Different Philosophy

I had written a Post which admittedly was not of high quality, then proceeded to lose it in a fantastic Slight-of-Hand on my computer. I will undoubtedly come upon it at some unopportune time in the future. It basically contained some idiot links to unimportant Web pages, now lost in the ozone. The entirety remains no great loss to humanity, simple criticism of the American Dental Association, the current trend of Advertising directed at children, and the misdirection of effort in Budget-cutting in the attempt to downsize the Federal Government. An unexciting mix is it not?

I had already written the title of my Post, though, and the subject fascinates myself, so that I am free-wheeling this scripture. It has always been my contention that Change will come to nothing, until there is a mental change which has occurred first. A prime example must be the arena of Federal Spending: Legislators are poor Budget-cutters, a basic function of Program managers. The real duty of legislators is to set the amount of Funds which will be devoted to any program, then to see such funding parameters are met. Program managers stand as most capable of determination of best devotion of specific funding. Legislators need to set the total largesse of the Budget, and ensure Program managers get fired, or sent to prison for writing bad Checks, if they do not meet budget guidelines. Voters then need to terrorize the legislators into setting proper budget limits. This is how Federal Spending reduction can be achieved.

The Targeting of children, and the mentally-defective, by Advertising can be curtailed by Fines to Advertising Agents who utilize sublimial compulsions to impel Sales. How could this be accomplished? Create an Advertising commission, like State Troopers on the Interstate system, who are charged with finding so many Violations per year; simply for finding the worst Offenders, and smacking them with a heavy Fine. Court adjucation can be forestalled with establishment of a Last-Ditch Advertising Court, which has absolute jurisdiction without any superior Appeal process; if it becomes too draconian, simply impeach the Judge. The Court should utilize the Advertising process against itself, with Fines consisting of 25%, 50%, and 100% of the Advertising-run Costs through the Public mediums.

This is How to get effective Change in undesirable aspects of American society. lgl

It's All in the Fine Print

Felix Salmon present a good Economic view of globalization, with the major proponents and Detractors from both Sides. I worry about such Writings because they all precede from an initial condemnation of Tariffs and Trade barriers. A favorite old Saying of mine is "The Devil is in the Fine Print." This is most evident in the arena of Trade, where Economists despair of the lobbying efforts of national industries to construct national monopolistic Pricing. This fear is justified to greatest degree, as Politicians have a tendency to respond quickly to moneyed Interests.

Reality, on the other hand, states that Tariffs and Trade barriers can be instrumental in achieving national economic Ends, with the least disturbance to national Living Standards, and equally little impact on World markets. Real Value from Tariffs could come from a Statement that such financial charges are to be uniform: I would suggest an 8% Foreign Product Tax implemented in similar fashion to normal State Sales taxation, collected by State agencies who would get 3/8ths of the Tax revenues for its collection and transfer to the U.S. Treasury. This Foreign Product of 8% would equalize the Real Values of American and Foreign labor fairly successfully. It would also provide a substantial Tax revenue base to the U.S. Treasury, far more equitably than will a National Sales Tax, while cutting down the Deficits endured by all levels of U.S. Government. It would also curtail the excess Profits Corporations enjoy from both Offshoring and Product importation.

Trade Barriers remain relatively bad, until One examines what they try to accomplish, which is to maintain basic labor-intensive industries at full production. Absolute Bars to Importation, though, will positively introduce geographic monopolistic Pricing. What to do? The Answer is always the same: Taxation. I would propose a Unnecessary Product Import Tax of 23% on any Product where at least 5 separate American Business concerns can maintain 125% of American Product Needs; the list compiled by Federal Statistical reference and collected by State Sales Tax systems–who will be granted 8% of the Tax for the complexity. American Labor will be protected from forced equalization with World Wage standards, American industries will have Protection from foreign Price Undercutting, and no other Country can claim any undue advantage granted to American labor. The huge American Trade Deficit would be eliminated. The Cost to the American Consumer, though disruptive in the Short-term, should not exceed 2-3% of their yearly Household budgets. lgl

Liberia

Emily Stanger presents interesting first impressions of an Internship in a Poverty-stricken Country. She asks a very seminal question of her own, by wondering if you can be a good Technocrat without losing your compassion for the Poor. Someone who has not faced the conditions of Poverty cannot understand this dilemma. Poverty always ensures a constraint of resources to apply to any Problem, and any choice will always leave one segment of Applicants in dire circumstance. Priorities must be established, and an efficient Technocrat must learn to harden his heart to the plight of the Losers in any Policy decision. There is no difficulty in understanding why such Interns most often go forward to take Jobs which maximize financial security for themselves and their future families.

Molly Kinder, Stringer’s roommate in Liberia, feels most Depressed by the previous warfare. She has yet to make the transformation that Poverty breeds the Warfare, which spawns the atrocities. She decries the Youth of the Soldiers, not realizing the Young make the best Combat specialists, being more nimble with greater physical recovery capacity; the Young also less afflicted by the moral implications of their actions. The threat of alternate starvation justifies almost any level of violence. This environment easily produces submission of people, especially the Young, to the rhetoric of the Megalomaniac, if he can steal enough food supplies to sustain them.

The story of Liberia’s downfall is best told by Kinder’s first blog entry, and her entries overall place too much faith in President Ellen Johnson Sirleaf. This lady lacks the power to get the current Generation educated Today, after a decade without Schooling; this leaving them unprepared for constructive labor. Re-electrification of the Country will likely remain a remote dream, as it cannot be financed in either the Short or Long term by Consumer rates. The Transportation network is actually bound to degrade, as there are no funds for Road or Railway Maintenance. Foreign Aid comes mainly in Food for the Poor, with little Business interest because of lack of Security, and the Above failures which cannot be restored. Economic models will always fail lacking skilled labor on the ground, and neither Profits or Altruism will bring their sufficient placement there.

I must thank Dani Rodrik for the links. lgl

History of Wages

Greg Mankiw tries to rewrite David Leonhardt, but may well done a relative poor job of it. David’s argument (search the link provided in Greg’s post) remains a sound economic debate, maybe best summarized by this Quote from David:

Since 1980, as union membership has 1. dropped sharply, the share of economic output going to corporate profits has more than doubled. The share going to workers’ compensation, meanwhile, fell to a 41-year low last year.

Here is the real Problem. Wages have been rising rapidly for Managers and Professionals, and the natural rate of unemployment has been dropping as well, but Employment Participation has been in decline and Labor has been losing Long-term Employment, Benefits, Pensions, and Wages Increases keeping pace with the Standard of Living. The natural rate of unemployment would not have declined without a drop in the Employment Participation rate; it would have actually increased. It would be nice if some nice energetic young Economist would create a comparison model of Hours worked per decade split by Class of employment, adjusted to a constant Year dollar; this would tell Us if American labor was, or was not, losing their economic position in the World economy.

I agree with Warren Buffett that he should have to pay more than 17.7% tax on his $46 million income, especially after he wouldn’t give a fellow Nebraskan like me the $10 Million Cash Award for being Handsome (they actually threw me out after I came asking for it, before I could meet with him. That Receptionist of his is tough!). My reason for the belief in a higher Tax rate for his kind of financial wizard is probably summed up in this previous Post of mine. The real erosion of Labor Wages comes in the shift of the Tax Load–Local, State, and Federal–downwards onto Laborers.

Laborers must pay the Social Security taxes, which is right and just, but Congress and President utilizes these Contributions to finance both lower Taxes for the Wealthy and much of their deficit spending. Business evades Property taxes by Enterprise Zone and Development Grants freeing them from Property taxation, while Home-owners pay ever increasing assessments. State Sales taxes are geared to free Business from impact, while higher Incomes often avoid such taxation by purchase of luxury Products granted Price reductions on account of the Sales tax. State Income taxes are most often set as percentages of Federal taxation, when only higher Incomes can utilize the multitude of Tax exemption systems. I do not possess Numbers readily at hand, but estimate a probable 12-14% Shift of the Tax load downward since 1963. lgl

Plant Aguaculture

Mark Thoma brings Us a link to Jeffrey Sachs on the Blue Revolution, where he discusses the potential of a basic fish farming, but under new technological constraints. I wonder at the paucity of the article. I have been advocating Genetic grafting and Culture of oceanic plant life, both for human and animal consumption for at least a decade. Why do People limit their Thought to extracting fish catches from the Sea?

