Recessions Necessary?

Mike Moffitt posted an article today which was a discussion of the necessity of Recessions. He basically found he could not find evidence of the Mark Rostendo argument that:

The "job" of a recession is to clean the "fat" out of the system, mop up excess, and pave the way for the next expansion. Until that process is complete, there isn't much from which a legitimate expansion can arise.
Recessions put weak companies out of business. In so doing, resources (skilled workers, capital) are freed up to be deployed more efficiently elsewhere. For example, Wall Street analysts who touted bankrupt Internet stocks are redeployed at local fast food restaurants to serve people in a capacity for which they are much better suited.
Stronger businesses that have used the contraction to firm up their bottom lines and grow more efficient are able to take advantage of these resources during the ensuing expansion. The economy emerges from a recession leaner, more efficient and in good shape for the next wave of growth and progress.
But in a mild, one-quarter downturn, many weak companies are able to pull through by the skin of their teeth. Thus they continue to suck up space and resources that could better be utilized elsewhere. For example, CNBC commentators, who should have been laid off, continue to prattle on and the dazed public continues to sit slack-jawed in front of the idiot box, hanging on their every word, doing nothing for the economy. Employees and capital are tied up in corporate time-bombs, just marking time before their inevitable demise. The excess that caused the recession remains in the economy, serving only as an anchor with which to weigh down future expansion.

Rostendo almost has it right, but fails in the analysis of what exactly has to be removed. What has to be removed is the excess Profits achieved by Business in the previous Boom. Excess Profits lead to too great a Draft upon Material resources; this generating artifically low-Profit enterprise as Businesses think to invest, and drain of Consumer financial state through the artificial generation of Demand through Advertising.

The Economist asserts that American Purchases currently are running about 106% of Gross Domestic Product. It contends rightly:

In principle, these purchases could fall by six percentage points of GDP, eliminating the deficit, without anyone in America needing to fall out of work. America would not suffer a recession. But it would feel like one: every man, woman and child would have to curtail their spending by $2,600 a year.

How could such a condition be created?
The Answer is simple, but perhaps beyond Economists. Recessions could be avoided by a simple expedient with the loss of fairly few Jobs. What We need is a national law simply stating no Goods can be sold outside of normal Business hours--9 a.m. Monday through 5 p.m. Friday--except for Groceries. What do We have here? We still maintain Services 24-7, still provide for all Temporary Consumers needs, but eliminate the prime Consumer purchase hours. The Result would be less Consumption except for pressing need, greater deliberation in Consumption decision, and less Business Profits. Consumption would decline by some amount, expected by this Author to be double the reduction necessary to reside within the GDP. Labor and Households would increase their Savings ratio, and Business would find less opprotunity to invest. Recessions are not necessary, but intelligence remains a criteria. lgl

The Splash

David Leonhardt authored an article in the NYTimes which does impress. The GDP rose in Q2 by an annualized 2.9% rather than 2.5%, while residential investment declined by 9.8%. Wages and Salaries supposedly rose by a 7% annual rate between Q4-2005 and Q2-2006, so they accounted for 46.1% of Output in Q2-2006 (of course, no mention of the percentage increase of Energy products during the same Period). An ideal Quote:

Joshua Shapiro, the chief United States economist at MFR, said that much of the income increase likely went to people who work on Wall Street or for hedge funds. The biggest spike was in the first quarter, when financial companies typically pay bonuses, and other data — including Labor Department numbers on wage growth and private-sector surveys on consumer confidence — suggest that most families are not receiving pay increases that outpace inflation.

another,

For the first time in a year, foreign trade lifted economic growth, as the value of imports rose just 0.6 percent, while the value of exports grew 5.1 percent.

A Reuters article relates a larger decline in Business investment and equipment to a reduction of 1.6%, the lowest since Q4-2002. Another article tells Us that the EIA says that Gasoline stocks are up 5% year over year, but Distillates are down 1% year over year The Associate Press article on Energy that Demand year over year rose 2.8% over the Period of the last four Weeks. It also mentioned only 300,000 barrels of the Distillates were for Heating (do We smell the scent of roaring Heating bills, especially with the vast number of new Homes year over year). Life in the United States. lgl

Household Despair

I did not intend to again write on the state of real Wages after my last Posting; but flairs in the Internet world suggest that I must. Greg Mankiw appears to be the most Instructive, Tim Worstall poses a viable question left unanswered, and a list of Others (Roberts, Altig, etc.) claim the inciting NYTimes article (find in Mankiw's Post) wrong in ignoring the scope of Labor Benefits in a study of total Compensation of Labor.

I suggest the NYTimes article was not in pursuit of Total Compensation of Labor. Let Us review a few facts about Households and Wages. Households' Consumption makes up about Two-Thirds of the Economy. Consumer Prices have risen over 4% year over year, and is expected to continue at this or worse rates unless something is done. The Question here is what? The Fed interbank rate is now over 5% (notice I do not utilize such pesky things as hard numbers) as marginal rates are immaterial in this Discussion; higher Fed rates would only further damage Household control of Expenses during a Slowdown, without any appreciable curtailment of Inflation. Tim, the Mankiw argument holds very shakey sway, but Labor Hires are inhibited because of those generous Benefits which Business continues to attempt Payout denial; filling your Argument with a hefty relevance. Household Take-Home Pay continues to fail in the face of real Consumer Price Inflation.

A pursual of the Concept of Benefits might be appropriate at this time. Benefits are structured Promises which Business gives to Employees in lieu of actual Cash Wages. The Thought behind Benefits from the Business viewpoint remains: We can promise now, and pay later; perhaps, We can even deny Payment later, after We have gained a sublevel Wage production. Business can underfund their Health and Pension Funds, and use these funds for their own Investment desires, until Employees, Health needs, or the passage of Time makes a rude demand for such Payments. The central core element here being that the funding does not actually have to be secured, and Business even gets a Tax reduction for the promises. By the way, this also has a heavy impact on Mankiw's generalized marginal productivity argument. There is the final element accuring to Business health stands as Republican Courts and Administrations which allows for easy Business default on such Fund underwriting, though We achieve strict Bankruptcy law to forestall Households from alleging that they cannot pay. Still, Households seem untouched by the wonderous Wand of Benefits; they always destined for other Business organizations, unless of course, Pension awards are actually paid years down the Road. lgl

Distortions

Russell Roberts produced a Post which left me a little puzzled. It was a Critique of a NYTimes article this morning which I included in the previous Post I delivered today. It must be admitted it was a poorly framed article, but did not deserve the heat which Roberts expressed. It disturbed me further that Tyler Cowan linked to the Roberts' Post.

Everything Roberts claimed was fundamentally True, but his refutation of the Times article was also set to deceive. It becomes apparent in the listed questions which he makes:
1. Why would you use a measure of compensation that ignores benefits, an increasingly important form of compensation?
2. Why would you use 2003 as your starting point when the recession ended in November of 2001?
3. There are no government series that I know of on median earnings. Where did those data come from?

