Poor Greece was getting lonely. Now come the big boys -- Italy and Spain. These guys have between them nearly nine times as much sovereign debt as our pals in Greece. Wonder how deep the French and German banks are willing to go to bail these guys out. Poor little old Portugal and Ireland -- they must feel neglected -- they've been forced off the front page by Greece and now along comes Italy and Spain.
I wonder if Italy will consider selling off the Colosseum in Rome. That should fetch a pretty price. Spain could let go of a few bullfighting rings and maybe some El Greco paintings (he wasn't Spanish anyway, he was Greek). I should have gone into the sovereign debt bailout consulting business. It looks like it has legs.
So, the ECB continues to believe that if we simply increase the amount of debt in the Eurozone by about 10 percent per year, we can solve the Eurozone debt problems. An interesting view.
Markets aren't as dumb as the ECB (and as the ECB wishes the markets to be). Yields on everything with a Euro attached to it have been heading straight up and will continue their upward ascent until every government in the Eurozone has fallen and virtually every state in Europe has, in one way or another, defaulted on their sovereign debt and crushed their domestic banking system.
Haven't we seen this movie before?
Minggu, 10 Juli 2011
So, Where's The Mystery?
Persistent high levels of unemployment unlike any economic recovery since the 1930s. Why?
If you knew that there was a large supply of apples at the stores that no one was buying, what would you suppose to be the reason? Your first thought might be the price. Maybe the price of apples is so high that no one wants to buy any. If they were free, someone would buy them. So, somewhere between free and the current price, there is a price that will get the apples off the store shelves.
The same is true with unemployment. At the right price, any business would hire. So, what's wrong with the price? Well, for one thing, imagine you hired someone and then told them a joke that they found offensive. They could then sue you for a few hundred thousand dollars. You could probably settle the suit out of court for $ 100,000 and that's that. So, what was the price of that employee again? Notice, I didn't even have to tell you the employee's pay rate. It is clear that the employee simply costs too much.
One could always say: well, don't tell offensive jokes. But, what if one of your employees told another of your employees an offensive joke. The same deal applies. (They might even conspire and tell each other offensive jokes and then they could both sue you!). You settle out of court for $ 100,000 and move on. But, you will think twice about hiring any more employees.
The cost of employees today is so laden down with litigation liability, various taxes (social security, workmen's comp, soon-to-be health care), family leave acts, etc., that if the employee agreed to work for free, the cost of that employee to a business is still very, very high.
So, businesses find another way. They outsource; they substitute capital for labor. Nothing will really change this. When the economy picks up, it will pick up slowly and haltingly because employment is never really going to go anywhere. Employees are simply too expensive.
Obama thinks that if only you could force them all to join a union, then things would be great. Just look at the recent decisions at the Labor Department and the NLRB for a whiff of the Obama medicine. Turning your work force over to a bunch of labor goons is not likely to boost employment -- witness the US steel industry, coal industry, any industry where unions have ever made any headway. In recent years, unions have made most of their progress among state and local employees and how is that going now? More jobs are being lost in state and local government than anywhere else in the economy.
If you want to boost employment, then lower the cost of employment to businesses by eliminating all of the litigation liability -- all of it -- and stop burdening employees with things that simply eliminate their free choice to decide how to finance their retirement and their health care. Let the employees decide for themselves. If someone is discriminating and it is illegal, then lets get on with a criminal prosecution. Let the person who makes the offensive remark pay the offended person, not the company where they both work.
"Human Resource" departments are really the front line of defense for larger firms to contain their potential litigation liability from the enormous burden of all politically correct legislation that has passed the Congress in the past two decades. Everything is now a "right" including, I guess, the right not to have a job.
If you want people to find jobs, then employer mandates must be reduced. Nothing short of eliminating virtually all of the politically correct legislation and court interpretations of the last two decades will do. Either you want people to have a chance to work for a living or you don't. Passing laws that shower politically correct mandates on workers means there will be fewer of them.
If you knew that there was a large supply of apples at the stores that no one was buying, what would you suppose to be the reason? Your first thought might be the price. Maybe the price of apples is so high that no one wants to buy any. If they were free, someone would buy them. So, somewhere between free and the current price, there is a price that will get the apples off the store shelves.
The same is true with unemployment. At the right price, any business would hire. So, what's wrong with the price? Well, for one thing, imagine you hired someone and then told them a joke that they found offensive. They could then sue you for a few hundred thousand dollars. You could probably settle the suit out of court for $ 100,000 and that's that. So, what was the price of that employee again? Notice, I didn't even have to tell you the employee's pay rate. It is clear that the employee simply costs too much.
