Japan did same thing way back when.. At some point years after the peak.. they thought they were crawling out of it ready to "normalize" rates.. They did one hike and then had to cut and run back to zero back to more QE when deflation fighting came back into play.. Same thing will happen to us.. All this talk of "normalizing" rates is complete nonsense.. No turning back now that we've been allowed to go on huge debt binge since we went off gold standard... We will be at zero for a long ass time and stuck in low to no growth semi deflationary environment for a long ass time.. Near term we have many bubbles ready to pop including an equity bubble.. And equities will tank despite rates staying low/near zero...
A little history...
--------
[h=1]Wells Fargo Buys Wachovia for $15.1 Billion[/h]NEW YORK (AP) -- In an abrupt change of course, Wachovia Corp. said Friday it agreed to be acquired by Wells Fargo & Co. in a $15.1 billion all-stock deal, wiping out Wachovia's previous plan to sell its banking operations to rival suitor Citigroup Inc.
A key difference is that the Wachovia deal will be done without government assistance, while the Citigroup deal would have been done with the help of the Federal Deposit Insurance Corp.
"This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," Robert Steel, Wachovia's president and chief executive, said in a statement.
The Wachovia-Wells deal, announced Friday, comes in a turbulent time for banks and financial firms as they grapple with the ongoing credit crisis, which led to the recent bankruptcy of Lehman Brothers Holdings Inc. and the failure of Washington Mutual Inc.
Wachovia shareholders will receive 0.1991 shares of Wells Fargo for every share of Charlotte, N.C.-based Wachovia stock they own, valuing Wachovia at about $7 per share. This is a nearly 80 percent premium over the stock's Thursday closing price of $3.91. Shares closed at $10 last Friday, the last trading session before the deal with Citigroup was announced.
The board approved Wells Fargo's offer late Thursday. The deal is still subject to Wachovia shareholder and other regulatory approvals. Wells Fargo said it expects the deal to close by year-end.
"It provides superior value compared to the previous offer to acquire only the banking operations of the company and because Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world's great financial services companies," said Wells Fargo Chairman Dick Kovacevich.
San Francisco-based Wells Fargo will record merger and integration charges of about $10 billion, but says it expects earnings to be boosted within the first year after the acquisition closes. No government assistance is part of the deal terms.
Additionally, Wells Fargo plans to issue up to $20 billion of stock, primarily common stock, to maintain a strong capital position.
Charlotte will be the headquarters for the combined company's East Coast retail and commercial and corporate banking business. St. Louis will remain the headquarters of Wachovia Securities.
Additionally, three members of the Wachovia board will join the Wells Fargo board when the transaction is completed.
The combined company will have total deposits of $787 billion and assets of $1.42 trillion, more than doubling Wells Fargo's totals on both counts. The bank will operate more than 10,000 locations. The two banks currently employ a combined 280,000 people.
On Monday, Citigroup agreed to buy Wachovia's banking operations for $2.16 billion in a deal orchestrated by the federal government. That deal, which had been approved by the boards of both companies, was still subject to approval by Wachovia's shareholders and regulators. It is not clear whether Citigroup will have to pay a break-up fee.
In addition to assuming $53 billion worth of debt, Citigroup had agreed to absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio. The FDIC agreed to cover any remaining losses in exchange for $12 billion in Citigroup preferred stock and warrants.
But the failure of the government's proposed $700 billion bailout for financial institutions Monday afternoon cast doubt on whether Citigroup would be able to rid itself of some of Wachovia's bad debt.
While the proposal would have prevented most banks from profiting on the sale of troubled assets to the government, an exception would have been made for assets acquired in a merger or buyout.
That would have allowed Citigroup to sell Wachovia's distressed mortgage-related assets to the government for a profit.
A revised version of the bailout plan was passed on Wednesday by the Senate and goes up for a House vote on Friday. The plan still centers on enabling the government to spend billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions.
Citigroup has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.
While Wells Fargo has logged three straight quarters of profit declines, the bank has been weathering one of the nation's worst credit crises much better than most of its competitors, in part because it had less exposure to the subprime mortgages whose failure undermined the financial sector.
That means it hasn't been forced to take the huge number of write-downs that other banks have needed. Under Stumpf the bank also has continued raising its dividend at a time when many other financial institutions are slashing theirs to preserve capital.