Benefits could be ignored in the Context that such awards channel to other Business concerns, while Employees face ever increasing Living Costs while their Take-Home Pay remains relatively stagnant. It is relevant that the Business Concerns accepting payment for those Benefits express no hesitation in raising Charges because of incipient Inflation. This stands as the vital reason why Business shows reluctance to maintain those self-same Benefits. Use of median earnings cancels out the Advanced Skills Labor who have kept ahead of the Inflation rate in their Wages, but who are in the distinct Minority of Total Employed. I am also quite sure Roberts would derive approximately the same Numbers as attained by the Economic Policy Institute, no matter the agenda of the EPI, if he cared to check on median earnings.

Roberts states:
Both of these claims are puzzling. The first claim, about labor's share of the pie ignores benefits. As I have mentioned here before--the standard claims you hear about labor's share declining come from using wages without other forms of compensation. When you include benefits, labor's share is virtually a constant at 70% of national income and has been steady since the end of World War II, . . .

Is this Statement relatively True? The news on Local Stations tonight is about Good Year cancelling Health Care coverage for Retirees. This sounds like Compensation granted in previous Years has been denied by Business Concerns, even though specifically granted by Union Contract in previous years. What does this do to the rate of Compensation to Workers? A singular Incident would be hardly noteworthy, but Business Concerns have been cancelling Health Care and Pension benefits all over the Country. It also leads to a rather thorny problem as well, which I am sure Our Republican administration has not considered: If Business Concerns were granted Tax Reductions from expressed Benefits provisions, what is the proper Tax burden which should be assessed for noncompliance? lgl

Jackson Hole

The Jackson Hole conference of central bankers is over, and they throughly managed to scare themsleves as well as others. They all contemplate all of those Home Equity loans in the time of falling Housing Prices. Andrews at the NYTimes suggests the Import prices of Chinese Goods will increase, and apply pressures for Inflation. The Inflation rate is already over the Target rate of 2%, and all indications exists for even higher levels of Inflation. Disembodied Voices at the Conference whispered that horrid Word--Stagflation--in the Wings, while the Spectre of foreign undersubscription of Treasuries flickered in the air of the halls. Does the Fed fight Inflation, even if it turns a Slowdown to Recession?

DuPont elsewhere informs All they will cut Pension contributions by Two-Thirds, hoping to increase Profits some 3 Pennies per Share in 2007 and a nickel a Share in 2008. Why does this sound like an Act of desperation? Real Wages have not grown in this Cycle and Consumers are faced with the full brunt of the Energy crunch, combined with the Payments on those Home Equity loans coming due. Dupont may be abandoning the last Great Hope of their Employees.

Is the Economy slowing down? The Answer is Yes! I am reminiscent of the Stock Collapse of the late 1980s, where I sat with a University Professor who was the then Director of the University Pension portfolio. I attempted to assure him that Day that the slump was not a recurrence of the Stock Market Crash of 1929. I reminded him that We would all still be here on the following Day; it did not even equate to a Holocaust. Anything I relate Today will probably work as well as my platitudes did that Day. I will only state that if the Economy goes South once more, We will simply have to fix it. lgl

National Health Care

Maggie Mahar works herself into a position where Taxpayers finally absorb some 74% of the total $2 trillion health care bill already. Some aspects of her addition may be a bit hazy, but she presents fairly salient points:

private insurers pick up just 30 percent of the tab -- and the money they lay out comes from the premiums paid by employees as well as employers. In other words, private sector employers pay less than 30 percent of the total. The remaining 19 percent of the $2 trillion total is covered by patients themselves (14 percent) and by the nonprofit philanthropy sector (5 percent). {still in the middle of her argument}

Arnold Kling counters the Mahar argument that Government avoids a National Health Care system because of the Real Cost of present Health Care, along with the Political fear of the power of the Special Interests. Arnold may be right, as I have not yet read his book advertised in the Post.

Why don't We adopt a National Health Care System?
We operate within a Private Health Care System where Doctors, Clinics, and Hospitals utilize professional health associations (dare We talk of Oligarchical collusion here) to set proscribed Product charges. We have a Pharm industry who possesses 2 Centuries of Clinical Research trials and Product Development studies, and who can conduct Lab trials for about $300/Hour utilizing the current method of Lab technicans; Companies who can reduce actual Production Costs of Drugs to mere Pennies per Dosage; still, who can claim Billions of Dollars in Research Costs due to current Tax law. We have Insurers who spend 40% of their total assessed premiums in Varification Costs, and 18% of those premiums in Profits for Management and Stockholders. We finally have understaffed Health facilities due to low Pay, and Business-proclaimed excessive Labor Costs.

What We need is a formal List of Procedurial Charges organized by Health Care Economists, not by the Recipients of that Pay. We need Research funded by a central organization who distributes allocation of Research funds based upon health need, not upon Profits-generating potential. We need Drug Costs to be generated by actual Production Costs, not by the principle of whatever the Market will pay. We need Government intervention which defined precisely what Procedures are paid for by Private Insurers, and what the largesse of that Payment will be. We need Government regulation of the staff requirements of health care facilities, and limitations on what the Average Costs of such Staff labor will be. What We need is a National Health Care System. lgl

Productivity and Health Care

The Grossman and Rossi-Hansberg thesis indeed does indicate that Outsourcing actually pays for increases in American real Wages. Don Boudreaux and Arnold Kling both take Gladwell to task for alleging American Manufacturers operate at a disadvantage having to supply Health and Pension benefits to Labor, instead of some Univeral Health and Pension system. What do these articles have in common? The Grossman and Rossi-Hansberg thesis clarifies that real American Wages are not matching the real American increase of Health and Pension Costs. Boudreaux insists there is still Comparative Advantage in Trade even American Manufacturers face higher Production Costs: so far, everything is True.

What is my Point?
Everyone forgets important elements. Increases in Productivity can produce increase Health Care Costs, especially Repetitive Impact injuries. The increased Production Costs of American industry fails to cripple Profits' increase--only the transmission of Wage increases to Households who are suffering from escalating Costs. Check this Reuter's article on the expected increase in Chnese Imports Cost, an indication that Comparative Advantage may be evaporating for American Households. Japanese Beef Imports seem again ready to raise Business Profits while raising Prices at American Meat Counters. American Wage scales are being calified, while American Consumer Prices continue to soar, though Business Profits are in a Golden Age.

At least We are not talking about Iraq!

the inflation rate has reached 70 percent a year, up from 32 percent last year. Wages are flat, banks are barely functioning and the consensus among many American and Iraqi officials is that inflation is most likely to accelerate.

"It’s a very serious problem," said Anthony H. Cordesman, a Middle East analyst at the Center for Strategic and International Studies in Washington. "You don’t have stable trucking; you don’t have stable distribution. You have a constant protection racket, with security forces who are involved in sectarian fighting often taking bribes to have things operate. All of that builds up pressure on prices."

