Good News in U.S., Bad News in Euro Zone, and Interactive Map Euro Bank Stress Test

There were a number of indicators today and yesterday all pointing toward an improving economy in the U.S.  Considering the mess going on everywhere else and no actual improvements made to the structural problems we are facing, this has all the makings of fiat financed recovery.  Here is the good news:

First up is improved retail sales, via CNBC:

Amid slumping consumer confidence, shoppers remained resilient, and many retailers posted solid results for the month of September.

 Helped by shoppers finishing up their back-to-school shopping and stocking up on fall apparel as the temperatures grew cooler, many retailers were able to outpace estimates.

This was encouraging for the economy, given that unemployment has been above 9 percent for more than two years, and news headlines about the U.S. budget deficit, European debt worries and a volatile stock market have given consumers little reason to spend more freely.

Next are less than expected unemployment claims via Bloomberg:

Claims for U.S. unemployment benefits rose less than forecast last week to a level that shows companies may be starting to slow the pace of dismissals.
Applications for jobless benefits increased by 6,000 in the week ended Oct. 1 to 401,000, Labor Department figures showed today. Economists projected 410,000 claims, according to the median estimate in a Bloomberg News survey. The monthly average dropped to the lowest level since the end of August.

Here is an interesting one, railroad car load and traffic is up via the always great Mark Perry and Carpe Diem:

"The American Association of Railroads today reported gains in weekly rail traffic, with U.S. railroads originating 312,170 carloads for the week ending Oct. 1, 2011 (week 39), up 4.7% compared with the same week last year. Intermodal volume for the week totaled 250,864 trailers and containers, up 4.4% compared with the same week last year. This week’s U.S. carload volume is highest since Week 45 of 2008, and the intermodal volume is the highest since Week 39 of 2007."

And personal bankruptcies are declining via Wall Street Journal:

Personal bankruptcy filings continued to slow in September as Americans were less eager to turn to the courts for financial relief.
The number of consumer bankruptcies dropped 17% to 108,517 in September compared to the same month a year ago, the American Bankruptcy Institute and National Bankruptcy Research Center said Tuesday. So far this year, the number of consumer bankruptcies was 10% lower than the same time period a year ago.

I am even seeing a slight amount of success from my own job searching endeavor.  I got a few phone calls today on possible openings.  Whether this the making of a another Fed induced boom will remain to be seen but since everybody and their mother is bearish about the economy right now, it doesn't hurt to go against the flow and expect the opposite.  One of the concerns I always had with the Austrian Business Cycle Theory was the assertion by some that businessmen can easily pick up on unsustainable booms and wouldn't buy into them if they expect a bust.  William Anderson does a great job explaining this fallacy today in his Mises Daily article:

I have heard a number of Chicago School and affiliated economists critique Austrian business-cycle theory (ABCT) by saying that artificially low interest rates should not fool rational business owners and investors, so that there is no way that people would be "tricked" into making massive malinvestments, not to mention irrationally bid up assets into bubbles. That viewpoint is both shortsighted and unfortunate.

Bubble behavior can be seen as rational, even if market participants know they are seeing a bubble. After all, as long as one catches a bubble on the way up, buying low and selling high, one can make money. Furthermore, bubbles burst precisely because investors recognize that the asset prices at the top of the bubble are out of balance with market fundamentals; it is just that these things do not happen with the mathematical precision and smoothness of the mathematical models, so many academic economists simply turn away from looking at things as they really are.

Second, investors and entrepreneurs generally do not look at the economy from a universal viewpoint, instead looking at their particular opportunities. For example, during the housing bubble, a number of new mortgage firms came into being. From the ABCT viewpoint, this was throwing gasoline onto the fire, but to people entering the market, it seemed like a good and quick way to earn a lot of money. Moreover, there were plenty of people on the squawk box and elsewhere claiming that the housing market could sustain a lot more new money than it actually could.

In other words, people, even large groups of people, can be wrong.

I have been the victim of such a concept recently.  I started buying physical silver about a year ago when the price was close to what it is now.  It went up, I bought a bit during the run up, and the price has since gone down.  I have written about this commodity bubble in an article I recently submitted so hopefully it gets approved and published soon.

