Executive Order on Overtime May Spark Next Recession

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Businesses cannot always afford to pay overtime

By Michael Carr   |   Wednesday, 01 Jul 2015 07:43 AM

Economists using data to forecast economic growth might want to focus some attention on the White House instead. Based on the pursuit of fairness rather than data, the Obama administration decided 5 million workers deserve a raise.

New rules about who qualifies for overtime could prove to be devastating to small businesses and will most likely hurt millions of employees.

In the past, workers in management positions were exempt from overtime pay rules as long as they made about $11.38 an hour. New rules will require anyone making less than $24.25 eligible for overtime. The old rule might have set the bar too low but the new rule seems high based on what people earn.

Entry-level managers at fast-food restaurants, for example, who have worked their way up to jobs paying $30,000 a year will be forced into hourly schedules. College grads entering the workforce in salaried positions earnings $45,000 a year will be forced into hourly schedules. It’ll be illegal for these employees to exercise initiative by working later to learn their job or earn a promotion.

Businesses cannot always afford to pay overtime so many workers will be forced into hourly positions. They could then see their hours cut and the size of their pay checks reduced.

Productivity will suffer as employers focus on hours worked rather than output. This could be a drag on economic growth.

Prices could rise if employers are unable to control labor costs, leaving everyone paying more and hurting discretionary income.

Pain from the new rules will kick in after they take effect in 2016. Like many Obama administration decisions, this giveaway to supporters will cause pain after the president leaves office.

Odds of a recession in 2016 grow with each executive order and the next president is likely to start his or her term under the cloud of a bear market in stocks.

© 2015 Newsmax Finance. All rights reserved.

U.S. on Same Debt Path as Greece

Greek-style capital controls could come to U.S.
Published on Jul 1, 2015

It’s crunch time for Greece as IMF debt looms and bailout ends. Puerto Rico announced it’s about to suffer the same fate, and a new chart shows that the US is on the same debt path. American author and journalist, Nomi Prins, discusses the hidden alliances that drive American Power and how what we’re witnessing in the economy today is all part of the globalist bankster takedown plan.


15 Weeks: Treasury Says Debt Has Been Frozen at $18,112,975,000,000

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(CNSNews.com) – The portion of the federal debt that is subject to a legal limit set by Congress closed Friday, June 26, at $18,112,975,000,000, according to the latest Daily Treasury Statement, which was published at 4:00 p.m. on Monday.

That, according to the Treasury’s statements, makes 15 straight weeks that the debt subject to the limit has been frozen at $18,112,975,000,000.

$18,112,975,000,000 is about $25 million below the current legal debt limit of $18,113,000,080,959.35.

The Daily Treasury Statement for March 13 was the first to show the federal debt subject to the limit closing the day at $18,112,975,000,000. Every Daily Treasury Statement since then has reported the same thing: the debt closing the day at $18,112,975,000,000.

Every Daily Treasury Statement since Monday, March 16, has reported the debt beginning and ending each day at $18,112,975,000,000.

Table III-C on the Daily Treasury Statement for June 26 says the debt began the month of June at $18,112,975,000,000, began the day of June 26 at $18,112,975,000,000, and closed the day of June 26 at $18,112,975,000,000.


On March 13, Treasury Secretary Jacob Lew sent a letter to House Speaker John Boehner and other congressional leaders informing them that he was planning to declare a “debt issuance suspension period.”

A “debt issuance suspension period,” Lew said in his letter, was necessary because in 2014 Congress enacted legislation that “suspended” the debt limit until March 15 and then reinstated it on that date at whatever level the debt had reached by then.

“As you know, in February 2014, Congress passed the Temporary Debt Limit Extension Act, suspending the statutory debt limit through March 15, 2015,” Lew said in his March 13 letter. “Beginning on Monday, March 16, the outstanding debt of the United States will be at the statutory limit. In anticipation of reaching that date, Treasury has suspended until further notice the issue of State and Local Government Series securities, which count against the debt limit.”

State and Local Government Series securities, says the Congressional Research Service, are “customized securities available for state and local governments to hold proceeds of bond sales.” They are considered part of the federal government debt that is held by the “public.”

“Because Congress has not yet acted to raise the debt limit,” Lew said in his March 13 letter, “the Treasury Department will have to employ further extraordinary measures to continue to finance the government on a temporary basis. Therefore, beginning on March 16, I plan to declare a ‘debt issuance suspension period’ with respect to investment of the Civil Service Retirement and Disability Fund and also suspend the daily reinvestment of Treasury securities held by the Government Securities Investment Fund and the Federal Employees’ Retirement System Thrift Savings Plan.”

