Daily Digest 6/3 - A Way Through The Debt Mess, The Wacky World Of Gold, Mass. Begins Tornado Cleanup

• A Way Through The Debt Mess
• Awesome Wrongness
• The Wacky World Of Gold
• Can We Make Another Billion Today?
• No Worse Than Expected
• Is QE2 A Savior, Inflator, Or A Dud?
• German Energy: Nuclear? Nein, Danke
• Massachusetts Begins Cleanup After Tornadoes

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Economy

A Way Through The Debt Mess (jdargis)

Mr. Obama is not the first president to confront the Cerberus of debt limits, taxes and spending cuts. Indeed, Lyndon B. Johnson’s struggle in 1967 and 1968 to raise the debt ceiling, ward off draconian spending cuts and raise taxes offers important lessons for Mr. Obama.

Awesome Wrongness (jdargis)

About a year and a half ago, all the Very Serious People said that it was time for a pivot in economic policy. Recovery was underway, so no more efforts to stimulate demand; the big threat was the bond market vigilantes, so it was urgent to slash the deficit now now now.

The Wacky World Of Gold (jdargis)

Gold and gold-mining shares used to rise and fall in lockstep. Over the past five years, however, the price of gold has trebled while the value of gold miners has merely doubled. Investors in firms that shift, crush and process rocks are more grounded, it seems, than those who invest in bullion.

Can We Make Another Billion Today? (Ilene)

$1,129,860,000! That's how much money was made shorting 376,620 NYMEX contracts at $103 yesterday, as we planned! Congratulations to those of you who got your share playing along with us and, to the manipulators who got stuck with the bill - screw you bastards, we have your number and we're going to ring it now! I called a cash-out at the $100 line in Member Chat as 2.9% was more of a drop than we expected in one day andwe will re-load on the bounce as we cross back below the $100.50 line - as discussed in this morning's Member Chat - assuming the Dollar has bottomed out at 74.35.

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No Worse Than Expected (jdargis)

Then there's the abysmal labor market. This week, ADP, a private payrolls firm, announced that the private sector added an anemic 38,000 jobs in May. That works out to just 760 jobs per state and is the worst growth since last September. (In April, by comparison, private employers added 177,000 jobs.) On top of that, initial unemployment claims—a leading indicator, suggesting where the unemployment rate is headed—are climbing back up. That has stoked fears that the May unemployment rate, which the Labor Department will announce Friday, might rise from last month's 9 percent.

Is QE2 A Savior, Inflator, Or A Dud? (jdargis)

In fact, QE2 didn't stimulate the economy, as the left had hoped, nor will it lead to the inflationary or bond-market disaster feared by the right. QE2 did basically nothing. But that is a deep and unsettling lesson: The Fed is essentially helpless in the current situation.

The chart attached to the left shows how interest rates behaved through the QE2 episode.

Energy

German Energy: Nuclear? Nein, Danke (jdargis)

The “energy transformation” is neither as revolutionary as Mrs Merkel suggests nor as hazardous as industry fears. Germany is returning to its policy of seven months ago. It has surplus generating capacity and low prices that are unlikely to rise much in the next few years, notes Mark Lewis of Deutsche Bank. Mrs Merkel’s shift was already under way. In 2000 30% of electricity came from nuclear. Since then, renewables like solar and wind have expanded their share from 6.6% to 16.5%.

Environment

Massachusetts Begins Cleanup After Tornadoes (jdargis)

Gov. Deval Patrick described two residential neighborhoods in Springfield — Sixteen Acres and East Forest Park — as having experienced “complete devastation” after touring the area Thursday morning. “We’ve got a real mess on our hands, but we’re in this together,” Mr. Patrick said.

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