In neutral but interesting news, check out the outcome of the Fed's first Open Market Operation since "Operation Twist" via Zerohedge:

In essence, by dint of its adjusted mandate, the Fed became the Treasury - what proceeded at precisely 11 am was the announcement of a sale of $8.87 billion in bonds with maturities from January 31, 2012 through July 31, 2012, bonds that were sold not by the traditional issuer of bonds, but by the Fed. Granted no new money was raised by the US in the process, but it was still a curious development. What was far more curious was the staggering turnout by the Dealer community, which indicated an interest for, wait for it, a whopping $242.6 billion in bonds!  Said in conventional terms, the Bid To Cover was an unprecedented 27.3, or there was $27 in demand for every $1 of bonds finally sold by the Fed. Why is this worthy of bolding. Because, in a traditional Treasury auction, the Bid to Cover by the Dealer community is far, far lower.

When the hand that feeds tells you to jump, you really don't have a choice in the matter.

While things look a bit better in the U.S., Europe is once again seeing troubles, mainly based on rumors like always.  Via Handelsblatt-Google Translate:

In Berlin and Paris argue about EFSF

Exclusive The euro rescue package to buy bonds from future debts States. But with how much money? France wants to give the fund a free hand - for the rescue could not stay no longer enough to fear Germany.

Brussels is a dispute between Germany and France erupted over the extent to which the euro rescue fund future EFSF may buy government bonds. France wanted to make the EFSF this respect no rules, told the Handelsblatt by a senior EU diplomat. This would theoretically mean that the EFSF could not use its entire volume of funding expended to buy bonds of a single Euro-state.

EFSF has a total of 440 billion euros, has been a part of it, however, scheduled for the loan packages to Ireland and Portugal. The federal government wants to limit the amount used for bond purchases per euro government, it said in Brussels. Think Germany will also share in a time limit on bond purchases.

The purchase of government bonds is one of three new instruments may have on the future of advanced EFSF. The design of these new instruments will be governed by guidelines to deal with the high officials of the euro finance ministers in Brussels at present. The guidelines must then be approved by the Budget Committee of the Bundestag. The German Parliament has made this a condition for agreeing to extended EFSF.

Check out IMF Advisor Dr. Robert Shapiro:

If they can not address [the financial crisis] in a credible way I believe within perhaps 2 to 3 weeks we will have a meltdown in sovereign debt which will produce a meltdown across the European banking system. We are not just talking about a relatively small Belgian bank, we are talking about the largest banks in the world, the largest banks in Germany, the largest banks in France, that will spread to the United Kingdom, it will spread everywhere because the global financial system is so interconnected. All those banks are counterparties to every significant bank in the United States, and in Britain, and in Japan, and around the world. This would be a crisis that would be in my view more serrious than the crisis in 2008.... What we don't know the state of credit default swaps held by banks against sovereign debt and against European banks, nor do we know the state of CDS held by British banks, nor are we certain of how certain the exposure of British banks is to the Ireland sovereign debt problems."

The powers-that-be won't let this happen of course but the fear campaign is always entertaining.  Just see the Bank of England's latest only-surprising-to-the-critics announcement:

The Bank of England’s Monetary Policy Committee today voted to maintain the official Bank Rate paid on commercial bank reserves at 0.5%. The Committee also voted to increase the size of its asset purchase programme, financed by the issuance of central bank reserves, by £75 billion to a total of £275 billion.

Nothing like an increase of QE adrenaline to keep the zombie banks alive.  Like I said, the fear mongering is only entertainment, central banks aren't going to let nature take its course if they can help it.

For the ultimate in fun, see this interactive Euro Bank Stress chart via Reuters:

Feel like telling the banks to take a hike and eat the haircuts inevitably coming their way, go hog wild!

Update- He just keeps getting better:

The Q & A is also good but this speech is definitely on point.  This is what we don't see with all the "why do you hate food stamps and want children to starve? You have 15 seconds to respond" crap that qualifies as a presidential debate.