The spike has come as a shock to Iraqis, who make only about $150 a month on average — if they have jobs. Estimates of unemployment range from 40 to 60 percent.

I wish I could say it comes as a Shock to me. lgl

Lazy Friday

I spent my morning at Exercise and a Doctor's Appointment, where as usual, I only learned I was still overweight and should exercise more. They did take an Echogram this time, a waste of another 20 minutes extra to inform me I was the same as usual. I adopted the Attitude, and find some reluctance to exercise by Typing, so I will provide a Reading List with some commentary.

http://www.the-idea-shop.com/papers/usatoday-propertytax.html
http://www.taxfoundation.org/blog/show/1775.html
Property Tax opposition is growing, and pressures will increase with Housing Market Prices reductions in the offing. Bureaucracy has always been adamant in refusal to reduce any Tax without legislative action.
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http://washingtontimes.com/upi/20060823-051747-8542r.html
Remember that the Congressional Research Service probably underestimated the War Costs by some 24%.
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http://forestpolicy.typepad.com/ecoecon/2006/08/why_do_people_s.html
I do not agree with Dave Iverson on the ineffectiveness of Costs/Benefits analysis, but he brings up some good points, if you survey the links.
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http://www.env-econ.net/2006/08/minumum_wage_re.html
I do not agree with the basic Tim Haab premise, understanding the positional role of Minimum Wage labor. I do tend to agree with the McCulloch argument. Minimum Wage is paid for labor which rarely disappears at the same rate as more Skilled Labor. Businessmen may cut half his staff, with that Cut rarely reaching to Custodians. David Card could easily find Unemployment rates do not vary drastically with Minimum Wage increases.

The McCulloch argument is countered by the very real labor demand all Business faces of Labor unrest, if labor category Wages rate ratios are not maintained. Minimum Wage increases invariably lead to Skilled Labor demands for Raises. lgl

Arbitrage and Bad Signs.

There is an excellent article in the NYTimes which outlines Milton Friedman's 1953 argument on Speculation. He basically states that Speculators could not continue to Buy High and Sell Low over the long-run. He thereby attests Speculators stabilize Prices. Dell asserts that Speculators can affect immediate Pricing, due to their inexperience and flush funds. Mr. Dell is correct to assert that Speculators can affect present Pricing, but wrong in his analysis. Speculators must be very experienced to profit immediately. Friedman ignored the fundamental principle that Speculation is Short-term in character, with the process of dredging Short-term profits from quick Rollovers. They buy quietly as the Market begins to slide off the Top Price, until they have a Hold position, then start to buy minor amounts at high Offers. They finish by selling their Hold position to the Herd stampede Buy which they generated. They do not lack experience!

Durable Goods were very disappointing in July, and not just in the area of Transportation. Manufactured Durable Goods seem good, but without Defense Goods, everything gets a little shakey. There is a definite softness in Managerial Scheduling.

India begins moving to control foreign investment. India has not had the security apparatus utilized by China, which the later has used effectively to control the flow of funds into and out of the Country. India starts to realize the danger of unhampered flow of Capital, with its sudden potential disappearance. India will commence with simple Security measures, but will quickly emplace Economic Fail-Safes. This, along with the Asean Agreements, will soon slow the rapid transmission of foreign investment. American Corporations may even have to pay their Tax burdens, as foreign Investment ventures disappear. lgl

Inequality and Government Policy

Paul Krugman wrote a NYTimes column recently which caused a Blog furor. Many of the Majors wrote on it. What follows is a list of most relevant Posts, Clicks will lead to the commentary.
Andrew Samwick, Mark Thoma, Brad DeLong, and Greg Mankiw. The Readers may be bored at this point, but Someone may want to check the original Pual Krugman for his Thoughts on the matter, which has been around for awhile. One might also ask why I have delayed writing on this Issue, and I can only say I wanted some prospective on the Argument.

Does Government polices actually affect Inequality?
I agree with Krugman more than with the Others-including Thoma. It does indeed impact pre-tax Income, mainly in the arena of managerial Wage and Product Price settings. A higher Business Tax and Personal Income taxation will induce higher Wage grants to minimal Wage employees, while reducing the incentive of productivity Wages. Even Business Profits assume less desirability, and so generating less inflationary pressure on Product Pricing. Contraction of Tax rates around a norm, though Stepped, gives incentive to Managers to search for forms of economic profits above normal Business profits.

Do Higher taxes actually reduce Investment Capital?
Here again We are faced with a common homily. Every Economists unites to proclaim lower Taxes (more compressed Steps in the Tax rates) promotes Capital aggregation, and thereby Investment. The trouble here lies in the proliferation of Tax Breaks of every kind to Business, which obscures the actual effect of compressed Tax rates. It is further confused by the fact there is little evidence of Tax Breaks actually producing viable Capital investment; they mainly being known for Production of submaximizing Profits for tax purposes, and Paper instrument investment inflation (such instruments actually hamper Production with an additional Cost of excessive Investor payments).

Do Government policies impact Inequality of Incomes?
Most certainly! There remains much difference between a 20% Tax rate on two Incomes: $50,000 and $50 million. Economists never quantify impact of Tax rates on Living Standards, and there is no doubt that reduced Tax rates on the Wealthy must be made up in some form (including the future taxation of Public debt) by the Economy as a whole. The forms of Taxation also often discriminate against poorer Incomes, forcing a greater devotion to Consumption over Savings (showing an inverse relationship with compressed Tax rates). I will not even enter into the Issue of Corporations moving taxable Funds overseas as early as 1995, in expectation a potential Republican Administration and Congress could gain compressed Tax rates before The Taxman Cometh. lgl

Rites of Spring

It is Fall or thereabout, isn't it? I have been reading about Immigration today, and I was reminded of the James Michner novel; excellent Read, but then again, it is a Period piece which might be misunderstood by newer Generations. Why does it remind of the novel? It was Michner's attempt at a Coming-of-Age novel. The Pieces read today resembled the trevails of Youth.

The Washington Post article stated the CBO accounted the Cost of the Senate Immigration Bill, if turned into law, would cost some $126 billion over ten Years. Dean Baker said this was a gross exaggeration of the facts, based on a previous CBO estimate on the intent of the Sponsors of the Bill made earlier. He claims that the Bill would cost no more than $35 billion over the decade. There are two very bad aspects of consideration! The First is legislation rarely conforms to its Sponsors' desires by the time is passes whatever House it is aired within, such places known for Special Interests, Add-Ons, and Pork Barrel. The Second states that the CBO does not bother to consider the intent of Anyone, simply evaluates what it will cost if passed into law. It was the bad Wording which was approved by the Senate, not the Intent.

The New Economist also had a blog contemplating Bulgaria's introduction into the EU, along with the present relaxation of Immigration rules from Bulgaria to Britain. The Author suggests that Bulgaria has too high a level of Corruption, with a Criminal class on the order of the Russian mafia, whose Eyes are on Western Europe. Of course, what is new about this? It is always Criminals who find it easiest to migrate.