John G. Stumpf, Wells Fargo president and CEO, took over in June 2007 -- near the start of the credit crisis -- from Kovacevich, who remains chairman. Both men worked since the 1980s at Norwest Corp., Wells Fargo's predecessor.
Wachovia shares were up $2.25, or 53 percent, at $6.50 in premarket trading, while Wells Fargo fell $1.40, or 3.8 percent, to $35.31. Citigroup shares were down $3.10, or 13.2 percent, to $20.35.
AP Business Writer Jennifer Malloy Zonnas contributed to this story from New York.
--------
[h=1]Wells Fargo Buys Wachovia for $15.1 Billion[/h]NEW YORK (AP) -- In an abrupt change of course, Wachovia Corp. said Friday it agreed to be acquired by Wells Fargo & Co. in a $15.1 billion all-stock deal, wiping out Wachovia's previous plan to sell its banking operations to rival suitor Citigroup Inc.
A key difference is that the Wachovia deal will be done without government assistance, while the Citigroup deal would have been done with the help of the Federal Deposit Insurance Corp.
"This deal enables us to keep Wachovia intact and preserve the value of an integrated company, without government support," Robert Steel, Wachovia's president and chief executive, said in a statement.
The Wachovia-Wells deal, announced Friday, comes in a turbulent time for banks and financial firms as they grapple with the ongoing credit crisis, which led to the recent bankruptcy of Lehman Brothers Holdings Inc. and the failure of Washington Mutual Inc.
Wachovia shareholders will receive 0.1991 shares of Wells Fargo for every share of Charlotte, N.C.-based Wachovia stock they own, valuing Wachovia at about $7 per share. This is a nearly 80 percent premium over the stock's Thursday closing price of $3.91. Shares closed at $10 last Friday, the last trading session before the deal with Citigroup was announced.
The board approved Wells Fargo's offer late Thursday. The deal is still subject to Wachovia shareholder and other regulatory approvals. Wells Fargo said it expects the deal to close by year-end.
"It provides superior value compared to the previous offer to acquire only the banking operations of the company and because Wachovia shareholders will have a meaningful opportunity to participate in the growth and success of a combined Wachovia-Wells Fargo that will be one of the world's great financial services companies," said Wells Fargo Chairman Dick Kovacevich.
San Francisco-based Wells Fargo will record merger and integration charges of about $10 billion, but says it expects earnings to be boosted within the first year after the acquisition closes. No government assistance is part of the deal terms.
Additionally, Wells Fargo plans to issue up to $20 billion of stock, primarily common stock, to maintain a strong capital position.
Charlotte will be the headquarters for the combined company's East Coast retail and commercial and corporate banking business. St. Louis will remain the headquarters of Wachovia Securities.
Additionally, three members of the Wachovia board will join the Wells Fargo board when the transaction is completed.
The combined company will have total deposits of $787 billion and assets of $1.42 trillion, more than doubling Wells Fargo's totals on both counts. The bank will operate more than 10,000 locations. The two banks currently employ a combined 280,000 people.
On Monday, Citigroup agreed to buy Wachovia's banking operations for $2.16 billion in a deal orchestrated by the federal government. That deal, which had been approved by the boards of both companies, was still subject to approval by Wachovia's shareholders and regulators. It is not clear whether Citigroup will have to pay a break-up fee.
In addition to assuming $53 billion worth of debt, Citigroup had agreed to absorb up to $42 billion of losses from Wachovia's $312 billion loan portfolio. The FDIC agreed to cover any remaining losses in exchange for $12 billion in Citigroup preferred stock and warrants.
But the failure of the government's proposed $700 billion bailout for financial institutions Monday afternoon cast doubt on whether Citigroup would be able to rid itself of some of Wachovia's bad debt.
While the proposal would have prevented most banks from profiting on the sale of troubled assets to the government, an exception would have been made for assets acquired in a merger or buyout.
That would have allowed Citigroup to sell Wachovia's distressed mortgage-related assets to the government for a profit.
A revised version of the bailout plan was passed on Wednesday by the Senate and goes up for a House vote on Friday. The plan still centers on enabling the government to spend billions of dollars to buy bad mortgage-related securities and other devalued assets from troubled financial institutions.
Citigroup has not turned a profit for three straight quarters, and lost a total of $17.4 billion during that period after writing down its assets by about $46 billion. That's the most write-downs of any U.S. bank.
While Wells Fargo has logged three straight quarters of profit declines, the bank has been weathering one of the nation's worst credit crises much better than most of its competitors, in part because it had less exposure to the subprime mortgages whose failure undermined the financial sector.