One first has to realize that Oceans are an ecosystem. We could quadruple the total number of Feed fish and triple the draw of fish-eating species which humans eat toward the continental shelves. We must integrate the Concept of farming the continental shelves, making whole stretches of these Shelves covered by nutritious carpets of aquatic plant life; life that is perennial and showing the properties of grasses of quick regrowth upon cropping. Feed fish would quickly multiply, and the fish-eaters will follow. Once a genetic development program is devised, I picture a possible 2 million square mile carpeting of the continental shelves Worldwide. The plant life has to have an indestructible Root system with rapid regrowth potential; fertilized by natural Ocean currents.

Close-in seabed can be devoted to human consumption farming. I see a vast number of plant foods genetically-designed to potentially produce up to 30% of the Vegetable biomass currently produced on land of humanly-eatable substance. One can envision fishing vessels restricted to deep Oceans, while permanently anchored Ocean homes would operate a set number of area traps and Lines; the Catch collected by Fish Tank vessels who pump out the caught biomass from holding tanks, they also operating as ferries for Shoppers etc. traveling to the mainland (identical technology transferable from Oil platforms). The Ideal here is a two million dollar Fish platform which produces a half-million dollar fish catch per year. Hence the need for Plant aquaculture to sustain fish catch levels. lgl

Proper Economic Policy

Tyler Cowen and Sybil have both pointed to this link, and I will do the same. I have long sense assured myself that Monetarism will neither significantly affect Inflation, or stabilize bubbles. It will not impact Inflation, due to the fact that the two real Sources of Inflation is Government deficit spending, and the excess funds available for Investment when there are no Investments capable of being Profits-producing at Market standard (what the article in the WSJ means about their being durable, but not fungible). The term ‘fungible’ means the ability to translate into Cash, either through Sale or Production activity. Austrian theory suggests an alternate expectation that too much later Investment in the recent buildup has been of high Risk-Taking, while enjoying little Profits potential. I agree with this assessment.

The Austrian proscription for Monetary controls mirrors the policy of Burns as Fed Chairman, which proved to be a medium-sized disaster for the American economy. I personally think that current Fed rates are too high, but do not advocate their reduction before introduction of proper Controls necessary to counter the effects which the article stipulates. There is only one effective Proscription for Inflation and Control of Bubbles–higher Taxation.

Almost every Economist–including the Austrians–would not agree with the area of Taxation needed, which is increased taxation of Business Profits. Governments must pay for their own Expenditures; best funded by taxation of Business Profits; something which does not significantly limit Investment capital under modern Financial institutions and Instruments, and it is insane to tax Consumers when the need is for them to purchase the Product Sales necessary for Business Profits to be realized. Business taxation leads Business to curtail excessive Expenses (to trim both Production and Management expenditures), generating careful Management supervision of Production, Distribution, and Sales, and finally; inciting increased expansion of Investment, but Investment which meets the standard Market Profitability. lgl

Pensions and Hedge Funds

Hedge funds have long found a Gold mine in the Pension Funds around this Country, Dave Iverson gives a good analysis with links. It reminiscent of the mafia’s use of the Teamsters Funds in the 1960s-80s. The rationale behind this Scalping practice comes in large amounts of steady increasing finance, under slipshod supervision of Fund managers without intrinsic stake in the success of fund. Fund managers face only Firings if there is intense loss to the Funds, and gain Salary and Bonuses with high Profits rates in invested funds. Hedge funds can promise high front-end Profits, and Pension managers receive their bonuses from these Profits; no one seriously worried about the long-range viability of the investments. Future losses can be written off by both Pension and Hedge fund managers without financial cost to themselves, while all participants in both Hedge and Pension funds must swallow the losses.

The Practice becomes doubly deadly by the fact that Short-term Profits are maximized by the creation of bubbles in the Market. Bubbles, by their innate nature, must burst at some future date; the entire sector of the Market washing out false value to return to structural value. Hedge Fund investors need realize that they are always buying only structural value, when they are often purchasing at false value Prices; managers completely in favor of the false value Pricing, which heightens the Short-term nominal value of Trading. Investors in both Pension and Hedge funds are ‘Buying High and Selling Low’.

Almost All Market analysts would deny my last Statement, but it is true for small Periodic amount continuous investors. Their Fund managers will almost always be buying above structural value, if for the nothing else, the driven Prices generated by themselves and their other compatriot fund managers. Participant sellout will invariably be maintained at the lowest Periodic prices at the times of Sale (or in the monthly payments from the fund involved); this to maximize the total amount of transferable funds for investment for the fund managers to derive their immediate Profits. That is the Way it is! lgl

Scheve and Slaughter extends the sensible Proposition that Protectionism is driven by increasing Income Inequality; very close to the Truth, but still a shade off. Actual Income Inequality, unless absolutely dire, does not raise the Beast of Protectionism. The Economy is a game of expectations: small Incomes mean little under a widespread Market for high-paid labor, where most Labor can possess the expectation of eventually landing a good Income Job. The Rationale of Income redistribution fails in countering the rise of Protectionism solely because Offshoring and Trade are draining the mass of high-paying Jobs from this Country. Highly paid professionals can proclaim the advantage of Trade, but echos in an empty hall, if Trade erodes the niche social classes of Employment. I utilize this later expression to highlight the real resentment present in the American Labor Movement, which consists of a reaction to the inability to draw Social esteem from their employment.

There remain real causes for Protectionist sentiment: the real Cost of Trade, the high Energy expenditure Costs of Trade, the Cost of Transactional flows of Capital, and the inferior corrosion of Product Quality. Governments underwrite various Production Costs in every nation, Costs which often are well-hidden to the unwary Eye. One of the most evident hidden Costs is that of Shipping, where many nations minimize Portage Costs way below Normal Structural Costs. Other nations transport Trade Goods under their own Bottoms, and sell these Ships fuel well below World Market cost. The Energy Costs of Trade stands very high, I personally estimate an equivalent BTU usage of 22 gallons of fuel per ton over domestic production, unless Air Freight is used; here it costs about 17 lb. of fuel to transport one Pound of Trade Product over 10,000 miles. The Cost of Transactional flows of Capital in Trade stands immense, my estimate states these Costs average around 11% of Trade Value, and is the arena where the great wealth from Trade is created. The corrosion of Product Quality need not be defined; if you do not believe this Statement, buy your Toothpaste from China.

Governments have enough problems in trying to protect their own Citizens from Product fraud of all types, they cannot protect the Citizens of the World effectively; a real rationale for a limited, well-regulated Trade pattern. Income Inequality, at the same time, derives as much from the Distortions introduced by Trade, as from actual Trade Advantage. A limited, well-regulated Trade pattern (there I go using that phrase again) allows for far greater supervision of Employment patterns, as well as providing natural reinforcement for proper Wage Scaling. One hears Economists discuss Externalities in almost everything, the one Exception being Trade. I would personally prefer filling my Pickup gas tank one extra time, rather than bringing an extra ton of foreign-manufactured Imports into this Country from China–can’t We find Someone around here to produce that ton at a competitive Price? lgl

Where are We Going with This?

I received this article by way of Aeon McNulty. The context We have here is the cheaper grade of Plant material which can be utilized to produce a biofuel. I have previously posted on the unviable nature of diverting Food crops to fuel production, which curtails Food stocks for domestic herds, thereby raising the Food Costs of Consumers; combined with the high Fertilizer Costs of maintaining the needed level of Food crop production. The real Need is for a transfer to a Nitrogen-fixating plant as Feedstock for the biofuels. This is the Problem which must be understood by Farmers, the Managers of biofuel plants, and Political administrations.

The long-range goal for a biofuel Feedstock should be a perennial plant which is self-fertilizing, at least over the Short-run (only Periodic years of fertilizer application), of limited cultivation and harvesting Cost, with multiple yearly harvesting (biomass developed 3-5 times per year); all within the context of high glucose yield, with easy Conversion of the biomass into biofuel. Here is the exact Statement of the Problem. Current Agricultural and Business reaction to biofuel technology is the most rapid development of Profits-rendering practice, without much consideration of maximization of Energy production at least Cost on a sustainable long-term basis. The present atmosphere of biofuel efforts lay focused on a self-destructive industry of short duration, as biomass Feedstock wear out the tillable land. lgl

Immigration Assessments

Greg Mankiw finds his human side, worrying about the welfare of the poor immigrants. Krugman vents his passion about the unraveling of the Welfare State, and desires a reduction of the inflow of immigrants–as long as they are Low-Income. I should state for the Record that Yossarian would easily have understood the position of maintaining an unassailable border, acknowledging the value of staying below the radar. David Friedman sees it from the viewpoint of garnering Votes, the Issue seeming to be the destruction of the Welfare State; Readers be warned that David has a Bite less deadly than his Bark, but can get aroused.