Short Word on Immigration: It is the Traditional route of native Business to recruit manual labor without the horrid prospect of granting a Living Wage. The Immigration law should be much simpler: State that Guest Workers would be allowed, but Immigration allowed only in native Employment Agency busses; said Agencies accountable with heavy Fines for the geographic position and Job of every Worker. lgl

Trade Advantages

Tyler Cowan has an excellent Post today on Trade. Be sure to read the Overview on Comparative advantage. One needs to read Tyler's last paragraph on the relevance of Fixed Costs in consideration of Trade. Fixed Costs in Trade include all the immediate Production Costs involved in obtaining the Trade Goods, the Distribution Costs of trading these Goods, and otherwise finalized Communication Costs of Trade. These things must all be considered in terms of Trade Cost, but there are additional elements which also must be studied.

The Variable Costs of Trade must also be fused into the equation of Trade Advantage. What are the Variable Costs of Trade, you may ask. Well, the answer is We start to drift into Space! The Variable Costs are certainly present, but are hard to catalogue. The probable easiest to list is the Educational Cost required to retrain Labor after a shift to specialized Goods for Trade. Previous Employment contracts as old technology is discarded; creating loss of Labor Income, Retraining Costs, and substitute Welfare payments to replace lost Income. Another element here resides in a basic conponent shift in Labor rolls, the new technology necessitating a greater or lesser Labor force (almost universally Labor reductions with complement Welfare payment increases). Trade Advantage can easily be canceled by the Educational Cost of Trade alone.

There is also the Cultural Cost of Trade. What is this? Introduction of Trade levels past a certain extent alters the basic Wage/Salary/Profit ratio of the entire economy. Increase of Trade changes the Wage scale of not only the Labor involved in the Direct Trade area, but the Cost of Professional fees, special Skill Labor, and shifts the Income attainment of Propertied Interests tied to the pre-Trade mix of Economic activity (not to forget the Static Income elements whose Income was tied to Pensions, etc., of the old technology Products). Other Costs derive from revision of old Income allotments (like Insurance premiums, basic Utilities Costs, medical treatment Costs, etc.).

There are the Economic Costs of Trade. Elements here include increased Infrastructure Costs to distribute Trade products--almost always borne by the Communities, not the importing industry. Materials Costs increase or decrease relative to being Complementary or Competitive to Trade Goods manufacture, again shifting the Wage/Salary/Profits ratio of native competing industries. There is a final Cost in the required Skill level required for advanced Trade, where a certain segment of Labor cannot attain the advanced Training. Trade is an Icon of Economists, but can definitely be the Enemy of Labor and Management. lgl

The Why of Bloging

Much question has been given over on why people read Blogs. I say equal time should be granted for the question of why people blog. The reason why people read blogs is easy: people short on time read bloggers who they have found to be trustworthy and provisional of links to articles and Threads of interest. The reason why bloggers scribble so continuously lies in their desire for recognition, almost All knowing it will be only a fleeting thing of little intrinsic value; never seriously contemplating any real money deriving from it. I, on the other hand, am in it only for the money, knowing full well I will never see a Penny come from it!

Any desirous of serious Comment at this point should check out this NYTimes article about a Congressional Research Service study. The Defense Dept. states We are spending about $6.8 billion a month ($81.6 bn/Year), but the Study suggests the likelihood the price tag for Iraq alone to be some $8 billion per month ($96 bn/Year). Neither estimate considers the Replacement Costs of Munitions and Equipment in the calculation. This Author feels the total Cost of the two (Iraq and Afghanistan) will average in excess of $11 bn per month ($132 bn/Year) with a $2 bn per month Cost ($24 bn/Year) for Equipment and Munitions Replacement. Blowing up the infrastructure of a Country is not cheap. lgl

Public Transportation

Comment this Week has been replete with discussion of American Car companies cutting their Production schedules. The basic reason: Retail Gas station Sales reached 10% of Consumer purchases (in truth, this Author awaits the revised numbers as it seems large). It still portends depressed Sales for the SUV/Pickup lines loved by the Big Three for their enlarged Profit Margins--if they can be sold. There is the Problem!

This transition has been long in coming, Americans intent on overspending their Incomes; Many falling into the practice of drafting equity from their Homes for Consumption. Now the Housing market is falling, and large reductions in Consumption can be estimated. Business is trying to find a format where they can continue to turn a Profit in the new environment, Households attempt to reduce Monthly expenditures, and rural areas (who have not matched the Pay increases of the urban areas) struggle to meet the increased Energy bills with their own longer routeing.

Car dealers should consider getting into the modified Public Transportation business. It is time to utilize all those excess SUVs and underemployed Salesmen and Mechanics. They need to attempt to capture the Commuter traffic! Advertisement could fill SUVs with Employees who are offered cheap transportation to and from Work. They could also fill SUVs with Shoppers with the addition of Carry-all trailers. Car dealers must evolve in Transportation networks which do not ignore Those who cannot pay for their own new vehicles.

Fuel can be saved with announcement of Timed Routes in Area pickups, but with Curbside service; requiring only telephoned, short notice. Little old ladies (I should not be Gender-specific) will flock to Transportation with a Driver willing to carry bags and packages. Reduced traffic during Rush Hour will not only save Time, but also Gas. Many assigned Drivers can be switched to their Day-jobs of Salesmen and Mechanics during Showroom hours. It will be easy to cut Gas consumption to One-Third that of Individual transportation even with Curbside service, and individual radio and CD sets with Earphones per seat will achieve demand for the Service. People must get inventive in the midst of Recessions. lgl

Modern Business

Chinese Central Banks are worried, but the NYTimes article misses the major worry of Chinese leadership. Chinese families place most of their Savings in Banks (averages about half their Income), and the major criminal element in China are bankers or Those to whom they lend funds. The level of corruption in the Banking system in China probably exceeds any other nation. Uncollectible loans are a way of life in Chinese banking, and a probable 30% of major Bank loans are issued with no expectation of repayment. Bank officers get a healthy kickback on such loans, while the Borrowers scam out their take through excess Operating Expenses and Salaries before Bankruptcy. The Depositors pay the price of the Scam, while continual new Deposits hide the loss of funds.

The real worry of Chinese leadership stands as twofold: first, the growing quantity of Plant, Equipment, and land being left empty by shelled-out projects, and; the increasing Chinese lifestyle threatens to lessen the level of Deposits, so that there may be an approaching Bank Scandal because Deposits may not be redeemable. Leadership must suppress Consumption until Bank profits can provide the needed Cash, but Chinese bankers refuse to surrender their corrupt ways.

The London Exchange moved to protect some heavy Player Short-Sellers. Nickel had a $300 per ton per Day limit on Short-Sellers who could not supply the metal; clear protection for the Short-Sellers. The nickel, which is used to make Stainless Steel, has more than doubled in Price this Year, and Exchange warehouses have barely more than 15% of last Year’s supply. The interesting note, here, lies in nickel Producers attaining monopoly pricing of their Product through claimed Production problems at Mining sites; does it remind of the Oil industry.

