Short-Sighted Fedral Policy

The Food Crisis is here, and the keyword is Fertilizer. Several aspects of the Crisis, though, should be highlighted. The American Fertilizer industry has supplied American agriculture with sufficient stocks of fertilizer since the 1950s. American export of fertilizer stocks began to grow with the cheapening value of the Dollar, with Fertilizer Plants selling off traditional supplies at vast Profit; there also appearing Fertilizer industry abrogation of Contracts made with American Farmers, through the simple expedient of claiming a Shortage, and refusal to distribute their Product while insisting on a higher Price. Ethanol Subsidies probably provoked an additional 3% total demand increase for Fertilizer; a primary condition which would easily have been canceled by Overtime Production at Fertilizer plants–which never occurred. The actual Shortage of Fertilizer was multiplied by a factor of 5, due to Federal refusal to apply limits to Fertilizer Exports from the United States. The Shortage incurred doubled the functional Application Cost of applying the Fertilizer to the agricultural ground, with great impact upon Food prices in the Present and Future.

The long-foretold Recession is still not with Us, and actually, will probably not be with Us until the new Food Costs hit Us because of the increased Agriculture Costs. This means after We bin another harvest. Consumers are already limiting their Expenditures to basic Necessities, and trying valiantly to pay down their debts. Business interests are feeling good, even under the Constraints, estimating that Exports will grow to make up for any loss of American Consumer Demand. There are several dangers on this Horizon: developed Port facilities are relatively maximized at the current time, and massive increase of Exports (over 2% by Volume) will strain both Port facilities and Sea Lanes around continental waters. Transportation Fuel Costs are up drastically, and only posed to continue their rise with additional Craft on the high Seas. Business Interests estimate they can suppress Wage Demands in the global economy; they should forget their anger against Hugo Chavez, and hark back to the Movement generated by Ceseare Chavez; they must understand their vulnerability to the same Conditions afflicting the rest of the economy.

I may be the only Observer who contemplates long-term Changes brought by interruptions of Short-term Income flows. Business will pay higher Wages under striated Consumption conditions, or else will lose both Labor and Productivity. Federal absolvement of their own responsibility to maintain valid Trade conditions, will not grant them immunity from their own ruination, where their own Operating Costs will increase even faster than that of Taxpayers. The current Credit Crisis was generated by two principle means: the adverse policies of the Fed, and the Federal pattern of deficit Spending. Federal inaction in regulating Trade Conditions has incited the basic pattern of Shortages seen in the Economy–even Oil. Special Interests and Speculators believe they have engineered their own fortunes, but they only created their own Downfall (being a Billionaire means nothing, when the value of the Dollar can equal that of the Mexican Peso). lgl

Tax Revolts of various Type

Steve Hanke gives a good presentation of the dangers within Monetary and Fiscal policy, the greatest being a Time frame element where Releases and Clamps are invariably mis-timed by the Period of implementation. Students should realize that Contraction data always arrives some 60 Days after the management decisions which produced the data, and Implementation Times have a Delay Period of almost 30 Days (Second-source after current Contracts have been completed, the policy affecting the Contracts negotiated post Policy decisions will show up in later months). This means that the most rapid fiscal and monetary policy is always 90 Days late. Economists searched throughout history for economic models universally applicable which would minimize Recessive conditions, without restricting Growth conditions. It remains the source for my insistence on maintaining the Fed Funds rate at 4.2% forever, simply to maintain a Constant flow of Capital funds variable only by Consumer Demand and Investment opportunity.

Political Calculations, the blog, holds to truths which are self-evident, but also utopian. Transparency of Tax brings abrogation of Tax, as it only clarifies the real escape mechanisms for Tax evasion. Neutrality becomes impossible immediately upon provision of Tax exemptions for political contributions–Corruption advances from merely Profitable forward to provisionary of Protection. A broad Tax base simply expands the Numbers desirous of escaping that base, mostly exhibiting multiplex level of special Tax clauses, all funded by Tax-free political contributions. No one wants a Simple or Stable Tax; simplicity breeds increased Tax payments, while Stability brings decline of Tax Management Services. The call for no retroactive tax stands as a nonsensical demand, as all Taxes are retroactive, Cash demanded after you have finally managed to make some; Tax personnel highly cognizant of trying to draw Blood from a Stone. Low Taxes defeat the desires of All; not paying for Government, not guaranteeing employment for the Tax Preparation industry, and not inciting Taxpayers to hide their Cash. Their provisions for free Trade, Open process, getting Local, State, and Federal levels to flow in common, beneficial direction expresses desire for a World of the Magi, never witnessed in the history of Man. I am with Political Calculations in Spirit, but Material Gain insists I deal in the whorehouse.