You know that the World has been turned over to the Spin-Doctors, when there are Ties introduced between major Issues like Immigration and Welfare policies, especially when the value of the Dollars being spent are also introduced. Where to start on a Discussion on the sentiments issued by these excellent Economists–leaving out Yossarian. This Subject is like an old-style unguided missile, it could land just anywhere.

The threat to the Welfare State from Immigration is relatively minimal, Numbers-crouching will probable establish that Immigration will not increase Welfare Costs above the highest percentage levels ever witnessed in this Country; and this during a Time of sustainable economic growth. Friedman portrays the board Hint that Immigration is a Political Issue, not an Economic Issue; something which is highly relevant, turn to this Post by George Borjas if you want to enter into the economic venue of Immigration.

There are relatively easy methods to forestall Immigration Costs, while retaining the benefits of Immigration; these being methods used in other Countries in history, and as such, carry the onus of draconian contempt. The most effective bar is the refusal to allow Immigrants to bring their families with them–utilized by China, Russia, and Eastern Europe since the Napoleonic era. Immigrant labor has a tendency to go home when not allowed to maintain a family unit within the Work area. It has the added benefit of lowering Welfare Costs, transferring the Unemployed Immigrant into a legally-exportable item. A second method is to issue Work Visas to the industries and Businesses needing the required labor, who are charged with removal of the offending Immigrants when gainful employment ends, else the Business is financially charged for the Infraction–a practice which has enjoyed some popularity in South America. A more advanced method is to charge a special Surtax on Income of Immigrants (non-Citizens) to repay the implicit Welfare Costs of Immigration. All the above ideas are disagreeable, though the Economist would state that most of the derogatory sentiment is propelled by the effectiveness of the measures. lgl

Sensible Speculation

I particularly like this Peter Boettke Post which provides links to comparison articles published in The Hoover Digest. Gary Becker attempts to approach the problem of climate change from an microeconomic viewpoint, while Richard Posner attempts more of a macroeconomic sweep, and the Anderson and McCormick article tries a functionalist ‘Let the Market decide’ approach to the problem. All three articles are excellently written, and should be Read. I think, though, I might provide some predisposition to study each article, perhaps to better understand the articles.

Gary Becker assumes a continuity of Social and Economic direction over the next Century; prevailing Thought one Century ago held the component Parts that the Empires of Europe were getting more powerful every Day, gaining Power through scientific advance and the growing integration of Royalty across the Continent. No unsolvable Problems loomed on the Horizon, and the Working classes were rapidly attaining high Living Standards. The Empires of Europe could survive any economic contraction because of their integrated economic base with all the Resources of the World. A check of Economic models of the Era will assure the Economic profession agreed with this basic position. History has proven their assessments to have been flawed, as economies deteriorated in the destruction of WWI.

Richard Posner takes the position that Global Warming can only be the fault of the human race alone, and that exterior factors cannot influence Climate to far greater degree than any human conduct. Reality states that Volcanic activity has always been the major Carbon Emitter on the planet, and is not likely to surrender this leadership in any Time sequence humanity could devise. Geologists should concentrate their efforts on predictions of future Volcanic activity, possibly by historical assessment of such activity by Century over the course of its history. Here is where the principal Estimates should be based. Suggestion that human economic activity should be constrained because of Carbon emissions is premature, though the use of Carbon fuels (limited in quantity at easily retrievable sites) need be contained.

Anderson and McCormick suffer from a common delusion that Climate Change can be countered effectively, any more than Markets can be efficiently regulated. It is my belief, which can be evaluated by scientific Testing, that Hurricanes and Tornados are Nature’s natural way to extrude excess Heat from the atmosphere; one that I believe is a quite efficient Heat Emitter. I wish Business-oriented personnel would not closely identify Carbon Emissions as potential threat, or as opportunity to sell a new Technology. I think the only proper orientation to Green efforts should be in Land Reclamation, where the long-term goal will be an increase of available Agricultural acreage coupled with a vastly increased rate of Carbon sequestration. lgl

Management Policy and Privacy

Austan Goolsbee and Mark Thoma suggest there is a greater adaptability in the American Business format to technological change. They cite increased Productivity rates, but can such be alleged without consideration of reduced Labor Participation rates? Can Productivity be considered enhanced, if it comes from elimination of Aged and Inefficient Employees? There is no intrinsic gain in Productivity, only in Speeding the Production line through elimination of lower Productivity Labor Support Costs. The Halo of American genius may be a little tarnished by a ‘Use and Discard’ philosophy of Employee management.

The study of American Takeovers of foreign business may express greater adaptability by dumping the self-same Aged and Inefficient Employees from the Labor rolls, a shark-like desire to rip the flesh off to the bone; all without the slightest Care taken for vested rights of Employees. Some Europeans might allege similarity to mafioso-style butchery of legitimate businesses, to sell off the component Parts at Profit; later selling the Name itself for Profit, but without assets. Some mafia types may even be jealous of modern American Management policy, if for nothing else their immunity from the RICO Act.

Peter. T. Leeson tries to rebut Dani Rodrik in Dani’s disbelief in the functional ability of non-Government regulated free markets. I have not explored the links provided in the Post, but do believe any argument for unregulated free markets rely totally on the non-suppression of information about the market transactions. This means all Business Concerns would have to allow Public Access to all their Transactional Records, making such Records accessible through some cheap medium–like Posting on the Web. Any Privacy demanded by Business Interests would lead to oppression of the Choice-Profile of Consumers; inciting unstructured choice of Products to the Consumers’ Price disadvantage. Provision of these Records to easy Access would, in itself, require some form of Third-Party supervision and regulation–i.e., anarchy of Markets will fail. lgl

Truth in Ideology

I would first like to state that I agree with Dani Rodrik on the necessary existence of the State. I would like to state on the Issue that there is an inevitability to the development of State functions, simply through the inadequacy of private enforcement; Losers are always very grouchy about being fleeced, and eventually pick up Support for construction of a State. It reminds of the Question of how many angels can sit on the head of a Pin. No one will ever see the elimination of the State, or it’s functions, so the Argument is couched in terms of the Absurd.

Here is another argument of foregone conclusion, as there is going to be Inflation, there being no question that it will come; the real Value determinant being how fast it will come. I differ from general Economic views in believing that Inflation is driven by two component Parts: Government deficit spending, and the growth of Business Profits without innate reinvestment (excess of recapitalization of the business, transfer to Ownership for Consumption v. transfer to Ownership for purposes of reinvestment; it is inflationary if reinvested rather than spent). The later creates excess investment funds in the spectrum of limited Investment potential (endeavors which have not chance of equaling the Profitability generated by the original Business). Governmental deficit spending is exactly the same as Printing Currency, except Treasuries are Currency guaranteed a Yield to incite Subscription. The most important Monetary deflator–increased Taxation–enjoys an onus not only undeserved, though it holds the only truly sufficient power to curb Inflation; Monetary policy unequal to the task of even limiting Inflation to a programmed rate.

Economics is filled with Schools and Positions which have been held for Generations with rigid abandon by Advocates; a true patriotism to Ideal, as almost every Position has been shown to be Wanting of true success. Failures are excused as unforeseen adverse factors which were not accounted, but One wonders as this form of excuse has frequency rates approaching the infinite Universal. I may at this time enter the realm of the genuine Heterodox through making the following Statements: Taxation is good, Tariffs are good, Trade restrictions can be good, defense of Labor rights is good if not carried to Excess, and that Business personnel are not on the Consumers’ side (want of Consumers’ monetary assets supercede all other considerations). lgl

Sure to Ruin Your Day

Tim Haab presents a real argument for gearing any Carbon Tax to the level of Income, else Consumption will continue, and potentially grow, because the Carbon Tax will not keep up with Income growth. Here is the immediate dilemma: such Carbon taxation will work effectively only when there is a consistent Equality of Income. Carbon taxation consistently impacts lower Incomes to far greater degree than it does higher Incomes. The first Question is: Can We allow Carbon taxation which is Draconian to lower Incomes, simply because it may impact the Gas Consumption of higher Incomes; considering that higher Incomes are the vastly greater Consumers of fuel? The next Question states: Isn’t there a better Substitute taxation to reduce Energy consumption than Carbon taxation?

Combine the two Questions, and We soon find the impact of Taxation must be placed upon the greatest Consumers, not on Those who already economize on their Energy consumption due to lack of Income potential. Gasoline is currently distributed in 3 Grades, and therefore, Service stations cannot claim a differentiation in Pricing will not be accomplished. I would suggest Gas Pumps be altered to sell Economy Vehicles Gas, Luxury Gas, and Commercial Gas. Prices would be altered to reduce inefficient consumption practice, and Pump nozzles somehow modified to prevent wrongful consumption. Economy Vehicles Gas would be relatively untaxed, Commercial Gas would be taxed to curtail nonproductive consumption, and Luxury Gas hiked up to slow down the Soccer Moms.