A last Note: About half of Hatch, N.M., Chili crop was washed out by rain. Hatch is a wonderful town only a half-hour's drive from where I once lived. It is sad, as they raised some of the best jalepenos in the World. The economic consequences are bad for the town, and the Deming Processing plant will import a greater percentage from across the border. The trouble comes in an inferior Chili at higher Price with more Imports from Mexico, and higher Costs for American Farmers. lgl

Run for Bernanke's Job?

Tyler Cowen is an exceedingly good Economist, and his Post “Why I disagree with Milton Friedman” (http://www.marginalrevolution.com/) stands as self-explanatory. His use of the Swiss example of the 1980s proves his knowledge of the Subject. I myself am opposed to the fixed monetary rule as proposed by Milton Friedman. The trouble for me results in my distaste for the floating monetary rule as well.

My belief holds that volatile Short-term Interest rates are necessary for the proper functioning of the Market. The lack of this volatility secures the practice of Stock Options, removes Business suppression of Wages in negotiation, impels excessive construction of Consumer Credit, and leads to low-Profit Capital construction. I like Short-term Interest rate volatility.

My Solution is to peg the current Money Supply, and let the ‘Creative Destruction’ of that Peg flow through the Market. It would intrinsically increase the value of present Capital Construction, lead to extended Productivity of such Capital, allow Market reduction of extreme levels of Consumer Credit, and reintroduce a Savings rate into the American economy. I would even go so far as to accredit it with a potential to reduce the level of Imports, and increase the level of Exports. I doubt it would have any impact upon the current level of Employment. lgl

The State of the Economy

In July, of 2,625 explosive devices, 1,666 exploded and 959 were discovered before they went off. In January, 1,454 bombs exploded or were found.

The Quote comes from an article based on a new Report of the DIA. One unidentified high-level Defense Dept. Official states:

"The insurgency has more public support and is demonstrably more capable in numbers of people active and in its ability to direct violence than at any point in time."

The Article goes on to catagorize:

Yet some outside experts who have recently visited the White House said Bush administration officials were beginning to plan for the possibility that Iraq’s democratically elected government might not survive.

Meanwhile, the CBO suggests that the total Federal deficit will be $1.76 trillion between 2007 through 2016. The telling point of the AP article on the CBO Report states:

That is based on an assumption that the deficits will shrink dramatically beginning in 2012, reflecting the fact that Bush's first term tax cuts will have all expired by that time. The president is working to get Congress to make those tax cuts permanent.

It seems We are fighting a War which is lost already, and it is driving Us into Bankruptcy; though We must not discount the power of the Bush Tax Cuts. Why were the Bush Tax Cuts initiated? To fuel the Economy remains the common answer. This Economy with the Tax Cuts never matched the rates of Recovery from previous Recessions, which did not possess the benefits of those Tax Cuts. Some Economic Indicators point to a coming economic slowdown, with soft Employment, weakened Housing, and relatively static Manufacturing. There appears little reason for Bush to desire making the Tax Cuts permanent, except for the Wealthy to keep their preferential Tax breaks. lgl

Wages and Housing

The Tax Policy Blog has a good article which quotes Chris Edwards from his Washington Post article, but does not paraphrase the most important element:

Why is federal compensation growing so quickly? For one thing, federal pay schedules increase every year regardless of how well the economy is doing. Thus in recession years, private pay stagnates while government pay continues to rise. Another factor is the steadily increasing "locality" payments given to federal workers in higher-cost cities.

This can be combined with a BLS News Release which states:

Average weekly earnings rose by 4.1 percent, seasonally adjusted, from July
2005 to July 2006. After deflation by the CPI-W, average weekly earnings
decreased by 0.1 percent. Before adjustment for seasonal change and inflation,
average weekly earnings were $571.48 in July 2006, compared with $542.49 a year earlier.

combined with:

U.S. single-family housing starts fell 2.3 percent in July to an annual pace of 1.452 million units, the slowest since May 2003.

Overall housing starts were down 13.3 percent from July 2005. Total housing permits were down 20.8 percent from the same month last year.

This means that the 62% advantage of Federal Employees over Private Sector Employees will increase, while Total Compensation for Federal Employees will increase even more rapidly (now standing at twice that of Private Sector Workers). Reminder to myself: Check the growth of Federal Employment. A 20% drop in Housing Starts average What?--a probable 31% drop in Construction employment (including Supplier Payrolls and maybe a 9% increase in Emergency Room visitations?). lgl

Economic Growth

Timing remains everything in Economics, and curtailment of foreign investment in the U.S. economy may have already started in Q2, though any indication as yet is small. What if the downturn is real and will accelerate in following Periods? It would mean foreign confidence in American economic growth is waning. This lack of confidence will, in itself, act as a self-fulfilling prophecy. Government, industry, and Consumer will be compelled to reduce their economic activities, lacking the revenues to continue current trends.

Where does the World stand in terms of economic growth?

The World Population grows, but it is also Ageing, so the percentage of Working Age Population is declining as a percentage of total Population. This was previously true only for the basic Developed Nations, but the reality collects more nations yearly. The entire World will be looking for Labor within a score of years. Mining Operations (for everything from Oil to Iron and Minerials) have scraped off the surface deposits, and while there is still plentitude, the wealth lies deeper and harder to mine. It will take more technology and Labor to extract, and a greater level of Investment. All will require more Energy and Time, so less material will be brought to the surface for use. Reduced Economic Growth will come as Time passes, but what will it mean?

Many will think loss of Standard of Living. They will be wrong! We cannot lose any of the Standard of Living, without loss of the Labor elements to be drafted from the Population. What will occur is transfer back to Mass Transit modes, development of Long-Life Products, and Housing which maximizes Agricultural reclamation--not luxury living. A cessation of actual economic growth will alter Business practice as well, not least removal of Stock Grants and Stock Options from the Benefits package--as they have turned into drect erosion of Stockholder equities. Skilled Labor will be the key to success again.

Could I be wrong?

I estimate this World cannot acquire even another billion of human population, without the acute shortage of Potable Water. Fresh Water is already at a premium, and current Business practice shrinks the available amounts daily. Agriculture and Animal Husbandry itself necessitates a heavy degree of Water, mostly Fresh, and the human population cannot survive without them. We need to replace forest, and other sources of CO2 conversion. We need to start Today, to built for the future. lgl

Basket of Goods

John Whitehead has posted an article, Rounding Error, outlining the Bureau of Labor Statistics consideration of more precise rounding of data for the CPI. My own idiot Thought immediately was why no consideration of the Producer Price Index as well? The reportage since 2001 has seemed somewhat politically biased. Why is Core Inflation indexing so often utilized, without pronounced publication of Overall Inflation? Why is there so little discussion of Year over Year Inflation? Where are the Tables showing economic growth rates over the last 50 years? Why does one have to dig to find the old Breakdown tables of Federal Spending these days?

