Thursday, June 30, 2005

Spending Flat?

The PCE index holds the power to deceive, as all the Spending increase comes in the volatile elements. Your basic Energy components rose almost 70% since the first of the Year, but Energy is still being stripped from the PCE without even attempt to reflect an Averaged input. The only thing this Price index indicates is the fact Retailers especially, but Business overall, has lost Pricing Power--due to the need to generate Sales.

May through September are the heavy Construction months (note that We are in late June), in the midst of a Housing boom purportedly. These should be the greatest diesel use months, but note growth of diesel use has dropped to 5.7% from 7% in the last Energy Information. There were only 78,000 new Jobs created last month, and the 4-Week average for new Jobless claims dropped, so why the 0.2% Income growth rate? The new Jobs plus the lack of Layoffs could account for the registered Income growth.

The United Nations reduced projected Global growth from 4.1 to 3%, because of the higher Energy prices. Realistic fact: EU, Africa, Russia, Latin America, Middle East, and British Commonwealth would not account for the 1.1% drop; this meaning bad news coming from China, India, U.S., Japan, Korea, Taiwan, Hong Kong, and Singapore. Indonesia and Malaysia facing declining per capita growth because of poor Government policy. Now Russia intends to further cut Oil production by seizing Yukos assets outside its borders. lgl

Wednesday, June 29, 2005

The 3.8% annual GDP Growth

It sounds like too many 'One-Shot' economic initiatives to the Author. It may include much Inventory selling, and reflect the rise in Oil prices. There is some relief in the later:

Oil Falls Below $58 as Crude Stocks Rise
Published: June 29, 2005

The current Oil price is some $3 off the High, due to the rise in U.S. Crude oil stocks of 1.1 million barrels. The interesting spread here lies in the difference between analysts' forecast of a 1.4 million barrel drop in Crude stocks. The Spread is 2.5 million barrels, of which only 794,000 barrels can be accounted for in new increased Imports. We are over 1.5 million barrels short of a projected usage, using previous Year usage rates. It is not that great a reduction considering the daily American Oil consumption rate, only in the 200k barrel per day range, but the higher Fuel prices have impacted. Current Crude prices mean a likely $.12-.20 Pump price increase within July. Summer vacation season may be foreshortened.

Mortgage Applications Dip Last Week
Published: June 29, 2005

This is the article to read for concerned Economists. The mortgage rates are dropping, but applications are also dropping. The fall in Refinancing mortgages indicate Consumers are starting to hesitate in financing their Consumption through refinancing. The increase in percentage of Fixed Rate to Variable Rate mortgages express the thought of the Smart Money that rates will not reduce further. This Author suspects the Upgrade element of the Housing bubble has seen it's day. Business construction may have to carry the Economy by sometime next Year. lgl

Tuesday, June 28, 2005

The Future of Iran

Amir Taheri: Islamist regime in total control
June 27, 2005,5744,15737132^7583,00.html

A fairly straightforward assessment of the current Iranian political climate. Ahmadinejad was selected and elected by Khamenehi as the man most capable of gaining Iran an effective nuclear weapons program. Ahmadinejad's election shows that the Khomeinist regime cannot be reformed from within probably stands as a truism. The Article, though, mistakes the threat posed to the rest of the World.

Khamenehi was one of the most radical clerics of the original Khomeinist regime, who has since organized and directs the Fundamentalists. His power over Iranian society was exhibited by the Ahmadinejad sweep; Khamenehi could not only win the Popular Vote, but control the Vote Counting bureaucracy to cancel the Votes of the middle class Rafsanjani Supporters. Khamenehi possesses the political expertise never held by Khomeni.

Khamenehi will become a problem for the entire World, as he is a Believer in the Islamic Fundamentalist War with the infidel West. He insists on Iran holding the Nuclear Weapons option to forestall Western suppression of Iranian training and funding of Terrorist incursions to the West. Taheri likened the Khamenehi regime to North Korea, but Iran will prove to be much worse; North Korea does not possess a religious fanaticism demanding submission of foreign societies. (The additional factor exists that Iran will use Oil extortion as No. 2 producer in OPEC) lgl

Need of Correct Answers

The Author has a sketchy Model with incomplete variable data (no determinate level of discretion), which he developed adhoc. Readout says Truck Cargo-ton miles will begin to decrease if Fuel exceeds $2.61/gallon, a Price level which can be reached if Oil Price reaches $63.45/barrel. The Author is notorious for poor Math skills, and he sketched out the Model on Spiral paper. Please redirect to competent Studies. lgl

