ChartingTheEconomy.Com

July 3, 2009

Declaration of Independence

Filed under: Uncategorized — admin @ 12:02 am

IN CONGRESS, July 4, 1776.

The unanimous Declaration of the thirteen united States of America,

When in the Course of human events, it becomes necessary for one people to dissolve the political bands which have connected them with another, and to assume among the powers of the earth, the separate and equal station to which the Laws of Nature and of Nature’s God entitle them, a decent respect to the opinions of mankind requires that they should declare the causes which impel them to the separation.

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.–That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, –That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness. Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed. But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.–Such has been the patient sufferance of these Colonies; and such is now the necessity which constrains them to alter their former Systems of Government. The history of the present King of Great Britain is a history of repeated injuries and usurpations, all having in direct object the establishment of an absolute Tyranny over these States. To prove this, let Facts be submitted to a candid world.

He has refused his Assent to Laws, the most wholesome and necessary for the public good.
He has forbidden his Governors to pass Laws of immediate and pressing importance, unless suspended in their operation till his Assent should be obtained; and when so suspended, he has utterly neglected to attend to them.
He has refused to pass other Laws for the accommodation of large districts of people, unless those people would relinquish the right of Representation in the Legislature, a right inestimable to them and formidable to tyrants only.
He has called together legislative bodies at places unusual, uncomfortable, and distant from the depository of their public Records, for the sole purpose of fatiguing them into compliance with his measures.
He has dissolved Representative Houses repeatedly, for opposing with manly firmness his invasions on the rights of the people.
He has refused for a long time, after such dissolutions, to cause others to be elected; whereby the Legislative powers, incapable of Annihilation, have returned to the People at large for their exercise; the State remaining in the mean time exposed to all the dangers of invasion from without, and convulsions within.
He has endeavoured to prevent the population of these States; for that purpose obstructing the Laws for Naturalization of Foreigners; refusing to pass others to encourage their migrations hither, and raising the conditions of new Appropriations of Lands.
He has obstructed the Administration of Justice, by refusing his Assent to Laws for establishing Judiciary powers.
He has made Judges dependent on his Will alone, for the tenure of their offices, and the amount and payment of their salaries.
He has erected a multitude of New Offices, and sent hither swarms of Officers to harrass our people, and eat out their substance.
He has kept among us, in times of peace, Standing Armies without the Consent of our legislatures.
He has affected to render the Military independent of and superior to the Civil power.
He has combined with others to subject us to a jurisdiction foreign to our constitution, and unacknowledged by our laws; giving his Assent to their Acts of pretended Legislation:
For Quartering large bodies of armed troops among us:
For protecting them, by a mock Trial, from punishment for any Murders which they should commit on the Inhabitants of these States:
For cutting off our Trade with all parts of the world:
For imposing Taxes on us without our Consent:
For depriving us in many cases, of the benefits of Trial by Jury:
For transporting us beyond Seas to be tried for pretended offences
For abolishing the free System of English Laws in a neighbouring Province, establishing therein an Arbitrary government, and enlarging its Boundaries so as to render it at once an example and fit instrument for introducing the same absolute rule into these Colonies:
For taking away our Charters, abolishing our most valuable Laws, and altering fundamentally the Forms of our Governments:
For suspending our own Legislatures, and declaring themselves invested with power to legislate for us in all cases whatsoever.
He has abdicated Government here, by declaring us out of his Protection and waging War against us.
He has plundered our seas, ravaged our Coasts, burnt our towns, and destroyed the lives of our people.
He is at this time transporting large Armies of foreign Mercenaries to compleat the works of death, desolation and tyranny, already begun with circumstances of Cruelty & perfidy scarcely paralleled in the most barbarous ages, and totally unworthy the Head of a civilized nation.
He has constrained our fellow Citizens taken Captive on the high Seas to bear Arms against their Country, to become the executioners of their friends and Brethren, or to fall themselves by their Hands.
He has excited domestic insurrections amongst us, and has endeavoured to bring on the inhabitants of our frontiers, the merciless Indian Savages, whose known rule of warfare, is an undistinguished destruction of all ages, sexes and conditions.