Lew informed Boehner that these same actions had been taken “during previous debt limit impasses.”

For example, as CNSNews.com reported, when Secretary Lew declared a debt issuance suspension period in 2013, the Treasury reported the debt subject to the limit was frozen at $16,699,396,000,000 for 150 days, running from mid-May to mid-October of that year.

The Treasury has posted Frequently Asked Question sheets that explain the actions the Treasury is taking during this “debt issuance suspension period” and their statutory basis.

“Under current law, if the Secretary of the Treasury determines that the issuance of obligations of the United States may not be made without exceeding the debt limit, a ‘debt issuance suspension period’ may be determined,” the Congressional Research Service said in a report published on March 27. “This determination gives the Treasury the authority to suspend investments in the Civil Service Retirement and Disability Trust Fund, Postal Service Retiree Health Benefit Fund, and the Government Securities Investment Fund (G-Fund) of the Federal Thrift Savings Plan.

“In addition,” said CRS, “this gives Treasury the authority to prematurely redeem securities held by the Civil Service Retirement and Disability Trust Fund and Postal Service Retiree Health Benefit Fund.”

“The total federal debt consists of debt held by the public and intragovernmental debt,” the CRS said in a report published in 2011. “Debt owed to the public represents borrowing from entities other than the federal government, and includes borrowing from state and local governments, the Federal Reserve System, and foreign central banks, as well as private investors in the United States.

“Intragovernmental debt,” said CRS, “consists in debt owed by one part of the federal government to another, which are mostly held in trust funds.”

The net effect of the Treasury’s actions is that although the publicly held debt of the government continues to fluctuate–as the Treasury redeems maturing debt held by the public and issues new debt held by the public—the overall debt subject to the limit set by Congress closes each business day at $18,112,975,000,000.

At the beginning of June, the debt held by the public was $13,052,706,000,000 and the intragovernmental debt was $5,100,145,000,000, according to the Daily Treasury Statement. By the close of business on June 26, the debt held by the public had increased by 18,125,000,000 to $13,070,831,000,000, and the intragovernmental debt had decreased by 18,275,000,000 to $5,081,870,000,000.

But on every business day of June–as on every business day for the last 15 straight weeks–the Treasury reported that the federal debt subject to the legal limit set by Congress closed the day at $18,112,975,000,000.

David Stockman Shock Blog: The Real Unemployment Rate Is 42.9%

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June 30, 2015


RUSH: Ladies and gentlemen, the unemployment rate, what is the latest reported unemployment, 5.5%, is that what it is, 5.3, 5.6?  It’s in that neighborhood, right?  I don’t know what the exact number is.  Not that this matters to anything anymore.  I mean, the truth is increasingly irrelevant.  The truth is increasingly meaningless.  In fact, there isn’t any truth in way too much of the country.  There is certainly no objective truth.

Anyway, I have had, as you know if you listen regularly, I’ve had a lot of doubt about the accuracy of an unemployment rate of 5.5% when, at the same time, we have 92, 93 million Americans not in the workforce.  It just hasn’t made sense to me.  Now, as you know, the Bureau of Labor Statistics, the government releases the unemployment numbers every month, and there are different categories, and the U, letter U-3 is what gets reported.  That’s the 5.5% now, whatever it is, that’s the U-3 number.  The U-3 number — and, by the way, it’s increasingly obvious that all of this is bogus and meaningless now as well.

But the U-3 number only attempts to count people who are out of work and looking for a job.  People who have been out of work beyond the total length of time that they get unemployment benefits, which is up to, what is it now, 99 weeks?  (interruption)  It’s even longer than that?  (interruption)  Okay, 99 weeks.  So if you’re looking for a job and getting your employment benefits they count you in U-3. But if you stop looking for a job at any point, you’ve been out of work two weeks, stop looking, you don’t get counted in the U-3 number.  If you’ve been out of work for three years and stop looking, then you don’t get counted as unemployed.

I don’t know how they find out who is looking for a job and who isn’t, because this is largely guesswork.  There is a very small interview sample that they take, and then they project nationwide results from this small, relatively small sample.  The U-6 number is much closer to accurate.  The U-6, it never gets reported.  You have to look at websites dedicated to economics to find out what that number is.  The Drive-By Media never reports it.

So 99.9% of the people celebrating Supreme Court rulings last week do not know what the U-6 unemployment rate is.  That number is reported to be around 11 or 12%.  And that number includes people who are out of work and have given up trying to find a job or aren’t, for whatever reason, looking for work.  So it is said to be a more accurate number, but that has not even worked for me.  I mean, just the simple math, 92, 93 million Americans, and from there I said, “How many adult Americans are there in our country?”  To put that 93 million in proper perspective, 93 million Americans not working.  And my always added caveat, they are all eating.