Monday, June 27, 2005

Reading List

Some Contributors to started discussing the ownership of Books, and which were the most important. This Author thought he might want to play, but not for the reasons normally thought. Later Generations might be able to utilize a Bibliography of some excellent Works since fallen from Reading lists:

Second Revised Edition,
B.H. Liddell Hart
Hart was one of the great military historians, and explains Strategy in terms of development, implementation, and effect. Economists often fail because they fail to define the elements of strategy in economic performance, and the potential success or failure of the utilized strategy.
THE ANVIL OF WAR: German Generalship in Defense on the Eastern Front
Editor: Peter G. Tsouras
Another military history, but Why? A business leadership with a crumbling Production line because of supplanting technology of Competition does not need to ask.
Schaum's Outline Series
Theory and Problems of
Edward T. Dowling
Outdated volume for the current Age, but reference to such a Problem set book teaches the art of Model construction.
Taylor and Gilligan, 1985
Again a dated volume, but the Author is acquainted with it. It still supplies answers occasionally, but the Author suggests younger Students could find a much newer similar Work.
By Leon Uris
Teaches the evil of oppression, and the need to oppose it.
The Author does not mean to confuse the Readers. He never uses any of this stuff. lgl

The Funny Money

Low Rates Could Be Around for Long Term
Published: June 27, 2005

The Article tries to describe the various theories for low Long-term Interest rates. This Author cannot claim to be a Fed Governor or ex-Fed Governor, but he thinks the rationale for the low Long-term rates results from classic economic principles, not new and exotic properties. A good Poker player will always examine his own 'Hole' card, before betting on the other players' cards.

The American economy still imports more than it exports, with Imports increasing faster than Exports. Outsourcing continues to increase, though American businesses are beginning to bring some of it home, realizing that internal business policy does not vacation well. Real economic investment, except for Housing, seems in short supply. American business since the Reagan era entered into the production of Financial Paper, as well as any Product produced; hereafter known as the 401k Era. This is where We are coming from!

Much of the American Labor force has currently been scrapped to pay a Dividend to the Financial Paper of the 401k Era. Real American economic investment has been in decline, because American Wages cannot pay the Dividend on the Financial Paper of the 401k Era. The Dividend, though, is churning out new funds for Investment. American Corporate stocks and bonds are showing difficulty in maintaining the Dividend for the 401k Era Paper since the American labor has already been laid off, and does not seem like a good investment option. Foreign investment seems risky to many Investors, who eye foreign legal systems with great suspicion. The Holders of the 401k Era Paper are simply dumping investment funds into Long-term Bonds, mortgages, and Treasuries due to lack of alternate investment opportunity. lgl

Sunday, June 26, 2005

Our Workplace
Attack Trends
Counterpane Internet Security Inc.

A Beginner's Read for understanding what is happening on the Internet. Worms that Google to find proper targets, Black Internet markets which buy and sell Security penetration skills and programs, and even PackageWare to obtain Credit Card numbers with terminal access to the processing Computer. The World is changing, and Hackers are out for your money now.

The new Series of Worms use regular Web visits to picked Sites to define which Spammers will be offered your Web address. New Viruses infect and record Web address traffic on a Computer for a specific time period, before moving the infection outward to those addresses in a package dispatch, then attacking your central processor. New Feedback Worms record and transmit all Steps used by Security programs to contain and eliminate Viruses. A Salvadoran Worm known to this Author effects Terminal access authorization for the originating Computer from the penetrated system through an email message attachment.

New Security procedures will forever alter the nature of the Internet. The Computer of the future will operate only from Hard-Burn Cards, which must be physically implanted in the system--like CDs or DVDs. All Download materials will be Read-Only without possibility of operating code instructions expanding beyond the quarantine area. lgl

Saturday, June 25, 2005

Mid-Year Forecast

Intelligent people know the foolishness of forecasting. No one remembers a forecast unless it is in error. The Author must admit to his addiction, so here goes:

The Economy, and this extends to the World economy, starts to drift in trouble. Economic development accelerates, but it relies on Oil for energy provision. Oil production stands at relative maximum (understand that Oil production could be doubled, but only with danger to long-term production capacity), and efficient production to achieve Conservation of existing Oil Production plant will require almost a 8-12% reduction in the supply of Oil within the next 36 months. This reduction of Oil supply will probably never be reinstated, though it may only last for 4-6 months.

An undeveloped Country engaging in industrialization can expect an average 6-8% increase in Oil consumption per year, while an underdeveloped Country should expect an average increase of around 2% per year in Oil consumption. Developed Countries should expect declining levels of Oil consumption, as efficiencies occur. Increasing Oil consumption within developed economies means inefficient allocation of Energy supplies (this is true even under conditions of a expanding economy).