In every stage of these Oppressions We have Petitioned for Redress in the most humble terms: Our repeated Petitions have been answered only by repeated injury. A Prince whose character is thus marked by every act which may define a Tyrant, is unfit to be the ruler of a free people.

Nor have We been wanting in attentions to our Brittish brethren. We have warned them from time to time of attempts by their legislature to extend an unwarrantable jurisdiction over us. We have reminded them of the circumstances of our emigration and settlement here. We have appealed to their native justice and magnanimity, and we have conjured them by the ties of our common kindred to disavow these usurpations, which, would inevitably interrupt our connections and correspondence. They too have been deaf to the voice of justice and of consanguinity. We must, therefore, acquiesce in the necessity, which denounces our Separation, and hold them, as we hold the rest of mankind, Enemies in War, in Peace Friends.

We, therefore, the Representatives of the united States of America, in General Congress, Assembled, appealing to the Supreme Judge of the world for the rectitude of our intentions, do, in the Name, and by Authority of the good People of these Colonies, solemnly publish and declare, That these United Colonies are, and of Right ought to be Free and Independent States; that they are Absolved from all Allegiance to the British Crown, and that all political connection between them and the State of Great Britain, is and ought to be totally dissolved; and that as Free and Independent States, they have full Power to levy War, conclude Peace, contract Alliances, establish Commerce, and to do all other Acts and Things which Independent States may of right do. And for the support of this Declaration, with a firm reliance on the protection of divine Providence, we mutually pledge to each other our Lives, our Fortunes and our sacred Honor.


The 56 signatures on the Declaration appear in the positions indicated:

Column 1
Georgia:
   Button Gwinnett
   Lyman Hall
   George Walton

Column 2
North Carolina:
   William Hooper
   Joseph Hewes
   John Penn
South Carolina:
   Edward Rutledge
   Thomas Heyward, Jr.
   Thomas Lynch, Jr.
   Arthur Middleton

Column 3
Massachusetts:
John Hancock
Maryland:
Samuel Chase
William Paca
Thomas Stone
Charles Carroll of Carrollton
Virginia:
George Wythe
Richard Henry Lee
Thomas Jefferson
Benjamin Harrison
Thomas Nelson, Jr.
Francis Lightfoot Lee
Carter Braxton

Column 4
Pennsylvania:
   Robert Morris
   Benjamin Rush
   Benjamin Franklin
   John Morton
   George Clymer
   James Smith
   George Taylor
   James Wilson
   George Ross
Delaware:
   Caesar Rodney
   George Read
   Thomas McKean

Column 5
New York:
   William Floyd
   Philip Livingston
   Francis Lewis
   Lewis Morris
New Jersey:
   Richard Stockton
   John Witherspoon
   Francis Hopkinson
   John Hart
   Abraham Clark

Column 6
New Hampshire:
   Josiah Bartlett
   William Whipple
Massachusetts:
   Samuel Adams
   John Adams
   Robert Treat Paine
   Elbridge Gerry
Rhode Island:
   Stephen Hopkins
   William Ellery
Connecticut:
   Roger Sherman
   Samuel Huntington
   William Williams
   Oliver Wolcott
New Hampshire:
   Matthew Thornton

Data source:

National Archives

July 2, 2009

The Exhaustion Rate of Unemployment Benefits Hits Record High

Filed under: Unemployment Claims — admin @ 12:01 am

book3_2196_image005

As you have seen from the prior few posts, unemployment insurance claims (both initial and continued) are near record levels.  What is very disturbing is that this is occuring at the same time the exhaustion rate of unemployment benefits hits record highs.

The way the Bureau of Labor Statistics calculates the exhaustion rate needs a little explanation.  It takes a 12-month average of the number of final payments and divides that by a 12-month average of the number of first payments.  The 12-month average period for which the first payments are counted lags the 12-month period for which the final payments are counted by 6 months.  For example, the exhaustion rate for June 2008 equals the number of final payments from July 2007 through June 2008 divided by the number of first payments from January 2007 through December 2007. 

