The stock market roared on Friday, relieved, one supposes, that the onset of a new depression has not yet begun. A paltry 156,000 new jobs were created in April, which, normally, would be bad news. But previous month's revisions gave 2013 a monthly average of over 200,000 jobs created per month. That was better than previously thought, but is dismal and inadequate to reduce unemployment unless folks simply quit looking for work.
Since Obama took office, 9.5 million Americans have given up looking for work. Why bother, when there are alternatives? Besides, the Obama Administration and the Congress have made it almost un-American for businesses to hire anyone, so why not go with the flow.
It's pretty amazing that the pitiful record of the Obama Administration on the economic front has now become acceptable. Europe has gotten use to the spectacle of double digit unemployment and widespread economic stagnation. It looks like America is following suit.
Sabtu, 04 Mei 2013
Kamis, 02 Mei 2013
Keynes was right: rate cuts don't work
Today the ECB lowered their lending rate. They are moving toward the US Federal Reserve effective target of zero interest rates. It's done nothing for the US, why should it offer any hope for Europe.
Keynes argued persuasively in the 'General Theory' that, absent the 'animal spirits' of entrepreneurs, lowering interest rates may have little or no effect on a stagnant economy. He was right.
Lower rates don't make an employee that is paid $ 50,000 in wage and salary but costs $100,000 to hire (because of government) worth doing. You can subsidize rates --make them negative -- and it won't matter.
An economic policy that confiscates profits from businesses, pushes labor costs to a multiple of what the employee actually receives in income, arbitrarily outlaws important free-market economic initiatives (Keystone), and rewards political cronies (Solyndra) is not likely to produce economic growth quite apart from the level of interest rates.
Tinkering with Fed policy might matter if the other economic policies were not in place. But, the other policies are in place and they matter.
With an Administration fighting a daily war against free markets, the economy is not going to go anywhere. The economy needs a return of 'animal spirits' in the business community, as Keynes argued. Absent that, expect more of the same dismal economic news.
Keynes argued persuasively in the 'General Theory' that, absent the 'animal spirits' of entrepreneurs, lowering interest rates may have little or no effect on a stagnant economy. He was right.
Lower rates don't make an employee that is paid $ 50,000 in wage and salary but costs $100,000 to hire (because of government) worth doing. You can subsidize rates --make them negative -- and it won't matter.
An economic policy that confiscates profits from businesses, pushes labor costs to a multiple of what the employee actually receives in income, arbitrarily outlaws important free-market economic initiatives (Keystone), and rewards political cronies (Solyndra) is not likely to produce economic growth quite apart from the level of interest rates.
Tinkering with Fed policy might matter if the other economic policies were not in place. But, the other policies are in place and they matter.
With an Administration fighting a daily war against free markets, the economy is not going to go anywhere. The economy needs a return of 'animal spirits' in the business community, as Keynes argued. Absent that, expect more of the same dismal economic news.
Rabu, 01 Mei 2013
From the European Front
While yields on Italian debt are lower, the rest of the economic news continues to get worse. Unemployment in the Eurozone reached 12.1 percent on average according to figures released this week, while major strikes and employee walk outs plague Greece, Spain, and France according to today's NY Times. The European economy is still in free fall.
Surprisingly, you hear almost no news about the European economy other than self-serving statements from Euro-officials about how the crisis is over. The crisis is not over; it is deepening.
Politically, Europe is moving toward the extremists on the right and on the left. The European center, devoted to big government and the welfare state, is losing credibility with voters. The great European experiment has run out of (other people's) money. Now the day of reckoning is at hand.
Americans traveling in Europe report increasing street crime, especially in frequently-visited tourist areas. Life is changing in Europe and it is not getting better.
Americans should pay attention. We are on the same path. The next shoe to drop in the US will be Obamacare. When Americans realize that they are paying for insurance and health care that they cannot afford, do not want and do not need, the rebellion will begin here. US debt is on an unsustainable path and the economy is weakening. The stock market and improving home prices are about the only bright spots. Employment gains have corroded and GDP growth is disappearing from view.
The American media does not tell this story and glosses over the hard facts on the ground. But the media will become irrelevant as the facts on the ground will eventually overwhelm a fawning media. The American economy is getting worse and Europe is headed for a depression.
Surprisingly, you hear almost no news about the European economy other than self-serving statements from Euro-officials about how the crisis is over. The crisis is not over; it is deepening.
Politically, Europe is moving toward the extremists on the right and on the left. The European center, devoted to big government and the welfare state, is losing credibility with voters. The great European experiment has run out of (other people's) money. Now the day of reckoning is at hand.
Americans traveling in Europe report increasing street crime, especially in frequently-visited tourist areas. Life is changing in Europe and it is not getting better.
Americans should pay attention. We are on the same path. The next shoe to drop in the US will be Obamacare. When Americans realize that they are paying for insurance and health care that they cannot afford, do not want and do not need, the rebellion will begin here. US debt is on an unsustainable path and the economy is weakening. The stock market and improving home prices are about the only bright spots. Employment gains have corroded and GDP growth is disappearing from view.
The American media does not tell this story and glosses over the hard facts on the ground. But the media will become irrelevant as the facts on the ground will eventually overwhelm a fawning media. The American economy is getting worse and Europe is headed for a depression.
Jumat, 26 April 2013
This Is As Good As It Gets
The GDP announcement this morning for the first quarter of 2013 was 2.5 percent, well below the 3 plus estimates that economists were expecting. This will not be the first disappointment. Folks like Jim Cramer on CNBC can't understand why businessmen are reluctant to expand capital equipment and hire employees. That's because Cramer is a media celebrity not a businessman.
If Cramer were even remotely aware of the actual business climate that ordinary folks have to contend with, he would know what the problem is -- over regulation, absurd tax levels, Obamacare, EPA regulations, Dodd-Frank. It is almost as if the Obama Administration has declared war on the US economy. Anything that smacks of business success is viewed suspiciously by the Administration (and by Jim Cramer, I might note).
The talking heads can't figure it out, but the economics are simple. If hiring an employee at a $ 35,000 salary means it costs you $ 75,000 per year, you are not going to make that hire. End of subject.
Why the simple economics of hiring and firing eludes people like Jim Cramer is amazing.
There is no reason that health care costs should be borne by employers. None....no reason at all. But one thing is certain, if employer bears the cost of health care, they are going to be reluctant to make new hires and anxious to reduce their existing work force. Why is that hard for the Obama fans like Jim Cramer to figure out?
Citizens should finance their own health care. That would keep costs down and make the market efficient, as in the provision of anything else in a market economy. The only way to get health care costs to spiral out of control is to get the government involved.
There is so much double talk in an attempt to circumvent the obvious facts on the ground. The economy is grinding to a halt in Europe and in the US. The West is in deep, deep trouble. They have drunk the nectar of socialism and wealth redistribution. All of that feels good for a while until the economy begins to fall apart. We are now witnessing the collapse of the West.
This is not going to get better. It is going to get worse. Economic policies in Europe and in the US are not designed to make economies grow. They are designed to make economies fair, according to the fairness whims of the political elite. That kills economic growth.
So, get used to it. This is as good as it gets.
If Cramer were even remotely aware of the actual business climate that ordinary folks have to contend with, he would know what the problem is -- over regulation, absurd tax levels, Obamacare, EPA regulations, Dodd-Frank. It is almost as if the Obama Administration has declared war on the US economy. Anything that smacks of business success is viewed suspiciously by the Administration (and by Jim Cramer, I might note).
The talking heads can't figure it out, but the economics are simple. If hiring an employee at a $ 35,000 salary means it costs you $ 75,000 per year, you are not going to make that hire. End of subject.
Why the simple economics of hiring and firing eludes people like Jim Cramer is amazing.
There is no reason that health care costs should be borne by employers. None....no reason at all. But one thing is certain, if employer bears the cost of health care, they are going to be reluctant to make new hires and anxious to reduce their existing work force. Why is that hard for the Obama fans like Jim Cramer to figure out?
Citizens should finance their own health care. That would keep costs down and make the market efficient, as in the provision of anything else in a market economy. The only way to get health care costs to spiral out of control is to get the government involved.
There is so much double talk in an attempt to circumvent the obvious facts on the ground. The economy is grinding to a halt in Europe and in the US. The West is in deep, deep trouble. They have drunk the nectar of socialism and wealth redistribution. All of that feels good for a while until the economy begins to fall apart. We are now witnessing the collapse of the West.
This is not going to get better. It is going to get worse. Economic policies in Europe and in the US are not designed to make economies grow. They are designed to make economies fair, according to the fairness whims of the political elite. That kills economic growth.
So, get used to it. This is as good as it gets.
Rabu, 24 April 2013
Ignorance and the NY Times
Eduardo Porter, an "economics" columnist with the NY Times, has penned an article this morning in the NY Times that purports to address the lack of solutions to today's economic stagnation. Porter reports on a recent IMF sponsored conference of economists that was supposed to address problems posed by the "financial crisis of 2008."
According to Porter, the 2008 collapse discredited policies of lower taxes and de-regulation. You have to wonder what world Porter lives in. Was Sarbanes-Oxley an example of the deregulation? Were the Congressionally-imposed strengthening and rule-making for Fannie and Freddie examples of de-regulation? Exactly what is Porter referring to? Or do facts matter anymore when you have a convenient agenda ready?
Here is an example of the absurd conclusions that Porter draws in his article: "One lesson from the crisis -- first learned in the 1930s and corroborated in several contemporary analyses -- is that when interest rates lose their power to stimulate the economy, additional government spending can help generate real growth." Really? Could have fooled me!
Government spending in the US has exploded since 2008, as well as the national debt. And what have we gotten for this explosion in government spending? Economic stagnation -- the worst economic recovery since? Guess what -- the 1930s. Yes, the last time government spending was tried as a solution was the last time the economy failed, for a genertion, to recover from an economic downturn.
The way out of our current quagmire is easy and historically established. Go back to the early 1980s. Drastic tight money, high interest rates, major tax cuts and de-regulation spurred the most dramatic economic recovery in world history. All of this took place in the US under President Reagan in the bad old 1980s. The Clinton years benefitted from these policies, but Clinton couldn't handle prosperity. He and a Republican Congress raised taxes which began to produce economic contraction by mid-2000. Further regulatory nightmares, led by Sarbanes-Oxley, the dramatic push by Congress to expand Fannie and Freddie set the stage for the 2008 disaster.
What has been discredited is the idea that expansive monetary and fiscal policy can substitute for free market capitalism. The facts have turned naive Keynesiasm on its head. Free markets produce economic growth. Governments produce economic stagnation. The IMF wasted its time holding their conference last week. They would have been better served reading some economic history and learning the facts.
According to Porter, the 2008 collapse discredited policies of lower taxes and de-regulation. You have to wonder what world Porter lives in. Was Sarbanes-Oxley an example of the deregulation? Were the Congressionally-imposed strengthening and rule-making for Fannie and Freddie examples of de-regulation? Exactly what is Porter referring to? Or do facts matter anymore when you have a convenient agenda ready?
Here is an example of the absurd conclusions that Porter draws in his article: "One lesson from the crisis -- first learned in the 1930s and corroborated in several contemporary analyses -- is that when interest rates lose their power to stimulate the economy, additional government spending can help generate real growth." Really? Could have fooled me!
Government spending in the US has exploded since 2008, as well as the national debt. And what have we gotten for this explosion in government spending? Economic stagnation -- the worst economic recovery since? Guess what -- the 1930s. Yes, the last time government spending was tried as a solution was the last time the economy failed, for a genertion, to recover from an economic downturn.
The way out of our current quagmire is easy and historically established. Go back to the early 1980s. Drastic tight money, high interest rates, major tax cuts and de-regulation spurred the most dramatic economic recovery in world history. All of this took place in the US under President Reagan in the bad old 1980s. The Clinton years benefitted from these policies, but Clinton couldn't handle prosperity. He and a Republican Congress raised taxes which began to produce economic contraction by mid-2000. Further regulatory nightmares, led by Sarbanes-Oxley, the dramatic push by Congress to expand Fannie and Freddie set the stage for the 2008 disaster.