One could always say: well, don't tell offensive jokes. But, what if one of your employees told another of your employees an offensive joke. The same deal applies. (They might even conspire and tell each other offensive jokes and then they could both sue you!). You settle out of court for $ 100,000 and move on. But, you will think twice about hiring any more employees.
The cost of employees today is so laden down with litigation liability, various taxes (social security, workmen's comp, soon-to-be health care), family leave acts, etc., that if the employee agreed to work for free, the cost of that employee to a business is still very, very high.
So, businesses find another way. They outsource; they substitute capital for labor. Nothing will really change this. When the economy picks up, it will pick up slowly and haltingly because employment is never really going to go anywhere. Employees are simply too expensive.
Obama thinks that if only you could force them all to join a union, then things would be great. Just look at the recent decisions at the Labor Department and the NLRB for a whiff of the Obama medicine. Turning your work force over to a bunch of labor goons is not likely to boost employment -- witness the US steel industry, coal industry, any industry where unions have ever made any headway. In recent years, unions have made most of their progress among state and local employees and how is that going now? More jobs are being lost in state and local government than anywhere else in the economy.
If you want to boost employment, then lower the cost of employment to businesses by eliminating all of the litigation liability -- all of it -- and stop burdening employees with things that simply eliminate their free choice to decide how to finance their retirement and their health care. Let the employees decide for themselves. If someone is discriminating and it is illegal, then lets get on with a criminal prosecution. Let the person who makes the offensive remark pay the offended person, not the company where they both work.
"Human Resource" departments are really the front line of defense for larger firms to contain their potential litigation liability from the enormous burden of all politically correct legislation that has passed the Congress in the past two decades. Everything is now a "right" including, I guess, the right not to have a job.
If you want people to find jobs, then employer mandates must be reduced. Nothing short of eliminating virtually all of the politically correct legislation and court interpretations of the last two decades will do. Either you want people to have a chance to work for a living or you don't. Passing laws that shower politically correct mandates on workers means there will be fewer of them.
Sabtu, 09 Juli 2011
Certain Disaster is not "The Certainty We Need"
The President is still singing the same old tune that has sunk the US into the worst economic recovery in our nation's history. According to Obama what the country needs is the announcement of a deal (no matter what it is) to raise the debt ceiling. That would certainly remove uncertainty ... no question. Simply increasing the debt ceiling with a minimal effort to deal with reducing spending virtually guarantees US insolvency within a generation.
You don't really need a trained economist to see why the Obama Administration has created the worst economic recovery in US history. Just imagine what you would do if your goal was to prevent the US from recovering the dynamic engine of the 1980s and 1990s. What you would do is precisely what Obama has done.
Begin by demonizing business and business people. Make it clear that anyone who makes money is really the enemy of the country. Find ways to make labor so expensive and non-competitive that outsourcing and massive domestic unemployment will be the result. Try to expand the clout of union bosses so that small business will think twice about adding to their employee base. Expand the rights and abilities of employees to sue their employer for any reason they choose. Punish companies that plan to hire unless those folks hire union workers (think Boeing and South Carolina). Have the bureaucracy push new regulations that force business to close and layoff additional workers. Get Congress to pass laws that are vague but threatening and require decades to figure out precisely what the new laws do (Obamacare and Dodd-Frank). Bring to halt any new free trade agreements so that other countries can gain jobs that America will lose (Columbia free trade agreement, for example).
In short, wage war on the private sector with every weapon that you can muster. This is the Obama dream, but the American nightmare.
You don't really need a trained economist to see why the Obama Administration has created the worst economic recovery in US history. Just imagine what you would do if your goal was to prevent the US from recovering the dynamic engine of the 1980s and 1990s. What you would do is precisely what Obama has done.
Begin by demonizing business and business people. Make it clear that anyone who makes money is really the enemy of the country. Find ways to make labor so expensive and non-competitive that outsourcing and massive domestic unemployment will be the result. Try to expand the clout of union bosses so that small business will think twice about adding to their employee base. Expand the rights and abilities of employees to sue their employer for any reason they choose. Punish companies that plan to hire unless those folks hire union workers (think Boeing and South Carolina). Have the bureaucracy push new regulations that force business to close and layoff additional workers. Get Congress to pass laws that are vague but threatening and require decades to figure out precisely what the new laws do (Obamacare and Dodd-Frank). Bring to halt any new free trade agreements so that other countries can gain jobs that America will lose (Columbia free trade agreement, for example).
In short, wage war on the private sector with every weapon that you can muster. This is the Obama dream, but the American nightmare.