The 12-month average period helps smooth out monthly bumps in the numbers.  The lag helps ensure the data on persons exhausting their benefits is compared with the appropriate data from when they received their first payments (because it usually takes about 6 months to exhaust benefits).  Without the lag, first time data could skew the exhaustion rate calculation.  For example, a big decline in first time claims would make the exhaustion rate increase even if the number of persons exhausting their benefits that month didn’t change.

Data source:

U.S. Department of Labor

=================================================================================

July 1, 2009

Continued Unemployment Insurance Weekly Claims Near 7,000,000

Filed under: Unemployment Claims — admin @ 12:03 am

book3_2196_image001

As of June 13, 2009, the number of Americans filing for continued unemployment insurance weekly claims hit 6,738,000 (on a seasonally adjusted basis).  This is the Labor Department’s advanced reading which will likely be revised.

Data source:

U.S. Department of Labor

================================================================================

June 30, 2009

Initial Unemployment Insurance Weekly Claims Remain High

Filed under: Unemployment Claims — admin @ 12:02 am

book3_2196_image0021

book3_2196_image0031

This is the first post in a series on unemployment claims and payroll losses.

The first chart shows a recent view of initial unemployment insurance weekly claims.  As you can see initial claims are slightly off of their recent highs.  However, a quick look at the second chart shows that on a historical basis initial claims remain very elevated.

According to the U.S. Labor Department unemployment insurance benefits are intented to provide temporary financial assistance to unemployed workers who are unemployed through no fault of their own.  Each state administers its own separate unemployment insurance program following guidelines established by Federal law.

Data source:

U.S. Department of Labor

=================================================================================

June 29, 2009

Personal Savings Rate Hits 50-Year Average

Filed under: Savings — admin @ 12:02 am

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The latest personal savings numbers for the U.S. came out on Friday showing that the personal savings rate contined to increase in May.

In 2005 I wrote an article predicting that the U.S. equity markets were set for a period of under-performance when compared to the prior 10 years (http://chartingtheeconomy.com/?p=71).  Part of my prediction was based on the assumption that the continued decline in personal savings was unsustainable.  In the article I state, “the growth in personal consumption expenditures cannot continue to outpace growth in personal income indefinitely.”  Given that consumer spending accounts for around 70% of GDP, I reasoned that the inevitable slowdown in spending (and increase in savings) would slow the economy for many years.

In February 2009, I wrote another article stating:  “To compensate for their lack of savings (savings gap) since the early 1990’s consumers will likely move to savings rates that are above the long-term average.” (http://chartingtheeconomy.com/?page_id=56)  As you can see from the above chart, this just happened for the first time since the early 1990’s.  In May 2009, the personal savings rate hit 6.9% just surpassing the 50-year average of 6.83%.

Data source:

U.S. Bureau of Economic Analysis

================================================================================

June 26, 2009

Question and Answer

Filed under: Debt — admin @ 12:02 am

I had a couple of good comments from readers yesterday.  I think it is worth posting these comments and my replies because not everyone goes back to read the comments.  I hope this post is helpful in clarifying the past series of charts on outstanding debt.

Question #1 from Brspiral:

I’m struggling a little bit with this series on financial sector debt. Financial sector debt clearly has grown dramatically since 1980, but what exactly is financial sector debt, and what does this growth mean for our economy going forward? Per your previous posts, non-financial sector debt includes “Household debt, business debt, state & local government debt, and the portion of the federal government’s debt hold by the public”. If business and household debt are excluded from financial debt, what’s left?

When a bank makes a loan, it becomes an asset on its balance sheet and deposits are the liabilities. What’s an example financial sector debt? I’m guessing it will be comprised (partially) of the debt held by hedge funds, private equity, etc., but I’m not sure how that’s differentiated from the business debt calculation in the non-financial sector.

I’m just not sure what to take away from this data.

Thanks.

My Reply to Question #1:

Thanks for the thoughts. I should have been clearer. First, the financial sector is comprised of: Commercial banks, savings institutions, Credit Unions, government sponsored enterprises (GSEs), Asset-backed security (ABS) issuers, Finance companies, REITs to name a few. Second, the debt instruments they owe are things like: GSE issues, mortgage pools, mortgages, corporate bonds, bank loans, open market paper.