There once was a Time when Economists could discuss the Economy in a straight-forward manner, then We went Open on the Internet, and Economists became Journalists. Numbers which were previously analytical now approach the grandeur of Press releases. Where are the Days where One could easily adjudge the Inflation rate for an entire Presidential term? Did DSL kill the honest Economist?

Other News says Yasuo Takei is dead in Japan. The second richest man in Japan, he is probably the first of the New Age Capitalists (format like Gates and Buffet) to die. Age catches up with Us all. lgl

Oil Recession?

The WSJ had an Econoblog August 11th, Will Oil History Repeat Itself?, between James Hamilton and Stephen Brown. Both accept the posis that the rise in Oil pricing resulted from the growth in Oil Demand Worldwide this time, rather than specific Short-term Oil Shocks as in previous Oil-induced Recessions. Each ascribes in some form to the proposition this latest Run-up in Oil prices did not incite either Consumer or Producer cutbacks, due to the Housing boom building equities and Consumer choice to expand Credit Debt with equal contraction of Personal Savings. This author also concurs with the sentiments expressed.

The Question becomes will this condition persist?

Hamilton fails to provide clear comment, but Brown suggests an economic slowdown. Study of the elements of the current Consumption choice must be made. The nature of Consumers has changed in the interval since most of the previous Recessions. Consumers of previous Recessions, along with Producers, were graduates of much harsher economic times; especially the crucial Middle Class buyers who were the children of the Great Depression. Younger Buyers in these earlier Recessions had experienced the hard times in Employment after the end of the Vietnam Conflict, and the hard Economic policy of the early Reagan era.

The current list of Buyers were either too young, or firmly emplaced in the economic structure, and did not suffer from the duress of the later Recessions. They are the first Generation totally comfortable with Credit Cards, Debit Cards, and Overdraft insurance. Their Wages, Salaries, and Equities have been rising competitive with the Inflation rate, also gaining in Work experience so that normal Wage increases for Productivity have also applied. They have not seen the Bear yet!

The trouble comes in that their Home equities are decreasing, their mortgage rates are increasing, their Credit Card balances are at an all-time High, and probably, Work Incentive bonuses and Seniority Wages may have maxed. The Need is to keep them Buying, but they have not learned the methodology of how to stretch their Paychecks, or economize on the Entertainments. The Need may be a tough Sell. lgl

A New Educational System

An article in the LATimes (courtesy of Greg Mankiw) led me to contemplate my Thoughts on Education. Milton Friedman advocates deregulation of Education as espoused in the article. I imagine this may actually be backing away from the problem of poor Elementary and Secondary Education in this Country. I will advocate the economic advantages of more significant regulation–again the Devil’s Advocate.

The current system does not assure acquirement of the basic skills associated with each Grade level. Teachers push the Students through each Grade so they can ‘stay with their Class’. Only about 20% actually learn the material, 30% field the basic elements sufficiently to match the superior 20%–though later dropping the essence of the material, and 50% express inferior grasp of the basic in one or more areas of study. Does this sound like an efficient system?

I would call for a complete revolution in the Educational system, but one which would benefit All, not just a certain segment of Students. My Concept is to establish Grade, Secondary, and Remedial campuses, like unto College campuses. Here We get much greater regulation, with all Students living in dormitory facilities (Parents finding it necessary to check their Students in and out only on specified days). Study Periods would be mandatory (but with Instructor assistance), Students would have to test out of all Subjects, never advanced in any area until proven to have achieved a quantified mastery of the Subject; complete discard of the system of Grades and Grade levels. Each Student would attend until the appropriate Age has been reached.

Parents would be freed of the burden of Child Care, except in the entertainment Periods assigned (of necessity being very liberal as We are talking of children). Instructors could instill common goals and discipline on all Students; while at the same time, being supervised for proper behavior on their own part. Employers could ascertain the strengths and weaknesses of potential Employees far better with access to these records, while Students would have already attained a disciplined Work Ethic with years inside an institutionalized form of Workplace. The Total Costs of such a system would actually be less, as Parents paid in Taxes, rather than in Subsistence Costs, Spoiling activities, and Supervision Costs. lgl

Soft Landing

EDmund Andrews had an article where he expresses the doubt of many Economists that the Fed can effect a 'Soft Landing' slowdown of the Economy while suppressing Inflation. Some excerpts:

Many other economists contend that inflation is more entrenched and will be more painful to reverse than the Fed thinks. Others predict that inflation will indeed subside, but only because the economy will weaken much more than the Fed is expecting.

To be sure, economists differ on how weak the economy already is or how severe inflation pressure is. And skepticism abounds on the chances of achieving a true soft landing.
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There often is depressed Thinking when economic activity stands less than robust. One Economist cited in the article, Robert Gordon, even states the Economy is ripe for stagflation. Can a Soft Landing be affected? Certainly! How?

The major detriment in the Economy at the Present is Government Spending. There are methods to curb such Spending, though no one inside or outside the Administration likes to speak of it. The easiest and sole way to curb Government Spending is to cut Defense Spending. We need to get out of Iraq, get out of Afghanistan, and slash almost all Weapons development.
Sound like Treason? It is not!

Iraq must establish its own Government and Society, as must Afghanistan. Nothing which American troops can do will forestall potential Terrorist Recruitment and Training in either nation post American occupation, and leavetaking is to the benefit of All. The United States military is the most technologically-advanced force in the World, and cutting Weapons development will not hamper this supremacy more than marginally; easily rebounded in the face of Threat with the Research already accomplished.

Cutting U.S. military contracts would save the most Federal revenues at the least Cost. Far less personnel would face Unemployment, and they would enjoy greater advantage in finding other work. The households of these Employees are among the most inflation-generating of all households, spending widely and rapidly on the entire range of Consumer products. Cutting military contracts would reduce Materials Demand about 8-11% for Metals, 4-12% for Energy, and take the edge off Wage Demand. Just because Politician and General state We require such Expenditures for Safety, does not assure that the Need is even real.

Why have I brought up all of this? Cancellation of those military Contracts will rid the American economy of inflationary pressures, without supplying any real suppression of the economy at all. Unemployment is minimized, Business Profits are predictably cut by about 15%, and draft of material resources will be cut so that materials Pricing could witness a 10-30% drop in prices. Is that likely? As likely as the Fed getting a Soft Landing out of the current mix. lgl

Terrorism 2

Greg Mankiv provided a excellent Paper to be read. The Authors, Alan B. Krueger and Jitka Malec’kova, established a sound base with which to understand the economic base of Terrorism. It exists, and is the driving force behind Terrorism. The place to start comes from two Quotes from the Paper:
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Definitions used by scholars tend to place more emphasis on the intention of
terrorists to cause fear and terror among a target audience rather than the harm caused to the immediate victims. Also, scholarly definitions often include nation states as potential perpetrators of terrorism, as well. We readily acknowledge that the line between terrorism and resistance can become blurred.
and,

Nevertheless, the evidence we have assembled does not indicate a connection between poverty and terrorism, and we are not aware of compelling evidence that points in the opposite direction.
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I disagree with the assessment that the intention of the terrorists is to ‘cause fear and terror among a target audience rather than the harm caused the immediate victims’. The goal in terrorism remains the capture of Popular Support and funding through shown activity, from their base of support. Like any Political movement, funding and support dry up in the face of inactivity.