That means it hasn't been forced to take the huge number of write-downs that other banks have needed. Under Stumpf the bank also has continued raising its dividend at a time when many other financial institutions are slashing theirs to preserve capital.
John G. Stumpf, Wells Fargo president and CEO, took over in June 2007 -- near the start of the credit crisis -- from Kovacevich, who remains chairman. Both men worked since the 1980s at Norwest Corp., Wells Fargo's predecessor.
Wachovia shares were up $2.25, or 53 percent, at $6.50 in premarket trading, while Wells Fargo fell $1.40, or 3.8 percent, to $35.31. Citigroup shares were down $3.10, or 13.2 percent, to $20.35.
AP Business Writer Jennifer Malloy Zonnas contributed to this story from New York.
Present day..
-------
[h=1]It keeps getting worse for Wells Fargo[/h]
The window of a Wells Fargo bank after a protester smashed it with a pipe wrench during a demonstration in Oakland, California.Justin Sullivan/Getty Images
Wells Fargo is facing a tidal wave of bad news.
The bank has a mounting series of problems stemming from the news that since 2011 employees had opened fraudulent accounts for customers.
In addition to a settlement on Thursday, Wells has been hit with backlash over other things such as executive compensation and questions about its debt.
[h=2]The crux of it all[/h]The catalyst for all the bad news is the opening of fraudulent accounts on behalf of customers.
Starting in 2011, Wells Fargo employees opened 2 million bank and credit card accounts in customers' names without their knowledge. The goal was to generate fees for the company and hit aggressive sales targets for employees.
After an investigation, the bank was accused of fraud by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the Los Angeles prosecutor. It settled on Thursday for $185 million.
In addition to the fine, 5,300 employees have been fired in connection with the fraudulent openings - roughly 1% of Wells Fargo's workforce.
[h=2]The fallout[/h]Since the announcement of the settlement, Wells Fargo not only has had to deal with the financial fallout, but also with a public relations disaster.
On Monday, five US senators on the Senate banking committee wrote a letter to Richard Shelby, head of the committee, asking for an investigation and hearings to address the matter.
"The magnitude of this situation deserves a thorough and comprehensive review," the letter said. "As members of the Senate committee of jurisdiction, we should undertake prompt action to fully investigate the cause, scope, and impact of this event, as well as understand and consider implementing any lessons learned."
The hearing is set for September 20, and according to Isaac Boltansky, director of policy research at Compass Point, it will likely evoke memories of the 2013 London Whale hearing, where the bank's top brass were dragged up in front of lawmakers.
Elizabeth Warren.AP
"Our sense is that lawmaker questioning - particularly from Senators Brown (D-OH), Warren (D-MA), and Merkley (D-OR) - will focus on establishing a narrative that Wells Fargo is either 'too big to manage' or its management was willfully complicit in the fraud," Boltansky said.
Democratic Sen. Elizabeth Warren, who signed the letter to Shelby, told CNN that Wells had committed a "staggering fraud." Democratic presidential candidate Hillary Clinton commented on the settlement by Wells, calling the accountopenings "outrageous behavior."
Moody's, a credit rating agency, issued a warning that the settlement may have a negative effect on Wells' debt because of image concerns and called the incident "highly disturbing."
"We do expect some immediate damage to Wells Fargo's reputation from this embarrassing episode," the Moody's report said.
On Tuesday, Treasury Secretary Jack Lew told CNBC that from what he had seen, Wells Fargo had participated in "bad behavior," and that the accusations showed bank regulation should not be rolled back.
"What I can tell you is there's a lot of talk in Washington these days about rolling back Dodd-Frank, about rolling back the law, changing the law that created the agency that uncovered and took action against this," he said. "This ought to be a moment when people stop and remember how dangerous the system is when you don't have the proper protections in place."
[h=2]Wells Fargo's response[/h]In addition to the settlement, Wells announced that it was eliminating its sales goals for retail employees. The thinking is that targeted goals for opening accounts and generating fees led employees to cut corners and open accounts fraudulently.
"We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers," CEO John Stumpf said in a statement about the change.
Wells Fargo CEO John Stumpf.Reuters/ John Adkisson
Despite the shift, Stumpf said in an interview with The Wall Street Journal on Tuesday that there "was no incentive to do bad things" at Wells and laid the blame on the employees rather than the culture of the firm.
