Of particular interest is this excerpt:

“Last week, however, the Securities and Exchange Commission (SEC) filed fraud charges against New Jersey for misrepresenting its financial obligations, particularly its pension obligations, and misleading investors in its bonds. New York—and many other states—had better sit up and take notice.”

I have previously written of the topic of state budgets and methods used to “balance” them in the July 21, 2009 post.

There is a lot that can be written about the efforts to conceal the true nature of states’ financial conditions.    By “sweeping (financial) problems under the rug” instead of truly solving the deficit problems, it almost seems as if states are inherently betting (in a big way) that current economic hardship is transitory, and that better future economic conditions will “save the day.”  In effect, there is little need to solve structural budget/financial problems because a strengthening economy will alleviate or eliminate such issues.

As well, of course, the federal government has provided relief.  As the Op-ed states, “…Washington does little to enforce responsible budgeting. In its fiscal stimulus packages of 2009 and 2010, for instance, the federal government funneled hundreds of billions of dollars to the states without regard for their fiscal practices, treating irresponsibility in New Jersey and New York the same as prudence in, say, Texas and Indiana.”

It is not hard to envision a scenario in which the three aforementioned “crutches” states are employing to “make it through” their financial crises are no longer available.  Exceedingly dubious “quick fixes,” placing large (inherent) bets on “sunnier” economic days ahead,  and receiving large-scale federal government support are not conditions that can, or should be, relied upon on an ongoing basis.  Of course, these “crutches” should never have been viewed as feasible options in the first place.

A Special Note concerning our economic situation is found here

SPX at 1051.87 as this post is written

The data was last updated August 3, 2010, reflecting May 2010 levels.

Here is a table showing various statistics with regard to National Level participation and costs going back to FY2007.  As seen in this table, the number of people participating as of May 2010 is 40,801,392, up 18.6% from year-ago levels.  As a reference point, the figure as of May 2007 was 26,409,288.

As I wrote in the April 12 post, “Of course, what is particularly disconcerting is not only the extent of participation in these programs, but the fact that this is yet another notable statistic that is getting worse well after the purported end of the recession.”

A Special Note concerning our economic situation is found here

SPX at 1066.48 as this post is written

Some have recently expressed that deflation can be a scenario from which one can remain unimpacted, or will profit from.   Examples include a August 7-8 Wall Street Journal article titled “How to Beat Deflation-And Even Profit From It.” A recent article by Robert Prechter Jr. in the August 9 Barron’s concluded by saying “If you shed market and institutional risk, you can sail through deflationary times unscathed.”

I have previously written of deflation, in the context of whether it would be a “benefit,” in a September 8, 2009 post.

Of course, the extent of deflation plays a major role in determining its impacts…

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SPX at 1120.20 as this post is written

Here is a summary from the “About” page:

“The Economic Security Index (ESI), sponsored by the Rockefeller Foundation, measures the share of Americans who experience at least a 25% drop in their available family income whether due to a decline in income or a spike in medical spending or a combination of the two, and who lack an adequate financial safety net to catch them when they fall. A higher ESI therefore indicates greater insecurity, much as a rising unemployment rate signals a faltering economy.

Data are available for the ESI from 1985 through 2007, with projections for the most recent years (a less complete form of the index is available back to the late 1960s).

The ESI looks at actual economic losses, not at who fears or is vulnerable to them. The threat of such losses is real and growing for all Americans.”

From the homepage, this summary is provided:

“The Economic Security Index shows that economic insecurity disproportionately affects the less advantaged, but has risen substantially for all Americans.”

Here is a chart for 1985-2007 (with 2008-2009 projections):

my comments:

I find this Economic Security Index interesting for a variety of reasons.

There are many implications that can potentially be drawn.

Once I further research this Index, I will write another post(s) about it and its implications.

SPX at 1122.32 as this post is written

For reference purposes, here is a chart of Durable Goods New Orders, through 6-1-10, on a Percent Change From Year Ago basis:

source: St. Louis Fed

Below is the latest ECRI WLI Growth chart.  I find the (loose) resemblance (from 2008) of it to the New Orders chart shown above to be curious.  Of course, the ECRI WLI Growth chart is more current (updated through Friday) and has a recent rapid downward trajectory to it:

source: Doug Short’s blog

(click on above images to enlarge charts)

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SPX at 1115.57 as this post is written

(click on chart to enlarge image)

I find this chart interesting especially given its long-term perspective.

As seen by this measure, the post-2007 experience is (very) atypical…

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SPX at 1102.66 as this post is written

I find these charts valuable as they provide a long-term history of each survey, which is rare.

Each survey chart is plotted in blue, below the S&P500:

(click on each chart to enlarge image)

Conference Board Consumer Confidence, last updated 6-29-10:

University of Michigan Consumer Confidence, last updated 7-16-10:

ABC News Consumer Comfort Index, last updated 7-8-10:

NFIB Small Business Optimism, last updated 7-15-10:

As one can see, these charts continue to show subdued readings, especially when viewed from a long-term perspective.

These charts should be interesting to monitor going forward.  Although I don’t believe that confidence surveys should be overemphasized, they do help to delineate how the economic environment is being perceived.

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SPX at 1094.59 as this post is written

First, this quote from a story titled “Impact to Reach Beyond Wall Street”:

“”The bill does not respond at all to the causes of the financial crisis,” said Peter Wallison, a former Reagan administration official and co-director of American Enterprise Institute’s financial policy studies program. “Instead, it weakens the U.S. economy and reduces economic growth.”

Second, a couple of quotes from another July 16 story titled “Law Remakes U.S. Financial Landscape”:

“The bill “is a 2,300-page legislative monster…that expands the scope and the powers of ineffective bureaucracies,” said Sen. Richard Shelby (R., Ala.).”

also:

“”We failed completely to understand the complexity of what the impact of the national decline in housing prices would be in the financial system,” said Ms. Yellen, currently president of the Federal Reserve Bank of San Francisco. “We saw a number of different things, and we failed to connect the dots.”

My comments:

I am in general agreement with the quotes from Peter Wallison and Richard Shelby.

I included the quote from Janet Yellin as I believe it is notable, and frankly, I was surprised to see it.

From an “all things considered” standpoint, I don’t believe this bill provides any aggregate value.  It won’t prevent any future financial crisis.   I think it is notable that there is so much negative commentary about this bill from the financial and economic community; some of this commentary is appended to the second story mentioned above.

Furthermore, not only does this bill not provide aggregate value, but it also has the potential to be quite pernicious on numerous fronts.  At this point, it is impossible to predict how this bill will be enacted; however, it is clear that there is outsized potential for many unintended harmful consequences.

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SPX at 1064.88 as this post is written

I find this phrase rather mystifying; rarely is it specified as to “whom” will prevent such economic harm from occurring.  Presumably it is the government, Federal Reserve, Congress, the President, or perhaps just fate.

While it may be comforting to believe that adverse economic events “won’t be allowed to happen,” I don’t believe, for a variety of reasons, that the idea reflects reality.

The best way to avoid adverse economic events or circumstances is through effective policy and decision making.

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SPX at 1028.06 as this post is written

Below the Retail Sales Per Capita is a chart of the S&P Retail Sales Index.

Of course, this view of total retail sales, on a per-capita (factoring in population growth) basis, is not one that is often seen.  I’ve posted it as I believe that this “per-capita” view is an important one, for many reasons.

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SPX at 1027.37 as this post is written