What has been discredited is the idea that expansive monetary and fiscal policy can substitute for free market capitalism. The facts have turned naive Keynesiasm on its head. Free markets produce economic growth. Governments produce economic stagnation. The IMF wasted its time holding their conference last week. They would have been better served reading some economic history and learning the facts.
Minggu, 21 April 2013
Even the WSJournal Doesn't Get It
David Wessel has a lengthy article in this morning's Wall Street Journal about the future direction of the world's economies. He begins with Europe and then walks the reader through the US, Japan, China, and the rest of the world. In every case, Wessel's discussion is about government policy.
The overall theme is that economic recovery depends upon government policy, discretionary policy at that. He discusses the twists and turns of policymakers as they, according to his story line, attempt to guide their economies to the promised land.
But, that is exactly the problem. Once government policy becomes the determinant of the economy's future, the economy no longer has a future. The proper role of government in a free market is to lay down the rules of the road and then to get out of the way. Increasingly, a government of rules is not to be found.
Instead we watch daily as policy makers, who frequently have a very limited knowledge of economics, move this way and that in a vain attempt to get economic growth going. Such things cannot work. They never have worked and they never will.
Economic growth occurs when businesses make capital expenditures and hire workers to create product. They aren't going to do that if they have to spend their time wondering what the next move is going to be by their government. Government action is detrimental to an economy's future. Government inaction and consistent application of the rules of the road is the ticket to prosperity, not frenetic political activity and polarizing rhetoric.
If Obama had played more golf and forgotten about the stimulus, Obamacare and Dodd-Frank, we would probably be looking at 4 - 5 percent unemployment today and economic growth rates of 3 1/2 to 4 percent. Unfortunately, Obama thought he had something to contribute. So, we stagnate. that's the price of a responsive government.
The overall theme is that economic recovery depends upon government policy, discretionary policy at that. He discusses the twists and turns of policymakers as they, according to his story line, attempt to guide their economies to the promised land.
But, that is exactly the problem. Once government policy becomes the determinant of the economy's future, the economy no longer has a future. The proper role of government in a free market is to lay down the rules of the road and then to get out of the way. Increasingly, a government of rules is not to be found.
Instead we watch daily as policy makers, who frequently have a very limited knowledge of economics, move this way and that in a vain attempt to get economic growth going. Such things cannot work. They never have worked and they never will.
Economic growth occurs when businesses make capital expenditures and hire workers to create product. They aren't going to do that if they have to spend their time wondering what the next move is going to be by their government. Government action is detrimental to an economy's future. Government inaction and consistent application of the rules of the road is the ticket to prosperity, not frenetic political activity and polarizing rhetoric.
If Obama had played more golf and forgotten about the stimulus, Obamacare and Dodd-Frank, we would probably be looking at 4 - 5 percent unemployment today and economic growth rates of 3 1/2 to 4 percent. Unfortunately, Obama thought he had something to contribute. So, we stagnate. that's the price of a responsive government.
Rabu, 17 April 2013
Taming the Beast
When an economy collapses, usually with the financial sector leading the way, everyone fears that it will not soon recover. But, history tells us otherwise. The numerous financial and economic collapses from the end of the civil war in the US up to the start of World War I took place during the fastest spurt of economic growth in US history. The US economy had no central bank during this period and the government was so tiny that fiscal policy was largely non-existent. Absent modern policy tools, what happened?
What happens, when government is not around to step in, is that economies recover on their own. That's what the period from 1865 to 1914 teaches us. It was during that period that the US overtook other economic power houses to become, by the end of the first World War, the most powerful economic engine in the world. That is the outcome one can expect if the central bank is non-existent and if government fiscal policy is non-existent.
But what happens when government attempts to "tame the beast?" and "reform" the economy and the markets. After the 2008 collapse, an unprecedented effort by central banks and governments took place throughout the Western economies. Combined with aggressive "regulatory reform" to prevent future financial collapses, political actions by western economies have attempted to "tame the beast" of modern capitalism for the past 4 1/2 years.
And what is the outcome of all of this government action? -- economic stagnation and distress. Economies that chugged along with 3 - 3 1/2 percent real GDP growth and 4 - 6 percent unemployment, now face zero real GDP growth and unemployment rates between 7 1/2 percent and 30 percent (Spain, Greece).
What next? The beast has been tamed. The furious fires of capitalism have been successfully tapped down by government policy. Now, policy makers have abandoned any serious effort to get free markets going again and are focused on taxing rich folks. That is the new agenda -- move more and more activities from the private to the public sector (think health care) and go after the wealth of anyone who played by the old rules.
We now have new rules. Bond indentures (think GM, think Stockton) can be rewritten by the judiciary and by politicians. Raiding government protected checking accounts are now policy tools for dealing with excessive sovereign debt (think IMF recommendations on Cyprus). Nothing is safe from the wandering policy eyes of the Obama administrations and European politicans. Even IRA accounts in the US have now become targets of the new political elite.
The beast has been tamed. Look for the economies in Europe and the US to roll over. In the US, the imposition of massive tax increases, major new hikes in employee costs (Obamacare), an onslaught of new EPA regulations, and blurring of the legal status of ordinary financial contracts (GM) is enough to snuff out the tepid recovery in the US. Absurd policies designed to increase sovereign debt in heavily indebted Europe will put the nail in the coffin for Europe. The future is not bright.
What happens, when government is not around to step in, is that economies recover on their own. That's what the period from 1865 to 1914 teaches us. It was during that period that the US overtook other economic power houses to become, by the end of the first World War, the most powerful economic engine in the world. That is the outcome one can expect if the central bank is non-existent and if government fiscal policy is non-existent.
But what happens when government attempts to "tame the beast?" and "reform" the economy and the markets. After the 2008 collapse, an unprecedented effort by central banks and governments took place throughout the Western economies. Combined with aggressive "regulatory reform" to prevent future financial collapses, political actions by western economies have attempted to "tame the beast" of modern capitalism for the past 4 1/2 years.
And what is the outcome of all of this government action? -- economic stagnation and distress. Economies that chugged along with 3 - 3 1/2 percent real GDP growth and 4 - 6 percent unemployment, now face zero real GDP growth and unemployment rates between 7 1/2 percent and 30 percent (Spain, Greece).
What next? The beast has been tamed. The furious fires of capitalism have been successfully tapped down by government policy. Now, policy makers have abandoned any serious effort to get free markets going again and are focused on taxing rich folks. That is the new agenda -- move more and more activities from the private to the public sector (think health care) and go after the wealth of anyone who played by the old rules.
We now have new rules. Bond indentures (think GM, think Stockton) can be rewritten by the judiciary and by politicians. Raiding government protected checking accounts are now policy tools for dealing with excessive sovereign debt (think IMF recommendations on Cyprus). Nothing is safe from the wandering policy eyes of the Obama administrations and European politicans. Even IRA accounts in the US have now become targets of the new political elite.
The beast has been tamed. Look for the economies in Europe and the US to roll over. In the US, the imposition of massive tax increases, major new hikes in employee costs (Obamacare), an onslaught of new EPA regulations, and blurring of the legal status of ordinary financial contracts (GM) is enough to snuff out the tepid recovery in the US. Absurd policies designed to increase sovereign debt in heavily indebted Europe will put the nail in the coffin for Europe. The future is not bright.
Sabtu, 13 April 2013
Once Upon A Time
The American dream was, once upon a time, the idea that if you worked hard, postponed consumption, saved your money and invested it, you could live whatever lifestyle that you wanted. The flip side was that if you failed, you paid the price for that failure. That idea fueled the economic engine that made American the wealthiest country in the world. Millions of people came to America, because of the freedom that the American dream represented -- the freedom to be who you wanted to be without the heavy hand of the government telling you what you could or could not dream.
We are now embarked, along with our friends in Europe, upon the journey to the American nightmare. Political struggles, both in Europe and the US, are degenerating into class warfare, pitting higher incomes against lower incomes, and producing economies that no longer grow. Massive unemployment is becoming accepted and commonplace. The Eurozone unemployment rate exceeds 12 percent and American workers are leaving the work force to enjoy that leisure that an over-abundant "safety net" provides.
Freedom includes the freedom to fail, the freedom to make mistakes, the freedom to pay the price of your failure and your mistakes. Once upon a time the discipline that was imposed by the freedom to fail provided the necessary incentives to succeed. Taking away the freedom to fail with the heavy hand of government takes away the freedom to succeed. It is not only the "too big to fail" that is the problem, it is the "too politically correct to fail" as well that eliminates the freedom necessary to make an economy successful.
We are now embarked, along with our friends in Europe, upon the journey to the American nightmare. Political struggles, both in Europe and the US, are degenerating into class warfare, pitting higher incomes against lower incomes, and producing economies that no longer grow. Massive unemployment is becoming accepted and commonplace. The Eurozone unemployment rate exceeds 12 percent and American workers are leaving the work force to enjoy that leisure that an over-abundant "safety net" provides.
Freedom includes the freedom to fail, the freedom to make mistakes, the freedom to pay the price of your failure and your mistakes. Once upon a time the discipline that was imposed by the freedom to fail provided the necessary incentives to succeed. Taking away the freedom to fail with the heavy hand of government takes away the freedom to succeed. It is not only the "too big to fail" that is the problem, it is the "too politically correct to fail" as well that eliminates the freedom necessary to make an economy successful.
Jumat, 12 April 2013
Economists Who Think Incentives Don't Matter
I nominate Simon Johnson for an award as an economist who has managed to reach the remarkable conclusion that economic incentives do not matter. He joins a long list of politicians who seem to think that government policies that take money from one group of Americans to give it to another have no effect on behavior.
Save and save and save and then find out that the government will take the proceeds of your savings away from you. That's the message of the recent Obama message and Simon Johnson's column today in the New York Times. Obama's new war on the IRA promises to slap the hands of any American who decided to forego that extra TV or car or who bought a house that they could afford, putting the money into an IRA account instead.
The new crime is saving, investing and accumulating assets. According to Obama, that is un-American and he proposes bringing it to an end. Somehow eliminating what paltry private savings the American economy generates doesn't seem to bother Obama and his economic advisers. After all, I suppose, China can continue to supply whatever savings we need as the Chinese own an increasing share of American assets and Americans own less and less of their own country.
Meanwhile those who don't save and who splurge on consumer goods and purchase homes they cannot afford will continue to receive bailouts, special new program proposals from the Obama-led White House, and higher levels of dependency on government. Already the number of Americans even remotely interested in working for a living is at a forty year low and the number of Americans collecting disability checks is at a record and a new record is achieved every day.
Reward the indolent and punish the thrifty and those with a work ethic -- that is the Obama mantra, ringingly endorsed by his adoring economists. Simon Johnson thinks he hasn't gone far enough. I suppose Johnson would like to raise the minimum wage to $ 100 an hour as well. That should go far to eliminate poverty (at least for the handful of Americans who would still have jobs).
Save and save and save and then find out that the government will take the proceeds of your savings away from you. That's the message of the recent Obama message and Simon Johnson's column today in the New York Times. Obama's new war on the IRA promises to slap the hands of any American who decided to forego that extra TV or car or who bought a house that they could afford, putting the money into an IRA account instead.
The new crime is saving, investing and accumulating assets. According to Obama, that is un-American and he proposes bringing it to an end. Somehow eliminating what paltry private savings the American economy generates doesn't seem to bother Obama and his economic advisers. After all, I suppose, China can continue to supply whatever savings we need as the Chinese own an increasing share of American assets and Americans own less and less of their own country.
Meanwhile those who don't save and who splurge on consumer goods and purchase homes they cannot afford will continue to receive bailouts, special new program proposals from the Obama-led White House, and higher levels of dependency on government. Already the number of Americans even remotely interested in working for a living is at a forty year low and the number of Americans collecting disability checks is at a record and a new record is achieved every day.