Current Electrical rates are set to grant heavy Consumers an advantage in Price in their consumption. This Preference should be sharply restricted by Federal regulation. Only Production facilities requiring heavy Electrical usage in industrial production processes will be allowed preferred Rates. An Office which burned $4000 of Electricity per month, can afford to pay $4000 for that Electricity. Likewise the same can be said for Bars, Nightclubs, Casinos, and Sports fields. This type of regulation actually brings benefit, as normal Users will find some marginal reduction in their Electrical Costs, as the Normal Costs are spread uniformly.

The above Initiatives will reduce Energy usage to greater degree than normal Carbon taxation, and may even be some benefit to the Automotive industry, if they are charged with Recalling all vehicles and refitting them with proper opening gas tanks. Consumers will accept the necessary payment for the Refitting, if they are forbidden to purchase fuel for their Vehicle without a Refit. Wondrous are the Ways in which you can gain the Hatred of your fellow Americans. lgl

Too Cheap to Buy the Book

Martin Heintzelman proves himself intelligent in stating there is actually little hope for long-term substantial environmental improvements in the arena of Energy usage. It takes a concentrated number of BTUs to propel the industrial engine on which We all rely, and they can only be created in a limited number of Ways; each method carrying its own noxious by-products, all functionally bad for the ecology. This does not impede families in the production of children, or does it alter current attitude on Product availability to improve the Style of Life. We must understand that We will need more Energy in the future, and it will be necessary to develop new technologies for producing that Energy; all current technologies depend on nonrenewable resources (for the production of concentrated power).

The Book by Morgenstern and Pizer evaluates attempts to limit CO2 emissions and Energy use in seven studies around the World. The Counterfactual should be more aptly named the Counterfarsical, as no serious study can estimate better Emission levels than current levels, given the more rapid Ageing of Energy generation units (more Generation units in operation, all increasing capacity, and more Units wearing out). The Best which can be hoped for may remain that the West can convince China to built more efficient Coal-fired plants. Low-hanging fruit indeed!

The Book discusses whether Voluntary or Compulsory programs are the most efficient in attaining Change in Energy generation and use. The Reader must realize that any of the suggested Programs would gain an Engineering student an F, if the Program was submitted as a Machine type. Functional impact of any of the Programs insists industry make sure the Program passed the ‘Business as Usual’ litmus test of allowing all current Production technology to survive. Remember that Bush has still not reversed his Texan desire to build more Coal-fired generating plants. Environmentalists may as well organize a Voluntary effort, because Legislators will not take on the entire spectrum of the Business world. lgl

Meaningful Change

Mike Shedlock has a good Post, which would be better if not wandering all over the place; I can’t say too much about that, though, considering my own proclivities. One might choose to pick Mish’s ideas apart, because they indeed have much merit. The elements I enjoy consist of his allegation that We cannot Inflate Ourselves out of increased Government liabilities, Consumers are finding greater difficulty in financing themselves out of Consumer Debt, and On-going Expenses are rising faster than Wages+asset appreciation for most Borrowers. His Challenge should be thoughtfully Read, but perhaps misses the main point: practically everything he cites could be corrected through the simple expedient of eliminating the Bush Tax Cuts.

The growth of M3 Today has the same inclination as in 1996, but has a different impetus. Investors back then had to invest or face taxation. M3 growth Today comes from the skew in Incomes coming from industries outside the Fed’s famous Core Inflation. One of the great mysteries of Core Inflation derives from Food and Energy being excused from Inflation Averaging, but not Health Care. Few would allege Health Care trails Energy and Food by much, and actually, if it too was excluded from the Averaging, then there would probably be a very flat Inflation rate. An adequate Tax rate system, something on the order of the 1996 Tax Schedule, could well get all Prices moving at the same Speed. How? By insuring that excess Profits are actually taxed, not higher but equally, rather than being excused as under the current Tax system.

We know innately that much of current Government Expenditures result from unnecessary Spending, but identification of Kind may be revealing. At least 10% of Government Spending could be eliminated if We separated political patronage from the Budgeting process. I still suggest a Program where Congressional members were granted only a limited amount of Discretionary funding by Vote, the amount set by the yearly Estimate of Tax revenues available; a No Vote being entered automatically for every member of Congress exceeding their limit, no matter the Issue. A second element worth working on is elimination of Contracting of outsource labor; passage of law which forbids issuance of outside labor Contracts at an Expense rate higher than composite Government Civil Service labor, circa 1996 Inflation-adjusted. The Government would have to go back to employing Lawyers, Engineers, etc., rather than provision of a Business profit on top of labor Wage. These two Enactments alone could truly incite percentage Cuts from the Budget. lgl

Ahead of the Curve?

The Big Picture brings Us this Barron’s article by Alan Abelson, who puts forth some critical evaluation of the Fed’s dependence on Core Inflation as both description and camouflage. I equally find fault with this type of Deception, but from a alternate avenue. Bright young Managers, in their enthusiasm for Profits, will finally develop the Thought that it is very profitable to keep their Product prices contemporary with the excluded Products rent from Core Inflation. I added the term ‘young’ because older Managers understand the ‘runaway’ tendencies of Inflation; of course, ‘older’ also means more likely to have made their fortune already. One is asking for Communal Spirit from people taught to employ the slaughter of the Market.

Read this Piece by Chris Dillow, which can be applied to a Manager’s reaction to Core Inflation data, especially Those who may be constrained by a Time Preference. The highest desire of Managers probably comes in the form of autonomy, where they are free of the constraint of Debt. Here is the crux of the Problem. It pays to jump the Herd mentality, at least in the Short-Run, and Managers have been culturally educated to develop independent strategies for success. Dillow’s Conventional Course becomes even less Rewarding to younger Business managers, whose Role Models have always expressed a ruthlessness in attainment of their goals.

Another real factor consists in the Herd mentality of all Business managers. All Economists know that the widely-fluxing Product prices must Seasonally reduce, or Herd mentality will quickly drive all Product pricing to the new Inflationary plateau. It is only a question of Time, and one which enjoys a relatively short Window of Opportunity. The only distinction between full Averaged Inflation and Core Inflation stands as a Statement of what Core Inflation will be at some future indeterminate Date. Business managers, young and older, adjust their Price Schedules to reflect the actual Inflation, not Core Inflation. Economic Forecasts on Inflation would serve greater Insight with a concentration on Estimate of End-of-the-Year Inflation forecasts; an Estimate which could be shaded (lying about) in hopes of inhibiting automatic Price Schedules. lgl

The Great Moderation

This Bill Testa Post may seem somewhat confusing, but is a good Read for analysis. He is basically stating that people are retaining their Jobs longer, but there is a general trend of loss of Jobs throughout the Midwest correspondent with the reduction in Durable Goods manufacture and Industrial Services. The Switch to Offshore Production has not been gentle to the Midwest, even to the Present Day. The Great Moderation is a Great Mini-Recession for this Section of the Country. Someone like myself who has worked in this Section realizes that the Opportunity has deserted the Midwest, and without some form of Drive to competitively manufacture being introduced; it is unlikely to reacquire its Employment base.

Mark Thoma has a good Post on the concept of The Great Moderation. The Work done in the Papers linked in Mark’s Post is very good, but there is a distinct disconnect in correlation to the Ageing of the Labor Forces as a Whole. Here lies what I believe is the real Source of the Great Moderation. Skilled Labor has retained their Employment to far greater degree than unskilled Labor, and the decline in unskilled Labor numbers coupled with American Youth demands for equalized Wage scales comparable to their Parent’s introductory Salaries brought on the Rush to Offshore; this massively helped by Environmental regulations and demanded Health and Pension benefits by Youth. Offshore Producers not only found adequate Labor numbers, but much cheaper Employees.