You are right, a bank’s loans become assets on its balance sheet and deposits are liabilities. What I am showing here is different. It is the debt that the financial sector owes. An example would be when a bank makes a loan to another financial company (say Goldman). It becomes an asset for the bank, but is debt that Goldman owes. Another example would be if Bank of American issues corporate debt, it would show up in the financial sector debt outstanding.

As far as the debt instruments, bank loans are a small part of the whole (i.e. most of the debt that the financial sector has taken on in recent years is not from bank loans). The big instruments are GSE issues, mortgage pools, and corporate debt. These instruments make up over 80% of the debt owed by the financial sector.

I guess the main point I was making was to show the growth in leverage that the financial sector has taken on in recent years. I think it is a main cause of the current crisis.

Thanks again for the question. I could have been clearer.

=================================================================================

Question #2 from N. Leblanc:

Thank you for this graph.

A quick calculation, from 1980 to today:
1) Total debt increased 200% of GDP
2) Time span: 29 years
3) GDP today of, roughly, 14 trillions

So, 14T x 200% / 29 years = 965 billions per year of additionnal debt.

That is more than Obama’s stimulus package each and every year since 1980. How can that be sustainable???

My reply to Question #2:

How can that be sustainable? I don’t think it can be (could be) unless you debase the heck out of the dollar.

I often argue (and warned years back) that the lack of savings and increase in debt (speculative lending) were accelerating growth in the economy (creating a bubble). Going forward the savings rate will increase (it already has increased as I predicted some time back) and stay higher. As far as debt, the speculative lending (easy money) is gone. Therefore, at best, I believe that we return to a long period of slower growth (after more pain). The past few decades were not normal. What we are going through is a return to normal. I think many people still think we will get through this crisis shortly and then return to the way it was. I don’t. The only wildcard would be if there is some type of game changer (new technology) to accelerate growth. We could see some big quarterly or annual growth in GDP, but on a longer-term basis I see slower growth. I really think 2008 will go down in history as a watershed year. The lives of many people will be very different pre and post 2008.

Thanks for the comment.

June 25, 2009

U.S. Domestic Debt As a Percentage of GDP (NonFinancial and Financial Sectors)

Filed under: Debt — admin @ 12:06 am

debtt0gdp1q09_7981_image001

The level of U.S. domestic debt as a percentage of GDP was pretty flat from 1945 - 1980.  However, from 1980 until 2009 the level has spiked to over 350%.  What is also interesting is how the level of debt as a percentage of GDP in the U.S. financial sector exploded from about 20% of GDP in 1980 to over 120% of GDP in 2009.

Note:  The Federal Reserves Flow of Funds report does not include the intragovernmental holdings portion of the U.S. government’s debt.  Intragovernmental holdings includes things like money the U.S. government has borrowed from Social Security.  Intragovernmental holdings were 4.27 trillion as of June 22, 2009.  If added to the above chart, the total outstanding domestic debt in the U.S. would be around 390% of GDP.

Data source:

U.S. Federal Reserve - Flow of Funds

U.S. Bureau Economic Analysis

================================================================================

June 24, 2009

Domestic Financial Sector Debt Has Grown by Almost 3000% Since 1980

Filed under: Debt — admin @ 12:02 am

book3_27786_image005

The above chart shows the cumulative increase in outstanding debt for the domestic nonfinancial sector and domestic financial sector since 1980.  This is just another view of the huge leverage that the U.S. financial sector took on over the past few decades.

Last week a reader asked if I could show this type of data relative to GDP.  I will do that in tomorrow’s post.

Data source

U.S. Federal Reserve - Flow of Funds report

=================================================================================

June 23, 2009

Finanical Sector Debt is Now Over a Third of Total Debt in the U.S.

Filed under: Debt — admin @ 12:02 am

book3_27786_image004

The above chart shows the increase in outstanding domestic debt in the U.S. for both the nonfinanical sector and financial sector since 1980.  Outstanding debt from the finanical sector accounted for about 1/8 of total outstanding domestic debt in the U.S. in 1980.  In the first quarter of 2009 this figure had increased to about 1/3 of total outstanding domestic debt in the U.S.

