Three weeks ago, the United Nations voted to link arms sales to the human rights record of the buyers. While superficially appealing, this treaty is worthless. The treaty only covers exports (not imports), countries that didn’t vote for the treaty (Russia) are not bound by it, and do you really think regimes that survive by killing their citizens using black-market weapons will suddenly become angels when there’s no enforcement mechanism?
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No Shoot
Rather than requiring gun-training, fingerprinting, outlawing assault weapons or “large” ammunition magazines or limiting the number of guns you can buy/day, instead require gun buyers to post a $10,000 bond for each gun purchased, and if the gun is involved in a crime, the bond is forfeited. This gives gun buyers strong incentives not to “give” guns to friends and family, prevents straw purchases and makes illegal guns more costly.
Souring Cyprus
The recent $13 billion bailout (60% of GDP) made by the IMF, ECB, and European Commission to Cyprus does not solve problems, it just delays them. With a post bailout debt-to-GDP burden of 140%, an economy that will shrink 20% over the next two years, the gutting of its huge financial sector, and a promise by its creditors to extend no more credit, shorting Cypriot debt is a sure bet.
Less Work
US employment peaked in 1/08 at 138.1 million. Employment then fell to a low of 129.3 million in 2/10, a loss of 8.8 million jobs. Today 46 months after the end of the recession, employment is 135.2 million, 2.9 million below the high. Assuming an optimistic 200,000 new jobs per month, a new employment high will not be reached until 6/14, 6.5 years after the start of the Great Recession.
Note: On Friday I stated that the distillery that produces Maker’s Mark was reducing the alcoholic content of that product by 7%. After a huge outpouring from loyal constituents, the firm decanted, I mean recanted. Sorry for the stale information.
Bad Booze
The Friday File: Due to skyrocketing demand and fixed supply of bourbon, rather than raising the price, the distiller of Maker’s Mark is reducing its alcoholic content by 7%! While most customers won’t notice, those that do will buy better bourbon like Knob Creek and Booker’s from the same distillery. Boosting the price of Maker’s would require raising the price of all its bourbons and that would lose it customers.
Happy Housing
Between 1998 and 2002, before the housing market went haywire, total housing starts averaged 1.65 million units and the population of the US averaged 282 million persons. Over the next five years the US population will average about 320 million. As a result, I expect housing starts to steadily rise to a plateau of about 1.725 million units. Absent increasing bank regulations, starts would be expected to exceed 1.825 million.
Papal Probabilities
The Friday File: With a papal conclave fast approaching, Cardinal Peter Turkson from Ghana is the leading contender with odds of 11-4 that he leaves the conclave as pope. Next is Archbishop Angelo Scola of Italy at 3-1 and Cardinal Marc Ouellet of Canada at 6-1. The problem Turkson faces is that less than 10% of the 120 voting cardinals are African, while half are European.
Week in Review
Decent Week in Review: Consumer credit expanded fueled by long-term student (yikes) and auto loans, the service sector continued to expand at a steady if uninspired rate, while manufacturing activity jumped to its highest level since 05/12. The best news, the trade deficit narrowed to $38.5 billion, about $8 billion more than expected, and should result in Q4 GDP being revised up from -0.1% to maybe as much as 0.75%!
Hagel Hurts
Nominating Senator Hagel for Secretary of Defense raises serious doubts among allies and enemies that President Obama will use all means necessary to prevent Iran from acquiring nuclear weapons. Therefore, the chances of a negotiated settlement fall (despite biting sanctions), because for negotiations to have any hope of success, the Iranians must believe the US is prepared to use massive military force. Thus, the likelihood of an Israeli attack rises.
Euro Risk
Despite the euro zone being in recession, the euro is dramatically rising against the US dollar, from $1.20/euro in July to $1.36 today. Why, because massive European Central Bank (ECB) action prevented Spain from collapsing, and the ECB is fast becoming an inflation hawk and has thus started to shrink its balance sheet, until, of course, the southern European countries go into recession and the ECB again loosens monetary policy.