases (net outlay) and to gasoline and motor oil fluctuated over the period. Vehicle purchases accounted for 8.3 percent of total spending in 1984, reached a high of 9.8 percent in 1986 and ended in a low of 5.5 percent in 2008, a recession year in which consumers sharply curtailed vehicle spending. The share allocated to gasoline and motor oil fluctuated between 2.9 and 5.7 percent of the total, largely due to fluctuating gas prices.

Here’s some of the items that seem to be on the rebound with the improving economic condition. These are easy categories for people who hate the devil in the details.

1) Investments in My Quality of Life (vacations, home improvement, dining out and home furnishings): There is no easy substitute for these items. Some tend to be more of an experience vs. a possession therefore they are more resilient: less likely to be cut back, and more poised for a rebound as people feel their financial situation improve.

2) Things I Don’t Think About: These include activities for children and subscription services such as cable TV/Internet and magazines. People are less likely to cut back on things that they need to “opt out” of, as opposed to purchase decisions they need to make every time they buy. They are also less likely to cut back on experiences (especially for/with their family) than things.

3) Things that Entertain Me: This category includes spending on video games, books and electronics. In the end, people still have time to fill. In many cases they are looking for more efficient ways to fill it: best balance of utility (i.e. fun) and price.

4) Guilty Pleasures: This category includes spending on items such as jewelry, designer clothes and shoes. Items seen as “frivolous” purchases—particularly those where consumers can’t rationalize a tangible value—face the most difficult road to rebound. This trend was consistent across income levels: even more wealthy people need better reasons to buy. However the aspiring affluent are particularly vulnerable, people with expensive tastes, but with incomes that aren’t large enough to be recession-proof.

Remember, Household spending accounts for about 67% of all GDP so any significant changes are bound to impact the economy. Recognize yourself in any of these patterns?

Why won’t Dodd fight for Elizabeth Warren?

Dodd’s pushing for Sheila Bair for the head of the Consumer Financial Protection Bureau (CFPB) even though she doesn’t want the job. Every one wants Elizabeth Warren, but Dodd seems unlikely to back her and is showing public unwillingness to fight for her.

The New Republic’s Noam Scheiber wrote that “after surveying a dozen insiders over the last few days — congressional aides, industry officials, progressive activists, and a few administration officials — I’ve concluded that the odds are good that Warren would be confirmed if nominated by the White House.” And Dodd now seems to have shifted his rhetoric, saying that even if Warren is confirmable, it’s not worth a potential fight to get her the job:

“What you don’t need to have is an eight-month battle for who the director or the head or chairperson of this new consumer financial protection bureau will be.”

Republicans overwhelming voted against the Dodd-Frank Reform bill, so why the sudden fear of the Republicans? Does it have something to do with his coming exit from the senate and most likely entrance into the FIRE lobby or is there some one inside the White House (like Geithner and/or Summers) who don’t want her in the position and want Dodd to take the fall?

Could the world’s food supply be the next speculative bubble?

Speculators are always looking for places to speculate. The clarion call of the big money and the adrenalin thrill of the kill don’t always happen on an actual killing field for the very rich. They frequently happen with some carefully placed shorts and momentum. They do have the same results as a hunting party. Something dies. In this case, it could be the world’s hungry.

I know that wasn’t exactly a profound way to open a thread but I didn’t know how else to begin a conversation on food inflation and this UK Guardian headline: “Commodity prices soar as spectre of food inflation is back; Speculation and rumour could be the driving force behind sudden market rise in food prices”. It sounds like one of my dry economic topics when I put it this way. But, really you need to notice this.

I’ve talked about how incenting farmers to grow biofuels instead of food in a world where the population is still growing faster than it should is a dangerous bet. It may be that a few some ones are taking that bet since it’s been raised by a Russian Drought and an Indian Plague. Witness one of the few markets where we’re seeing asset prices rise above a normal rate of return. No, it’s not really the stock market that’s been floating around the same numbers for months now. It’s not the housing market or the commercial real estate market that still appears to have some downward momentum. The new asset bubble appears to be in commodities. It also seems centered in food.

The price of wheat, oil and copper soared this week but the picture looks much less clear this time. Old-fashioned supply and demand is still at work, but there are fears that wild rumours and speculation are driving up prices.

Wheat prices, which are up 40% over the last month, reached a two-year high as concerns about a drought in Russia and rotting stocks of grain in India exercised markets in London and Chicago. Claims that a major crop failure in Australia, following an invasion of locusts and a wet summer in Canada, could lead to a worldwide shortage, have pushed up prices in recent weeks to levels not seen since 2008.

The rise in futures contract prices traded on the major markets also follows a United Nations report in June that warned food prices could rise as much as 40% over the coming decade, amid growing demand from emerging markets and for biofuel production

The World Development Movement said reports pointing to a long-term upward trend in prices and the recent weather-related farming crisis had proved fertile ground for speculators who bet on rising prices.