A truly ironic aspect of the Driving force behind The Great Moderation results from the basic ingratitude of the current Business leadership. This Group were educated and hired under the Social structure established the New Deal, the G.I. Bill, massive infusion of Research Grants and Educational Funds founded in the 1960s, and overgenerous Entrance salaries continuing until the Tight money policies of Burns. They now advocate Rugged Individualism after their own positions had been entrenched under the old Socialized system. Greed may not be Evil, but it still doesn’t smell very good!. lgl

Need for Discipline

Greg Mankiw asks the Real Question of how much progressivity is optimal for Tax rates. Dedicated Students should read every link in the Post, and every link in the linked Pages. I personally would like to read the Paper of Ivan Werning. I personally have real difficulty with the concept of Pareto efficiency and Tax rates. There are two Parts to the setting of Tax rates: the spread of Rates, and the overall Tax impact. Pareto efficiency will only impact the spread of Tax Rates, not the overall impact. A 15% Tax spread appeals to most Economists, but there is vast difference between 5-20%, 20-35%, and 45-60% overall Tax impact. Greg calls the Tax impact a political issue, but I think there is a heavy economic issue in each. (By the way, I favor 10-30% Tax spread over Four intervals, but with Business paying all Social Security contributions; this simplifying necessary Tax increases to meet Social Security and Medicare financial Costs).

Tyler Cowen has a blog Post and a NYTimes article on the laxity of Youth discipline in America producing young entrepreneurs as well as Troublemakers. I have some trouble with this Concept, and not because many Youth are not more successful–which they are. I imagine these youthful Business achievers lack a qualified Life experience; the basic element consisting of absolving themselves of responsibility for proper maintenance of a labor force. They do not understand the Costs of providing a Household, the Crisis of inability to control Income Flow, or proper exploitation of expansion capacity outside of their specific skill. The obvious Retort will be that they will learn on the Job, but how many Economic lives will be adversely impacted in the Learning Period?

Menzie Chinn has this Post, which has a link to another Post on how to control Energy use. Both are elemental to understanding our Trade Deficit position, and its fallibility. American reaction to the settled nature of the Yuan cannot affect Our Trade deficit markedly; the only Recourse here is to take Steps to regenerate American manufacturing capacity. The Bush position on Energy punishes Food Consumers with higher Prices, while doing nothing to constrain Fuel usage. The current Push by both President and Congress is to benefit Corporate and Agribusiness through Tax Credits, rather than make any other substantial gain. Take the Time to study both Posts; no policy initiative currently advocated attacks the structural problems involved. lgl

Real Trade Patterns

Greg Mankiw attempts outline of limits to Pigou taxation, but may have picked poor examples of taxing Externalities. Silver and Gold colors for Cars provide the best prevention of Weather-checking of the vehicles, greatest Sight detection at Distance, greatest Sight attraction at Night, and easiest discernment of Parked condition–Day or Night. The Daughter of a Friend was trying to impose an Externality, not tax One. The other Example utilized by Greg would have created a Heat Tunnel above his residence and Lot to the benefit of his Neighbors through cooler surrounding Temperatures in summer, and spread of Heat in the Winter; an Externality which the contributing Neighbor should charge for from his neighbors. I can readily understand Greg’s intent, but this Post dealt with the creation of Externalities, not the taxation of them.

Mark Thoma gives a path to a George Ip article in the WSJ about rising Inequality of Income, implying that most Americans blame this Inequality on Trade. Here is the Statement which counts: Americans who think Trade is driving this Inequality are Right! A national economy with a higher Standard of Living cannot increase Exports to economies of lesser Standards of Living, without long-term equalization of Living Standards. The Optimum would be foreign rise of Living Standards to match the wealthier nation, but there are extreme conditions forestalling such a universal Rise: lack of Educational Funding, lack of Infrastructure capitalization, lack of Community Services, and Wage Scales tied to Traditional domestic production. The Reality is that Living Standards lower to far greater degree, and more rapidly, than Living Standards have ever risen. It is not a Process which enhances either the wealthier nation, or the poorer economies.

Modern Economics advocates a Policy of Trade Equalization as Means to raise Living Standards of All. There is a basic fallacy in this Position, and One which is extremely Costly for all Participants. Wealthier nations face degraded Standards of Living and rising Income Inequality, while poorer nations find the majority of their Developmental Capitalization devoted to Export products unsuited for native consumption–and therefore, their economies become enslaved to Maintenance of Export levels to retain their own Living Standards. Everyone recognizes a certain level of Trade is necessary for efficient economic performance by all Participants. A real Mistake arises, though, when the increased Profitability from this Trade is seen as a medium for raising internal Living Standards. The amount of real necessary Trade levels are relatively small, though almost universally the most Profitable of all Native production; still, curtailment of domestic Capitalization in favor of Export Trading is a form of economic Suicide. lgl

Interest Rates and Boom and Bust

Tyler Cowen sometimes makes real sense, sometimes he doesn’t. In this Case, he makes an incredible amount of sense, but no One will recognize it. There is almost no correlation between Risk and Interest rates, and little more relationship between Risk and the extension of Capital. Tyler would be on my Case for these Statements, but hopefully would basically agree with the Sentiment.

I have always seen Credit facilities as a Supply Side Push, rather than a natural economic model continuum. What this means is current Production facilities produce a continuous flow of Profits, a great share of those Profits without fitting recapitalization potential in the Businesses which generate the Overflow. These Profits are of such magnitude that there is disinclination for distribution of the funds for Consumption (do I sound like an Economist?). The alternative is to push these funds into the Credit market. Interest rates are partially set by the availability of these funds for Credit extension, partly are set by financial institutions insisting on what they consider a relevant rate of Return for the extension of these funds (based upon the largesse of funds extended).

Here is the reason One cannot find a correlation between Risk and Credit extension. Award of funds is based upon the Supply Side Push to get these funds committed, and drawing Interest in the first place. Greater Risk will be borne by the lending institutions if there is appreciable increase in the supply of funds through Depositors etc. The only inhibition to high Interest rates is the difficulty of getting the total volume of these funds engaged in Profitable returns. Interest rates are designed to entice Borrowers into exploitation of less Profitable endeavors, simply to increase the flow of funds in Interest-bearing structure; Consumption Credit being priced to increase the total amount of funds engaged in profitable return.

Here is the real conflict with Economic theory. The setting of Interest rates is a graph maximizing the Profits of financial institutions, for the benefit of financial institutions, not the promotion of the economy. It is not a Concern to generate most efficient Economic performance, some of the loan extension debacles conducted by financial institutions highlight this fact; many poor business risks have attained incredible amounts of loans. There is a basic disconnect between financial stability and the extension of Credit, based solely on the desire to get the Profit return of Interest payments, regardless of the actual ability to repay the loans. This reality contravenes successful economic policy, and propels much of the Boom and Bust mechanism adversely operating upon the Economy. lgl

Opinion after Opinion

Chris Dillow terminates a Love Affair with Opinion, which might have been laid on with a too broad brush. Opinion contains more than simple prejudice, else belief remains nothing more than a mathematical Proof. I do hope Opinion can reach a greater height than Tribal identification, knowing I feel disinclination to be associated with several personal family members, to say nothing of Drinking buddies or the Group with whom I regularly eat Lunch; I minding not personal acquaintance, simply ideological stance. But here again, this remains only a matter of Opinion.

The Informed Reader should read this Post by Menzie Chinn. I am not as puzzled at David Altig or Menzie Chinn about the Inflation worries, knowing that We must settle into a stable Energy Pricing structure, before We ever get to an effectual Core Inflation calm. The Rationale for this Statement comes in the knowledge that swings of Household Costs defeats the basic schematic of Household Budgeting for Consumers, this means Consumer Products appear on and disappear off many Household radars in terms of affordable Cost, and is disastrous when already Contracted in Consumer Debt. Any Statement that only Core Inflation matters is stupid in the face of continually swinging Prices.

I agree with Mark Thoma on this One. It is not a fundamental Problem with Medicare, only with the general lack of adequate Medical provision in this Country. One of the simplest Solutions for Medicare Costs is to tie Medicare premiums to the health care Inflation rate. This would induce great pressures to suppress Medicare Costs in particular, and general Health Care Costs in general. The real Problem, though, remains the need for Universal Health Care, and personal knowledge that Health Care Costs will only be limited by a universal One-Payer system of standardized Costs. We will face ever-increasing Pricing Constraints making Health Care unaffordable until We effect that Standardization. lgl

The Campaign Season

Tyler Cowen finds some Surprise in the failure of the Immigration bill; I did not. The Immigration bill was identical to Bush’s desire to put Missile systems into Eastern Europe, Proprietary Rent-Seeking on the part of the Military/Industrial complex with their hold over Congress and President; all Participants seeking a Cash Cow for themselves in a time I will call post-Bush. Democrats, for reasons of possession of their own agenda, want the financial provisions from the proposed Cash Cows to flow elsewhere; making the Cash Cows unprofitable from a Maintenance Cost framework, which would include a vast reduction in political campaign funds, reductions due to lack of performance. All Parties are getting somewhat concerned, including Legislators, Vested Interests, and Lobbyists themselves, because they have only about one Year left before a rumored change in Business as Usual (personally, I believe any change in the manner of doing Business has the greatest unlikelihood).