Speaking at Barclays' Global Financial Services Conference, Wells Fargo CFO John Shrewsberry said the fraudulent accounts were not opened in order to generate revenue for the bank. Instead, a few employees opened them to boost their performance.
"It was really more at the lower end of the performance scale, where people apparently were making bad choices to hang on to their job," Shrewsberry said.
[h=2]$125 million[/h]Also drawing the ire of lawmakers and pundits is the $125 million retirement payment going to Wells Fargo executive Carrie Tolstedt upon her retirement at the end of the year.
Sarah Rice/Getty
Tolstedt heads up the community banking division that in part oversees the retail banking and credit card operations part of the company and which was responsible for the fraudulent accounts.
Tolstedt is scheduled to step down at the end of the year and receive roughly $125 million in stock and other compensation from the bank.
The retirement is not a result of the findings, according to Wells Fargo; Tolstedt announced the move in July. Additionally, these compensation packages are usually set well in advance.
Still, in a time of public relations struggles, it's another headache for the bank.
[h=2]Going forward[/h]Wells Fargo's stock has taken a bit of a hit since the news, dropping by roughly $3 per share in the past week - just shy of 6%.
The Senate investigation still looms, and the public relations mess will nag the company, but outside of the settlement cost it is unclear what impact the past week will have on Wells Fargo.
So far it hasn't mattered too much - at least according to the company.
Shrewsberry said at the Barclays' conference that there has been little effect so far on customer behavior at Wells, but only time will tell if that remains the case.
-------
[h=1]It keeps getting worse for Wells Fargo[/h]
Wells Fargo is facing a tidal wave of bad news.
The bank has a mounting series of problems stemming from the news that since 2011 employees had opened fraudulent accounts for customers.
In addition to a settlement on Thursday, Wells has been hit with backlash over other things such as executive compensation and questions about its debt.
[h=2]The crux of it all[/h]The catalyst for all the bad news is the opening of fraudulent accounts on behalf of customers.
Starting in 2011, Wells Fargo employees opened 2 million bank and credit card accounts in customers' names without their knowledge. The goal was to generate fees for the company and hit aggressive sales targets for employees.
After an investigation, the bank was accused of fraud by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, and the Los Angeles prosecutor. It settled on Thursday for $185 million.
In addition to the fine, 5,300 employees have been fired in connection with the fraudulent openings - roughly 1% of Wells Fargo's workforce.
[h=2]The fallout[/h]Since the announcement of the settlement, Wells Fargo not only has had to deal with the financial fallout, but also with a public relations disaster.
On Monday, five US senators on the Senate banking committee wrote a letter to Richard Shelby, head of the committee, asking for an investigation and hearings to address the matter.
"The magnitude of this situation deserves a thorough and comprehensive review," the letter said. "As members of the Senate committee of jurisdiction, we should undertake prompt action to fully investigate the cause, scope, and impact of this event, as well as understand and consider implementing any lessons learned."
The hearing is set for September 20, and according to Isaac Boltansky, director of policy research at Compass Point, it will likely evoke memories of the 2013 London Whale hearing, where the bank's top brass were dragged up in front of lawmakers.
"Our sense is that lawmaker questioning - particularly from Senators Brown (D-OH), Warren (D-MA), and Merkley (D-OR) - will focus on establishing a narrative that Wells Fargo is either 'too big to manage' or its management was willfully complicit in the fraud," Boltansky said.
Democratic Sen. Elizabeth Warren, who signed the letter to Shelby, told CNN that Wells had committed a "staggering fraud." Democratic presidential candidate Hillary Clinton commented on the settlement by Wells, calling the accountopenings "outrageous behavior."
Moody's, a credit rating agency, issued a warning that the settlement may have a negative effect on Wells' debt because of image concerns and called the incident "highly disturbing."
"We do expect some immediate damage to Wells Fargo's reputation from this embarrassing episode," the Moody's report said.
On Tuesday, Treasury Secretary Jack Lew told CNBC that from what he had seen, Wells Fargo had participated in "bad behavior," and that the accusations showed bank regulation should not be rolled back.
"What I can tell you is there's a lot of talk in Washington these days about rolling back Dodd-Frank, about rolling back the law, changing the law that created the agency that uncovered and took action against this," he said. "This ought to be a moment when people stop and remember how dangerous the system is when you don't have the proper protections in place."