Various Forecasts have estimated Oil consumption according to differing methodologies. The Author likes the ones which attempt to determine the Time necessary to double Oil consumption under current practices. Time schedules estimates range from 14 years to about 23 years--the Author likes the Later, because it incorporates almost all development delay factors which tend to suppress Oil consumption.

This knowledge integrated, the direction of the American economy can be studied. The current Housing boom consists of Housing dependent upon vehicular transport for residence. Outsourcing of physical Product demands a Transportation energy Cost which cannot be borne under conditions of reduced Oil production. Students should understand Oil production and supply is not simply a question of higher Oil prices, but remains an Equation requiring numerous variables consisting of Wellhead drilling, actual Pumping rates, transportation facilities to Refineries, actual refining capacity, and final transport to Sales market areas. All these Variables face bottleneck constrictions coming from insufficient geographic feature area, inadequate Capital stock, or the Time delay factor of Production.

Egregious uses of Oil will be the first to face constriction, as necessary Oil usage for economic operation are maintained. This Author actually expects Americans will have to cut Oil consumption by 3 million barrels per day, within the next 36-48 months. The Changeover will be rapid due to Oil Supply bottleneck, and Countermeasures should be enacted as quickly as possible.

A List of Countermeasures:
1) An immediate imposition of a $1 per gallon tax on all Vehicle fuels.
2) Recapitalization of Community Bus and Subway services.
3) Development of an automated Trolley system
4) Development of a National Sales tax based upon one Cent per 100 miles from the Product manufacture facility.
5) A Federal tax on Parking facilities in Cities, Shopping Malls, and Workplaces of $10 per Vehicle entrance which is charged to the Business to ensure non-provision of Parking alongside provision of Community Transport (At worst, businesses will maintain their own busing system).

This is how it must change! lgl

Saturday, June 11, 2005


This author will be gone from June 12-25 because of a Cousins Reunion in the area of his birthplace. One wonders about the nonsensical desire to return to the old Home. lgl

Islamic Terrorists

Understanding Jihadi Networks
Strategic Insights, Volume IV, Issue 4 (April 2005)
by Marc Sageman, M.D., Ph.D.

Sageman has the previous Work experience with Salafi Terrorists to compel a rich definition of the Terrorist network structure--undoubtedly accurate. The Jihadi networks utilize the same basic formula as Sects of the order of Jim Jones of Guyana massacre. Membership of Terrorist cells rely on College-educated Males (average age 26 when they join), who possess Occupational or Professional skills, but exhibit little success in their personal endeavors. They are often isolated from their families, where they had previous close relations; many Recruits come from Time spent as foreign Students studying Technical skills away from the close family unit. They turn inward in Group pattern, in a rejection of an alien society. They are a Group banding together, and become ideologically inbred, adopting Spiritual values to escape the apparent lack of success in the alien society (remember they come from above-average Income families in their original Countries).

Sageman rightfully defines the Salafi Terrorists as possessing no real Central leadership since the 9/11 Attack, which led to a Worldwide response fracturing al Quada financial and training organizations. Recruitment to these networks is not as Self-generating as he implies, and depends not upon only localized mosques of perhaps a Dozen, but on the presence of malignant mullahs throughout the Muslim world. These mullahs are embedded throughout Islamic society--whether Native or foreign enclaves--who pressure their contempories not to disavow Terrorists and Terrorism, while preaching a philosophy of hatred. The article, though, is of high quality, and should be read to understand the nature of Islamic fundamentalist terrorism.

Some Quotes:

The Soviet invasion of Afghanistan internationalized the militant Islamist movement. Sheikh Abdallah Azzam preached a traditional jihad against the Soviet invaders. Many militants from all over the Muslim world answered his call. As the Soviets withdrew, Azzam extended the defensive jihad into a more global one. He preached that all former Muslim lands dating back to the fifteenth century, from the Philippines to Spain, had to be liberated from the infidels.

they held intense discussions about their failure to capture a core Arab state and transform it into an Islamist state. Some militants, led by Osama bin Laden, argued that this failure was due to the United States propping up the local regimes.