Reward the indolent and punish the thrifty and those with a work ethic -- that is the Obama mantra, ringingly endorsed by his adoring economists. Simon Johnson thinks he hasn't gone far enough. I suppose Johnson would like to raise the minimum wage to $ 100 an hour as well. That should go far to eliminate poverty (at least for the handful of Americans who would still have jobs).
Kamis, 11 April 2013
Sanofi and the Future of France
Sanofi is a drug company with a research facility in Toulouse, France. The facility needs to be closed. It is a research facility that hasn't produced a new drug in twenty years and costs are prohibitively high in any event. 600 workers are employed there.
So, what happens when Sanofi decides to close the plant? Mass demonstrations and a protracted legal battle. In the end, Sanofi will be refused by the government and the plant will stay open, regardless of what Sanofi shareholders want.
So, what happens when another company is considering opening a plant anywhere in France? They will think about Sanofi's troubles and look elsewhere. Markets work and learn -- which is bad news for France, a country with a declining GDP and absurd economic programs.
Obama thinks that they are on the right track. I guess it depends on what destination you are shooting for.
So, what happens when Sanofi decides to close the plant? Mass demonstrations and a protracted legal battle. In the end, Sanofi will be refused by the government and the plant will stay open, regardless of what Sanofi shareholders want.
So, what happens when another company is considering opening a plant anywhere in France? They will think about Sanofi's troubles and look elsewhere. Markets work and learn -- which is bad news for France, a country with a declining GDP and absurd economic programs.
Obama thinks that they are on the right track. I guess it depends on what destination you are shooting for.
Rabu, 10 April 2013
Krugman and I agree on one thing
Austerity is not the answer. Austerity just means lower standards of living in the future and political chaos. Does anyone think things look bright for Cyprus, Greece, Portugal, Spain or Italy? These unpayable debts should have been moved into default negotiations. That is the only answer. Increasing sovereign debt in all of these countries is madness and brings Germany and France into the same boat.
Bureaucrats and naive politicians (think Obama) always believe that there is some simple "political" solution to every problem. There isn't. They are wrong. The only way to deal with too much debt is to reduce it. Period. Nothing else helps.
The ECB is on the wrong track. It is long past time for "workouts," but better late than never.
Otherwise the center-right and center-left political parties will be completely discredited and radical alternatives, already emerging, will move into prominence.
Politicians never learn. The only way to a higher standard living is free enterprise. Having the government responsible for old age security and health is a huge mistake. Government can play a role as a backstop, but if government is the major provider, the only outcome will be waste and mismanagement and improper funding, which is what we are observing.
Obama's biggest problem is that he thinks of everything in terms of "justice," which, to him, means equalizing the outcomes of the economic process. If you do that, the economy will grind to a halt. That was the experiment in Russia, China and Cuba. It doesn't work. The sluggish and stagnant growth of the American economy is living testament to the outcomes that the Obama economic policies will lead to. Things will get worse.
What is needed is an economic environment where individuals are free to pursue their dreams and achieve success or failure on their own terms. You can't guarantee everyone success. That just means that everyone fails.
Bureaucrats and naive politicians (think Obama) always believe that there is some simple "political" solution to every problem. There isn't. They are wrong. The only way to deal with too much debt is to reduce it. Period. Nothing else helps.
The ECB is on the wrong track. It is long past time for "workouts," but better late than never.
Otherwise the center-right and center-left political parties will be completely discredited and radical alternatives, already emerging, will move into prominence.
Politicians never learn. The only way to a higher standard living is free enterprise. Having the government responsible for old age security and health is a huge mistake. Government can play a role as a backstop, but if government is the major provider, the only outcome will be waste and mismanagement and improper funding, which is what we are observing.
Obama's biggest problem is that he thinks of everything in terms of "justice," which, to him, means equalizing the outcomes of the economic process. If you do that, the economy will grind to a halt. That was the experiment in Russia, China and Cuba. It doesn't work. The sluggish and stagnant growth of the American economy is living testament to the outcomes that the Obama economic policies will lead to. Things will get worse.
What is needed is an economic environment where individuals are free to pursue their dreams and achieve success or failure on their own terms. You can't guarantee everyone success. That just means that everyone fails.
Minggu, 07 April 2013
The President's Budget Proposal -- More of the Same
If you want people to save less, increase the tax on their savings. So, the President now threatens to pull the rug out from under IRAs. The President's defenders say that he is only going after very wealthy IRA users, but we know where it ends -- the average American will find his savings threatened by this increasingly autocratic regime in Washington.
How do you help poor people? Increase their taxes. So, the President proposes to increase the tax on cigarettes. Who are the smokers amongst us? The country club set? Or those without jobs and working at the lowest paid jobs in the country? Everyone knows the answer to that, including the President. He knows that smoking is mainly a habit indulged in by the poor, so he wacks the poor with one more tax hike. Smoking is almost unheard of among upper middle income folks. Obama has his sights set on socking it to the poorest demographic in the country.
What about entitlements? The President proposes cutting medicare reimbursements. He seems to think this will mean that medicare services will simply cost less with no reduction in services. Why not simply eliminate reimbursements entirely. Then everyone could get health care free! This is the logic of the President's medicare savings. We've seen it all before. There are now several states where a majority of doctors will not take medicare patients and that chorus of opt-outers is growing everyday. The President's plan is that health care will ultimately be free, unless you need a doctor or a hospital, in which case it will be unavailable.
As for cost-of-living adjustments on social security, that is merely a technical adjustment of limited significance in a world where people increasing live on social security far beyond our society's ability to provide the resources to support it.
Meanwhile the new budget continues to subsidize Obama's cronies where the losses continue to pile up in failed "green industry" activities, though Obama's cronies never seem to lose any of their own money in these ventures -- just taxpayer money.
So, tax thrift, reward those with uneconomic schemes and dreams that cannot make it in the market place, let the entitlements grow on to infinity, and sock it to the poor. Continue the same economic policies that have produced the worst economic recovery since the 1930s (the last time these kinds of policies were tried). Meanwhile, let the national debt soar on to infinity.
That's the President's new proposal. Not much of a surprise, given the last five years.
How do you help poor people? Increase their taxes. So, the President proposes to increase the tax on cigarettes. Who are the smokers amongst us? The country club set? Or those without jobs and working at the lowest paid jobs in the country? Everyone knows the answer to that, including the President. He knows that smoking is mainly a habit indulged in by the poor, so he wacks the poor with one more tax hike. Smoking is almost unheard of among upper middle income folks. Obama has his sights set on socking it to the poorest demographic in the country.
What about entitlements? The President proposes cutting medicare reimbursements. He seems to think this will mean that medicare services will simply cost less with no reduction in services. Why not simply eliminate reimbursements entirely. Then everyone could get health care free! This is the logic of the President's medicare savings. We've seen it all before. There are now several states where a majority of doctors will not take medicare patients and that chorus of opt-outers is growing everyday. The President's plan is that health care will ultimately be free, unless you need a doctor or a hospital, in which case it will be unavailable.
As for cost-of-living adjustments on social security, that is merely a technical adjustment of limited significance in a world where people increasing live on social security far beyond our society's ability to provide the resources to support it.
Meanwhile the new budget continues to subsidize Obama's cronies where the losses continue to pile up in failed "green industry" activities, though Obama's cronies never seem to lose any of their own money in these ventures -- just taxpayer money.
So, tax thrift, reward those with uneconomic schemes and dreams that cannot make it in the market place, let the entitlements grow on to infinity, and sock it to the poor. Continue the same economic policies that have produced the worst economic recovery since the 1930s (the last time these kinds of policies were tried). Meanwhile, let the national debt soar on to infinity.
That's the President's new proposal. Not much of a surprise, given the last five years.
Sabtu, 06 April 2013
Portugal Waffles on Austerity
Promised 78 billion Euros by the ECB, Portugal had agreed to limit it's budget deficit to 3 percent of GDP. Forget that promise. It won't happen.
The high court in Portugal said "no" yesterday to a plan to trim government employees compensation and that is the end of the 3 percent plan. Back to plan B. Portugal now says 5 percent is doable. Not that it matters.
Portugal's debt was 124 percent of GDP before the ECB stepped in. It will be 150 percent within two more years on its way, no doubt, to over 200 percent within a decade. This, of course, assumes there is someone out there willing to buy this worthless stuff.
All the other Eurozone countries are on a similar trajectory, including France and Germany. The US is on a similar path, perhaps as a sympathetic show of unity.
The ECB magic elixir is that the cure for too much debt is more debt. Austerity is thrown into the mix, one supposes, for comic relief.
Ridiculous economic policies in the US and in the Eurozone are bearing fruit. Their economies are stagnant at best and collapsing at worst, while their sovereign debt levels continue to explode.
The high court in Portugal said "no" yesterday to a plan to trim government employees compensation and that is the end of the 3 percent plan. Back to plan B. Portugal now says 5 percent is doable. Not that it matters.
Portugal's debt was 124 percent of GDP before the ECB stepped in. It will be 150 percent within two more years on its way, no doubt, to over 200 percent within a decade. This, of course, assumes there is someone out there willing to buy this worthless stuff.
All the other Eurozone countries are on a similar trajectory, including France and Germany. The US is on a similar path, perhaps as a sympathetic show of unity.
The ECB magic elixir is that the cure for too much debt is more debt. Austerity is thrown into the mix, one supposes, for comic relief.
Ridiculous economic policies in the US and in the Eurozone are bearing fruit. Their economies are stagnant at best and collapsing at worst, while their sovereign debt levels continue to explode.
The Obama Hunt for Revenues
The Wall Street Journal reports today that the Obama Administration is now planning on major new taxes on: 1) cigarettes; and 2) IRA accounts.
Increasing the taxes on cigarettes goes after the poorest demographic in America. In his continuing war on the lower middle income Americans, Obama plans to raise what is probably the most regressive tax in existence -- the cigarette tax.
For balance, one supposes, Obama intends to break the long standing promises of IRA accounts. IRA accounts are a special target of the Obama Administration, because IRA's are the main avenue that individuals use to provide savings for their retirement. Not content to let social security run out of money in the next generation, Obama now plans to steal the private savings that individuals have accumulated by abstaining from consumption and saving for their future.
There are no limits to the duplicity and meanness that characterizes the Obama Administration. These proposals are just more of the same. Just as the minimum wage laws make it a criminal offense to provide jobs for the poorest amongst us, the cigarette tax punishes the poorest Americans and the attack on IRA's is an assault on individual thrift.
Meanwhile another "green jobs" project funded with $ 200 million in Obama Administration funds is going belly up. Fisker, a maker of electric cars, with a huge credit line from the US Government, is laying off 150 of its employees (60 percent of its workforce) in order to conserve cash for Obama-friendly wealthy shareholders. The company still has the ability to draw another $370 million from government coffers as it slides into bankruptcy. Another transfer from the poor and from the savers to Obama's wealthy friends.
Increasing the taxes on cigarettes goes after the poorest demographic in America. In his continuing war on the lower middle income Americans, Obama plans to raise what is probably the most regressive tax in existence -- the cigarette tax.
For balance, one supposes, Obama intends to break the long standing promises of IRA accounts. IRA accounts are a special target of the Obama Administration, because IRA's are the main avenue that individuals use to provide savings for their retirement. Not content to let social security run out of money in the next generation, Obama now plans to steal the private savings that individuals have accumulated by abstaining from consumption and saving for their future.
There are no limits to the duplicity and meanness that characterizes the Obama Administration. These proposals are just more of the same. Just as the minimum wage laws make it a criminal offense to provide jobs for the poorest amongst us, the cigarette tax punishes the poorest Americans and the attack on IRA's is an assault on individual thrift.
Meanwhile another "green jobs" project funded with $ 200 million in Obama Administration funds is going belly up. Fisker, a maker of electric cars, with a huge credit line from the US Government, is laying off 150 of its employees (60 percent of its workforce) in order to conserve cash for Obama-friendly wealthy shareholders. The company still has the ability to draw another $370 million from government coffers as it slides into bankruptcy. Another transfer from the poor and from the savers to Obama's wealthy friends.