The involvement of the Educated in support of Terrorism comes from actual personal relationships with the Terrorists; the overwhelming breeding ground for Terrorism comes from highly-educated children of the basic Haves of their native society. Why?

Economic growth of underdeveloped nations is the culprit. These societies produce far more talented, trained Educated than their native societies can employ. These Educated must endure menial Jobs if they return to their native societies, or find employment in foreign economies with a alien culture. These Individuals feel isolated and abused in their foreign employment, and turn their anger against the foreign cultures who they are forced to be a part of. Terrorism is a method to gain stature and improvement in lifestyle in both native society and the foreign cultures in which they feel they are captives. They seek to return to their native lands as Heros. The Paper highlights the fact that the basic Poor and Laboring Classes express less enthusiasm for Terrorism than do the more educated and well-off in the native societies. lgl

Understanding Terrorism plus

Arnold Kling provides a good article, The Age of Post-National Warfare, on the failure to counteract Terrorism. I personally do not agree with him in his approach of it being a Blood Feud warfare. Categorization of Terrorism actually limits the boundaries of the defense. It still should be read for the quality of it’s comments–a typical Kling quality.

The basic underlying drive behind all Terrorism resides in the Have-Nots of any society attempting to displace the traditional power of the Haves. Terrorists search for a Cause which the majority of their society will support; once found, they have acquired Popular Support, and can always find some segment of the Haves to provide funding for the Cause. They do this, even though the rise to power of the Terrorists diminishes the class power of the Haves. No Terrorist has ever been very religious, or of high Principle. Suicide Bombers only exhibit a Terrorist’s power over the more destitute of their own society, granted by the strength of Popular Support. Terrorism has been with Us throughout human history, it’s modern version tracing its roots back to the 1825 Officers’ Revolt against the Tzar of Russia.

Other News
The NYTimes and AP both have articles on Water Management today. The Associated Press article holds real interest, because of down-the-road implications about Meat pricing. The Crisis of Potable Water will be as great in a decade, as is the Oil prices of Today. lgl

Advertising

There is a major movement (behind the Scenes) to change the basic format of Advertising, with redesigned technology which will prevent Consumers from using their own equipment to avoid advertisements. Soon DVDs and TVs will prohibit scooting past commercial Ads. Many Businessmen witness this process, and think that it should go further. It will. Another decade will see the debacle of Internet Users forced to sit through Advertising, before they are able to arrive at their desired destination. Many of You may think the time has already arrived, but you do not know of which you speak; negotiations have already opened with Internet Service Providers over selling captive audience periodic overrides which must be watched. The alternative to this Advertising will be lack of Service.

We already face DVDs which will not fast forward through Commercial spots. This Author is old enough to remember the major Selling point of original Cable TV: avoidance of Advertising. I do not believe any Cable network has ever ran without Commercial advertising, even from it's inception. Business and Advertisers are set to invade the Internet, and your basic Internet User sits complacent. They currently demand We pay for Hookup, extract a monthly Service fee, and populate all Sites with stationary or Pop-up Ads. When will it stop?

Children will eventually reach my Age, though they refuse to believe it. The current technology crafted for Business by Business will one day insist they watch old Commercial Ads (some undoubtedly already for out-of-business Concerns) simply to show their children Old Favorites. Another elementwill also intrude: more and more Airtime is being consumed by Advertising. The system is also inefficient: I once estimated that only One-in-230+ actually ever bought any individual Product advertised; Business relying on millions of Viewers of said Advertising to achieve their Sales goals.

Advertising will be regulated some day, but only after Consumers are sufficiently angered to demand Change. People will be paying high Prices for Entertainment which will grow to be One-Third advertising or greater. People will be paying for Internet Service where they will be forced to watch maybe Two hours of Advertising per Day just to maintain access. Consumer Airtime is valuable as well, and they must accomplish in their Day. Control measures must be studied. lgl

Where are We at?

Ben Stein has a Commentary in the NTImes today, and Anyone who can access it should. He provides insight into many areas, and makes the declarative statement:

In total, profits are by far the highest they have ever been, running at a rate of very roughly $1.38 trillion in the first quarter of 2006. As a percentage of gross domestic product, profits are also the highest they have been since the statistics began being kept in 1959 — roughly 12.7 percent.

Ben is the Commentator of known reputation, and often grants shrewd insight. The statistics above are probably true, although there will be revisions before We arrive at total determination of exact numbers for 2006. What possibly can be said is Total Profits will undoubtedly reach over $3 trillion for 2006. We are over halfway through the Year, and baring absolute collapse, Profits will not shrink below 10% until the new Year.

Other Aspects of his commentary could use a little explanation. He questions the persistent American discontent with the Oil companies. A simple explanation for All: The Oil companies, counting Executive bonuses and Stock options, were making approximately (17%?) Profit overall Average when Oil was $36/barrel. Today, Oil companies are drawing about (17%?) Profit on average, excluding Executive bonuses and Stock Options, on a higher Volume of Oil (no numbers without Search, but think over 12-14%). Their Labor Costs have at most increased by 20%, and their Capital Costs by a probable 10-12%. Does it make Anyone desire to join the Oil industry.

Ben wonders why Retail and Trade Labor is not getting the Pay Raises normally associated with an increase of Profits--what he considers normal practice, but something which realistically occurs only with the presence of a strong Labor Movement. Study of 19th and 20th America states that prior to WWII, outlines Pay Raises came only with Strikes. The low rate of Employment, combined with Immigration, keeps longterm Wage rates static. The low Labor Participation Rate highlights the American Change, when before Americans used to Work for a Living; now, they accept Welfare or live off Profits. Some Economists may even admit that the later two forms of Subsistance are the most expensive forms existent, and will eventually kill an Economy. lgl

Pension Law

The new legislation holds no real gain according to some Sources--both Economist and Journalist. This Author holds the suspicion it contains the same incompetance average as all the rest of the passed legislation of Our new Century. Pensions reside beside Concert Tickets in the realm of Scalphers.

I remember (you kids are too young) when People used to talk about fully-funded Pensions, and even comments of independent Pensions (Danny Devitto playing Larry the Eliminator). It would be nice if Pensions were once again considered Labor payment, instead of Corporate dodge to obtain a Savings ratio for Capital Investment. How did Pensions become a Slush Fund for Corporate Managers? Maybe We should ask Devitto.

The current Pension legislation only continues in the tradition of the Corporate Raiders, with Pensions still resemblant of the Social Security Fund, and Corporate leadership telling all Americans they must personally invest and Save for their own Retirement. I may have missed something somewhere (I often do), but wasn't the idea of Pensions to achieve a standardized form of Savings for retirement for the more mentally-Challenged of Us?

