ICANN or Cant I…
Will the US turn over the internet? Will free speech and free markets suffer?
What it means – Some of the greatest companies today owe their success to a free internet. Google, Amazon, Yahoo, Microsoft, Apple, Snapchat, Facebook, Twitter and many more are just a few examples. On October 1st, President Obama will hand over control of the internet without consent from Congress to a global organization run by champions of free speech like China, Russia, Iran and Turkey. None of these countries are champions of free markets or have fostered the growth of technology and free speech over the internet. The very engine that has contributed to our financial freedom and success over the last 25 years is about to be given to an organization run by multiple countries who hate capitalism and despise free speech. It may not be fair to them but the internet is a property of the United States and that means you as a citizen owns it. Not the government. As we are, “a nation of the people for the people by the people.” Expect free speech to follow the likes of Facebook and Twitter…Censorship will happen over time.
New Home Sales Fall 7.6% in August, Still Up 20.6% on the Year…
Coming off the blowout gain of 13.8% in July, new home sales dropped back to a more sustainable pace in August.
What it means – This is the better part of the housing market. New home building creates middle-class jobs, so this is welcome news.
One caveat in the report is falling median sale price, which slipped 3.1% on the month and 5.4% on the year. That’s a bit surprising, given tight supply and rising sales. I’ve noted the disconnect between modest wage growth and exploding home prices, but I’d expect sales to drop before prices fell. Perhaps builders sense a change in the marketplace and are pushing inventory out the door as fast as they can.
U.S. Durable Goods Orders Flat in August, Down 1.3% Excluding Transportation…
Both the headline number and the core number jumped in July, so analysts expected a pullback in August.
What it means – While not completely erasing the July gains, the August orders are more in line with the long-term trend, which is flat-to-negative. Non-defense orders excluding aircraft, a proxy for business spending, showed orders rising 0.6%, but current shipments fell 0.4%. This will hurt third-quarter GDP, and should lead the Atlanta Fed to drop its GDP estimate below 3%.
OPEC Announces Production Cut, Oil Up 5%…
After a conference call, OPEC members announced an agreement in principle to cut global oil production, sending the price of oil higher, even as demand slows down.
What it means – At this point, not much. OPEC members are notorious for making agreements without following through. A day after the much-heralded agreement, some cartel members expressed concern about how the production limits for each country were determined. The full details of the plan won’t be released until November.
Even if the agreement holds that long, there’s no reason to believe the individual members won’t produce more than their allotment, as they have in years past. Since most OPEC members rely on oil revenue to fund their governments, I’m betting they’re more interested in selling what they can instead of doing what’s best for their neighbors.
Greek Parliament Votes to Cut Pensions and Put More State Assets up for Sale…
The government desperately wants to meet the demands of its lenders so it can receive the next installment of bailout funds on October 10.
What it means – The IMF is not part of the latest group lending money to the Greeks. IMF leaders determined the country cannot repay its current debts, so lending it more money is pointless.
Of course, the IMF doesn’t have to prop up Deutsche Bank and other large European lenders that stand to lose significant chunks of cash when (not if, but when) Greece stops paying its debt. It’s no secret that most bailout funds never made it to Greece. Instead, the payments add to Greece’s debt outstanding, while the funds are routed to its creditors. In this way, the bailout lenders are essentially supporting the banking system of Europe.
But this time, the next installment of cash due in October would go to the Greeks themselves, so the lenders are playing hardball, requiring proof that the Greek government is following through with painful austerity measures before they release the cash.
It makes for great theater, but won’t make a bit of difference. With exports off 7.1%, unemployment at 23%, and expected economic growth of 0.6%.
Global Trade Grows at the Slowest Pace since the Financial Crisis…
The World Trade Organization (WTO) estimates trade will grow 1.7% this year.
What it means – The WTO had expected growth of 2.8% this year and 3.6% next year, but that was when the IMF, the Fed and too many others expected almost 4% growth from the U.S. and more than 2% growth from Europe. Now that those pipe dreams have been dispelled, their estimates have come down to earth.
After modest growth this year, the WTO anticipates only slightly better growth of 1.8% next year. Welcome to the global slowdown.
Officials in Yichang, China Require Party Members to Have Two Children…
City administrators posted an official letter to Communist Party members in city government and private companies demanding that they fulfill their new obligation to have two children per family.
What it means – Yichang is a city in the central province of Hubei, so it’s not like this was a directive from Beijing. Still, it’s interesting that after 30 years of forced sterilizations, property confiscation, imprisonment, and general harassment of citizens who dared to have more than one child, government officials would now demand more children.
Of course, Hubei bureaucrats know they’re staring down a bad set of facts. The official birth rate in the province is 0.72, so each woman of child bearing age doesn’t even have one child, much less the two required to keep the population steady. At this rate, the population will age quickly, have trouble paying for social services, experience declining productivity, and eventually decline.