Jumat, 05 April 2013
Half a Million Americans Give Up Looking
This morning's job report was notable mainly for the number of Americans who have simply given up any hope of employment and have exited from the workforce. Another half a million Americans quit looking for work in March. The percentage of American adults that now make any effort at all to find work is at the lowest point since 1979 (when Jimmy Carter was president).
If more people continue to quit looking for work, the unemployment rate will continue to fall. Eventually, if everyone out of work just gives up looking, America's unemployment rate can fall to zero. That seems to be the only way to get the unemployment rate down in the new Obama world.
In a culture that is becoming increasingly a "where's mine?" culture, it is hard to see how the American economy that we used to know (in the bad old days) is ever going to return.
How many private sector jobs were created in March? A laughable 85,000. That's almost a rounding error to the Reagan era 1.2 million jobs that were created in September of 1982.
Watching the pundits was interesting this morning? They seemed puzzled. Was it the sequester, they pondered? They ignored the implementation of Obamacare, the $ 600 billion tax increase imposed at the beginning of 2013, the ceaseless barrage of new regulations designed mainly to strangle American business and the continued war against free enterprise that is waged daily by the White House.
The American culture is changing. We are becoming more like Greece every day in every way. There is a sense of entitlement in the air and in every part of life. McDonald employees in NYC demanding a 107 percent immediate wage increase in the midst of a sea of unemployed Americans is a great example of the modern cultural disconnect.
The idea that you have to work and save to provide for yourself is so Reagan-like. Why do that when government can generously provide everything?
Well now we know one thing that the government cannot provide -- private sectors jobs. Stay tuned. There is more coming. Wait until you experience the implementation of Obamacare. You haven't seen anything yet. You might read up on pre-1990 Soviet Russia to get a good glimpse of where we are headed.
If more people continue to quit looking for work, the unemployment rate will continue to fall. Eventually, if everyone out of work just gives up looking, America's unemployment rate can fall to zero. That seems to be the only way to get the unemployment rate down in the new Obama world.
In a culture that is becoming increasingly a "where's mine?" culture, it is hard to see how the American economy that we used to know (in the bad old days) is ever going to return.
How many private sector jobs were created in March? A laughable 85,000. That's almost a rounding error to the Reagan era 1.2 million jobs that were created in September of 1982.
Watching the pundits was interesting this morning? They seemed puzzled. Was it the sequester, they pondered? They ignored the implementation of Obamacare, the $ 600 billion tax increase imposed at the beginning of 2013, the ceaseless barrage of new regulations designed mainly to strangle American business and the continued war against free enterprise that is waged daily by the White House.
The American culture is changing. We are becoming more like Greece every day in every way. There is a sense of entitlement in the air and in every part of life. McDonald employees in NYC demanding a 107 percent immediate wage increase in the midst of a sea of unemployed Americans is a great example of the modern cultural disconnect.
The idea that you have to work and save to provide for yourself is so Reagan-like. Why do that when government can generously provide everything?
Well now we know one thing that the government cannot provide -- private sectors jobs. Stay tuned. There is more coming. Wait until you experience the implementation of Obamacare. You haven't seen anything yet. You might read up on pre-1990 Soviet Russia to get a good glimpse of where we are headed.
Kamis, 04 April 2013
Obama Calls for the Return of Predatory Lending
After excoriating the banking community for the past five years for making loans to Americans with less than stellar credit, Obama has now reversed course. This week, Obama has now called for banks to return to the bad old days -- lending to people of modest means.
What has been considered a crime by the Obama folks for the last five years is now their latest policy initiative. With the taxpayer, of course and as usual, as the guarantor.
Instead of letting the free market decide who gets to borrow and at what rates, which would avoid the booms and busts of the past, Obama is following his tried and true instincts. Only he knows what is best -- not the markets.
But banks have learned their lesson. Why loan to folks that might not pay you back, regardless of who the guarantor is? The banks now know that they will be accused of predatory lending when these loans go sour. By that time, Obama will be resting comfortably with his millions in Hawaii. What does he care?
Once again, an administration with nothing but contempt for free markets, has demonstrated their ignorance and their duplicity. At least, finally, they appear to realize that strangling the financial community has consequences. Witness the stagnant economy of the Obama years.
Don't expect banks to rush forward to put their neck in the noose once more.
What has been considered a crime by the Obama folks for the last five years is now their latest policy initiative. With the taxpayer, of course and as usual, as the guarantor.
Instead of letting the free market decide who gets to borrow and at what rates, which would avoid the booms and busts of the past, Obama is following his tried and true instincts. Only he knows what is best -- not the markets.
But banks have learned their lesson. Why loan to folks that might not pay you back, regardless of who the guarantor is? The banks now know that they will be accused of predatory lending when these loans go sour. By that time, Obama will be resting comfortably with his millions in Hawaii. What does he care?
Once again, an administration with nothing but contempt for free markets, has demonstrated their ignorance and their duplicity. At least, finally, they appear to realize that strangling the financial community has consequences. Witness the stagnant economy of the Obama years.
Don't expect banks to rush forward to put their neck in the noose once more.
Sabtu, 30 Maret 2013
The Next Step in Europe's Implosion
Rome wasn't built in a day and the Eurozone will not collapse in a day. But, the Eurozone will collapse. It's just a matter of time.
Consider the stronger countries in the Eurozone -- Germany and France. Both economies are now contracting. Meanwhile their debt levels, acknowledged and unacknowledged, have exploded to new levels. Both countries are now in the situation that faced Greece four years ago. So, how is their future going to be any different that what is now taking place in Cyprus, Greece, Spain and Italy?
The ECB ministers are a group of political hacks who know little or nothing about economics (something they share with the Obama advising team). Their idea of improving the economic plight of the Eurozone is to increase the level of debt, continue to implicitly guarantee profligate spending and bureaucratic regulations, and plunge the Eurozone into the economic dark ages.
GDP is falling, debt is rising, unemployment is rising, and recriminations are flying. The Eurozone is coming apart at the seams. Civil society has broken down in Greece and is in the process of breaking down in parts of Spain and Italy. Cyprus is entering a dark period. Nothing good lies ahead for the Eurozone.
So, what happens next?
Deposits will begin to seep out of the Eurozone -- most notably from Spanish and Italian banks -- but from other Eurozone countries as well. After all, the ECB bureaucracy has changed the rules. Deposits are now legitimate targets for the bureaucrats. It wasn't the ECB that decided not to confiscate insured depositors in Cyprus, it was the Cypriot parliament who refused to ratify the ECB and IMF policy of confiscating insured depositors. The confiscation of government insured deposits is now a legitimate policy weapon in the Eurozone, overturning a long past history of FDIC-like guarantees in the Eurozone. Nothing is sacred to the bureaucrats.
The genie cannot be put back in the bottle. The European banking sector cannot recover from this bureaucratic policy blunder. Deposits in the Eurozone can never be considered secure, even in circumstances where the bank that houses them is secure. The government can confiscate deposits wherever they may be. This is now a legitimate Eurozone policy weapon. It is also an IMF (read USA) policy tool as well. Even US FDIC-guaranteed deposits may be fair game to the bureaucrats when US debt woes become a front page crisis. An eventuality that must come in time.
Consider the stronger countries in the Eurozone -- Germany and France. Both economies are now contracting. Meanwhile their debt levels, acknowledged and unacknowledged, have exploded to new levels. Both countries are now in the situation that faced Greece four years ago. So, how is their future going to be any different that what is now taking place in Cyprus, Greece, Spain and Italy?
The ECB ministers are a group of political hacks who know little or nothing about economics (something they share with the Obama advising team). Their idea of improving the economic plight of the Eurozone is to increase the level of debt, continue to implicitly guarantee profligate spending and bureaucratic regulations, and plunge the Eurozone into the economic dark ages.
GDP is falling, debt is rising, unemployment is rising, and recriminations are flying. The Eurozone is coming apart at the seams. Civil society has broken down in Greece and is in the process of breaking down in parts of Spain and Italy. Cyprus is entering a dark period. Nothing good lies ahead for the Eurozone.
So, what happens next?
Deposits will begin to seep out of the Eurozone -- most notably from Spanish and Italian banks -- but from other Eurozone countries as well. After all, the ECB bureaucracy has changed the rules. Deposits are now legitimate targets for the bureaucrats. It wasn't the ECB that decided not to confiscate insured depositors in Cyprus, it was the Cypriot parliament who refused to ratify the ECB and IMF policy of confiscating insured depositors. The confiscation of government insured deposits is now a legitimate policy weapon in the Eurozone, overturning a long past history of FDIC-like guarantees in the Eurozone. Nothing is sacred to the bureaucrats.
The genie cannot be put back in the bottle. The European banking sector cannot recover from this bureaucratic policy blunder. Deposits in the Eurozone can never be considered secure, even in circumstances where the bank that houses them is secure. The government can confiscate deposits wherever they may be. This is now a legitimate Eurozone policy weapon. It is also an IMF (read USA) policy tool as well. Even US FDIC-guaranteed deposits may be fair game to the bureaucrats when US debt woes become a front page crisis. An eventuality that must come in time.
Sabtu, 23 Maret 2013
Little Cyprus
So how big is Cyprus? 800,000 people with a GDP of about 18 billion Euros -- less than 10 percent of the size and wealth of the State of Virginia. So, how can Cyprus rock the Eurozone?
Easy. Let politics substitute for economics and anything can happen.
The grand Euro scheme of bailing out country after country is rapidly running up against reality. The sacrifices that the bailers require are politically unacceptable to the bailees.
Austerity traded for more debt -- this is the bailout scheme devised by politicians. This scheme is an effort to change reality and it won't work.
The reality is that Cyprus banking is history. Who, in his right mind, would willingly leave their money in a Cypriot bank after the events of the past week? It doesn't really matter what solution is imposed, the Cypriot financial community will not recover.
Meanwhile, institutions with deposits in Italian and Spanish banks now face a new reality, hitherto not contemplated. The European Central Bank and the IMF have this week endorsed a new policy tool for dealing with debtor nations -- confiscation of bank deposits. Who would have thought? But now the thinking begins. Should I or shouldn't I move my cash deposits from Italian and Spanish banks for the safer confines of London or New York or Geneva or Singapore? No doubt such thoughts are now extant in the minds of all institutional investors across the globe.
When economics no longer guides economies and the politicians take over, this is the outcome -- collapsing GDP, rising debt levels, and growing political anarchy. We are just at the early stages of the coming demise of Europe.
Easy. Let politics substitute for economics and anything can happen.
The grand Euro scheme of bailing out country after country is rapidly running up against reality. The sacrifices that the bailers require are politically unacceptable to the bailees.
Austerity traded for more debt -- this is the bailout scheme devised by politicians. This scheme is an effort to change reality and it won't work.
The reality is that Cyprus banking is history. Who, in his right mind, would willingly leave their money in a Cypriot bank after the events of the past week? It doesn't really matter what solution is imposed, the Cypriot financial community will not recover.
Meanwhile, institutions with deposits in Italian and Spanish banks now face a new reality, hitherto not contemplated. The European Central Bank and the IMF have this week endorsed a new policy tool for dealing with debtor nations -- confiscation of bank deposits. Who would have thought? But now the thinking begins. Should I or shouldn't I move my cash deposits from Italian and Spanish banks for the safer confines of London or New York or Geneva or Singapore? No doubt such thoughts are now extant in the minds of all institutional investors across the globe.
When economics no longer guides economies and the politicians take over, this is the outcome -- collapsing GDP, rising debt levels, and growing political anarchy. We are just at the early stages of the coming demise of Europe.
Selasa, 05 Maret 2013
Schwartz's Quandary
Today's NYTimes features an interesting article by Nelson D. Schwartz headlined "Recovery in US is Lifting Profits, But Not Adding Jobs." Surprise, Surprise!
The main tool for solving unemployment by the White House is to figure ways to make employees more expensive. Businesses aren't dumb. If you make a factor of production much more expensive, businesses will use less of it. Machines aren't more expensive; outsourcing is not more expensive, but hiring American workers is much, much more expensive thanks to Obamacare and numerous "worker protection" rules, laws and regulations.
