Palin is a Neoconservative, Not a Tea Party Constitutionalist

By Michael Pento | February 08, 2010 | 10:20 AM |  2 CommentsTweet This

Sarah Palin is missing the nucleus of what the Tea Party activists are all about. They are not looking for another John McCain or George Bush. While I sympathize with much of Palin's platform, she misses the entire isolationist sentiment of the movement.

Tea party activists want a return to the constitution. While they require that our leaders fiercely defend our country, they also do not want to conduct any more pro-active wars that bankrupt the nation. They also value the life of our young men and women more than the profits of Raytheon, Lockheed Martin and Northrop Grumman. There are many right leaning independents that will no longer support the use of military force to spread democracy and build nations across the globe.

Here is Mrs. Palin's interview with Chris Wallace on Fox news last Sunday. You could hear the votes dropping from true conservatives across the country when she uttered these words; "Say he decided to declare war on Iran..., which I would like him to do." Her comments were in response to the question how Barack Obama can improve his chances of re-election.

That means that President Palin would declare war on Iran, today! What kind of war Sarah? Many military experts claim that a messy and bloody ground war would be necessary, not just a week of "Shock and Awe" air sorties.

There is a nascent movement in Iran to overthrow Mahmoud Ahmadinejad and the people of that country are using people like Mir-Hossein Mousavi to change their government's attitude towards Israel and the west.

Our country must vigorously defend attacks against our nation and her allies. But demagoguery and jingoism should not be used as a way to score political points. And war must be viewed as the last option of defense, not a way of life or a political ideal.  

If Palin's platform in 2012 is more Neo-conservatism, she will mush her way back to Alaska.

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Will the Real Jobs Number Please Stand UP

By Michael Pento | February 05, 2010 | 12:01 PM |  4 CommentsTweet This

With the Dow falling back below 10,000, the financial media has trotted out a plethora of market bulls this morning. From Joe Lavorgna to Mike Darda to Lawrence Meyer to Bob Barbera, we have endured an inordinate amount of rosiness regarding the Non-farm Payroll report for January.

Even though the economy shed another 20,000 jobs last month and the benchmark revisions brought the total of jobs lost since December of 2007 to a staggering 8.4 million, we have been told by the above individuals to only concentrate on the household survey, which showed the unemployment rate dropping to 9.7%.

Perhaps an explanation for the reconciliation of the differences between the establishment survey and the household survey can be found on the Bureau of Labor Statistics web site.

Changes to The Employment Situation Text, Tables, and Data

Several changes to The Employment Situation news release text and tables are being introduced with this release. In addition, establishment survey data have been revised as a result of the annual benchmarking process and the updating of sea sonal adjustment factors. Also, household survey data for January 2010 reflect updated population estimates. See the notes at the end of the text for more information about all of these changes.

It very well could be that a reduction in the labor force in the household survey from their updated population estimates brought the unemployment rate down. The civilian labor force dropped by 249,000 according to the survey.

But either way, the question remains; what impetus can be realized that will cause 8.4 million people to become employed once again? These people were employed primarily in the real estate sector and the ancillary jobs associated with housing. Will they be hired back anytime soon? Can they be expected to become part of the goods producing sector of the economy? I think, sadly not.

It looks like we will have to wait for the next credit bubble to form in order to hire people to build and service the next asset bubble.But with sovereign debt issues pervading around the globe, it doesn't look like robust world GDP will abound.

What we should be doing instead is cutting taxes, government spending and regulations in order to create viable and balanced job growth. But instead we are headed in the exact same, wrong direction yet again.

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Really Mr. Chambers?

By Michael Pento | February 04, 2010 | 11:03 AM |  4 CommentsTweet This

Listening to Cisco's CEO John Chambers this morning on CNBC, one would think the global economy and technology sector was partying like it was 1999. But who should investors listen to? The head of a networking company or the fact that; IPOs are being pulled from the market, jobless claims continue to rise, sovereign debt issues plague the global economy and growth sensitive commodities, like copper, that are plunging.

Mr. Chambers not only sounded like a shill about his company but also made bold statements regarding his confidence about a dramatic global recovery. However, the truth behind CSCO may be found in the stock price, which is down over 6% from its January 14^th high of this year, down 2% since the beginning of 2010 and is the same price today as it was in 2001.