[h=2]Wells Fargo's response[/h]In addition to the settlement, Wells announced that it was eliminating its sales goals for retail employees. The thinking is that targeted goals for opening accounts and generating fees led employees to cut corners and open accounts fraudulently.
"We are eliminating product sales goals because we want to make certain our customers have full confidence that our retail bankers are always focused on the best interests of customers," CEO John Stumpf said in a statement about the change.
Despite the shift, Stumpf said in an interview with The Wall Street Journal on Tuesday that there "was no incentive to do bad things" at Wells and laid the blame on the employees rather than the culture of the firm.
Speaking at Barclays' Global Financial Services Conference, Wells Fargo CFO John Shrewsberry said the fraudulent accounts were not opened in order to generate revenue for the bank. Instead, a few employees opened them to boost their performance.
"It was really more at the lower end of the performance scale, where people apparently were making bad choices to hang on to their job," Shrewsberry said.
[h=2]$125 million[/h]Also drawing the ire of lawmakers and pundits is the $125 million retirement payment going to Wells Fargo executive Carrie Tolstedt upon her retirement at the end of the year.
Tolstedt heads up the community banking division that in part oversees the retail banking and credit card operations part of the company and which was responsible for the fraudulent accounts.
Tolstedt is scheduled to step down at the end of the year and receive roughly $125 million in stock and other compensation from the bank.
The retirement is not a result of the findings, according to Wells Fargo; Tolstedt announced the move in July. Additionally, these compensation packages are usually set well in advance.
Still, in a time of public relations struggles, it's another headache for the bank.
[h=2]Going forward[/h]Wells Fargo's stock has taken a bit of a hit since the news, dropping by roughly $3 per share in the past week - just shy of 6%.
The Senate investigation still looms, and the public relations mess will nag the company, but outside of the settlement cost it is unclear what impact the past week will have on Wells Fargo.
So far it hasn't mattered too much - at least according to the company.
Shrewsberry said at the Barclays' conference that there has been little effect so far on customer behavior at Wells, but only time will tell if that remains the case.
Now that we getting closer to election time all trumps shady business dealings .. Donations to politicians to buy favors etc coming out as you would expect ..
Like ive been saying all along only way Hillary can get elected is with trump on other side.. Any of the other GOP guys woulda won fairly easily IMO..
They wouldn't have to do much of anything to win.. Disclose their taxes... No major skeletons in the closest.. show a clean physical ... and play it by the book... Easy win..
Like ive been saying all along only way Hillary can get elected is with trump on other side.. Any of the other GOP guys woulda won fairly easily IMO..
They wouldn't have to do much of anything to win.. Disclose their taxes... No major skeletons in the closest.. show a clean physical ... and play it by the book... Easy win..
Just the establishment elite and their liberal media poodles getting desperate Tiz, nothing to see here folks, move along move along.
Pretty obvious this is politically motivated and yet more proof that Trump is a threat to the establishment, this only gives him even more credibility in the eyes of anyone who wants change in the USA
He's not "their man" or "one of them" and their actions prove it
and every time they pull a stunt like this... Donald Trump gets a few more votes...
Pretty obvious this is politically motivated and yet more proof that Trump is a threat to the establishment, this only gives him even more credibility in the eyes of anyone who wants change in the USA
He's not "their man" or "one of them" and their actions prove it
and every time they pull a stunt like this... Donald Trump gets a few more votes...
http://finance.yahoo.com/news/billi...he-biggest-bubble-in-the-world-161352803.html
More and more of the big wig $ guys starting to say things going to get bad. Sure that always happens but it does seem more frequent.
Singer saying bond market is a huge bubble.
More and more of the big wig $ guys starting to say things going to get bad. Sure that always happens but it does seem more frequent.
Singer saying bond market is a huge bubble.
The whole system needs a huge kick in the ass and Trumpy boy is the nearest we'll ever get IMO
As far as being dodgy is concerned... well the entire business community inhabits a legal no-mans land much of the time
I audited companies decades ago and rarely ever met a truly honest businessman/woman, it comes with the job and the scum always rises to the top
As far as being dodgy is concerned... well the entire business community inhabits a legal no-mans land much of the time
I audited companies decades ago and rarely ever met a truly honest businessman/woman, it comes with the job and the scum always rises to the top
Pretty obvious we turning Japanese ...
impossible to raise rates now with all the huge debt burdens everywhere.. Now "safe/stable/big" corporations have loaded up on debt like crazy to fluff numbers/M&A activity in a slow growth world..
next flush things gonna get really interesting as the have nots already struggling mightily..
