In  the American Metal  Market magazine Commercial Metals Company’s (CMC) metal fabrication division noted a drop in earnings to a $’17.3 million LOSS  in the most recent fiscal  quarter (three months ending Nov 30) from a profit of $66.6 million in the same period a year ago. Tonnage is down 32% and prices are down 34%.

Most metal fabricators are seeing similar results.  This highlights my previously stated point that our primary economic problem is not lack of credit but a lack of profits. Entire lines and companies are being mothballed until there is some uptick in construction and there is simply too much inventory to see this happening anytime soon.

For a few months I received auction notices for large fabrication shops about every week.

Imagine the impact of Commercial Metal’s report multiplied by thousands of companies.   My eyes tell me unemployment is getting worse, while the Bureau of Labor Statistics tell me it is getting better; I believe my eyes.

This excess inventory of buildings and housing was created before this administration, and the hardest thing to do at this point is nothing, but this is probably the best long term solution.  Efforts to prop up prices while inventory is still too high will only kick the problem down the road.

One idea would be tax credits for demolishing old buildings. This goes against my grain of economic common sense, but it would solve a problem of oversupply.

1.      blaming economic crises on “greed” is like blaming plane crashes on gravity.- Thomas Sowell

2.      “crony capitalism” is to capitalism what National Socialism (Nazism) is to socialism- hko

3.      ‘Those who hammer their guns into plows will plow for those who do not.’

4.      Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly, and applying the wrong remedies.  Groucho Marx

5.      The urge to save humanity is almost always only a false-face for the urge to rule it.- Mencken

6.      the government is no more capable of creating wealth than a hall of mirrors is capable of creating people- Peter Schiff

7.      We always rediscover basic principles after we learn the cost of ignoring them

8.      I never hear the word “community” to justify fiscal responsibility; only to rationalize the opposite.- HKO

9.      What truly breeds discontent is the illusion that Government can solve all of our problems.- R. Samuelson

10.  The problem is that most of those claiming to have the right answer don’t even know the right question.- HKO

11.  “A nation of sheep will beget a government of wolves.” Edward R. Murrow

12.  the biggest threat to business in America is liberal democrats and populist republicans

13.  Not every short term crisis requires a long term solution.

14.  18 of the last thirty medical Nobel Prize winners were American- yet our health care system is broken?

15.  “Every snowflake pleads innocent, but it’s still an avalanche.”

16.  Arrogance and ignorance is a dangerous combination

17.  “There is no difference in the ultimate fate of all chained economies, regardless of any alleged justifications for the chains.” Ayn Rand

18.  It is comforting in times of stress to go back to the fairy tales we heard as children, but it doesn’t make them less false.  John Cochrane

19.  Skepticism is the price knowledge pays for truth

20.  You do not win with an exit plan; you exit with a victory plan.-  HKO

21.  “I see as much misery from them that seek to justify themselves as from them that seek to do harm.” from HBO’s Deadwood.

Ludwig von Mises

“They have all sold their souls to the devil of easy money.  It’s a great comfort to every administration to be able to make its citizens happy by spending.  For public opinion will then attribute the spending boom to its current rulers. The inevitable slump will occur later and burden their successors.”

The quasi-governmental institutions Fannie Mae and Freddie Mac guaranteed  mortgages, which Wall Street happily securitized once the credit rating agencies- which had been given a legally protected oligopoly by the government-declared them to be safe investments.  Government owned banks and municipalities across the world bought mortgage- backed securities like never before.

The central position of Fannie Mae and Freddie Mac reinforced confidence that the government would intervene if the housing market ran into trouble. The Fed’s safety net and the FDIC made banks dare to take big risks because they could privatize any gains but socialize any losses.

When home prices began to fall and the market no longer wanted mortgage-backed securities, the financial authorities stepped in and decreed that the banks had to write down the value of such securities radically, giving rise to several waves of panic selling. And when nobody wanted to finance the special companies anymore, the banks had to take them over, which put such a burden on their balance sheets that regulations forced them to pile up capital rather than make loans.  President Bush and other leading policy makers whipped up a panic to push through the laws they wanted. And just as the financial markets were more worried than ever because they did not know where the big risks were, the authorities banned shorting, thus depriving the markets of liquidity and information when they needed it most.

If this is laissez faire, then I would like to know what government intervention looks like.

If politicians, central bankers, and bureaucrats had intentionally tried to create a crisis, they would have been hard put to find more effective actions.  At each stage, the government inflated the bubble at least as eagerly as the most enthusiastic of Wall Street traders. The only difference was that the government’s pump was so much bigger.

From “Financial Fiasco” by Johan Norberg

HKO comments- yet the media has thoroughly convinced the ignorant and the gullible that this was a failure of capitalism.

a comment on my article at American Thinker :

Then there is the “expert” assumption of academic economists who are fond of saying things like “assume a perfect economy.” A joke written in reply to this conceited habit a tale of three men washed onto a dessert isle with 3 cases of canned food. The three are a chemist, an engineer and an economist.

The chemist takes some plants, boils them to create an acid which he then uses to eat through the cans’ metal top and acquire food.

The engineer makes a fulcrum from some wooden sticks and a rock, creating a device that smashes the can open from the side.

The economist sits there and says, “Assume a can opener” – and proceeds to starve.