I find that to be one of the most relevant aspects of that number, and it goes over people’s head as though it doesn’t matter.  But if you can eat and have a phone and a big screen or whatever and not have to work, I mean, what are you more than likely to do if you are a recent graduate or product of the American education system?  You’re gonna opt to the path of least resistance.  Particularly now you add to that what has happened to employment with Obamacare, and that is 30 hours a week is now considered full time, not 40.

I mean, folks, the bottom line here is that just observing numbers and just casually absorbing them — not even running them; not calculating, just absorbing them — it cannot be that we have an unemployment rate of 5.5% or even 12.2%.  The number of people working is way down.  The number of hours worked is way down. It’s because of Obamacare, because the economy.  You can maybe talk about trade deals if you want. Throw it all in.  I don’t care.  The bottom line is, there’s much less productivity in this economy.

And then you add to that how much of the economy has been usurped by the federal government, the economy, the private sector where everybody tries to get their piece of the pie. That’s shrinking.  My gut feeling has been that we are in a dire economic circumstance, far, far worse than anybody knows.  Well, you might be saying, “What’s this got to do with anything?” Well, that’s why I urge you to always hang in there and be tough.

Last night a friend of mine sent me a link to a blog that is hosted and written by David Stockman.  David Stockman was the former budget director for Ronaldus Magnus until for some reason he was taken to the woodshed and fired.  Oh, I know what it was.  He disavowed supply-side, which was his own creation.  Anyway, Stockman has run a bunch of numbers and has been able to put all of this in context and has concluded that the actual unemployment rate in the United States of America is not 5.5%, and it’s not 12.5% or 13%.  It is 42.9%.

Let me share with you a little bit of how he gets there.

It’s a long blog post.  I can’t… I’m not even gonna try to summarize most of it.  I’m just gonna get to the meat of it as it relates to this.  But it’s an all-out assault on Keynesian economics and the Federal Reserve and the damage that both have done and continue to do to the US economy.  But here’s the focal point on unemployment.  “In fact,” he writes, “the Census Bureau survey takers and the [Bureau of Labor Statistics] numbers crunchers have not the foggiest idea as to what the real world’s potential labor force computes to, and how much of it is deployed on any given day, month or quarter.”

That’s economics-speak for they don’t have any idea how many people are working. The “world’s potential labor force,” meaning how many people in the world have an opportunity to hold a job and go to work at it.  Nobody knows.  They have no way to compute it.  And how much of that force is “deployed,” that’s just military lingo for how many people getting up and going to work every day.  “Accordingly,” he writes, “printing money and pegging interest rates in pursuit of ‘full employment’, which is the essence of the Yellen version of monetary central planning…”

Jessica Yellen is the chairman of the Fed. “[T]he essence of the Yellen version is completely nonsensical,” and it’s political, by the way, getting an unemployment rate 5.5%. You know what statistically full employment is. This is why this doesn’t make any sense.  Traditionally, statistically full employment has been 4.7%.  Everybody involved in economics from the government on down has agreed that if at any time the US unemployment rate is 4.7% then our economy is roaring.

We got people working and working overtime, and it’s as near to full employment as it’s possible to get.  Well, I’m telling you: If that’s true about 4.7%, there’s no way we’re at 5.5%.  This is just my gut reaction to all this.  This is why this is fascinating.  Now, Stockman is ripping into the money supply people and Obama because they’re pegging everything they’re doing to that. They’re printing money, giving it to the stock market, pegging interest rates at near zero in pursuit of full employment.

That is for Obama’s legacy.  They want Obama to be able to leave office claiming that his stimulus worked and that everything else he did economically, Obamacare, brought back a defunct economy that he inherited.  Key to creating that perception is the unemployment rate, and that’s why it’s been creeping down from where it is. What’d it get, as high as eight?  (interruption)  At some point.  Anyway, down to 5.5%.  Now…

“Likewise, the Fed’s current ‘soft’ target of 5.2% on the U-3 unemployment rate is downright ridiculous,” he says. “When in the year 2015 you have 93 million adults not in the labor force — of which only half are retired and receiving Social Security benefits (OASI) — and a U-3 computational method that counts as ’employed’ anyone who works only a few hour per week — then what you have in the resulting fraction is noise, pure and simple. The U-3 unemployment rate as a proxy for full employment does not even make it as primitive grade school economics.”