Data source:

U.S. Federal Reserve - Flow of Funds report.  The above chart does not include the portion of the federal government’s debt for intergovernmental holdings.  The Fed’s Flow of Funds report does not include this in their outstanding debt totals.  Domestic nonfinancial debt includes:  Household debt, business debt, state & local government debt, and the portion of the federal government’s debt hold by the public.

=================================================================================

June 22, 2009

13 States Have Unemployment Rates of 10%+

Filed under: By State — admin @ 12:02 am

book5_8677_image001

On Friday the Bureau of Labor Statistics released its May 2009 report on unemployment by state.  The report showed that 13 states now have an unemployment rate of 10% or higher.  This is up from just eight states in April.

I’ll return to the series on debt in the U.S. financial sector tomorrow. 

Data source:

Bureau of Labor Statistics

================================================================================

June 19, 2009

Domestic Financial Sector Debt Tops $17 Trillion

Filed under: Debt — admin @ 12:02 am

book3_27786_image003

The above chart shows the growth in the outstanding debt of the U.S. domestic finanical sector vs. the U.S. non-financial business sector from 1976 to Q1′09.  Just another sign of the tremendous leverage the U.S. financial sector took on over the past few decades.

I’ll have a few more charts on this topic next week.

Data source:

U.S. Federal Reserve - Flow of Funds

=================================================================================

June 18, 2009

Outstanding Debt by Sector in the U.S. - 1976 vs. Q1′09

Filed under: Debt — admin @ 12:01 am

book3_27786_image001

book3_27786_image002

The above charts show the amount of outstanding debt in the U.S. by sector in 1976 and in the first quarter of 2009.  As you can see the overall level of debt in the U.S. has increased dramatically (no big surprise).  Also of interest is how much more of the total outstanding debt in the U.S. is from the domestic financial sector now than in 1976.  Also note how domestic nonfinancial business debt has become a much smaller piece of overall debt in the U.S since 1976.

Data sources:

U.S. Federal Reserve - Flow of Funds report.  The Flow of Funds report does not include the intergovernmental holdings portion of the federal debt.  This information is from the U.S. Treasury Department.  Intergovernmental holdings includes things like borrowing from the Social Security fund.

U.S. Treasury Department

June 17, 2009

U.S. Capacity Utilization Hits Another Record Low of 68.3%

Filed under: Industrial Production — admin @ 12:02 am

book2_14223_image001

 

Yesterday, the Federal Reserve reported that capacity utilization for U.S. industry hit a record low of 68.3% in May.  The April 2009 number was also revised down from 69.1% to 69%.  The Fed’s capacity untilization calcuation is based on the percentage of total U.S. industrial capacity being utilized.  This report means that there is more excess industrial capacity in the U.S. than at anytime on record.  This doesn’t look like a recovery to me.

Capacity Utilization is considered a leading indicator of inflation and future capital spending.  This record low reading is an indicator that there is little inflationary pressure in the U.S. economy (at least now - I’m concerned about the effects of U.S. deficit spending on long-term inflation).  This record amount of spare capacity also indicates that industry has little need to spend capital to increase production (even if demand picks up significantly).

Data source:

U.S. Federal Reserve

=================================================================================

June 16, 2009

Per Capita Beer Consumption by Country

Filed under: Fun Facts — admin @ 12:02 am

book3_7996_image001

Keeping with yesterday’s theme, here is a chart on per capita beer consumption by country.  Cheers.

Data source:

Kirin Holding Company - Data is for 2004.

June 15, 2009

Beer Consumption Per Capita by State - 2008

Filed under: Fun Facts — admin @ 12:01 am

beer2008_4225_image001

I thought it would be nice to have a break from the topics of debt, unemployment, falling home prices, ect.  So, today’s chart is on per capita beer consumption by state.  The data is from the Beer Institute and is for consumption of beer by persons 21 years of age and older.  As a point of reference one 12 oz. beer per day equals 34.22 gallons a year.

Data source:

Beer Institute

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