The major new element is the sequestration that has reduced USA Federal spending.  This goes directly contrary to the deficit spending policy of the last four years.   However, in spite of the reduced federal spending the US economy continues to plod along on a path to a brighter future.  So who is to say we would not have done the same if we had not used deficit spending, maybe the system just automatically self corrects.

The fascinating event is our raging stock markets that are all hitting new highs.   Whatever has happened, the one percent is still doing much better than the middle class throughout the world.

As I have said before it is long past time to more closely examine the policies used until now since there is no clear demonstration that one is better than the other.   Meanwhile my bet on how the US economy will regain the heights it reached IN 2007 is paying off in spades.   The petroleum industry is booming with its all out use of fracking to extract major new energy resources.  And this industry that generates trillions of dollars in economic activity will lift all boats.   Think I’ll move to Minot.

Well “Big Brother” has definitely arrived.  Now cameras issue traffic tickets.  The speed limit in DC, unless otherwise posted, is 25 miles per hour.  I suspect the cameras could photograph any car, at any time, in any place to find tons of people exceeding the speed limit.  I mean, who really drives at 25 mph in DC?

Now the small thinker would immediately see this as a money spinner for the financially hard pressed DC Government.   But there is a larger possibility.  Perhaps this is a way to stiffle political opponents by serving them with traffic violations on a continual basis until they yield on poltical issues.    Talk about government control.

But there is a bright side.  I asked Thrifty, since the ticket was issued to their car, would there be a violation marked against my record?  They said no, so at least I will not suffer more than the cost of the ticket.

And just who are these mysterious credit rating agencies?  Ok, ok, not so mysterious since we all know them but we are usually in the dark as to how they operate.  I personally don’t pay attention to these ratings since I can usally get what I want in spite of my credit rating that is littered with false information, bad debts, disputes, and more.  In fact I was once asked by a home seller for my credit report in order to purchase a property.  I got a printed copy of my report and handed it to the vendor saying, “you read it, I won’t waste my time.”  The report was 53 pages long!  Talk about sleep inducing reads.

When selling real estate to foreign buyers during the boom I used to test  mortgage brokers by asking them how they would get credit ratings for my foreign buyers.  If they said they could get credit reports on them, I told them thanks and go elsewhere.  Why?  Well the credit reports we are all famliar with are only available for residents of two counrtries, the USA and Canada.  The broker who said he could get one on my foreign clients obviously had no idea how to deal with a foreign buyer.

So how did I get mortgages for my foreign buyers who did not have credit ratings?   Believe it or not we used “no doc” loans which meant no documentation of stated income, assets, liabilities and so on.  Add subprime rates, adjustable interest, and low down payment and we had the most tenuous of loans going.  But my clients were richer than the average person so they did pay.

So while most of you sweat bullets to maintain a good credit rating I will continue to pay no attention to the rating agencies that at first congratulate you for improving your FICA score and then scare the hell out of you when the rating slips.

In essence Hollande represents the economic drama seizing Europe between those who insist on continuing the austerity measures that have served Germany well, but not the other EU members.  Opposing this are those who argue that austerity is returning the EU to recession and that it is time to adopt the deficit spending pattern of the USA.

Neither side presents a convincing argument. As for austerity, while it may have worked well in Germany, it has not had similar success in other EU countries, for example right here in Spain. As for deficit spending, the US has rather meagre accomplishments for deficit spending and the trend is to cut government spending, i.e. the sequester.

The truth is no one has a formula to return us to the heady economy of 2007. We all face the “New Normal” which means for the USA continuing unemployment at higher than the historic average and growth at less than the histroic average.  And the same is true for Europe, except for Germany, the main proponent of austerity.

While the situation looks pretty somber, I have written several times about the only way out for the USA.  The oil and gas boom underway in the Great Plains, Pennsylvania and Texas is a real “game changer” (a too much overused phrase).  We are set to replace most of our energy imports with domestic production which literally means billions of dollars added to our economy.  Well oil and gas has been a major contributor to the US economy in the past and it can do so again.  

We may very well “frack” our way to happy days again.

While the intense cold made headlines, far more important was the higher level of rainfall during this late winter.  For once Mallorca’s resevoirs are full, ditto for the rest of Spain.  Lots of rain means better crop prospects for the summer.  In fact there seems to have been record rainfalls around the entire world except for California, which may be its punishment for leading the charge against climate change.  No sense wasting rain on those who oppose changing weather patterns.

While the winter was brutal, the summer promises to be very warm.  Add that to the bountiful rainfall and the prospects are good for record harvests.  As I keep saying, rather than waste time trying to stop change, it is far better to adapt to the changes.  Not hard to adapt to more fresh water and warmer, more widespread growing fields.  