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A Mortally Wounded Private Sector

By Michael Pento | February 02, 2010 | 12:00 PM |  6 CommentsTweet This

The President's 2011 budget proposal was so outrageously egregious that Obama had to hold a special conference on Monday just to spin the news.

The scope of the proposed budget for fiscal 2011 is $3.8 trillion. The difference between revenue and expenditures for this fiscal year will leave us with a deficit of $1.6 trillion and, amazingly enough, that shortfall will equal 10.6% of GDP-the highest since WWll and $200 billion more than 2009! Next year's deficit is slated to post just a $300 billion reduction to $1.3 trillion.

While it is true that "W" was a paragon of fiscal irresponsibility, it now seems past the time allotted to be able to just blame Bush for the debt. To give you a bit of perspective of how far we've gone off the fiscal rails, the budget for all of 2001 was "just" $1.9 trillion.

Going forward, the administration is projecting annual deficits between $700 and $1 trillion through 2020, which would add $8.5 trillion to the nation's debt. The annual deficit is not expected to drop below $700 billion even though they expect spending on wars to drop to $50 billion from the $159 billion that will be spent this year and next in Iraq and Afghanistan.

There is an inordinate amount of obfuscation in Obama's budget. It has many moving parts like the proposed cutting of 120 programs that will garner $20 billion and a fee (not a tax mind you) on the country's biggest banks that will raise $90 billion. There is also a freeze on non-defense discretionary spending that may save $250 billion over 10 years. But the freeze is only in effect for three years and then those outlays will be indexed to inflation.

But the problem of all this debt and fiscal profligacy is clear. Every dollar of debt is a promise to tax that same dollar in the future...and with interest. Estimates indicate that the publically traded debt will rise to $18.5 trillion by 2020. To compare, the total National debt outstanding today is already an unbelievable $12.3 trillion and the publically traded portion of that debt is $7.7 trillion. Having publically traded debt increase from $7.7 trillion to 18.5 trillion may result in catastrophe. It will greatly increase the odds of causing a U.S. dollar and bond market crisis.

A dramatically falling dollar and soaring bond yields will cripple our economy. We must get our fiscal and monetary house in order, today! I'm sorry to say but former Treasury Secretary Paulson's book "On the Brink" will have to be re-written and given a new title. Maybe, something like "Pushed over the Cliff" would be appropriate. A country cannot rescue the private sector by moving the debt to the public sector. In truth, we haven't bailed out the private sector at all, just mortally wounded the public sector. But there will be no one around to bail us out in the future. We have delayed and exacerbated the inevitable confrontation with our debt.

Can Mr. Geithner go hat in hand to China and ask them to let their currency rise, which means that they will have fewer dollars to buy Treasuries; and at the same time ask them to increase their purchases of Treasuries to the tune of almost $11 trillion in the next 10 years. Does that sound like a credible strategy or a sound plan for America? President Obama, Timothy Geithner and Ben Bernanke have failed to recognize that the true nature of the problem is our debt. Their failures to allow the nation to deleverage and to use the taking on of more debt as the panacea will lead to a crisis more severe than the one most think we have avoided. The sooner we realize that, the sooner we can begin to cut spending and to the greatest extent possible, mollify the inevitable economic crisis.

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Housing and Jobs

By Michael Pento | February 01, 2010 | 11:07 AM |  0 CommentsTweet This

MSN Money has a good two minute video out this morning. In it, Diana Olick indicates that 25% of mortgage holders or 15 million homeowners owe more on their house than it's worth. And because of that condition, many more consumers are deciding to walk away from their obligations. Which means the key to continuing this nascent recovery is to keep home prices from falling any further.

That also means creating jobs is of paramount importance. But you just can't lower the interest payment enough or even reduce the principal to an acceptable level if the mortgage borrower doesn't have job.

A government should not be in the job creation business. It should only provide an environment that allows the private sector to increase hiring. This way we know that the jobs created make sense; that they are economically viable and are accretive to economic growth.

I believe the private sector is under an almost unprecedented assault. Therefore I don't put any credence in a sustainable recovery in the job market or in the housing market. Since, our manufacturing base has been eroded; the job growth taking us out of the past two recessions has come from the building and servicing of asset bubbles. All we have today is a bubble in the bond market and I'm just not sure by servicing that bubble we can replace the over 7 million jobs lost since December of 2007.

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