Retail sales for August -0.3%
boggles my mind they can keep this thing afloat.. too much at stake for the elites in status quo vs potential loose cannon.. Once we get past election (regardless of who wins) should be tank city... Corporate Valuations ridiculous and macro data continues to wane...
boggles my mind they can keep this thing afloat.. too much at stake for the elites in status quo vs potential loose cannon.. Once we get past election (regardless of who wins) should be tank city... Corporate Valuations ridiculous and macro data continues to wane...
Today's lipstick on a pig article..
-------
[h=1]forbes.com[/h]We’ve just had the numbers for the United States’ manufacturing and industrial output for August and they’re both down 0.4%. Much will be said about this, there will be agonising and insistences that we must do something, anything. And yet the truth is that manufacturing simply isn’t important as a part of the economy these days. The attention we all pay to it is simply an historical overhang from when it was more important. Give it long enough and we’ll start to give this number the attention it properly deserves – perhaps a little more than the near nothing we devote to the agricultural production numbers but no more than that.
The news itself:
We’re all the way back to output at the level of June. Obviously a disaster, eh?
Still, the reason not to worry is because this is a measurement of a part of the economy which just isn’t important. Yes, yes, we all get told, interminably, that manufacturing is vital, that there’s some magical multiplier of making stuff to drop on feet and it’s all nonsense.Much of it simply being special pleading from people who own or work in the sector.
The truth is that manufacturing is only 15% of the entire global economy. And it’s some 12% of the US economy. So here we have a 0.4% drop, all the way back to June’s levels, in something that is 12% of the US economy. Or a fall of, potentially, 0.048% in GDP. And the thing is we don’t actually measure GDP to that level of accuracy. We only report it to the first digit after the decimal point. This is, quite literally, a change we won’t even see in our more general estimation of the US economy.
That is, it’s unimportant.
-------
[h=1]forbes.com[/h]We’ve just had the numbers for the United States’ manufacturing and industrial output for August and they’re both down 0.4%. Much will be said about this, there will be agonising and insistences that we must do something, anything. And yet the truth is that manufacturing simply isn’t important as a part of the economy these days. The attention we all pay to it is simply an historical overhang from when it was more important. Give it long enough and we’ll start to give this number the attention it properly deserves – perhaps a little more than the near nothing we devote to the agricultural production numbers but no more than that.
The news itself:
Output at American manufacturers fell more than economists forecast in August, a sign the industry is having trouble finding its footing.
The 0.4 percent decline at factories was the biggest drop since March and followed a 0.4 percent increase the prior month, a Federal Reserve report showed Thursday in Washington.
The 0.4 percent decline at factories was the biggest drop since March and followed a 0.4 percent increase the prior month, a Federal Reserve report showed Thursday in Washington.
We’re all the way back to output at the level of June. Obviously a disaster, eh?
Industrial production, a measure of output at factories, mines and utilities, fell a seasonally adjusted 0.4% in August, the Federal Reserve said Thursday. Economists surveyed by The Wall Street Journal had forecast a 0.2% decrease.
The difference between the two measures is that manufacturing is manufacturing and industrial production is manufacturing plus mines and utilities. They’re both down by the same amount but that they are both down the same amount is just happenstance.
Last month, there were some positive signs for the hard-hit energy sector, with mining output rising 1.0 percent, it’s fourth consecutive monthly increase. However, the index for utilities fell 1.4 percent.
Having utilities in there is a bit of an oddity. As that’s an intermediate good, an input into other things. For example, if electricity prices halved because solar power was so wondrously cheap then we’d all think that a pretty good idea. And yet we would show that utility output had fallen – not the same thing at all.
Still, the reason not to worry is because this is a measurement of a part of the economy which just isn’t important. Yes, yes, we all get told, interminably, that manufacturing is vital, that there’s some magical multiplier of making stuff to drop on feet and it’s all nonsense.Much of it simply being special pleading from people who own or work in the sector.
The truth is that manufacturing is only 15% of the entire global economy. And it’s some 12% of the US economy. So here we have a 0.4% drop, all the way back to June’s levels, in something that is 12% of the US economy. Or a fall of, potentially, 0.048% in GDP. And the thing is we don’t actually measure GDP to that level of accuracy. We only report it to the first digit after the decimal point. This is, quite literally, a change we won’t even see in our more general estimation of the US economy.
That is, it’s unimportant.