Here are the numbers I wondered about: “At the present time, there are 210 million adult Americans between the ages of 16 and 68…” That is the workforce.  Sixteen to 68 is the age boundaries where you find the potential American workforce.  Between 16 and 68, there are 210 million Americans, and 93 million — 40% — of them, are not working.  Now, that’s probably a much better way of expressing employment, unemployment, and the real strength, performance, or lack of, of the US economy.  But here is where they get in the weeds by computing a bunch of things that…

It’s gonna be hard to follow because you’re not reading it, but I’ll do my best.

“At the present time, there are 210 million adult Americans between the ages of 16 and 68 — to take a plausible measure of the potential work force. That amounts to 420 billion potential labor hours…”  So you have 420 billion hours that people could work in a standard 40-hour week. With all the vacations and the standard benefits thrown in, that’s the number of labor hours potential.  That’s “if we accept the convention that all adults are at least theoretically capable of holding a full-time job (2,000 hours/year),” that’s the calculation, “and pulling their share of society’s need for production and work effort.

“By contrast, during 2014 only 240 billion hours were actually supplied to the US economy, according to the BLS estimates,” actual government numbers. So the workforce is defined as ages 16 to 68, a total of 420 billion potential labor hours, which equals great productivity if that happens.  Last year, only 240 billion hours were actually supplied to the US economy, just a little over half what’s possible.  “Technically, therefore, there were 180 billion unemployed labor hours,” and that is how Stockman arrived at “the real unemployment rate was 42.9%…”

He’s actually computing the number of hours possible to be worked, at what they say is full employment, and then calculates the number of people and the number of hours actually worked, 43%.  Caveats: “Yes, we have to allow for non-working wives, students, the disabled, early retirees and coupon clippers. We also have drifters, grifters, welfare cheats, bums and people between jobs, enrolled in training programs, on sabbaticals and much else.

“But here’s the thing: There are dozens of reasons for 180 billion unemployed labor hours, but whether the Fed is monetizing $80 billion of public debt per month or not, and whether the money market interest rate is 10 bps or 35 bps doesn’t even make the top 25 reasons for unutilized adult labor. What actually drives our current 43% unemployment rate is global economic forces of cheap labor and new productive capacity throughout the EM and dozens of domestic policy and cultural factors that influence the decision to work or not.”

It’s called liberalism!  It’s called socialism!

It’s creating sloth!

It’s creating more and more people that don’t have to work, and they’re not.  And there’s all this productivity left — for lack of a better way to say it — languishing on the factory floor.


RUSH: Chase in Daphne, Alabama.  I’m glad you waited, sir.  Great to have you on the big program.  Hello.

CALLER:  Rush Limbaugh, God bless you for all you do.  Mega lifelong dittos, sir.

RUSH:  Well, thank you.  I appreciate that very much.

CALLER:  Yes, sir.  My question for you is I saw on Fox and a couple other sites that the Obama administration is pushing for people making 45,000 or less a year to become eligible for overtime pay.  And as a guy whose only regret is never being able to vote for Ronald Reagan, I kind of want to know what the catch is.

RUSH:  I’m looking.  I’ve got a sound bite on this.  If I can find it, and we can actually hear what Obama said — it is.  Grab audio sound bite — I wonder if we’ve got two.  Hang on just a second.  I’m sorry to waste time trying to find it.  I’ve got 12.  20 and 21?  Let me see if I can find 20 and 21 very quick.  (muttering)  No.  No.  Grab number 12.  This is Chris Cuomo today talking with the White House Domestic Policy Director Cecilia Munoz about Obama’s overtime plan. He says: “You’re doing what the private sector says you shouldn’t do, don’t mess with wages.  Let business decide what the right pay scale is.”

MUNOZ:  In the seventies more than 60% of the salaried workforce was covered by overtime.  We’re going back to a point at which salaried workers can expect those kinds of protections.  Ultimately that’s good for the economy.  If the business community wants to argue that the salary threshold should be set as it is now, at a level which is below the poverty rate for a family of four, I just think it’s really hard to argue that that’s good for the country and good for workers or good for the economy.

RUSH:  I don’t know.  You start talking about trying to recreate what was happening in the seventies, and that’s Jimmy Carter, and that’s stagnation.  But, again, it’s meddling.  I don’t really know what the catch is with this other than government meddling.  Who’s talking overtime?  We’ve got an unemployment rate of 42.5 % in this country.  Anyway, look, Chase, we’ll talk about this more tomorrow ’cause I’m really out of time today, but I’m glad you called.



Published on Jun 30, 2015

A year that began with President Barack Obama riding high after his re-election victory is ending with him in the biggest hole of his presidency. A new NBC …

President Obama’s ratings have hit a two-year high following a memorable week, a new CNN/ORC poll reveals. CNN’s Jim Acosta reports.