About two-thirds of those who joined the jihad did so collectively with their friends or had a long time childhood friend already in the jihad. Another fifth had close relatives already in the jihad. These friendship or kinship bonds predated any ideological commitment. Once inside the social movement, they cemented their mutual bonds by marrying sisters and daughters of other terrorists---lgl

Friday, June 10, 2005

The Budget

John Irons has an excellent posting and article:

John estimates the current Congress intends to cut current Spending programs by $247 billion within the next five years. Congress follows this with the intention to reduce Tax revenues by $100 billion, leaving a Budget deficit of $168 billion. They want to top their effort with something best expressed by a cropped Quote from John's article:

Estate tax: The House of Representatives voted to repeal the estate tax-a tax that impacts the heirs of multi-millionaires. Currently, $3 million can be passed from a married couple to their heirs tax-free. And only about 1 percent of decedents pay any tax at all. . . The total cost over the first decade of repeal would total nearly $1 trillion.

John Irons estimates a Fix for the Alternate Minimum Tax will lead to $300 billion deficits for the foreseeable future. He has more faith in the Corporate-dominated Republican Congress than this Author, who knows there will be no Fix during the span of this President, or even succeeding Presidents if Republican and Corporate--in that order, with Corporate far more dear to the heart. lgl

Energy Efficiency

Assessment of Selected Energy Efficiency Policies
May 2005
Energy Information Administration
Office of Integrated Analysis and Forecasting
U.S. Department of Energy
Washington, DC 20585

The document would be more effective if organized in a manner designed to easily transmit data. Basic rundown of viability of Initiatives: Raising the CAFE (Corporate Average Fuel Efficiency) and the EEPS (energy efficiency) Standards of industry has the greatest benefit; Appliance Standards raising is the second-best alternative; and tax credits offer the poorest option in terms of generation of energy efficiency.

The Problem: Raising the CAFE faces the greatest organized opposition, as vehicle fuel efficiency is extremely difficult to achieve, and Car companies and Consumers (lovers of SUVs) stand in opposition. The EEPS Standard alteration is fairly redundant, as industry traditionally emplace the most fuel-efficient new Plant to be found; the difficulty here is the slow Turnover factor in Capital equipment. Appliance Standards are easy to implement politically, and easy to integrate (study Japanese technology); major Policy proposal: forbid incandescent lighting in appliances and fixtures by 2006 (run fluorescent), and forbid sale of incandescent bulbs by 2010.

Tax Incentives and Tax Credits: Ineffective and will cause great loss of Tax revenue with no Bang for the Buck. Alternative: Introduce Effective-Cost Building permits which increase in total Price concurrent with inefficient building practice.

The Good News: Pollution emissions decrease with energy efficiency.

The Bad News: Current technologies (not matter how efficient) will not reduce Energy dependence on fossil fuels. The Report cites only minor percentage reductions (the highest for Coal of 12% under Case 2). The real need is for totally new technologies! Potential avenues: Solar panel roofing, possibly topped with small roof Wind generators; development of a plastic fuel; Ocean-wave generators; and redevelopment of the railroad system. lgl

Thursday, June 09, 2005

Defense Overspending

Arms Fiascoes Lead to Alarm Inside Pentagon
Published: June 8, 2005

The Pentagon has more than 80 major new weapons systems under development, which is "a lot more programs than we can afford," a senior Air Force official, Blaise J. Durante, said. Their combined cost, already $300 billion over budget, is $1.47 trillion and climbing

research and development spending on new weapons has gone up 77 percent since 2000, and now totals $69 billion a year

Oversight is dwindling, Pentagon officials acknowledge. While the dollar value of weapons contracts doubled over the last decade, the Pentagon halved the size of the work force that polices their costs. The government work of managing the design, development and production of weapons has been largely outsourced to the weapons contractors themselves.


May 2005
Management Control Breakdowns Result in Substantial Waste and Inefficiency

$2.2 billion{over a Period of Two years lgl} (88
percent) includes significant waste and inefficiency because new, unused,
and excellent condition items were transferred and donated outside of DOD,
sold for pennies on the dollar, or destroyed. DOD units continued to buy
many of these same items. GAO identified at least $400 million of commodity
purchases when identical new, unused, and excellent condition items were
available for reutilization. GAO also identified hundreds of millions of
dollars in reported lost, damaged, or stolen excess property, including
sensitive military technology items, which contributed to reutilization
program waste and inefficiency. Further, excess property improperly stored
outdoors for several months was damaged by wind, rain, and hurricanes.


Both the Defense Dept. and Congress are beginning to lose it! Generals have developed George Lucas vision, and want Star Wars technology. The Future Combat System is based upon Weapons (18) never before fielded or even designed, with Vehicle armor and weight definitely Jedi in origin. They scrap everything which does not meet the Vision, even though much of the Scrap is better than that possessed by any other military force in the World (scheduled Dates for removal from Main Force of Weapon systems is unbelievable). Weapon systems which provided the United States with success in Engagement after Engagement are not fancy enough for use on the modern battlefield, as defined by the Visionaries.

