.

China’s On Top, So Get Used To It – In an all-too-predictable development, our trade problems with those devious, untrustworthy Chinese has come to the fore again. In an election year, politicians must find someone to blame for America’s economic woes. Balance of trade and currency questions are complex, but the bogus story making the rounds goes like this: if the Chinese would allow the yuan (China’s dollar) to float, it’s value relative to other currencies (the U.S. dollar, yen & euro) would stengthen, which would make U.S. exports more competitve. Thus we would boost exports both to China itself and China’s export markets, which would lower our trade deficit and create manufacturing jobs in the United States. This story sounds good, especially to dummies like Paul Krugman, but there are many, many obstacles standing between us and this happy result. I laid out my own views When In Doubt, Blame China, which I wrote last March.
 
Local Taxes Roil US Mid-Term Elections – A recent rise in state and local taxes is roiling voters in an already tumultuous year, complicating the debate over whether to extend Bush-era tax cuts and upending some campaigns. As Washington is consumed with the debate over whether to extend Bush-era tax cuts beyond the end of the year, voters in many parts of the country are focused on state tax increases already hitting them. In fiscal 2010, states raised taxes by the largest amount since at least 1979, according to the National Governors Association, a bipartisan group that represents the country’s governors, with 29 states increasing taxes by about $24 billion. The rise was reflected in Census Bureau data out Monday, showing that state and local tax collections rose in the second quarter, partly because of tax increases and also due to some improvement in the economy.

US Income Gap Widens: Census Finds Record Gap Between Rich And Poor – The income gap between the richest and poorest Americans grew last year to its widest amount on record as young adults and children in particular struggled to stay afloat in the recession. The top-earning 20 percent of Americans – those making more than $100,000 each year – received 49.4 percent of all income generated in the U.S., compared with the 3.4 percent earned by those below the poverty line, according to newly released census figures. That ratio of 14.5-to-1 was an increase from 13.6 in 2008 and nearly double a low of 7.69 in 1968. A different measure, the international Gini index, found U.S. income inequality at its highest level since the Census Bureau began tracking household income in 1967. The U.S. also has the greatest disparity among Western industrialized nations. At the top, the wealthiest 5 percent of Americans, who earn more than $180,000, added slightly to their annual incomes last year, census data show. Families at the $50,000 median level slipped lower.

 
 
Banks are your friends…smiled the crocodile -Key players in the development of this story are judges in each state as they interpret state law defining proper ownership. Inquiry to two people who know courts predicted most judges would probably simply ignore technical discrepancies, but as the story develops these issues are gaining traction. Bypassing property laws is a big no-no perhaps. Foreclosure mess ups in Florida as Yves Smith continues to follow the trail of difficulties with titles in 45 states. GMACS letter to agents concerning foreclosures. Fitch considering downgrading servicers as difficulties develop and homeowners contest foreclosures based on title problems. JPMorgan Suspending Foreclosures as one of the big guys says oops.
 
Frank Warnock on Two Myths about the Dollar – Frank Warnock, an expert on US capital flows and stocks, has just written a piece for CFR entitled Two Myths About the U.S. Dollar. In it, he examines "two factors that could substantially alter the long-run value of the U.S. dollar: the dollar’s reserve status and the sustainability of U.S. international debt."The paper is chock full of statistics and graphs. I like in particular Figure 3, which provides insights into China’s holdins of US Treasury securities, and reminds us of the pitfalls in using TIC data to infer holdings.
 

Worried Consumers and CEOs Are Stuck in Logjam – Like patients suffering through a protracted bout of the flu, U.S. consumers can’t seem to shake off their blues. It isn’t just consumers, however, who feel more downbeat; CEOs also are more worried. Job jitters and uncertainty will constrain economic activity–and Washington deserves some of the blame. Earlier this week, the Conference Board’s consumer confidence index unexpectedly plunged to 48.5 in September, the lowest reading since February. On the heels of the consumer report came news from the Business Roundtable that its CEO economic outlook index fell to 86.0 in the third quarter, from 94.6 in the second. How do CEOs plan to respond to their lowered expectations? Many plan to cut payrolls–which goes a long way in explaining why consumers are singing the blues. According to the Roundtable survey, 23% of CEOs plan to decrease U.S. employment in the next six months, up from 17% anticipating cuts in the second quarter.

Here’s Where All That Government Spending Is REALLY Going – The Congressional Budget Office is basically projecting $1-trillion dollar annual Federal budget deficits for as far as the eye can see. This will require the country to pile another $1 trillion of debt on top of our existing $13.5 trillion debt load each year, which will quickly drive our national debt-to-GDP ratio over 100% (Greece-like).So, naturally, people are concerned about all that government spending. So where’s it going, really? It’s basically going to three things:

1. Entitlement programs (Social Security, Medicare, Medicaid) — +~$1.2 Trillion, or 60% of the increase

2. Interest on our debt — +~$750 billion, or 37.5% of the increase

3. Everything else — $50 billion, or 2.5% of the increase

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