So, what to do? Obama now suggests raising the minimum wage from $ 7.25 to $ 9.00 -- almost a 25 percent hike in the minimum wage. That is in keeping with the philosophy of making employees more expensive.
The war on workers and the war on the middle class by this White House continues unabated. Schwartz is puzzled by the "golden age for corporate profits" unaccompanied by meaningful increase in the demand for workers. But why is there any surprise. This is the predictable result of White House economic policy.
The main tool for solving unemployment by the White House is to figure ways to make employees more expensive. Businesses aren't dumb. If you make a factor of production much more expensive, businesses will use less of it. Machines aren't more expensive; outsourcing is not more expensive, but hiring American workers is much, much more expensive thanks to Obamacare and numerous "worker protection" rules, laws and regulations.
So, what to do? Obama now suggests raising the minimum wage from $ 7.25 to $ 9.00 -- almost a 25 percent hike in the minimum wage. That is in keeping with the philosophy of making employees more expensive.
The war on workers and the war on the middle class by this White House continues unabated. Schwartz is puzzled by the "golden age for corporate profits" unaccompanied by meaningful increase in the demand for workers. But why is there any surprise. This is the predictable result of White House economic policy.
Minggu, 03 Maret 2013
Three Cheers for Christina Romer
It has been somewhat of a puzzle that Obama's economists haven't rebelled at his Administration's assault on the US economy. Economics is, after all, economics. Finally!
In today's NYTimes, Christina Romer, former head of Obama's Council of Economic Advisors, questions the necessity of the minimum wage. She not only wonders openly about increasing the minimum wage, but questions the very idea of minimum wage legislation.
Romer is right that the minimum wage is not the way to go. While she doesn't go far enough to oppose the minimum wage outright, it is hard to see her op-ed piece as anything but a plea for sanity and clear opposition to Obama's recent call for a minimum wage increse.
In today's NYTimes, Christina Romer, former head of Obama's Council of Economic Advisors, questions the necessity of the minimum wage. She not only wonders openly about increasing the minimum wage, but questions the very idea of minimum wage legislation.
Romer is right that the minimum wage is not the way to go. While she doesn't go far enough to oppose the minimum wage outright, it is hard to see her op-ed piece as anything but a plea for sanity and clear opposition to Obama's recent call for a minimum wage increse.
Kamis, 28 Februari 2013
Down a little; Up a little
4th Quarter GDP was revised up today from a dismal -0.1 percent to a dismal +0.1 percent, confirming the stagnation character of the American economy. All the fine rhetoric from the White House and its chorus of apologists cannot hide the fact that US economy is stuck in the mud.
This should come as no surprise of course. Why should anyone expand their business or take on new employees in this environment? Heaven forbid that anyone should make a profit or try to get rich. That's the new sin.
So, what is left is stagnation. An economy that rewards people for not working and punishes those who wish to employ capital is an economy that is going nowhere.
Obama has managed to accomplish what few thought possible. He has shut down the mighty American economic engine.
This should come as no surprise of course. Why should anyone expand their business or take on new employees in this environment? Heaven forbid that anyone should make a profit or try to get rich. That's the new sin.
So, what is left is stagnation. An economy that rewards people for not working and punishes those who wish to employ capital is an economy that is going nowhere.
Obama has managed to accomplish what few thought possible. He has shut down the mighty American economic engine.
Jumat, 22 Februari 2013
The "Delay" Tax
Everyone knows, except Obama, that the entitlements are $70 trillion in the hole from an actuarial point of view. This means that, in finite time, they will run out of money.
So that, it is very, very clear that future generations will get nothing at all from social security and medicare regardless of the amount that they pay in. Unless something is done.
This we know (except for Obama, of course, who seems to know nothing).
All of this means that sooner or later, social security and medicare will be fixed. Running out of money is a fix. That does solve the problem.
A simple solution is to move out the age of eligibility for medicare (and index it). Do the same for social security. Means test both programs. Raise medicaid eligibility requirements. Doing these things would mean that social security and medicare will never run out of money.
So, a simple fix, can make things work. If we do it now. Delay means that when you do act, the actions must be much, more draconian. By postponing action, even for only a single year, the size of the cuts and the postponement of eligibility must be far greater than what would be necessary if we acted today.
This is the Obama "delay" tax. The longer you postpone dealing with the problem, the worse is the plight of future seniors. Either Obama doesn't know this (which is probable, because he isn't very focused on real issues) or he knows it and simply doesn't care.
So that, it is very, very clear that future generations will get nothing at all from social security and medicare regardless of the amount that they pay in. Unless something is done.
This we know (except for Obama, of course, who seems to know nothing).
All of this means that sooner or later, social security and medicare will be fixed. Running out of money is a fix. That does solve the problem.
A simple solution is to move out the age of eligibility for medicare (and index it). Do the same for social security. Means test both programs. Raise medicaid eligibility requirements. Doing these things would mean that social security and medicare will never run out of money.
So, a simple fix, can make things work. If we do it now. Delay means that when you do act, the actions must be much, more draconian. By postponing action, even for only a single year, the size of the cuts and the postponement of eligibility must be far greater than what would be necessary if we acted today.
This is the Obama "delay" tax. The longer you postpone dealing with the problem, the worse is the plight of future seniors. Either Obama doesn't know this (which is probable, because he isn't very focused on real issues) or he knows it and simply doesn't care.
Senin, 18 Februari 2013
Joe Stiglitz and Inequality
Joe Stiglitz has penned an interesting article on the growing inequality of measured income in the United States. The facts that he uses, of course, are subject to the usual limitations. If you ignore everything the government does and all employee benefits, then you get one answer. If you include government spending and employee benefits you get an entirely different answer. But, lay that aside for the moment, because, I think, Stiglitz is on to something. There is growing inequality of opportunity in America, but not for the reasons Stiglitz is implying.
It is no wonder that wealthy liberals are at the forefront of the call for reduced inequality. They know that their policies will solidify their exalted status in society. They are not at risk.
The simplest example can be read in today's editorial in the NY Times in support of raising the national minimum wage from $ 7.25 per hour to $ 9.00 per hour. That kind of policy won't hurt the liberal elite, protected with incomes far, far above these numbers. This kind of policy -- outlawing jobs for folks with limited skills -- only hurts those who might have trouble affording a copy of the NY Times, not those writing their editorials.
Minimum wage laws are one of the many reasons that inequality is growing in the United States. Entitlement programs, welfare programs and the takeover of public schools by teacher unions are other reasons for the growing inequality. I doubt that many of the editorial writers for the NY Times send their own children to public schools or need access to welfare programs of entitlement programs, so, by all means, make them available to others.
Providing government largesse for those less fortunate inevitably increases the number of those less fortunate. Outlawing jobs for those with limited skills is cruel and makes things far worse. Stiglitz is right. Inequality is growing. But the reason is that government is growing. Growing government puts lower income citizens in the penalty box and makes it difficult for them to ever escape. That is what causes growing inequality.
It is interesting that Stiglitz thinks America was much more a land of opportunity one hundred years ago. That was a time that predated minimum wage laws, teachers unions, social security, medicare, medicaid and welfare programs. That was a time when a real land of opportunity existed because government played a much more limited role.
It is no wonder that wealthy liberals are at the forefront of the call for reduced inequality. They know that their policies will solidify their exalted status in society. They are not at risk.
The simplest example can be read in today's editorial in the NY Times in support of raising the national minimum wage from $ 7.25 per hour to $ 9.00 per hour. That kind of policy won't hurt the liberal elite, protected with incomes far, far above these numbers. This kind of policy -- outlawing jobs for folks with limited skills -- only hurts those who might have trouble affording a copy of the NY Times, not those writing their editorials.
Minimum wage laws are one of the many reasons that inequality is growing in the United States. Entitlement programs, welfare programs and the takeover of public schools by teacher unions are other reasons for the growing inequality. I doubt that many of the editorial writers for the NY Times send their own children to public schools or need access to welfare programs of entitlement programs, so, by all means, make them available to others.
Providing government largesse for those less fortunate inevitably increases the number of those less fortunate. Outlawing jobs for those with limited skills is cruel and makes things far worse. Stiglitz is right. Inequality is growing. But the reason is that government is growing. Growing government puts lower income citizens in the penalty box and makes it difficult for them to ever escape. That is what causes growing inequality.
It is interesting that Stiglitz thinks America was much more a land of opportunity one hundred years ago. That was a time that predated minimum wage laws, teachers unions, social security, medicare, medicaid and welfare programs. That was a time when a real land of opportunity existed because government played a much more limited role.
Rabu, 13 Februari 2013
Round Two
The President enjoys a good fight. The only question is will there be an opponent. Reality, of course, is one major opponent. But, the Presidents seems adept at ignoring reality.
The State of the Union speech last night was the Hugo Chavez plan for the US -- more body slams to the private sector, more money to be wasted on government and government's pals. As for the poor, raise the minimum wage. One wonders why Obama did not advocate a $ 100 per hour minimum wage. Using his logic, that should solve the problem of poverty in one grand stroke.
As for the hopes of the unemployed and underemployed, forget it. This President is not bothered by slack economic growth and growing numbers of folks disappearing from the work force. Just expand medicaid and food stamps. That should do it.
As for the national debt. Hey! That's one area where we lead the world. Let's maintain that lead!
Meanwhile, the war on capitalism continues unabated. Tax rich people!! That seems to be the main mantra of this White House.
So, what's the future. It isn't good.
The State of the Union speech last night was the Hugo Chavez plan for the US -- more body slams to the private sector, more money to be wasted on government and government's pals. As for the poor, raise the minimum wage. One wonders why Obama did not advocate a $ 100 per hour minimum wage. Using his logic, that should solve the problem of poverty in one grand stroke.
As for the hopes of the unemployed and underemployed, forget it. This President is not bothered by slack economic growth and growing numbers of folks disappearing from the work force. Just expand medicaid and food stamps. That should do it.
As for the national debt. Hey! That's one area where we lead the world. Let's maintain that lead!
Meanwhile, the war on capitalism continues unabated. Tax rich people!! That seems to be the main mantra of this White House.
So, what's the future. It isn't good.
Minggu, 10 Februari 2013
The Snow Storm Disaster
As three feet of snow blanket Boston, the Administration tries to push their "climate change" agenda, as if anything of substance could result from that. There is no scientific evidence that weather patterns are changing materially, but that doesn't keep the Obama folks from pointing to every weather-related problem as more evidence of climate change.
One wonders why the infrastructure in America is not built up to withstand these storms and help the public resist them. The answer? There is no money left. The liberal agenda, mainly the entitlements, have not only taken top priority, but will eventually absorb more than any possible tax revenues could ever provide.
One of the many downsides of the entitlement world is much, much slower economic growth. Entitlements destroy private savings, reduce and eliminate work incentives, and make personal responsibility a remnant of antiquity. A record number of Americans now live off of social security disability payments and that trend is only in its infancy.
Once the government promises to care for our every need, it loses the ability to provide basic services -- such as protection from natural disasters. Why was there no protective flood wall in New Orleans to protect its citizens from Katrina? Why? Because the money that should have been available was drained off for entitlements and social services. Why aren't there widespread use of generators in the Northeast so that citizens don't have to huddle without power for days in subzero weather? Why? Because who can afford generators with public service costs, including health care, spiraling out of control. Government services aren't cheap. Check out the post office.
Today, the government increasingly determines the priorities of what goods and services will be provided to the American public. Infrastructure, generally, is a loser. Gradually, but certainly, the historic role of government to provides roads, courts and national defense will wither away. It is no accident that sequestration strikes hardest at the defense department. In time, America will lose the ability to defend itself militarily. That seems to be Obama's plan.
So, don't be surprised if, increasingly, Americans are buffeted by natural disasters that they are unprepared for, foreign wars that they are unprepared for, and infrastructure that is simply corroding away as more and more Americans become wards of the state.