Cost is going up, Weapons Production efficiency is going down, Weapons Provision finds ever-increasing delays, and Total numbers of Weapons are reducing to the point they will be unable to defend the District of Columbia. lgl

Wednesday, June 08, 2005

Socialized Medicine

Paying a Premium: The Added Cost of
Care for the Uninsured
Families USA Publication No. 05-101
© 2005 by Families USA Foundation

Nearly 48 million Americans will be uninsured for the entire year in 2005.
More than one-third (35
percent) of the total cost of health care services provided to people without
health insurance is paid out-of-pocket by the uninsured themselves.

Through this study, we found that the
remaining $43 billion is primarily paid by two sources: Roughly one-third is
reimbursed by a number of government programs, and two-thirds is paid
through higher premiums for people with health insurance

The Report is a relatively quick and easy Read, which especially Employers should study. It clearly outlines the reality that the Market system does not equitably balance Health Care among Those who need it in this Country. Study of the Premium rates current to 2005 indicate such a balance could never be achieved. The Study states Economists believe that between $65-130 billion is annually lost in Productivity because of lack of health care insurance. A Government-sponsored inclusive health care program is needed.

Governments, though, never do anything right! The Author, therefore, thinks any socialized Medical program should be as decentralized as possible. His Solution proposes each individual State organize its own medical program for all residents of the State. Ordinary medical Costs would be borne by State taxation--equal payment by State businesses and individual Taxpayers. Extraordinary Medical Costs would be borne by the Federal Government, upon Certification of the Medical program of each State. The Later Medical Costs should consist of all Surgeries,chemotherapys, expensive Testing procedures, and complex medical treatments. The Federal Government can thereby regulate the placement and number of treating facilities in each area.

This would be an inclusive, encompassing Health Care system, with all other Government-sponsored medical programs (Medicare, Medicaid, etc) being phased out when States receive Certification for their programs. lgl

The Way It Is

KC-767A Tanker Program
Report No. OIG-2003-171
Boeing wanted to get in on the economic fuel Cash which Congress was spreading around in 2001, and offered a lucrative job to a current Assistant Secretary for Air Force Acquisition, in order to get in on the Cash Cow benefits in the Y2002 Budget. The currently-deployed Tanker force (KC-135s) were not nearing their Life expectancy (41 years), and actually Maintenance Costs of the current fleet were exaggerated. Boeing and the Air Force Assistant Secretary came up with a Lease Agreement, which would pay Boeing a fortune yearly for little Up-front provision. The full complement of 100 KC-767A Tankers were not to be provided until after 10 years, with Lease rates set to pay for the Aircraft as they were built according to a Boeing schedule. The CBO quickly notes that regular Acquisition policies were not followed in the Request procedure included in the Y2002 Budget, that the Military was not satisfied with the military capability of the aircraft, and that purchase of the aircraft would be much cheaper than leasing the craft.

The real Scandal is not that it happened, but that the Appropriation made it into the Y2002 Budget, even though it required the evasion of standard Defense acquisition policy at numerous levels. This evasion could only come through active intervention of senior-level Management through multiple levels. The real Crime committed comes in that senior officials at Defense, Congress, and White House have retarded the Investigation into Wrong-Doing, suppressing News coverage of the Scandal, and intends to let the Incident pass without any criminal Indictments.

PGL quotes a Washington Post article at Angry Bear about the Lease deal, which will provide much greater insight. It gives some detail on the inefficiency of the commercial aircraft for military use, and describes how Boeing intended to have its Cake, and eat it too. lgl

Tuesday, June 07, 2005

Utility Increasing Block Pricing

Sheila M. Olmstead
Yale University, School of Forestry and Environmental Studies
W. Michael Hanemann
University of California, Berkeley
Department of Agricultural and Resource Economics, and Goldman School of Public Policy
Robert N Stavins
John F. Kennedy School of Government, Harvard University
and Resources for the Future
June 3, 2005$File/rwp_05_039_stavins_rev.pdf

The Author grew up on a Nebraska farm, and has long worried about the effects of Population growth and supply of Fresh Water. The cited Study is only for the Brave of Heart and economically-gifted.It concludes IBPs do not establish a Consumer response to a Water Supply curve, as some Economists have postulated. The interesting Point in the Study stands as the Researchers could not find a significant Price elasticity among Uniform rate Consumers, but found a Price elasticity among IBP rate Consumers, though a definitive answer for this response could not be determined.