The entire matrix introduces the Concept of Uncertainty into all Government effort; One which splits the Ranks on the Hill. Legislators want an increase in the level of Uncertainty because it increase the largesse of Political contributions, Vested Interests detest the level of Uncertainty which raises the Maintenance Costs of holding Congress at a lower level of overall Profitability, and Lobbyists could scream as their Income diminishes with their decreased ability to deliver on their Clients’ demands. There is the added Rent-Seeking of Legislators who would be President, or at least attempt to be; the price of a Congressman or Senator Vote rises dramatically with their Presidential aspirations. Vested Interests wish and desire that the American Public would settle on 2-3 Candidates for President, so that they could cut Expenses.

The real Disaster of the ongoing Process lies in the advantage of Legislators in delaying any prospective legislation, so they can boost the value of the political campaign contributions, with Congressional membership settling on the most nonsensical rationales for blocking legislation; One need remember the Fringe Element extremism of American society, where almost any idiotic public pronouncement will gain a political activist advocacy. Congress is creating their own Problems with their bombast, which they will have to grant audience if returned to Office. Does it remind of the last Days of the Roman Empire? It may well be that History dost repeat itself. lgl

Power Systems

Marin Soljacic has taken the first Step in what may eventually be the Salvation to the Problem of human energy needs. Every physicist and economist understands well the Constraint placed upon the Economy from the use of depletable resources for Energy generation. No matter what Power system is examined for long-range function, We will face shortages of Power if the system is dependent on depletable fuel product. The Operative term must be ‘Renewable’, and these Power systems must be up and running within a Century.

Two of the most viable Options for Power Generation remain the Electrical Magnetic Field surrounding the Earth, and placing a Power Generation plant much closer to the Sun, like on Venus. Both Cases, though, seem dependent upon development of a technology of Power transmission which Professor Saljacic brings to the table; which is harmonious frequency fields; Power lines will not do the Trick. Does this sound futuristic to some Readers? It had better not! The human race may not have a future without this technology. lgl

Systemically Organize

We have a basic Dispute Here between Cactus at Angry Bear and Free Exchange. The Later would want perfect data feed before Comparisons, while Cactus uses what he can find recorded to attempt Estimates. The first is impossible to find, the later will always lead to distortions. It still must be considered possible to construct some statistical comparison between Political Parties.

I would suggest that both turn their attention to mid-year collected data on the Average Income of Consumers (adjusted for Inflation), minus any increase in Consumption Debt (again adjusted for Inflation). The second suggestion I would have is that they extend this data for as far as they can find it recorded, which requires a request to the Federal Reserve and the BLS, both Units have comparison data extending back somewhere into the First World War.

AIt–CDt may in itself seem like a poor Guide to the health of the Economy, but it is easy to organize into a Comparison table split by levels of Presidential leadership, Majority compositions of Congress, and even altered Economic policy Initiatives. The value of such a Comparison table would permanently lay to rest speculation on the possible existence of a Lead-Time before an Economic policy takes place. I advance this idea only in the Spirit of economic rigor, and because at my advanced and unqualified Age, I will not touch Numbers-crunching. lgl

The new Political Reality

I read this article from Daniel Gross in Slate, and decided that I didn’t really want to blog this morning. Still, I felt the guilt feeling that I am failing my Readers with this protracted poor attitude. But then I decided I could get Daniel’s goat by mentioning that he failed to enunciate the real reason for the block of the merger of Whole Foods and Wild Oats: the real fear of the Food chains of a viable Corporate organic foods competitor. The merger would have left Whole Foods with 305 Stores, allowing for a full concentrated Distribution network, and ability to supply fresh Produce in wide competition with the traditional Food chains. Here was the real deadly intent behind the Merger, and the real desire to kill the Combination.

This idea fought hard to awaken other Thoughts in my tired brain, and I came up with a Question: The Bush administration is now a Lame-Duck entity, and it follows that they may well be experiencing a drop in revenue contributions from Lobbying interests, and finding it hard to make Ends meet in the political world, so that every venue of resource aggregation is pursued. This is more than a flight of fancy, as there may already be Signs that the Bush political machine is faltering. Could it be that Bush is trying to reconstruct a viable political machine in an Earthquake?

The universal indication of Failure in political machines remains the bailout of elemental members of the political machine, with major players adopting alternate employment elsewhere. The Bush machine has yet to witness great defections from their own Ranks, but Scooter Libby destined for prison without major discussion of Presidential Pardon must leave the Ranks shaken. This following Year may find the Bush administration facing a massive Desertion rate, especially as many Participants desire the famous ‘Out of Sight, Out of Mind’ evasion defense from facing a high degree of charges of felonious misconduct from a successive administration. A Changeover, most noted if it is also a change of political party, will undoubtedly bring great acrimony concerning a long history of deviant behavior by the current administration. It may be worsened as Bush loses the Support base of Bushites who no longer receive patronage. lgl

Lets Hope I am missing Something

This Post is one of those dazzlers, defined as the fact I agree with the full assessment, simply disagree with the Conclusion. Too many long-term generic factors exist to give Us a US economy producing a 3% Growth rate. Removal of Nominal expectations from economic data must suggest the American economy is entering a slow deterioration which will last until the full retirement of the Baby-Boomers. Everything can look Good, but the underpinnings sit on some fundamental Shift sand.

The Housing market cannot really Recover, due to the fundamental fact that Baby-Boomers are starting to sell Work outlet Housing for Retirement Housing. This element has fueled the Construction Boom of late Years, and will continue to do so; but only at the Cost of leaving excess Housing on the Market. Business is already making the Shift to Second-Job re-employment of Baby Boomers, but these are all less-than-efficient Production facilities of higher Pay for less Effort. Retailers already face a lessened Profit Margin from necessary Stock of Products dovetailed for an Ageing Consumer, and trying to gouge an excessive Profit from Youth Products to equalize Operating revenues. All of the Above, plus much More, holds little hope for an advancing Economy.

The real harm to the current Economy may come in the form of higher Energy prices. The American economy has been gearing up for Years to absorb the accrued Savings of the retiring Baby Boomers. The Problem enters that this Gearing has been within the very heavy Energy consumption-use Products of RTVs, high-Rent Campgrounds and Retirement Villages, wintering Resort facilities, and high-energy usage Home Products. Property values has been driven too high by venting of high Construction pricing through Energy pricing, and Product supply for the furnishing of these Properties is already well-advanced. Retirees buy high-Quality Products of long life, and their Product Replacement rates are much slower than the Working Population. The growing Consumer market is mostly composed of Immigrants, who spend less than the Norm of the Working Population, because of lower Wages and greater Rental Costs; despite the massive extension of Consumer Credit. I can’t see any alteration of these base Fundamentals, and they seem to dictate slower growth, or erosion reduction. lgl

Bacl and Decker Automobiles?

I have been informed by an Exercise pardner that there is now a brochure out about the possibility of an Air Pressure automobile. The idea holds real fascination, utilizing the concept of Wind Power to generate electricity to run the Compression units, then design of Air tanks and Air motor to generate power to the Wheels. The motor, if utilizing current rotary engine technology connected to centrifugal flywheel to accumulate potential energy, could be relatively easy to manufacture. A major Weight issue enters into the equation at this point, defeating the proposed project: the weight of the Air tanks will dissipate the deliverable Power to movement because of greater weight on the tires. The old conundrum, greater weight of vehicle requires greater Air pressure, greater Air pressure impels heavier Air tanks. The process ends in Self-Defeat.

Bright Shining Light:
What if the Air tanks were composed of the centrifugal flywheel in the first place? This would obviously cut drastically the total weight of the Vehicle, but the level of Air pressure would still prevent adequate Power-to-Wheel ratios. But Wait! What if the Air tanks were composed of Baffle layers like an Accordion, with layers separated by air pressures values designed to open and discharge at set Air pressures? The Attempt here would be to utilize the Air pressure to contain greater Air pressure closer to the Center. The total weight of the outer Containment could be reduced, while much higher Air pressure could be maintained in the Center. Where are our Engineers with their Square root of a -1?