A recent Gallup poll put President Obama’s approval rating at 47 percent, but the report isn’t all positive for the commander in chief. Follow Elizabeth Hagedorn: …

US President Barack Obama’s approval rating has hit a new low as Americans disapprove of his policies on the economy, health care and the crisis in Ukraine, …

According to two new polls released Wednesday, President Barack Obama is feeling more love from the American public than

Poll: Obama’s approval rating hits two year high

Poll: Obama’s approval rating hits two year high


Screen Shot 2015-06-23 at 11.11.10 AMSome of the world’s top money managers are getting concerned

by ZERO HEDGE | JUNE 23, 2015

Recently, it’s become readily apparent that some of the world’s top money managers are getting concerned about what might happen when a mass exodus from bond funds collides head on with a completely illiquid secondary market for corporate credit.

Indeed, bond market illiquidity is the topic du jour and has almost become something of a cliche among pundits and mainstream financial media outlets years after we first raised the issue in these pages. But just because something has become fashionable to discuss doesn’t mean it’s not worth discussing and indeed, we’re at least pleased to see that the world is suddenly awake to the fact that a primary market supply bonanza catalyzed by rock-bottom borrowing costs and yield-starved investors could spell disaster when paired with shrinking dealer inventories.

For illustrative purposes, here’s a look at turnover in corporate credit…

…and a snapshot of shrinking dealer inventories and ballooning bond funds…

Chart: Citi

…and finally, here’s UST market depth…

What all of these charts show is that whether you’re talking about corporate credit or “risk free” government debt, liquidity simply isn’t there and as was on full display last October, wild swings in illiquid markets will be exacerbated by the presence of parasitic HFTs.

Meanwhile, Treasury market participants are shifting to futures and corporate bond fund managers are using ETFs to offset “diversifiable” outflows, phenomena which prove investors are actively avoiding credit markets by resorting to derivatives, a practice which only serves to make the underlying markets still more illiquid.

Of course one way to mitigate risk is simply to move to cash (as we noted over the weekend, some managers are even moving to physical cash), a strategy TCW’s Jerry Cudzil is currently implementing in order to ensure he’s not one of the ones “looking silly” after the crash. Bloomberg has more:

TCW Group Inc. is taking the possibility of a bond-market selloff seriously.
So seriously that the Los Angeles-based money manager, which oversees almost $140 billion of U.S. debt, has been accumulating more and more cash in its credit funds, with the proportion rising to the highest since the 2008 crisis.

“We never realize what the tipping point is until after it happens,” said Jerry Cudzil, TCW Group’s head of U.S. credit trading. “We’re as defensive as we’ve been since pre-crisis.”

TCW isn’t alone: Bond funds are holding about 8 percent of their assets as cash-like securities, the highest proportion since at least 1999, according to FTN Financial, citing Investment Company Institute data.

Cudzil’s reasoning is that the Federal Reserve is moving toward its first interest-rate increase since 2006, and the end of record monetary stimulus will rattle the herds of investors who poured cash into risky debt to try and get some yield.

Of course, U.S. central bankers are aiming to gently wean markets and companies off zero interest-rate policies. In their ideal scenario, borrowing costs would rise slowly and steadily, debt investors would calmly absorb losses and corporate America would easily adjust to debt that’s a little less cheap amid an improving economy.

That outcome seems less and less likely to Cudzil, as volatility in the bond market climbs.

“If you distort markets for long periods of time and then you remove those distortions, you’re subject to unanticipated volatility,”said Cudzil, who traded high-yield bonds at Morgan Stanley and Deutsche Bank AG before joining TCW in 2012. He declined to specify the exact amount of cash he’s holding in the funds he runs.

Price swings will also likely be magnified by investors’ inability to quickly trade bonds, he said. New regulations have made it less profitable for banks to grease the wheels of markets that are traded over the counter and, as a result, they’re devoting fewer traders and money to the operations.

To boot, record-low yields have prompted investors to pile into the same types of risky investors — so it may be even more painful to get out with few potential buyers able to absorb mass selling.

“We think the market’s telling you to upgrade your portfolio,” Cudzil said. “Whether it happens tomorrow or in six months, do you want look silly before the market sells off or after?”
Well, preferably neither, but point taken and we would have to agree that if ever there were a time to take one’s money and run — before the realities of a dealer-less corporate credit market and/or an HTF-infested, VaR shock-prone government bond market conspire to prove, once and for all, that in today’s world, the idea that bonds are any safer than other asset classes is completely and utterly false — this is it.