The Study concludes that IBP rates still provide greater economic efficiency, due to greater assumption of the LRMC (Long Range Marginal Cost). The authors do not state as much, but probably accept that Command (administratively imposed) Water Conservation practice has the greatest efficiency. Some Readers are probably lost by this point, so the Author will try to clarify.

Command Water Conservation is costly and probably only about 70% effective in reaching restricted Water usage goals. Economists have advocated usage of IBPs to introduce greater Price elasticity, and Consumer recognition of the Water Supply Curve. Economists theorize such recognition by Consumers would be even more efficient than Price elasticity in inducing Water Conservation. The Study basically finds such recognition statistically not observable. lgl

Monday, June 06, 2005

Reality Time

Things That Will Happen Before Social Security
Faces a Shortfall
Dean Baker
June 2005

Based on current trends, we can expect that by 2052:
· Health Care -- Annual spending on healthcare will have increased by an amount
equal to 12 percentage points of GDP. This would imply an increase in annual
healthcare spending of almost $5,000 per person (measured at the 2005 level of
· Prescription Drugs -- Annual spending on prescription drugs will have increased
by an amount equal to 2.7 percentage points of GDP. This would imply an
increase in annual spending of $1000 per person (measured at the 2005 level of
· Housing -- The housing bubble will have burst, destroying more than $5 trillion
in bubble wealth created by the temporary run-up in home prices. This translates
into a loss of $17,000 per person.
· The Falling Dollar -- The dollar will have declined by 30 percent or more against
the currencies of U.S. trading partners. This will add more than 2.0 percentage
points to the annual rate of inflation and reduce annual consumption by
approximately $2,000 per person.
· The Criminal Justice System -- The number of people in jail or prison will have
increased to almost 7 million, with the government spending an additional 3.1
percentage points of GDP on the criminal justice system. This projected increase
in spending on criminal justice would be equal to $310 billion a year measured at
the 2005 level of GDP or $1,000 per person.

1 The Social Security trustees put 2041 as the date at which the program will first face a shortfall. In contrast to the non-partisan CBO, four of the six trustees are political appointees of President Bush.

· The U.S and the World (China) -- China’s economy will have grown to be more
than twice as large as the size of the U.S. economy. If it spends the same share of
its GDP on the defense as the CIA currently estimates, then China’s defense
budget in 2052 will be four to six times the level of defense spending that CBO
projects for the U.S. in that year.
· The U.S and the World (India) -- India’s economy will have grown to be one
and a half times as large as the size of the U.S. economy. If it spends the same
share of its GDP on the defense as the CIA currently estimates, then India’s
defense budget in 2052 will be three times the level of defense spending that CBO
projects for the U.S. in that year.
· Animal and Plant Extinctions -- Tens of thousands of species will have become
extinct, most of them due to human impact such as oil and mineral extraction,
pollution and deforestation.
· Climate Change -- The earth’s temperature will have risen by between 1.0 and
4.0 degrees, causing rising sea levels, melting glaciers, and spreading of tropical
diseases into temperate areas.

For the most part, these other trends are receiving almost no attention from either political leaders or the media. Presumably, these opinion leaders view developments like soaring health care costs or plunging home prices as being less consequential than the projected shortfall in Social Security in 2052. It is nonetheless worth noting these trends, since others may assess their importance relative to the projected Social Security shortfall differently.

This Study portrays why there is a limit beyond which Current Trends cannot be used to define Economic Projections. The Author will go through the List, as concisely as possible:

1) Health Care: Costs could not exceed more than 4 percentage points of GDP above its current level (then or now) , without facing extreme Health Care Labor shortage, while actual GDP growth levels would fall because of the stripping of resources from other necessary economic activities.
2) Proscription Drugs are at a traditional extreme High in Cost, and will reduce in Cost in later Years as Patents expire, and current Drugs are as equivalently effective as any further design.
3) Housing will begin to decline in value (bubble or not) because of declining Population. It will be much deeper than $5 trillion loss by 2052. (think $13 trillion).
4) The Dollar will start to regain value against other Trading Currencies, not lose value, within the next 2-3 Years. It has caused more than a 2% Inflation rate in the last three Years (think a workable 6% per Year over the last three Years). What will incite the rise in the value of the Dollar? The World's refusal to fund Federal deficits, American reduction in the use of Oil, and Consumer reduction in the purchase of foreign Goods.
5) The Criminal Justice system cannot absorb more Funds, and therefore will be altered. The greatest Cure would be to alter Sentencing policy to state Convicts must work, must pay for their own maintenance, and must pay to all Costs and Damages inflicted by the Crime for which they were sentenced. They will not be released until all such Costs are paid.
6) China is only a current Trend. China has greater Social Welfare problems than even the United States. China will find it difficult to maintain the economy achieved by 2010.
7) India is in a worse economic state than China, and will either face Warlordism or Dictatorship to reduce Population.
8) Ecology changes while dominant Species survive. Ecological damage must be assessed in statistical terms of impact, not Save the little Furry things!
9) 4-5 billion People will starve to death, if there is a Climate change of 4% in overall Temperature, other ill effects need not be considered. The Ecology also has several Self-saving curatives, a 1% increase in Temperature will increase Cloud density by over 20%, restricting Sunlight heat by about 14%.

