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.
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