The Above problem could be resolved, leaving only two further Problems. The first being how to maintain the power ratio to the engine after half the Air pressure has been dissipated, and the Second of how to pack enough Air pressure into the tanks to get a sufficient Mileage per tank to make the vehicle viable for Road use. lgl

Statism and the Environment

This Post from Dr. Butler sent me off on a flight of fancy this morning. I would first say that I totally agree with the tone of the Post, especially about the ineffectiveness of national leadership to deal with environmental issues. Governmental regulation will promote ecological benefits only if it is simple and straightforward, without interpretative policy organization allowing both Regulatory agency and Governed to claim fulfillment without atonement. This above Process simply raises Operating Costs plus actual environmental damage. There has to be a more effective method!.

What caught my Eye about here was the very real fact that half the ‘Food Miles’ can be attributed to bringing groceries home from the Supermarkets. Lights starting going off in my head! Here is where to change the ‘Food Miles’ continuum for greater uniformity, and with great simplicity of regulatory power. A major descent into Statist police power will be necessary, but it is all for the good Cause of going Green.

The first Step is a simple law, based similarly on the ‘Open Bottle’ law against liquor found in many States, and simply ban Groceries being carried in Passenger vehicles. The next Step is simple prohibition of Food Markets from provision of Parking facilities for Customers. The following Step would be a law preventing Delivery charges greater than 3% for delivering Groceries to the home; Many would consider this an anti-monopolistic measure which it is not, simply a element designed to create the proper Delivery vehicles. We suddenly have Mass Transit delivering Consumers to Food shelves, and even the development of Outdoor, lockable, Refrigerator units (greater viability in Heat control). Gad, I should have grown up in the Soviet Union, I am so good! lgl

Aged Malt

Edward Charles Ponzi Jr. functionally matches my Thoughts about Inflation and the Aggregation of Wealth in the American economy. This connects and extends my previous Post on Debt. Ponzi witnesses the Appreciation Boom, finding no real gain in Construction value, little real gain in actual Land or Lot value; Property separates from Wine which does appreciate in value with Age (Straight Whiskey man myself, but even more relevant). Here is the Rub: the real gain in GDP has come from Consumption financed by Debt generated by higher Property Evaluations, or by Capital Investment funded by Debt generated by higher Property appreciation. Can a pattern be discerned here?

Potential Scenario Trace Lines (Future Forecasting):

1) Property value up, Production up, Imports down, Import Prices up, Exports up
2) Property value down, Production up, Imports down, Import Prices down, Exports down
3) Property value up, Production down, Imports up, Import Prices up, Exports up
4) Property value down, Production down, Imports up, Imports Prices up, Exports down

Line 4 is obvious as a Recession format. We can be considered to be in Line 3. Line 2 may be considered optimum Boom condition, except for the methodology to finance our necessary Imports, currently handled by selling American Debt overseas; this venue, though, may be considered a limited access format. Line 1 could be considered a potential Recovery vane, except for again the financing of necessary Imports.

The real Problem, here, comes in which Trace Line the American economy will evolve into; I will not bore Reader with the infinite discussion of why these are the only viable Outcomes which the economy can generate. It will be sufficient to state all other Scenarios have contradictory canceling factors which eliminate alternate economic futures (I will definitely not provide my Work). We could continue in Line 3, but it is doubtful. Line 2 would require a Global decrease in Energy draft at the current time, but certain exterior factors may create this Condition in the near future (that a harder explanation than the rest of this garbage). Line 1 cannot be perpetuated for any durative time, due to current Energy consumption rates which would have to continue. This leaves Line 4 as the likely spectrum, though a disappointing one for our new Millionaires; this countered by greater Joy for the Working classes whose Living Expenses will begin to match their Income. lgl

Reality--No. Whatever

Mike Shedlock (Mish) gives Us a fairly comprehensive Post on the problems with incurring Debt. The Scott Reamer link should be considered a Must-Read. There is little to say beyond what they highlight, except to propound the real basic nature of Money. This element relies totally upon peoples’ trust in its worth. Money is simply Paper, or electronic notations in some Computer, without Peoples’ reliance on its Value. The base advocacy of Debt fundamentally devolves into an expected and desired diminishment of the worth of Money, in order to pay off the incurred Debt with the least amount of economic pain. All current Political leadership never expect to pay off the borrowed Value of the incurred Debt, but a vastly reduced Value of commonly lowered Nominal value. The Business sector equally expects a like course for the value of Stocks and Bonds.

Here lies the real Problem of Debt! I could cause massive Heart failure in Political leadership, by a Demand that Treasuries in the Social Security Fund be Inflation-adjusted to Year of Purchase, so that resident Value is maintained. Suddenly, the great Social Security Crisis drifts away in the Wind. Politicians–do not worry; I have called the Paramedics. We will never see the foregoing occur, but there should be an inherent Demand by all Who paid into the Social Security program, that the Social Security system live up to its provisions.

The financial markets likewise engage in the same incited misbehavior, knowing that any Inflation in Stocks will eventually transfer over to the Consumption markets. People are losing the Value of their Earnings, Savings, and Investments through the deliberate and excited Inflation rate, which has been carefully hidden in Stock Prices. Articles like the Fisher piece is more fraudulent than it is informative, and while not illegal, remains deliberate attempt to steal–this time the Value of Peoples’ Earnings. lgl

Real Appreciation

I have just completed reading the Posts of Richard Posner and Gary Becker on military Pay. Both are instrumental Reads as introductory education into the military Pay formula, and the American Public reaction to the losses among military personnel. The grounding for the American Public’s discontent, though, does not reside in their stipulated Reasoning. A greater depth of analysis is necessary to understand the Situation.

Posner and Becker assume there is no Draft observable in American society, but there is a Market-based Draft present. Personnel suffer from insufficient intellectual skills to acquire Scholarships or Grants, and additionally lack the necessary funds to acquire Skills from a Technical facility. They face a restricted Job market as they leave High School, or the Minimum Skill Jobs they attained after leaving High School. Personnel advancement is blocked for these young Individuals, especially as they face more-experienced Labor elements seeking employment. Their only venues for personal advancement is development of entrepreneurial skills for running their own business, or to join the Military. The Military tests this new Personnel, and without high intellectual or physical skills governing classification, are persuaded to enter into basic Infantry or Armored service. This is not as bad as initially perceived, as Personnel is granted Right to Service Schools of technical expertise in Times of low levels of Deployment. The Situation alters drastically with rapid Turnover of Deployments.

The current Administration quickly established a Policy of disallowing normal Terms of Service, which would grant normal exit from Service. This Administration then speeded the rates of Re-Deployment, functionally negating individual limitation in numbers of Deployments. The Bounce Effect of the current Policy is even worse than the permanent Deployments of WWII and Korea, with both Troops and Public cognizant of the Absence. The American Public are consciously and constantly aware of the unfairness of current Policy, where a small group of young Personnel are left to bear the total brunt of the War.

Fitting Military Combat Pay would assume all Household Debt of Wounded or Killed Personnel, so that their families suffer no duress which they lack the financial resources to eliminate. Military Pay, itself, should be structured to provide permanent Pay Hikes due to actual Combat deployments endured (a genuine fair Combat Pay would be a 3% Pay increase for each completed Combat deployment, completion established if Wounded). The actual Cost of these Provisions would not constitute more than 1% of current Military Budgets, and would actually reward these young Personnel for their long and rigorous struggle. lgl

A Real Carbon Tax

Tim Haab is a very bright guy, but may have a lot to learn about global Politics. Heavy Emitters will always claim Carbon Emissions Caps are too stringent, and will never settle for mandatory limits to be enforced; they will simply deny their level of Emissions, and will continue on with their development plans. Proof of excess Emissions could well be scientifically established, without ever gaining a diplomatic admission. This is the real inhibiting factor in setting Caps.

My Solution comes in an Carbon Tax, but One which is enforceable. There must first be passage of a multinational treaty which hopes to include all nations, but will only require Participation in the Treaty obligations. The Treaty will establish an International Fund to finance technological development of safe Carbon Emissions technology, and provide infrastructure funding for the Changeover. Signatories would be obligated to pay a Carbon Emissions Tax on all Emissions above a certain level; the Tax paid would be a two-level taxation, one for Developed nations, and the other for Developing nations. Carbon Emissions levels will set by the average of the lowest One-Third of Emitting nations based upon a measure of per 10,000 inhabitants; any Nation exceeding this emission level will have to pay the Tax, based upon emissions by a percentage increase per 10,000 inhabitants. Each percentage over the Average will be charged the Tax at set rates per 10,000 inhabitants annually.