Such are the Author's own thoughts on these matters. His opinion may warrant no greater belief than Others, but Outcomes are never certain. lgl

Sunday, June 05, 2005

Being Rich

Class Matters
Richest Are Leaving Even the Rich Far Behind
Published: June 5, 2005

Findings of a NYTimes analysis placed in Article form. Important for understanding of current Tax law, and what this produces.

Notable Quotes:

From 1950 to 1970, for example, for every additional dollar earned by the bottom 90 percent, those in the top 0.01 percent earned an additional $162, according to the Times analysis. From 1990 to 2002, for every extra dollar earned by those in the bottom 90 percent, each taxpayer at the top brought in an extra $18,000.

an Internal Revenue Service study found that the only taxpayers whose share of taxes declined in 2001 and 2002 were those in the top 0.1 percent.

The result expressed is actually much worse, due to the continual use by the Rich of Tax shelters, which protect the SuperRich from Tax rates. The article is critical of the AMT(alternate minimum tax), but this only expresses the impact of Inflation on Taxes, which the AMT does not adjust to cancel. What is actually needed is Tax law and policy which eliminates special exemptions, deductions, and tax credits which reduce the stated Tax rates. Removal of all special consideration Tax advantages would allow ability to flatten Tax rates along with reducing the Tax rates themselves. This would also nullify the capacity of the SuperRich to remove their Income from taxation. lgl

Saturday, June 04, 2005

Energy Conservation

Japan Squeezes to Get the Most of Costly Fuel
Published: June 4, 2005

This dependence on imports has prodded the nation into tremendous achievements in improved efficiency. France and Germany, where government crusades against global warming have become increasingly loud, expend almost 50 percent more energy to produce the equivalent of $1 in economic activity. Britain's energy use, on the same measure, is nearly double; the United States nearly triple; and China almost eight times as much.

From 1973 to today, Japan's industrial sector nearly tripled its output, but kept its energy consumption roughly flat. To produce the same industrial output as Japan, China consumes 11.5 times the energy.

Japan proves that Energy conservation is Cost-effective and accomplishable. It is unlike Hong Kong, though, as it still allows the die-hard Motorists on the Road. The Article is a Must-Read to understand the current status of Energy Conservation in the World today, but the Reader must understand it is a glossy Report, and does not present the potential pitfalls. You can only go so far!

The United States is a far different matter, with high potential to cut it's energy bill. There are simple ways to save on energy, without widespread suffering by the Population. Here are a few of the Options:

1) Close off intercity traffic, not by prohibition, but by Pricing. Refuse Communities Federal Aid unless they establish City-edge Public Parking and Public Transport. No Motorist can proceed past the Public parking area without a Permit carried in the windshield--$5 for two hours of access, $10 for all-day access. Parking in the Parking arena will be $1 per day. Exit with expired Access permit will be $25. Through-Route traffic must stay on the designated Highway, with a $5 necessary Access permit required for Exit, purchasable at Restaurants and Gas Stations along off-ramps or streets.

2) Communities will establish Public Delivery Services, where all purchased Retail Goods are delivered to the home address, or Parking stall number in the Public Parking area--Cost $1 per delivery.

3) Federal Tax law will be amended to state local area business cannot enjoy any Investment tax credits, unless they devote at least 5% of claimed Investment to Capital investment in the Public Parking areas and Public Transport services--which will be a Cooperative association which is run for Profit.

4) Local area Communities will be allowed to establish Toll booths on Interstate access roads--the toll rate to be $1 per vehicle, half of the Revenue to go to the Communities--less the Wages of Toll booth Workers--and half to Road maintenance of the interstate. Commuters can purchase yearly Access permits for specific Interstate access routes for $20 per year. Transport vehicles can buy universal Access permits for $200 per year.