One wonders why the infrastructure in America is not built up to withstand these storms and help the public resist them. The answer? There is no money left. The liberal agenda, mainly the entitlements, have not only taken top priority, but will eventually absorb more than any possible tax revenues could ever provide.
One of the many downsides of the entitlement world is much, much slower economic growth. Entitlements destroy private savings, reduce and eliminate work incentives, and make personal responsibility a remnant of antiquity. A record number of Americans now live off of social security disability payments and that trend is only in its infancy.
Once the government promises to care for our every need, it loses the ability to provide basic services -- such as protection from natural disasters. Why was there no protective flood wall in New Orleans to protect its citizens from Katrina? Why? Because the money that should have been available was drained off for entitlements and social services. Why aren't there widespread use of generators in the Northeast so that citizens don't have to huddle without power for days in subzero weather? Why? Because who can afford generators with public service costs, including health care, spiraling out of control. Government services aren't cheap. Check out the post office.
Today, the government increasingly determines the priorities of what goods and services will be provided to the American public. Infrastructure, generally, is a loser. Gradually, but certainly, the historic role of government to provides roads, courts and national defense will wither away. It is no accident that sequestration strikes hardest at the defense department. In time, America will lose the ability to defend itself militarily. That seems to be Obama's plan.
So, don't be surprised if, increasingly, Americans are buffeted by natural disasters that they are unprepared for, foreign wars that they are unprepared for, and infrastructure that is simply corroding away as more and more Americans become wards of the state.
Kamis, 31 Januari 2013
Rick Santelli Has It Right
"We are now Europe!" So said Rick Santelli on CNBC yesterday, as he responded to the negative GDP growth announcement for 4th quarter 2012. Santelli is right. We are now having the same silly discussions that go on routinely in Europe. We now think that somehow, someway the central bank can do something that makes it all better. And that somehow, someway, with sovereign debt exploding off into infinity, we can continue to spend and borrow our way to prosperity. It can't be done.
Economists have routinely become apologists for absurd economic policy, both in Europe and in the US. They often advocate raising minimum wages to increase employment. They have been in the forefront of advocacy for Obama policies that have brought the US economic recovery to its knees. Thank goodness for Santelli. He correctly notes that US sovereign debt problems are approaching Greek levels.
There was a time when US capitalism was the envy of the world. That time has passed. We are now simply a European basket case with all of the same problems that Greece, Spain and Italy have and for the same reasons. We are wealthier because of our free market history. But that is past history and we are now in a European present. Obama is succeeding in squeezing capitalism out of the US and the result is a stagnant, increasingly sick, economy on its way to modern day Greece and Spain.
Pretending that there is good news or economic strength in the worst economic recovery since the end of World War II is embarrassing. The facts on the ground are all to clear. The US is losing its pre-eminent position in the world economy and it is losing it at a fast clip. No amount of misleading news reporting by the American media can obscure the obvious fact of the decline of the American economic engine.
Three cheers for Santelli. He has it right.
Economists have routinely become apologists for absurd economic policy, both in Europe and in the US. They often advocate raising minimum wages to increase employment. They have been in the forefront of advocacy for Obama policies that have brought the US economic recovery to its knees. Thank goodness for Santelli. He correctly notes that US sovereign debt problems are approaching Greek levels.
There was a time when US capitalism was the envy of the world. That time has passed. We are now simply a European basket case with all of the same problems that Greece, Spain and Italy have and for the same reasons. We are wealthier because of our free market history. But that is past history and we are now in a European present. Obama is succeeding in squeezing capitalism out of the US and the result is a stagnant, increasingly sick, economy on its way to modern day Greece and Spain.
Pretending that there is good news or economic strength in the worst economic recovery since the end of World War II is embarrassing. The facts on the ground are all to clear. The US is losing its pre-eminent position in the world economy and it is losing it at a fast clip. No amount of misleading news reporting by the American media can obscure the obvious fact of the decline of the American economic engine.
Three cheers for Santelli. He has it right.
Rabu, 30 Januari 2013
State of Denial
The Obama Administration continues to trumpet the illusion that the economy is doing well. It isn't, Today's 4th quarter GDP numbers point to a declining GDP, not a growing GDP. The Obama enthusiasts in the media quickly found things within the report to like -- what else could they do? But, the undeniable fact is the economy is going nowhere.
If it were only the tax increases. But, there is so much more. Obamacare is kicking in and the EPA is clamping down hard on the economy. Meanwhile, Dodd-Frank implementation is destroying credit availability. The combination of all these things seems to get the Obama folks where they want to be -- the destruction of the American economic engine. They are succeeding. This morning's numbers bear testament. Stay tuned.
If it were only the tax increases. But, there is so much more. Obamacare is kicking in and the EPA is clamping down hard on the economy. Meanwhile, Dodd-Frank implementation is destroying credit availability. The combination of all these things seems to get the Obama folks where they want to be -- the destruction of the American economic engine. They are succeeding. This morning's numbers bear testament. Stay tuned.
Selasa, 29 Januari 2013
The Managed Economy
There seems to be some euphoria surrounding the Obama White House that the economy may finally be on track. The stock market's behavior this month is a glowing chorus of approval, according to many observers. Perhaps, the economy can be managed after all. Perhaps, taxes and health care costs don't really matter after all. Perhaps, the collapse of Europe is irrelevant. Perhaps....
The cold reality, though, is that the numbers on the ground are still pitiful and have the potential to get worse. What little pulse the economy has is now an occasion for celebration in the White House. Strange. The American economy has historically provided 3 to 4 percent economic growth as the American middle class became the envy of the world.
Yes, the middle class has greatly improved its economic position over the last three decades. Only if employee benefits are left out of the calculation, which now amount to over 30 percent of employee compensation, can we reach the conclusion that the middle class is losing ground. The middle class was doing better than ever until 2009. Now, we have Obama. Good luck middle class!
In the new Obama economy, only those at the top of the stagecoach will do well -- the rich, the famous, the politically entrenched. Those who fight for jobs and profits in the private sector will remain under seige until the political climate changes....which won't be anytime soon with the retreat of the loyal opposition.
We have now entered the age of the "managed economy." The Fed combined with government subsidies to preferred friends have largely sucked out the marginal dollar from legitimate free market uses to political purposes. That spells no growth.
Businesses are still the enemy and they will remain the target of this administration. Don't expect any help from a Republican-controlled House of Representatives. The Republicans have fallen on their sword and should, deservedly, lose control of the House in 2014. They have lost the will to fight for anything other than social issues and are willing partners in the rush to expand government.
Don't expect much from the new "managed economy" other than the absence of economic growth and a large permanent underemployed and unemployed class of Americans.
The cold reality, though, is that the numbers on the ground are still pitiful and have the potential to get worse. What little pulse the economy has is now an occasion for celebration in the White House. Strange. The American economy has historically provided 3 to 4 percent economic growth as the American middle class became the envy of the world.
Yes, the middle class has greatly improved its economic position over the last three decades. Only if employee benefits are left out of the calculation, which now amount to over 30 percent of employee compensation, can we reach the conclusion that the middle class is losing ground. The middle class was doing better than ever until 2009. Now, we have Obama. Good luck middle class!
In the new Obama economy, only those at the top of the stagecoach will do well -- the rich, the famous, the politically entrenched. Those who fight for jobs and profits in the private sector will remain under seige until the political climate changes....which won't be anytime soon with the retreat of the loyal opposition.
We have now entered the age of the "managed economy." The Fed combined with government subsidies to preferred friends have largely sucked out the marginal dollar from legitimate free market uses to political purposes. That spells no growth.
Businesses are still the enemy and they will remain the target of this administration. Don't expect any help from a Republican-controlled House of Representatives. The Republicans have fallen on their sword and should, deservedly, lose control of the House in 2014. They have lost the will to fight for anything other than social issues and are willing partners in the rush to expand government.
Don't expect much from the new "managed economy" other than the absence of economic growth and a large permanent underemployed and unemployed class of Americans.
Jumat, 25 Januari 2013
Optimism Abounds
The stock market has thundered forward since the turn of the year. Unemployment claims are near their twelve month low and even California thinks it sees balanced budgets ahead in their future. So, are we there yet?
Unfortunately, nothing has really changed. Let's begin with California. California, New York and Illinois face an almost immediate crisis with their pension systems. These problems are far, far larger in magnitude than their total annual spending budget for everything else they do. And, the clock is ticking. These problems don't get better every day; they get worse.
California, like New York and Illinois, believe that higher tax rates have no effect on economic behavior. They are wrong. Thus, the revenue projections these states are expecting from higher tax rates are an illusion. Even without pension funding issues, these states are on a straight line to some form of bankruptcy, even if the day of reckoning is not (yet) known with certainty. These states have done nothing to reign in excessive spending or face up to unfunded liabilities....nothing at all, much like their big sister -- the US government.
At the national level, the US remains mired in the slowest economy recovery in modern times. New and higher taxes that impact almost all Americans and almost all businesses (think income taxes, payroll taxes, Obamacare-imposed taxes and higher health insurance rates for almost everyone). These new taxes will slow any green shoots in the economy from gaining enough strength to power a real recovery. Expect continued stagnation, continued high unemployment.
What about Europe? Aren't things better there? There is certainly a pervading sense of euphoria that the worst is over. Is it? What has changed? Today, Europe has significantly more sovereign debt than it had two years ago. Today, the Eurozone is in a recession which it wasn't in two years ago. Today, the same stultifying labor laws and regulations maintain their stranglehold on European economies. No real change there.
Recall the fall of 2007. This was a time period a full year after the housing market had begun its collapse and after several large mortgage companies had gone bankrupt. This was a time three months after the asset-backed securities market (a market responsible for 20 percent of all debt financing in the US) had ceased to function.
What happened with all of these problems staring us in the face? The stock market surged to an all time high topping 14,000 in October, 2007. Lehman Brothers and Bear Stearns traded at their all time highs in a burst of euphoria that the worst was over. Five months later Bear Stearns collapsed and within twelve months Lehman Brothers failed in the climax of the financial collapse of 2008.
It is an interesting question why the stock market surged in late 2007 after it was widely known that the housing market was in full freefall and that housing finance was shaking the foundations of most of the larger banks. One wonders why European stocks are surging today in face of the facts on the ground. As for the US markets, is current market enthusiasm well founded or are we repeating the late 2007 scenario?
Unfortunately, nothing has really changed. Let's begin with California. California, New York and Illinois face an almost immediate crisis with their pension systems. These problems are far, far larger in magnitude than their total annual spending budget for everything else they do. And, the clock is ticking. These problems don't get better every day; they get worse.
California, like New York and Illinois, believe that higher tax rates have no effect on economic behavior. They are wrong. Thus, the revenue projections these states are expecting from higher tax rates are an illusion. Even without pension funding issues, these states are on a straight line to some form of bankruptcy, even if the day of reckoning is not (yet) known with certainty. These states have done nothing to reign in excessive spending or face up to unfunded liabilities....nothing at all, much like their big sister -- the US government.
At the national level, the US remains mired in the slowest economy recovery in modern times. New and higher taxes that impact almost all Americans and almost all businesses (think income taxes, payroll taxes, Obamacare-imposed taxes and higher health insurance rates for almost everyone). These new taxes will slow any green shoots in the economy from gaining enough strength to power a real recovery. Expect continued stagnation, continued high unemployment.
What about Europe? Aren't things better there? There is certainly a pervading sense of euphoria that the worst is over. Is it? What has changed? Today, Europe has significantly more sovereign debt than it had two years ago. Today, the Eurozone is in a recession which it wasn't in two years ago. Today, the same stultifying labor laws and regulations maintain their stranglehold on European economies. No real change there.
Recall the fall of 2007. This was a time period a full year after the housing market had begun its collapse and after several large mortgage companies had gone bankrupt. This was a time three months after the asset-backed securities market (a market responsible for 20 percent of all debt financing in the US) had ceased to function.