Jumat, 08 Juli 2011
9.2% and Rising
The race is on. Will unemployment reach a new high before the national debt does? The bankruptcy of Obama's economic policies is there for all to see. The media might try to deny it, but the truth is the economy is not really recovering. Why? Obama economic policies!
Until there is a better environment for the private economy, we will continue to get more of the same. Obama policies are turning the United States into a banana republic.
Until there is a better environment for the private economy, we will continue to get more of the same. Obama policies are turning the United States into a banana republic.
Republicans Preparing to Fold
Watch out. Here it comes again. John Boehner and Eric Cantor are planning another Republican collapse on the nation's fiscal nightmare. Obama and his allies seem to have scared the Republican leadership into accepting an essentially worthless "compromise" to get to a debt extension deal.
All the talk about how both sides have to give is silly. The nation's problems boil down to social security, medicare and medicaid. Nothing else matters. Cutting military spending, raising tax rates, and so forth are irrelevant and amount to mere political theater. If you don't tackle the entitlements in a serious way, then the next stop will be, within a few years, the beginning of a US default. The numbers make this outcome obvious.
We are four to five years behind Greece. If Republicans fold and accept another sham deal, then the country really has no hope of dealing with this situation and within a decade the US will begin to lower payments to those over 65 then relying on social security and medicare. The country will have no choice.
Meanwhile, the new higher tax rates will issue in a generation of no-growth and permanently elevated unemployment rates. Tax revenues will actually fall since the higher rates will discourage rich folks from showing taxable income (they do have a choice, you know) and will stifle economic growth.
It looks like the same old story. The Republican leadership is not really serious about dealing with federal spending. They are worried that voters won't stick with them if they hang tough, so they are bailing.
What Republicans should do is agree to a tough two month deal to extend the debt. Obama has said he will veto a two month deal. Let him. Then he becomes 100% responsible for the government shutdown. That is the only route available for Republicans if they lack the courage to push for serious entitlement reform in a longer term deal.
All the talk about how both sides have to give is silly. The nation's problems boil down to social security, medicare and medicaid. Nothing else matters. Cutting military spending, raising tax rates, and so forth are irrelevant and amount to mere political theater. If you don't tackle the entitlements in a serious way, then the next stop will be, within a few years, the beginning of a US default. The numbers make this outcome obvious.
We are four to five years behind Greece. If Republicans fold and accept another sham deal, then the country really has no hope of dealing with this situation and within a decade the US will begin to lower payments to those over 65 then relying on social security and medicare. The country will have no choice.
Meanwhile, the new higher tax rates will issue in a generation of no-growth and permanently elevated unemployment rates. Tax revenues will actually fall since the higher rates will discourage rich folks from showing taxable income (they do have a choice, you know) and will stifle economic growth.
It looks like the same old story. The Republican leadership is not really serious about dealing with federal spending. They are worried that voters won't stick with them if they hang tough, so they are bailing.
What Republicans should do is agree to a tough two month deal to extend the debt. Obama has said he will veto a two month deal. Let him. Then he becomes 100% responsible for the government shutdown. That is the only route available for Republicans if they lack the courage to push for serious entitlement reform in a longer term deal.
Kamis, 07 Juli 2011
Buffett is Disingenuous
Warren Buffett was interviewed this morning by Becky Quick on CNBC and, once again, reiterated his pro - big government stance. He cited the national debt that existed at the end of World War II in the US which was 120% of GDP at the time. The fact that he cites that episode shows the extreme cynicism of Buffett and other Obama apologists. Everyone knows, as Buffett knows, that slowing spending after World War II amounted to producing fewer tanks, airplanes and war materials -- no tough political decisions there!
Today, the issue is cutting social security, medicare, and medicaid. Buffett considers cutting social security benefits as the equivalent of ordering fewer tanks for a war that has come to an end. Either Buffett is an idiot, which is doubtful, or he is a man with an agenda, which is more likely.
Buffett is the guy who constantly urges higher tax rates knowing full well that he won't have to pay them, since he is free to shift his income in ways that minimize taxes, something he has, by his own admission, always done. Buffett and other rich folks who advocate higher taxes for the rich know full well that the truly rich have nothing to fear from higher tax rates. Indeed, the truly rich will simply shift their assets and around and control their taxable income so that they are not impacted by higher tax rates. They are masters at that.
What Buffett wants is for the great middle class to shoulder the burden of his big government spending plans. He has his. He could care less what happens to the opportunities for the average American. The environment that permitted Buffett to amass his fortune would be trashed by Buffett, so that he can maintain his power in a society where future Warren Buffetts would have little or no hope to create wealth.