Tim Jones, policy adviser to the WDM, said figures from US commodity futures trading commission showed the majority of contracts on foodstuffs over the past six weeks, including wheat, had bet on rising prices.

“There is strong evidence that speculators have seen an opportunity to drive up prices. But the damage caused by their activities is higher prices for everyone and people in developing countries can ill-afford to pay the cost,” he said.

One of the strong signals that the speculators have switched to creating a food asset bubble is this tidbit. “The CFTC figures showed there was a 35% increase in contracts since June betting on a rise in prices.” That means commodity futures traders are betting on price movements. Food inflation (the rise in food prices) should be solidly linked to those pesky real things that shift demand and supply curves like drought (Russia does have one), plagues of locusts, or lots of hungry babies. Is this the case in the current run up of food prices?

There are temporary reasons behind high food price inflation—drought, petroleum products price hikes, mismanagement of trade policies, transportation dislocations, debt waivers, speculation and so on. Per se, inflation numbers are also not really the point. There is no reason to expect that food price inflation will remain at 12.47%, which it was for week ending July 10. Such numbers are function of the base last year and will undoubtedly soften when the kharif crops arrive post-September. While short-term declines in prices of individual agro-commodities are possible, does one really believe that food price inflation will disappear?

It will moderate from double digits to 7% or thereabouts, but 7% is still inflation. And that 7% will remain, because there are medium-term causes behind the increase in food prices—NREG (which continues), increase in rural incomes (there is no reason to presume public expenditure in rural sector will taper off), increase in urban incomes, changes in consumption patterns and warped incentives through procurement prices and hikes in these (that isn’t going to be reversed either). We are talking about increasing demand imposed on an inelastic supply. (Increases in production and productivity have been marginal.)

These kinds of things make a market ripe for speculation. This is from The UK Guardian.

But critics maintain that spikes in prices of global commodities are increasingly driven by speculators. They said the effects of a block on Russian exports by the Russian government were overplayed. Russia sends most of its wheat exports to Egypt, Syria and other middle eastern countries, which can access grain from other sources.

Reports that large amounts of India’s wheat stockpile could rot were premature, they said. Also, while India is the world’s second largest rice and wheat producer, it only exports a fraction of its output and would have little impact on global supply.

“Fears have been piqued that we may be heading back to the 2007-8 food crisis,” notes Sudakshina Unnikrishnan, an analysts at Barclays Capital. “In our view, market fundamentals are less compelling this time around with many of the key factors that propelled prices in that period missing.”

While India and Russia are expected to have very bad harvest, the EU and the US are expected to have abundant wheat. So, some of these price increases do not make sense in terms of traditional economics which leads us to speculators that like to create momentum and ride it to big profits.

So, what to do? When speculators in futures markets start destabilizing a market and introducing increased volatility and momentum that is likely to hurt the underlying market, the answer is limit the trade. New financial reform laws allow Congress to do that and they should consider it right now before we have a mess in the food markets the same way we’ve got a mess in the housing markets. Fortunately, the capital markets appear to have stabilized. This would not limit farmers who hedge for risk management purposes. It would limit big traders, like Cargill and most definitely hedge funds who are only in it for the kill. There are so many big players these days that I’m beginning to think that speculators do more than just ‘add liquidity’ to the market. They seem capable of creating and driving momentum which is not what we want happening in markets. Believe me, the world’s food supply is nothing you want to leave to adrenaline and testosterone. Volatility in prices may give a few of those guys a thrill, but for the rest of the world who worries about food on the table, that’s a deadly game.

Not good news

If this is true–and I have no reason to believe it isn’t–then one of the few economic voices in the administration that is not a Wall Street insider is leaving her post.

Christina Romer, chairwoman of Pres. Obama‘s Council of Economic Advisers, has decided to resign, according to a source familiar with her plans.

Romer, an economics professor at the University of California (Berkeley) before taking the key admin post, did not respond to repeated calls to her office.

“She has been frustrated,” a source with insight into the WH economics team said. “She doesn’t feel that she has a direct line to the president. She would be giving different advice than Larry Summers [director of the National Economic Council], who does have a direct line to the president.”

“She is ostensibly the chief economic adviser, but she doesn’t seem to be playing that role,” the source said. The WH has been pounded for its faulty forecast that unemployment would not top 8% after its economic stimulus proposal passed.

Instead, the jobless rate is 9.5%, after exceeding 10% last year. It was “a horribly inaccurate forecast,” said Bert Ely, a banking consultant. “You have to wonder why Summers isn’t the one that should be taking the fall. But Larry is a pretty good bureaucratic infighter.”

Romer’s highly respected in the community and I always thought she would bring a voice of reason to the White House. Instead, she always got put in front of the camera trying to explain away economic bad news. I’m not sure who the replacement will be but it I venture a guess to say that it will be some one that plays nice with Geithner and Summers who appear to get their way when ever they can. I’m hoping it won’t be another Wall Street insider, but it would figure. It would also figure if the next one didn’t have a vajajay too. That seems to go along with playing well with the Obama inside team.