The real guts of the Treaty will be in Signatory Agreement not to Import or Export to any nation, Signatory or not, who does not pay their share of Carbon Tax into the Fund. Economists will immediately certify that funding for the Fund will be unimpeded, and the economic Incentive will be present to concentrate on Carbon Emissions technology for purposes of Emissions reduction. Reality states that initial Carbon Emissions taxation will be quite low, but that this will not remove the economic Incentive to develop Carbon Emission Reduction technology, and that the Carbon Emissions taxation will increase over Time once the Structure of the Treaty and Fund are in place. Long-term Carbon sequestration and development of non-Carbon fuel sources will only increase in value with global development, and this may be the best place to start. lgl

A Mix

Greg Mankiw started a Fad of determining your political stature by way of a web questionnaire; read about it at George Borjas’ blog. Dani Rodrik, it seems, has come up with the Suggestion that Everyone should inform the Readers of their position on the Graph. I am terribly stupid in the Graph building exercises, so I will simply state that I practically match Dani in my placement; I am sure this is bound to be a great embarrassment to such an esteemed colleague. Still, One should not throw bricks if you live in a Glass House.

David Smith again came in with an excellent article with which I totally agree. The lack of U.S refineries is the major drive behind the U.S. fuel prices, and a Trend-Setter of the World Oil price. The American economy is doing this to itself, what with its refusal to sanction new Refining capacity at the State and Local level; OPEC sets its Pricing schedule off of what level Americans will use Oil at what Price. We have to either cut Consumption, or build more Refineries, in order to bring down the Price of Oil. One help would be a switch to dedicated Refineries, the transfer between fuel types at combination refineries cost Us about 30 Days of Refinery Downtime per year.

This Post from Tim Worstall holds great truth, but also a great Lie. It is true that Ease of Firing grants Employers the liberty to hire more personnel more rapidly. It is also true, though, that increased Downtime of no Paycheck coming in, plus the Costs of Job-Hunting, eat up the Savings rate of the Anglo-Saxon model, eat up much of the 401(k) programs, and force an excessive amounts of Credit Card debt. It could very well be Happy, Happy, Happy with a grimace on the face.

This blog by Dean Baker is well worth a Read, as is the blog from which I stole it by PGL at Angry Bear. The real clincher here is the reduced Participation rate of the Population, dropping from 63.3% to 63.0%, or a loss of 600,000 from the Labor Force. This is significant in the fact that the illegal Immigration rate has remained relatively steady over the Interval, and the BLS statistics do not record this information in their model. A simple Statement says that the Job Destruction rate is much higher than reported, and the Job Creation rate is much slower than reported. This is not a time to ‘Smell the Roses’, because of a faint scent of putridity. lgl

Born Again Bucket Shops

Calculated Risk wrote a very important Piece on Tranches. The trouble comes in the form that a great share of the Readership might not understand the methodology of the financial system concerning tranches by reading the Post. Tranches are the means by financial institutions can make poor-risk loans with advantage to themselves. They sell the full range of loans–Good, Bad, and the Ugly. They bundle the loans to keep the loans they know are solid, and sell the loans which are Ugly or Bad–promising or suggesting a high rate of Return to Buyers. What they buy basically is the risk of the loan. Sellers get a commission for the Sale of a tranche, their share of the Take if the loan proves to be Good and Pays off, and dump the losses on the Equity Holders if the loans fail.

The Seller of tranches get Commissions for selling the initial loans, Commissions for selling the tranches, get most of the Value of the loans if they prove good, and avoids potential losses if the loans prove bad. The real Problem with tranches comes of their not being a form of Investment, just an Assumption of Risk Gamble where Odds are better at the Las Vegas tables, considering the quality of the loans. They remind of the ‘Bucket Shops’ of Old which actually did not Buy or Sell Stock for Investors, and could simply close up Shop if the Market ran against them. It is the legal Contract language that allows for Sellers to close up Shop in tranches. lgl

New Election Rules

Cactus at Angry has set a group of Series comparing Republicans and Democrats on a variety of Issues (check the list), comparing their success rates. He has his ideas on why the Republicans fail to measure as favorably as Democrats (and no, it is not because Cactus skews the data recovery). The basic difference between Republicans and Democrats is orientation: Republicans are Rent-Seekers, and Democrats show less aptitude in this arena. Democrats may be termed professional Politicians, whose main goal is acquiring and holding Office; they examine the fruits and privileges of their Office, and consider it sufficient reward. Republicans, on the other hand, are more ambitious; seeking high Rewards post-Office through pursuit of wealth and position while still in office. The normal Salary and Perks of Office provide inadequate Returns for the average Republican, who wishes to turn his tenure into a rise in Socio/Economic advance in social position. This additional goal of Republican Office-Holders is very expensive for American Taxpayers, and causes erosion of economic stability for Americans as a Whole.

There is relatively little which can be done about this differentiation between Republicans and Democrats, except possibly to forestall Democrats from adopting the same approach. Politicians, as Office-Holders, write the law; granting vast evasions for themselves while the ordinary Citizenry are not watching. They simply make the Rules, which invariably benefit themselves over other Priorities. There remains a multitude of legalisms preventing forms of corruption, all with a criteria of law enforcement detail forestalling any curtailment of their own behavior. What could be done to at least limit excess?

The first Step would be to refuse Office-Holders to attain or retrieve any Income other than their Salaries during their terms of Office. The next Step would be to specifically forbid Office-Holders to engage in solicitation of Political campaign funds; paid staff of the Political Parties must arrange all funding for the Party, and the Parties will allocate campaign funds to the various Candidates for Office in an equitable manner. Family members of Office-Holders must be paid Employees of the Political Party, or draw only a set Salary no higher than the Pay received by the Office-Holders in alternate employment; in no case will Family members be allowed to engage in Fund-raising activities for their Relative or any political Party. Office-Holders must return to Residence in the District having elected them to Office for at least 5 years after leaving Office, and are forbidden to engage in political activities in that Period, except to run for an alternate Office; they are specifically forbidden to engage in political fund-raising activities or Lobbying efforts during this Period following Office. People will claim these measures are too Draconian, but I personally favor the Athenian practice of Old in issuing an Edict of Exile for five years. lgl

Food for Thought

I have been studying this Post by James Hamilton, and traveling from his work to that of Menzie Chinn. What can you say about the Situation? Consumption increases were far more reliant on Inflation than Production, a even sadder commentary when specifying that most of the Consumption rise went into Imports. Menzie Chinn may find, by his log percentages, that Imports are rising faster than Exports again with the next Report. The Exports surge may yet be impressive for Brad Setser, though it is not likely to be joyous for American Production. Menzie Chinn’s discussion and graphs on the alteration of direction between preliminary and revised BLS estimates from positive to negative, something I have noticed for a while, might indicate a less-than-rigid Government devotion to modeling accuracy. Read between the Lines!

I do not feel as sanguine about the Employment picture as James Hamilton, the rise in GDP seemingly coming from higher Pricing, rather than from increased Production. Employment is buoyed by the fact We are entering the Summer months, but sale of higher-priced, fewer Products may leave Showroom floors emptier of more than Inventory. A real Concern of myself comes in the misdirected Subsidies implemented for the production of ethanol, a real element destined to reduce Employment in my part of the Country–the Midwest. The real factor here would state that Employment in the Construction industry would be down, except for those Subsidies. The real Injured Parties from the latest economic trends may be Small Businesses, traditional generators of the most substantive employment.

I do not think Ben Bernanke should be given Credit for the current situation, as James Hamilton would imply, though it may be a Soft Landing. I prefer to watch the Food Prices at this point, a high rise in Prices or sustained volatility past the Season’s harvests means a high level of Inflation has engrained into the Economy. An Inflation rate in excess of 4% by Q32007 will cut real Production by about 11%, and raise the Cost of Imports by about 20%. Americans may find themselves feeling Poor by Christmas Season. lgl

Misdirected Rejection

John Quiggin basically states my position on it issue of heterodoxy. The real Contention of the Heterodoxists comes over the rationality of economic behavior, both as Individuals and as a Group. A lack of this rationality will produce a Scatter of Data results across different economic settings, due to the irrational behavior of Participants. Here brings entrance of Statistics into the Discussion, bringing forth the process of Averaging. Under Conditions of irrational reaction, any data results in Scatter patterns of determination. The statistical Mean frames such Scatter pattern into useable form, the best which can be hoped for in any predictive program.

Heterodoxy claims basically descend to criticisms of evaluation of the Mean in these model descriptions, though I find little relative ability in any program to improve this evaluative ability. We must continue crippled most by Hayek’s lack of instantaneous information. This failure leads to misunderstanding of immediate reactions, even after the fact in modeling. Irrational reactions reside in misunderstood pressures placed upon Participants, alongside their impulse reactions to reorder their Participant patterns for personal reasons. The models are not wrong, just lack full information of the conditions of the economic reaction. lgl