5) Workers can claim a Public Transport tax credit of $300 per Year, if they can prove purchase of 12 Monthly Access Passes--by presentation of the Passes. lgl

Friday, June 03, 2005

Jobs and Oil

The 78,000 New Hires for May stands as no crisis, but the 5.1 Unemployment rate means a lot; signifying a large increase in Discouraged Workers (fancy term for saying their Unemployment Benefits have run out). The second element comes in Oil, June futures sliding over $54 a barrel for Light Crude, though even the Gasoline stocks are over 1% higher than this time last Year. Another problem comes in the type of New Hires, the majority coming from Health Industry or residential construction. The Former means higher insurance premiums and Welfare transfers, the Later means temporary work tied to the Housing Bubble. It is not an economically bad position for the Economy, but not a good position either!

It reinforces the Author's belief that the American economy needs a Sea change. Americans have been altering the economy for the last thirty years in an endeavor to promote the provision of high-Wage, high-Tech Products to the rest of the World. This Pressure derives from the fact Corporate and Business management is universally College-educated, leading to a reciprocal desire to hire only College-educated personnel in their productive effort. This incites concentration on the high-Wage, high-Tech Products; which will provide the Profits to pay the higher Wage scales of College-educated Labor. There is only one problem with this scenario: Neither American or Foreign markets need the Productive capacity which such orientation of the Economy can produce.

The Trade deficit will continue until the American economy evolves into an economy which can produce the majority of Products that Americans consume. The pursuit of Six-Figure Incomes for Jobs will not produce those Jobs, or will they reduce Welfare transfers, the Trade deficit, and the Government deficit. New Jobs have to be created within the $30-50k range!! This has to come about with an actual reduction of Fuel consumption. lgl

Wednesday, June 01, 2005


Recent Experiences of Large Defined
Benefit Plans Illustrate Weaknesses in
Funding Rules

The GAO Findings were predictable, though much regretted. Some 62.5% of Sponsors are not making yearly cash contributions, through the use of Plan accounting procedures (FSA) to assert that equivalent contribution has been made into the Fund. The trouble comes in their declaration of the highest Interest rates of return on Funds, along with prior Year contributions, all when the Funds, themselves, are underfunded--over half sampled where Funds are less than 90% capitalized.

The additional funding charge (AFC) lacks real power, where they are applied because the Sponsors did not make a cash contribution in the Year the AFC was assessed while the Fund is less than 80% funded. Current Reporting procedures lack transparency and probably understate the underfunding of the Plans. This combined with the use of FSAs propel the chronic underfunding.

Fund Service Accounting (FSA) procedures were allowed by Congress to promote flexibility in funding of Pensions (Obstensible goal), but are used in practice to evade Funding obligations by Sponsors. FSAs resemble the Tax credits granted to Business during the later Bush Years, but provide far greater damage.

Prognosis: The Pension Benefit Guaranty Corporation will fail, if current practice is allowed. Obligations will continue to pile up, as Sponsors renege on their commitments.

The only safeguard to Pension Benefits is forcing Sponsors to make cash contribution of realizable gain of full funding (full Benefits within the year range of predicted retirement) each Year, without recourse to Credits from prior contribution Years. There is a limit to how many, and what, incentives should be granted to promote economic growth. Pension Benefits are a Third Rail, funded only with great difficulty at later Date. lgl

Long-Haul Trucking

The U.S. Truck Driver Shortage:
Analysis and Forecasts
American Trucking Associations
Global Insight, Inc.
May 2005

Sound expression of the Labor shortage which will retard the American economy with the retirement of the Baby-Boomers. The Analysis based most projections upon statistics derived from several Sources, but using the primary base of The Office of Occupational Statistics and Employment Projection of the Bureau of Labor Statistic. They estimate 1.3 million long-haul Truckers were on the Road in 2004, and that there will need to be 320,000 more before 2014, if the Economy maintains a 3% Growth rate over the next 10 years.

The Study outlines how the demographics are against the necessary increase in Trucker numbers, citing the need to hire 219,000 new Truckers to replace the scheduled retiring Workers (this not being an Occupation where hiring elderly Workers is viable). It states industry analysts regularly suggested the average Trucker Income must increase from the mid-$40k to about $65k.

There is good news and bad news to all this. The good news states there is Employment opportunity for laid-off Construction labor, if the Housing Bubble bursts--even Today, with a already-present 20k Trucker shortage. The bad news comes in several parts: the Trucking industry will face both above-level Labor Costs and Fuel Costs; the Fuel Usage for 320k more long-haul drivers raises Consumption an additional 4 million+ gallons (Guess-estimate) per Day, something current Refining production cannot supply; and increased Freight charges alongside Labor shortages, will throw the Projections for Economic Growth of 3% per year for the American economy out of the window. lgl