What happened with all of these problems staring us in the face? The stock market surged to an all time high topping 14,000 in October, 2007. Lehman Brothers and Bear Stearns traded at their all time highs in a burst of euphoria that the worst was over. Five months later Bear Stearns collapsed and within twelve months Lehman Brothers failed in the climax of the financial collapse of 2008.
It is an interesting question why the stock market surged in late 2007 after it was widely known that the housing market was in full freefall and that housing finance was shaking the foundations of most of the larger banks. One wonders why European stocks are surging today in face of the facts on the ground. As for the US markets, is current market enthusiasm well founded or are we repeating the late 2007 scenario?
Selasa, 22 Januari 2013
So Much for the National Debt
Obama's inauguration speech yesterday makes it pretty clear. He has no intention of discussing ways to lower the deficit and begin to tackle our national debt problems. Quite the reverse! Obama has more spending, taxing and regulating plans ahead for the next four years. As if the economy wasn't bad enough, Obama is planning more anti-capitalism moves.
You wonder if his advisers have any idea what the implications are for the economy of all of this. There was always the chance that a Republican House would block the most extreme measures, but that is becoming increasingly unlikely as Republicans tack feverishly in Obama's political direction.
Given Europe's situation, which is far, far worse than the pundits are saying, the economic outlook for the US is pretty bleak. The best that can be hoped for is more slow growth and stagnant employment. That is the very best that one can hope for! The worst is that the economy could begin to slip into recession mode. While pundits think Europe is doing better, the truth is that, compared to two years ago, the European economies are much, much weaker, the level of sovereign debt in Europe is much, much higher, and what little restraint on spending and regulation has lost its political support. Europe is doomed.
The real question is whether capitalism in the US is doomed as well. It may well be.
You wonder if his advisers have any idea what the implications are for the economy of all of this. There was always the chance that a Republican House would block the most extreme measures, but that is becoming increasingly unlikely as Republicans tack feverishly in Obama's political direction.
Given Europe's situation, which is far, far worse than the pundits are saying, the economic outlook for the US is pretty bleak. The best that can be hoped for is more slow growth and stagnant employment. That is the very best that one can hope for! The worst is that the economy could begin to slip into recession mode. While pundits think Europe is doing better, the truth is that, compared to two years ago, the European economies are much, much weaker, the level of sovereign debt in Europe is much, much higher, and what little restraint on spending and regulation has lost its political support. Europe is doomed.
The real question is whether capitalism in the US is doomed as well. It may well be.
Sabtu, 19 Januari 2013
Republicans Go Over the Cliff
Too often, Democrats get blamed for our national debt problems and the economic stagnation that has come to characterize the US economy. Republicans deserve their share of the blame.
Who provided the votes necessary to escape considering our debt problems at the start of this year? Speaker Boehner violated the "Hastert Rule" and let the Senate bill come up for a vote which raised taxes. 48 Republicans then voted for the bill. A solid victory for Obama. A solid defeat for the American taxpayer. And, who engineered this? Republicans. Ditto for the emergency pork bill that passed the House last week. Once again, with Boehner's concurrence, Republicans provided the necessary votes to pass this abomination as well.
Yesterday, Republicans announced unilateral pre-emptory capitulation before the White House by pledging to extend the debt ceiling for three months in exchange for the usual -- nothing.
What is the difference between a Republican majority in the House of Representatives and a Democrat majority? The answer -- nothing at all.
You get the same legislation, the same bad economic policy. There is absolutely no difference.
Republicans object that the polls show that the public is on Obama's side. What did the polls show, then and now, about Obamacare as Obama jammed his unpopular health care through the Congress? It showed that Obamacare was unpopular then and unpopular now. But, did that matter? No
Obama saw it through. Say what you will. The Democrats believe in what they are pushing. The Republicans don't and it shows. Small wonder that Republicans have trouble getting their voters to the polls. Why bother?
Who provided the votes necessary to escape considering our debt problems at the start of this year? Speaker Boehner violated the "Hastert Rule" and let the Senate bill come up for a vote which raised taxes. 48 Republicans then voted for the bill. A solid victory for Obama. A solid defeat for the American taxpayer. And, who engineered this? Republicans. Ditto for the emergency pork bill that passed the House last week. Once again, with Boehner's concurrence, Republicans provided the necessary votes to pass this abomination as well.
Yesterday, Republicans announced unilateral pre-emptory capitulation before the White House by pledging to extend the debt ceiling for three months in exchange for the usual -- nothing.
What is the difference between a Republican majority in the House of Representatives and a Democrat majority? The answer -- nothing at all.
You get the same legislation, the same bad economic policy. There is absolutely no difference.
Republicans object that the polls show that the public is on Obama's side. What did the polls show, then and now, about Obamacare as Obama jammed his unpopular health care through the Congress? It showed that Obamacare was unpopular then and unpopular now. But, did that matter? No
Obama saw it through. Say what you will. The Democrats believe in what they are pushing. The Republicans don't and it shows. Small wonder that Republicans have trouble getting their voters to the polls. Why bother?
Jumat, 18 Januari 2013
The New Wall Street
Better-than-expected results were common for the major money-center banks that reported earnings this week. The announcement of these "good results" were accompanied by more layoff notices from every large bank. Wall Street continues to downsize as the rest of the economy remains in hunker-down mode.
We are gradually becoming accustomed to accepting economic stagnation as the new normal. Reminiscent of the 1970s, Americans are becoming used to sluggish job prospects, sluggish income and wealth growth, and massive and continuing unemployment. All of this is now described, by the president's coterie of supporters in the media, as an improving economy. This is not an improving economy so much as a different economy.
The place to be is somewhere in the government or quasi-government sector. You can make high six figure incomes at a relaxed pace in the upper echelons of most large universities. Even better, you probably aren't at risk of being laid off. But, if your plan is to enter the private sector and work your way up, the historic pathway of the American dream, you can probably forget it.
Working for government, at any level, is the ticket. Once an economy reaches the degree of government control and government ownership that the American economy has reached, the pathway to success changes. You can't depend upon the vibrancy of the economy any longer. That vibrancy has been legislated out of existence. So heading off to the private sector is problematic. Instead, it is time to strap on your politics and find your way into a government job or a non-profit job or a job in the educational sector. That is the pathway to success in the new economy.
Of course, this means increasingly that economic growth will not happen. How can it, when most people that "work" aren't involved in producing anything. Many so-called "workers" are mainly enforcing laws that prohibit others from working. If you have an economy where a growing percentage of workers produce laws and regulations and then enforce them, while a dwindling few produce anything of substance, then the real pie can't grow.
Instead you create a national divide -- something we can already see emerging -- between those in the protected sectors of government, education, and non-profit (funded by tax-reducing so-called charitable donations) who have incomes and job security and those fending for their life in the increasingly marginalized private sector.
So, the new Wall Street is simply the most visible current display of the decline of American economic leadership. The Obama plan is working.
We are gradually becoming accustomed to accepting economic stagnation as the new normal. Reminiscent of the 1970s, Americans are becoming used to sluggish job prospects, sluggish income and wealth growth, and massive and continuing unemployment. All of this is now described, by the president's coterie of supporters in the media, as an improving economy. This is not an improving economy so much as a different economy.
The place to be is somewhere in the government or quasi-government sector. You can make high six figure incomes at a relaxed pace in the upper echelons of most large universities. Even better, you probably aren't at risk of being laid off. But, if your plan is to enter the private sector and work your way up, the historic pathway of the American dream, you can probably forget it.
Working for government, at any level, is the ticket. Once an economy reaches the degree of government control and government ownership that the American economy has reached, the pathway to success changes. You can't depend upon the vibrancy of the economy any longer. That vibrancy has been legislated out of existence. So heading off to the private sector is problematic. Instead, it is time to strap on your politics and find your way into a government job or a non-profit job or a job in the educational sector. That is the pathway to success in the new economy.
Of course, this means increasingly that economic growth will not happen. How can it, when most people that "work" aren't involved in producing anything. Many so-called "workers" are mainly enforcing laws that prohibit others from working. If you have an economy where a growing percentage of workers produce laws and regulations and then enforce them, while a dwindling few produce anything of substance, then the real pie can't grow.
Instead you create a national divide -- something we can already see emerging -- between those in the protected sectors of government, education, and non-profit (funded by tax-reducing so-called charitable donations) who have incomes and job security and those fending for their life in the increasingly marginalized private sector.
So, the new Wall Street is simply the most visible current display of the decline of American economic leadership. The Obama plan is working.
Selasa, 15 Januari 2013
Fitch Warns on Us and Spain
Today, the Fitch rating agency warned of possible downgrades to two countries who look increasingly similar to one another -- the US and Spain. Neither country seems to have much hope of averting a fiscal collapse within a generation. The leadership of both countries have thus far refused to acknowledge their cataclysmic debt problems and seem to be intent on pursuing the path to modern Greece.
Senin, 14 Januari 2013
We Are A Deadbeat Nation!
The President said today "we are not a deadbeat nation." He's wrong. The US government has made promises to our future citizens that are impossible to keep. Obama knows it and we know it. Making breast-beating utterances like the one Obama made today is, at best, disengenous.
The Obama "Ostrich" policy continues.
The Obama "Ostrich" policy continues.
Jumat, 11 Januari 2013
Make It Illegal to Offer a Job -- Raise the Minimum Wage
State after state is in the process of increasing the minimum wage and there is now a renewed call to raise the federal minimum wage.
What is a minimum wage law? It is a law that makes it illegal to offer a prospective employee a job. The idea is that outlawing job creation creates jobs. That seems to be how Governor Cuomo sees it in his push for a minimum wage hike.
If this is such a great job creation idea, why not go whole hog. Raise the minimum wage to $ 500 per hour. Then, no job will pay less than the amount necessary to live in luxury. Gone will be poverty at this wage rate.
Even some economists have argued that increasing the minimum wage creates jobs. If that is so, why don't we subject them to a minimum wage? Why not say that no one can be an economist unless he is paid $ 10,000 per hour? That should solve their problem.
Maybe there are other ways we can dream up to lock up employers who offer people jobs. That should get the economy going.
What is a minimum wage law? It is a law that makes it illegal to offer a prospective employee a job. The idea is that outlawing job creation creates jobs. That seems to be how Governor Cuomo sees it in his push for a minimum wage hike.
If this is such a great job creation idea, why not go whole hog. Raise the minimum wage to $ 500 per hour. Then, no job will pay less than the amount necessary to live in luxury. Gone will be poverty at this wage rate.
Even some economists have argued that increasing the minimum wage creates jobs. If that is so, why don't we subject them to a minimum wage? Why not say that no one can be an economist unless he is paid $ 10,000 per hour? That should solve their problem.
Maybe there are other ways we can dream up to lock up employers who offer people jobs. That should get the economy going.
Sabtu, 05 Januari 2013
"Can't Afford More Protracted Slowdowns..."
So says the President. According to the President: "We still need to do more...." Praising what is the most abysmal job creation record in a recovery in American history, Obama cited 2 million new jobs last year. Reagan had more than 1 million new jobs in a single month during the much deeper recession in 1981-1982. But, Reagan was touting tax cuts while Obama is touting tax increases.
As the US debt spirals out of control -- it may already be unfixable -- the President pushes for more spending and more debt. He seems to have a plan. Bankrupting the US seems to be where the President would like to take us. It is far too late to believe that he is unaware of the level of the debt and the level of the deficits. He knows that we are on track to reach $ 22 trillion in debt before he leaves office with an economy stuck in the mud. He is aware of all of that. Our debt to GDP ratio will equal that of Greece when Obama leaves office.
Obama is also aware that within less than a dozen years, medicare and social security will run out of money. What is the plan? To ignore it. The "Ostrich" plan Extend and pretend. The only thing Obama seems to have learned from the housing collapse is how to repeat the experience with a sovereign debt collapse.
You will know when the game is over when rates begin to rise. That process has begun. Watch the ten year treasury, already up 50 basis points in just the last few weeks. Unanticipated inflation is on the way and higher rates are ahead. This will make the debt situation hopeless without some method of repudiating the debt, social security promises, medicare promises or all of the above.