Why is it every time We design a institutional security for Labor, who are too busy to keep proper track of such exterior activity to their own economic effort, Corporate Raiders always seem to denude the program of adequate funding and resultant security? lgl

Why I Blog

Several bloggers today comment on why People blog, varying from high academic tones to down-to-earth bull; generated by a article on why Economists blog in The Economist (I provide no links because they are all ove the Net--just Search). I search my soul for an answer to why I myself blog, and it is simple: to be read! I have written many books, all assumed to be too short and too expensive (Many claiming they were insufficiently researched, though I had written them in Cliff's Notes style to aid Anyone interested in the study of Economics without confusing detail). They did not sell (I contest Those who comment the Works were boring--Not So!).

Why I have come to enjoy blogging, mainly because of the freedom given to the medium. I will give a Case in Point, where no one will be able to discern whether I am discussing the matter Tongue-in-cheek, or am serious in intent:

A NYTimes article today described efforts to eventually turn Georgia Peaches into fuel for Cars. I immediately leaped forward with a great innovative Thought: Why limit Oneself to sweet Peaches, when Grocery consumption of Peaches would rise in Price with the competition of fuel distillers? Why not any type of fruit? A vast burst array of possibilities appeared in my mind's eye.

Riverlines and hillsides traditionally were deep in all forms of Berries before the day of intense agriculture. They are naturally acclimated to the territory, and need no excessive work to facilitiate production. These type Berries are extremely erosion-resistent, are of high natural productivity, and would lower Grocery Store Price for these Berries with proliferation. My mind wandered on: these Berries were of high Sugar content, and would make excellent alcohol sourcing. My mind traveled far afield: These Berries are produced by bushes which would made fine impediment barriers, We could plant all Road ditches and Interstate medians to these bushes; cutting the Cost of artificial barriers while the bushes would do an equally good Job except for possibly scratching the paint on the vehicles. A $2/hour Minimum Wage increase could put another 5 million Americans at work at Living Wage as Pickers and Pruners--first needed as Planters. Quick Thought on Costs: Mass Distillation of such Berries could be obtained for about $.40/gallon, Labor Cost would be equal to about $.70/gallon, and Total Production could cut maybe 15% of Our Fossil Fuel use.

And People ask me why I blog! lgl

Green Energy Production

This Author has claimed since the 1070s (yes, I am that old) that the United States needs to develop the technology for Energy production from Water--oceans and rivers. The failure comes mainly from a conceptionalism rooted in huge structures and massive machines. It is the wrong approach.

Conceive of lines of Generators set up like ferries. Basic barges run lines across major rivers (equally useable in oceans), pulling them up and laying them down periodically for maintenance and cleaning. Spaced along these Lines would be generators made to lay along the bottom like Crab traps to prevent fish mutilations', connected at the origin point to a trunk line to draw off the electicity. Every barge could run about 15-20 Generation lines, connecting to the trunk lines by easy connection Twist attachments and Safeties. The entire system must be designed for simplicity, maximization of pwoer generation, and periodic maintenance service. Simple and Cheap is the key?

Elsewhere, the Institute of Supply Management index is down to 54.0 in July, a drop of some three points (score of 50--economy is supposedly still growing). The trouble here lies in the fact that the ISM index is a fairly solid forecaster of trends. The economy is definitely slowing, but by how much? lgl

Fidel and Tax Compliance

There is no relationship in the two elements of the title, but this Author found some amusement in linking the Two: I am sure Fidel would be all for tighter Tax compliance. The man, though, has turned over the Cuban to his younger brother Rauel (spelling?). It seems unlikely that he will ever return to the World stage, approaching 80 yrs. old, and another Cold Warrior had bit the dust. His brother lacks sufficient political capital to make a transition of the Cuban economy to a modern-Day economy. He will not last much longer than Fidel.

Alicia Hensen has a good Post on the cost of Tax Compliance, which she states makes up some 22% of the total Income taxes paid. This is based upon a January 2006 Study by Hodge, Moody, and Warcholik. I make no attempt to deny the statistics, yet feel it is a might too high. Much of the Accounting Cost to Business would need be made anyway, as Operating Debt justification and Production Accounting. Business assigns such Accounting to Tax compliance for Ranting reasons, and mollify Investors. Hensen and the Others have some justification in adopting the fictionalized 22% Compliance Cost assigned to total collected Tax revenues.

Here is where I really get myself in trouble!

The Federal Income Tax law is a jungle of provisions extending back to its first application. Deductions, Exclusions, Exemptions, Preferments, and Tax Credits abound without estimatable boundary. They are composed of the Standard, commonly-recognized reductions of Tax burden, then follows the quicksand of special provisions, for which All need the aid and assistance of Tax Preparers; who consistently get it wrong as well. Now comes the Problem! Past the Standard reductions, which Anyone can figure, I estimate the special provisions may save individual Taxpayers no more than 7% of the demanded Tax revenue, while Business is saved at most about 12-14% of the Tax burden. It is clear that special Tax considerations are uneconomical! A standardized, clear Income Tax is the most economically efficient, and least burden of Compliance. lgl

Minimum Wage

What really determines Legislative decisions like raising the Minimum Wage?

We can discount Economic theory, as Economists generally insist that Minimum Wage levels retard Hiring and total Labor employment. I somewhat doubt this rationale! It seems to me that Hiring occurs whenever there is productive labor to be performed, with Businessmen moaning but still hiring. A Posting today suggested difficulty of Firing led to reluctance to Hire. The United States remains easy to dismiss excess labor, whether through Firing, layoffs, downsizing, or forced Retirements. It does not seem the basic force behind American business refusal to Hire at speeds of previous times.

We have witnessed Outsourcing within the last two decades, but a special Outsourcing; it not be a question of American productivity or Production Cost, simply that greater Profits could be realized by foreign production. Corporate leadership realized this fact, but forgot it was based upon certain underpinnings. The real constant need was American Consumer Demand. The later had to stay high and constant, else foreign production lost its Profits alure. Production has to be sold, requiring a solid market.

Why the interest in Minimum Wage today?

Corporate leadership recognizes Trends in the economy even faster than the Fed. They noticed a slaking in Consumer Demand, especially in Transportation and Energy-consumptive Products, though consistent across the economic spectrum. Consumers are reaching their Credit Card limits, and their Home values are dropping; many having high, habitual monthly Costs in Mortgage debt. They glance at Minimum Wage laborers, and visualize a scenario: A $2/hour Minimum Wage hike often enough means a $64, $80, or $96 a Week increase in labor incomes; translating into a rise in Credit Card limits without any significant rise in Taxes upon it. Again, it is Christmas for the Corporations.

Jeff Cornwall has a nice article on self interest. His contention stands as self interest does not necessarily mean greed or failure to meet social commitments. I am not sure this spread of self interest motivation can be assigned to the Corporate structure. lgl