Reminds me of a farmer I met from North Dakota who I asked how many square miles he farmed (in North Dakota one speaks of miles of farmland, not acres).  He was not sure of the miles but he said he farmed about one-fourth of the county where he was located.  Then I asked what he grew.  He stunned me when he replied soy beans!  Now soy beans have been traditionally grown in hot, humid areas.  But here a combination of genetically engineered seeds and climate change allowed this farmer to move soy bean production about 500 miles north of its traditional growing zones.

Changing climate patterns offer many new possibilities for farming as long as one sees change as an opportunity and not a loss.

Hard to be an optimist in a country where the official figures show an unemployment rate of 26% and minus 0.5% growth.  The government is finally taking some measures to control the so-called “black economy” or “submerged economy,” you know, the economy that exists off the books.  Two friends in Madrid had a heated debate about how much this “black economy” affects what is actually happening.  Certainly more people are working than the official unemployment figure would suggest.  And certainly if 25% or more of the work force was really unemployed for over a decade  there would have been a revolution in the streets.  The problem lies in not knowing how many are really not working. 

To get a handle on the “black economy” the government has introduced two new rules.  Any payment exceeding euros 2,500 must be made by bank transfer or check or credit card thus leaving a record.   Also there is a move to eliminate the euro 500 bill.  Both measure seek to cut into the “black economy” which depends on cash transactions.  Most credit card transactions also are automatically tallied to the vendors tax records.

And this is the main problem in Italy and Greece as well.   Hard to govern or lead an economy when maybe one fourth of economic activity bypasses the tax man.

While San Francisco was the main dirver in the ”Bay Area” economy until a dozen years ago, San Jose now holds that position.  San Francisco’s top industry is tourism while San Jose, the “capital of Silicon Valley” sets new economic standards with its high tech industry. 

The two towns are only 50 miles apart so they overlap in many ways.  But the main trend is clear, while San Francisco stays stagnant, San Jose keeps booming.  Of course many prefer it that way.  San Francisco’s current mayor, Ed Lee, is beaten up regularly by the environmentalist crowd for putting economic growth ahead of concern about the environment.   And the mayor is unabashed in his drive to stimulate more growth by feeding off the fast paced high tech industry of San Jose.  He wants “Silicon Valley” to move north.  His critics would prefer the city to stay back and tend to its gardens.

In many ways the two towns resemble the rest of the USA if not the world.  On the one hand we see urban centers that are booming while others hold back in efforts to remain, well, less urban.   The contrast offers a clear indicator of the choice to be made, greater wealth or bucholic splendor.  And while the best course would be to have both it would appear that they are not compatible.

Meanwhile I will keep checking to see if I need to get a new 49ers’ cap.

Main stop en route was Texas (see blog) so I am relecting on what I would call the “New America” or the sun blessed states of our south.  California, Texas and Florida account for 27% or our population and 27% of our GDP.  But the real story is how far they have come since pre-WWII.  In 1940 California had 7 million people, Texas 6.4 million and Florida 1.9  million, by 2013 the numbers are 38 million, 27 million and 20 million to rank 1,2,3 among the 50  states.  Texas and Florida continue to grow fast while California has become stagnant.  This was demonstrated by Texas and Florida gaining two new seats each in the US House of Representatives, following the 2010 census.  While for the first time in almost 100 years California did not gain a new seat.

And what has brought so many Americans to these three states?  Certainly the weather, all have lots of sunshine with the southern parts of each enjoying the mildest climates in America.  California and Texas lead the nation in high-tech industry and all three form the backbone of our space program.  Texas and California are also major energy producing states.   Florida is synonomous with leisure both tourism and retirement.  

While they share certain basic similarities, they do have distinct personalities.  California is the advant garde state setting major life styles for all to follow.  Texas is large and thinks large.  Florida hums to the laid back sound of Jimmy Buffet  But there is no question they are major draws for people from all parts of the country. 

Whatever your personal opinions of these three giants among the states they clearly indicated the future for the USA.  I recommend visiting all three to get an idea of what the “New America” will be.

I had a pleasant meeting with a group of the “leisure class” made up of Texans and transplants from other states.  No surprise the transplants, since Texas  enjoys the fastest population growth rate of any state and at 26 million stands second only to California in total population.  When I asked, the entire group replied that they would like to see Texas separated from the USA.  They noted that the state’s economy is larger than that of many countries and indeed at $1.3 trillion it is larger than that of England. 

Texas also leads the USA in exports having been the largest exporter of goods among the 50 states for the last seven years.  It also enjoys an unemployment rate of 6.5%, which is below the national average.  It is a leading state in high tech industries as well as traditional ones such as energy and agriculture.  Its main port, Houston, is the sixth largest in the world.  It has three of the US’s ten largest cities, Houston, San Antonio and Dallas.  In sum the state is well placed to operate as a separate economic unit. 

Of course the many other links with the remaining 50 states argue for staying in the union, not least of all providing lots of “cannon fodder” for its powerful college sports teams.  But one hear’s lots of calls for the state charting its own course and seeking its own destiny.   And maybe it could do well as an independent country.  However, for the time being one should take seriously the saying, “Don’t mess with Texas.”