The hypocrisy of the Obama Administration is without historical precedent in the US. The country is going bankrupt and quickly. We are not that far away from Greece. States like California and Illinois are already on the "Greek Cliff." The country as a whole is not far behind.
The recently agreed "compromise" on the fiscal cliff only moves the country closer to the day of reckoning. There is no stomach in either political party for facing the looming disaster that faces the US.
As the US debt spirals out of control -- it may already be unfixable -- the President pushes for more spending and more debt. He seems to have a plan. Bankrupting the US seems to be where the President would like to take us. It is far too late to believe that he is unaware of the level of the debt and the level of the deficits. He knows that we are on track to reach $ 22 trillion in debt before he leaves office with an economy stuck in the mud. He is aware of all of that. Our debt to GDP ratio will equal that of Greece when Obama leaves office.
Obama is also aware that within less than a dozen years, medicare and social security will run out of money. What is the plan? To ignore it. The "Ostrich" plan Extend and pretend. The only thing Obama seems to have learned from the housing collapse is how to repeat the experience with a sovereign debt collapse.
You will know when the game is over when rates begin to rise. That process has begun. Watch the ten year treasury, already up 50 basis points in just the last few weeks. Unanticipated inflation is on the way and higher rates are ahead. This will make the debt situation hopeless without some method of repudiating the debt, social security promises, medicare promises or all of the above.
The hypocrisy of the Obama Administration is without historical precedent in the US. The country is going bankrupt and quickly. We are not that far away from Greece. States like California and Illinois are already on the "Greek Cliff." The country as a whole is not far behind.
The recently agreed "compromise" on the fiscal cliff only moves the country closer to the day of reckoning. There is no stomach in either political party for facing the looming disaster that faces the US.
Kamis, 03 Januari 2013
Forecasts for 2013
Welcome to 2013. Where are we headed?
1) Stagnation in the US economy and in the Eurozone. Western Europe will remain in recession territory in 2013. There is no reason for much improvement. The picture in the US will deteriorate. Improving housing and growth in the energy sector will not be enough to keep the American economic engine going. Unfriendly government policy in the US -- higher taxes, increased regulation, implementation of Obamacare, demonizing rhetoric from the Obama White House -- mean the economy is most likely to slip back into recession territory.
2) Markets -- stock markets, ending in the negative (but not disastrous), and terrible bond markets (disastrous) should be the pattern for 2013. Improving housing markets and home prices during most of 2013. Pattern should be similar to the economic trajectory of the US in the 1970s and for pretty much the same reasons.
3) Continued economic growth in the Asian periphery that surrounds China. The only blight on an overall good record will be Japan, which is afflicted by the same set of diseases that plague the US and Western Europe. Asian economic growth will be hurt by stagnation in the West, but should still be the strongest economic area in the world.
On the political front, the Democrats will strengthen their hold on government and on economic policy. The Republicans no longer have a platform to run on and will increasingly retreat to narrow social issues, having totally abandoned the low tax, free market agenda. More debt, more government, more regulation, weaker economy -- that is the pattern for 2013 and for the next five or six years.
1) Stagnation in the US economy and in the Eurozone. Western Europe will remain in recession territory in 2013. There is no reason for much improvement. The picture in the US will deteriorate. Improving housing and growth in the energy sector will not be enough to keep the American economic engine going. Unfriendly government policy in the US -- higher taxes, increased regulation, implementation of Obamacare, demonizing rhetoric from the Obama White House -- mean the economy is most likely to slip back into recession territory.
2) Markets -- stock markets, ending in the negative (but not disastrous), and terrible bond markets (disastrous) should be the pattern for 2013. Improving housing markets and home prices during most of 2013. Pattern should be similar to the economic trajectory of the US in the 1970s and for pretty much the same reasons.
3) Continued economic growth in the Asian periphery that surrounds China. The only blight on an overall good record will be Japan, which is afflicted by the same set of diseases that plague the US and Western Europe. Asian economic growth will be hurt by stagnation in the West, but should still be the strongest economic area in the world.
On the political front, the Democrats will strengthen their hold on government and on economic policy. The Republicans no longer have a platform to run on and will increasingly retreat to narrow social issues, having totally abandoned the low tax, free market agenda. More debt, more government, more regulation, weaker economy -- that is the pattern for 2013 and for the next five or six years.
Rabu, 02 Januari 2013
A Test of the Perfect Foresight Assumption
Economists typically assume that individuals and business have "perfect foresight." What this means is that people "optimally" forecast the future based upon what they know now. Of course, there are many random events that one cannot know now. But, one thing everyone knows now is that the average US taxpayer is on the hook for nearly $ 60,000 in sovereign US debt. That number will climb to over $ 100,000 by Obama's last year in office.
What this means is that the average American is under-water financially and the situation is rapidly getting much worse. Under perfect foresight, Americans will perceive their weakened financial position brought on by the Obama excesses and will dramatically curtail their spending. Businesses, likewise, will pull in their horns. This is the prediction of "perfect foresight" economics, an assumption typically used in economic modeling.
The "crowding out" of investment spending by massive government deficits is the immediate reality that helps inform future forecasts. There is only so much savings to go around. The US saves very little. The US imports its savings from other countries (that is the driving cause of the balance of payments problems). Even these imported savings will not be enough to both : 1) fund the US national debt; and 2) provide investment funds for US economic growth. The latter will be shortchanged.
The war on US financial institutions codified by the Dodd-Frank legislation prohibits US financial institutions from funding an economic recovery and the war on business led by an aggressive EPA and the new Obamacare regulations means that the economy is headed nowhere.
Obama seems to be winning his war against the US economy on every front. Don't expect much from the US economy over the next four years. If the national debt passes the $ 20 trillion mark by 2015, which it is on track to do, don't expect much after the next four years.
What this means is that the average American is under-water financially and the situation is rapidly getting much worse. Under perfect foresight, Americans will perceive their weakened financial position brought on by the Obama excesses and will dramatically curtail their spending. Businesses, likewise, will pull in their horns. This is the prediction of "perfect foresight" economics, an assumption typically used in economic modeling.
The "crowding out" of investment spending by massive government deficits is the immediate reality that helps inform future forecasts. There is only so much savings to go around. The US saves very little. The US imports its savings from other countries (that is the driving cause of the balance of payments problems). Even these imported savings will not be enough to both : 1) fund the US national debt; and 2) provide investment funds for US economic growth. The latter will be shortchanged.
The war on US financial institutions codified by the Dodd-Frank legislation prohibits US financial institutions from funding an economic recovery and the war on business led by an aggressive EPA and the new Obamacare regulations means that the economy is headed nowhere.
Obama seems to be winning his war against the US economy on every front. Don't expect much from the US economy over the next four years. If the national debt passes the $ 20 trillion mark by 2015, which it is on track to do, don't expect much after the next four years.
Obama Wins; USA Loses
As the Wall Street Journal spells out in some detail this morning, all Americans face major tax increases in 2013, including the middle class. These tax increases don't include substantial increases in health care insurance costs for both employers and employees. Funding the Obama agenda is expensive. Republicans have given them a blank check by permitting Speaker Boehner to schedule a vote on the McConnell-Biden compromise.
Results are what matter and the truth is the Republicans did not have the courage of their convictions. Once again, they let the country down. Boehner should be removed as Speaker, but he won't be. Maybe the only answer is to vote the Democrats back into control of the House, so that there can be a loyal opposition instead of a "me-too" Republican leadership.
The McConnell-Biden deal increases the deficit, dramatically increases taxes, and rewards Hollywood producers and the money-losing wind energy business. How could Obama not like that outcome and why would Republicans go along? Who knows?
It now gets worse for Republicans as the debt ceiling discussion gets rephrased to: "We voted to spend this money, now we have to honor our commitment." That will be the Democrats argument. Obama will propose more tax increases and, once more, Republicans will cave. Obama will get more spending, higher taxes, and more subsidies to his political allies.
Not only will he get all of this, but Republicans will vote for it, as they effectively did last night when Boehner scheduled a vote on the "fiscal cliff compromise." The fact that a majority of Republicans voted against the compromise is irrelevant. Without Boehner's support, the deal would never have gone through and he is the leader of the Republicans.
It is not surprising that Obama plans to sink the country in a sea of taxes, regulation and debt. What is surprising is that the Republicans are aiding and abetting Obama is his destructive course.
The Republicans had maximum leverage until last night. Now the Republicans have no leverage at all in the upcoming debt ceiling discussion. They also have nothing to run on in 2014. Here's an easy prediction: Democrats will retake the house in 2014. The Republicans deserve their fate.
Results are what matter and the truth is the Republicans did not have the courage of their convictions. Once again, they let the country down. Boehner should be removed as Speaker, but he won't be. Maybe the only answer is to vote the Democrats back into control of the House, so that there can be a loyal opposition instead of a "me-too" Republican leadership.
The McConnell-Biden deal increases the deficit, dramatically increases taxes, and rewards Hollywood producers and the money-losing wind energy business. How could Obama not like that outcome and why would Republicans go along? Who knows?
It now gets worse for Republicans as the debt ceiling discussion gets rephrased to: "We voted to spend this money, now we have to honor our commitment." That will be the Democrats argument. Obama will propose more tax increases and, once more, Republicans will cave. Obama will get more spending, higher taxes, and more subsidies to his political allies.
Not only will he get all of this, but Republicans will vote for it, as they effectively did last night when Boehner scheduled a vote on the "fiscal cliff compromise." The fact that a majority of Republicans voted against the compromise is irrelevant. Without Boehner's support, the deal would never have gone through and he is the leader of the Republicans.
It is not surprising that Obama plans to sink the country in a sea of taxes, regulation and debt. What is surprising is that the Republicans are aiding and abetting Obama is his destructive course.
The Republicans had maximum leverage until last night. Now the Republicans have no leverage at all in the upcoming debt ceiling discussion. They also have nothing to run on in 2014. Here's an easy prediction: Democrats will retake the house in 2014. The Republicans deserve their fate.
Selasa, 01 Januari 2013
Vote No on the McConnell-Biden Deal!
Eric Cantor has come out against the M-B deal. Three cheers.
What the House should do is what it historically always has done. Legislate. Amend this M-B deal. Put in real spending cuts. Ignore the tax rate issue for now, so that issues don't get confused. Get rid of the wind energy tax credits and all of the other nonsense that the Democrats have tossed in. Get to $ 1.6 trillion in real spending cuts or vote no.
This is the best time to conduct this fight. Democrats may regain the House and then what? They can do whatever they want.
The time to fight for the country's solvency is right now. We have the leverage now. We will not have it if we cave here.
Going over the cliff is better than the M-B deal. No question. Any Republican who votes yes on this bill, as it is, should draw a primary opponent in 2014. McConnell should definitely draw a primary opponent for agreeing to this. Every Republican Senator who voted for this should draw a primary opponent.
What the House should do is what it historically always has done. Legislate. Amend this M-B deal. Put in real spending cuts. Ignore the tax rate issue for now, so that issues don't get confused. Get rid of the wind energy tax credits and all of the other nonsense that the Democrats have tossed in. Get to $ 1.6 trillion in real spending cuts or vote no.
This is the best time to conduct this fight. Democrats may regain the House and then what? They can do whatever they want.
The time to fight for the country's solvency is right now. We have the leverage now. We will not have it if we cave here.
Going over the cliff is better than the M-B deal. No question. Any Republican who votes yes on this bill, as it is, should draw a primary opponent in 2014. McConnell should definitely draw a primary opponent for agreeing to this. Every Republican Senator who voted for this should draw a primary opponent.
All Tax Increases, No Spending Cuts
This is "balanced?" The so-called compromise to prevent going over the fiscal cliff is all about increasing taxes. There are absolutely no spending cuts in this plan. This is a pure Democratic plan. McConnell should be ashamed of himself. Boehner should not permit a vote on this.
Obama let his views be known. He said yesterday that this is just the beginning of the tax increases.
Where are the Republicans?
Obama let his views be known. He said yesterday that this is just the beginning of the tax increases.
Where are the Republicans?
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