Buffett is an arrogant rich guy with nothing but contempt for capitalism and its defenders.
Today, the issue is cutting social security, medicare, and medicaid. Buffett considers cutting social security benefits as the equivalent of ordering fewer tanks for a war that has come to an end. Either Buffett is an idiot, which is doubtful, or he is a man with an agenda, which is more likely.
Buffett is the guy who constantly urges higher tax rates knowing full well that he won't have to pay them, since he is free to shift his income in ways that minimize taxes, something he has, by his own admission, always done. Buffett and other rich folks who advocate higher taxes for the rich know full well that the truly rich have nothing to fear from higher tax rates. Indeed, the truly rich will simply shift their assets and around and control their taxable income so that they are not impacted by higher tax rates. They are masters at that.
What Buffett wants is for the great middle class to shoulder the burden of his big government spending plans. He has his. He could care less what happens to the opportunities for the average American. The environment that permitted Buffett to amass his fortune would be trashed by Buffett, so that he can maintain his power in a society where future Warren Buffetts would have little or no hope to create wealth.
Buffett is an arrogant rich guy with nothing but contempt for capitalism and its defenders.
Jumat, 01 Juli 2011
Right on Floyd Norris
It is not often that I praise a New York Times article, but here goes. Floyd Norris's piece this morning on the European Central Bank's handling of Greek debt is right on. As Norris notes, all the ECB is doing is forcing private banks to roll over Greek debt and hold that debt at fictitious prices on their balance sheet. In effect, the ECB is forcing private banks to lie about the value of the assets on their balance sheets.
As Norris notes, lying about the values of your balance sheet assets was considered the great crime of 2008 that lead to the collapse of the US financial system. Now, regulators in Europe and the US are encouraging (forcing) private banks to lie about the value of their assets.
This is why regulation is such a joke and why the real crime is the enactment of Sarbanes-Oxley and Dodd-Frank. Regulators have never, ever uncovered anything of substance about our financial system. Where were they in the Madoff episode? Where were they in the Bear Stearns and Lehman Brothers collapses? It is a sick joke that Sarbanes-Oxley and Dodd-Frank will do anything at all useful for the American financial system.
Yesterday, Sheila Bair, FDIC Chairman, whose agency did nothing to curb the excesses of 2005-2007, weighed in, urging Congress to fund Dodd-Frank. She should be embarassed. Her agency is a poster child for regulatory failure and her picture should be at the top of the poster.
Regulatory agencies are mainly a depository to place people who likely can't find a job in the private sector. To justify their existence, they insist upon making companies devote ridiculous amounts of time complying with absurd regulations. Do such agencies avert catastrophic financial failures? No.
Never in world history have regulatory agencies averted a financial collapse. Watch what is going on in Europe today to see why. Far from helping avert a collapse, the ECB is taking a relatively small problem and turning it into a major catastrophe. Along the way it is forcing the private banks of Europe to lie to their shareholders about the value of the assets on their balance sheets.
The regulators are creating the next great financial collapse -- the collapse of Europe sovereign debt. Europe would be better off if there were no regulators at all.
As Norris notes, lying about the values of your balance sheet assets was considered the great crime of 2008 that lead to the collapse of the US financial system. Now, regulators in Europe and the US are encouraging (forcing) private banks to lie about the value of their assets.
This is why regulation is such a joke and why the real crime is the enactment of Sarbanes-Oxley and Dodd-Frank. Regulators have never, ever uncovered anything of substance about our financial system. Where were they in the Madoff episode? Where were they in the Bear Stearns and Lehman Brothers collapses? It is a sick joke that Sarbanes-Oxley and Dodd-Frank will do anything at all useful for the American financial system.
Yesterday, Sheila Bair, FDIC Chairman, whose agency did nothing to curb the excesses of 2005-2007, weighed in, urging Congress to fund Dodd-Frank. She should be embarassed. Her agency is a poster child for regulatory failure and her picture should be at the top of the poster.
Regulatory agencies are mainly a depository to place people who likely can't find a job in the private sector. To justify their existence, they insist upon making companies devote ridiculous amounts of time complying with absurd regulations. Do such agencies avert catastrophic financial failures? No.
Never in world history have regulatory agencies averted a financial collapse. Watch what is going on in Europe today to see why. Far from helping avert a collapse, the ECB is taking a relatively small problem and turning it into a major catastrophe. Along the way it is forcing the private banks of Europe to lie to their shareholders about the value of the assets on their balance sheets.
The regulators are creating the next great financial collapse -- the collapse of Europe sovereign debt. Europe would be better off if there were no regulators at all.
Langganan:
Postingan (Atom)