I provide this last article, not because I agree with James Galbraith so much, as it is an important Read which touches many of the bases. He tries to imply, as I try to yell from the rooftops, that the major thing wrong with the American economy is Americans. We blame Everyone but Ourselves for our own economic delinquency. The great Crime of foreigners comes in the form that they provide American desires with cheap, efficient Product, so We Americans can overindulge in conspicuous over-Consumption. I have already proposed an applicable Income Tax on foreign labor on Income earned on production for American Sale, payable to the IRS; don’t see anything wrong with it, as We tax Workers in Texas for Goods which they sell in New York lgl

Acute Policy

Serious Students might want to pursue the full article found here. The key element to be searched for is the Proof that only two of the Recessions since 1955 have proven to be deflationary. The basic traditional theory would suggest that less Output would reduce the resource Costs of the Output; hence there will be a deflationary cycle. How realistic is this Assumption? Capitalization of both Production and Resource Recovery venues occurred within the previous Production cycle, with Repayment schedules conditioned by the previous Production levels. Individual businesses in both the Production and Resource Recovery sectors must raise Prices, or cut Operating Budgets, in order to maintain the Repayment schedules. I have several Guess-estimates on the general run of Business under Recession conditions: 1) Business will raise Prices to make up the difference, until such time at Sales volume has dropped over 11%; 2) Business will start a Layoff program if sustained Sales reduce over 3%, Layoffs producing 150% reduction of Sales in comparison to Operational Savings; 3) Central Bank provision of liquidity only allows the Price increases in Output and Resources to be maintained, without any spur to Consumption at all.

The optimum policy of Central Banks is to provide assistance to Businesses, not to Pricing. I would substitute a policy of replacing the Service Costs of Capitalization for Businesses with Sales losses in excess of 4%, to be repaid by a 1% Interest Charge on their total Sales volume after a initial delay of 24 months. Every Business would have to be approved through their Credit-holding institution, with the financial institution bound to meet the Loan commitment upon Business forfeiture; the desirable rate charged to the financial institutions would be 4% of the total Charges per year. The whole effort desired remains attacking the virus in the system, not the system itself. lgl

For Better or Worse, Richer or Poorer

Jeff Cornwell writes good stuff, and this time it was about ‘niche’ businesses. There are certain things which he did not mention about niches, which I will take a pass at. The First is Be Prepared: hitting a niche is like an Oil Well which is a Smackover, Orders will be coming in as rapidly as if you were a national business if you access a genuine niche, expansion will be at runaway train rates. The immediacy of the business will be unbelievable, and quick fulfillment of Orders must be made to maintain the reputation of your business. This element is so important that if the rush of Orders does not come, you can expect not to have hit the niche desired exactly, calling for almost immediate change of Product or Service. The Internet is vital to modern Business, but it turns Market conditions into High Water scenarios, notorious for Floods placed upon normal business organizations. Remember that niche markets depend upon a developed national Distribution system. Watch your Credit Sources: you will need immediate expansion funds, be sure to possess access to immediate levels of adequate Credit; original financing may seem adequate, until you must triple your Productive capacity. Finally, watch your personnel: hire exactly Those who have previously worked in a high stress, mass productive business; niche businesses have to gear up, and need experienced labor who know Shortcut methods. Keep these fundamentals in mind, and the Racehorse nature of niche business can be survived.

Dani Rodrik and Tyler Cowen are both Right, and both Wrong. Tyler was correct in his assessment that ‘One Size fits All’ does not fit any. The basic argument I find relevant here states the degree of Product involvement in Trade remains the elemental issue. You must discuss this in terms of the percentage of Trade product coming in the form of Rice, and the percentage of Rice which is consumed domestically. World and national economies vary in economic advantages gained from Trade, and understanding of those variances are vital in consideration of the value of Trade to both the World economy and the specific national economy. The World economy would like to control the national economies, but governments hold control on the ground. I have always been an advocate of rational Tariff policy, though I have criticized other forms of Trade restrictions. The basic rationale behind this position states that Tariffs are the real means by which the benefits to national and World economies can be equalized, through a process of evaluation of the above criteria of national domestic access of both domestic and World markets. I love my rational Tariffs!

Will the Tax Rebate work? An interesting Question which has a relatively nonexistent Answer. One has to understand We are already dealing with an ailing economy, which might not actually be Sick, and only responding to Supply Shocks from Energy prices and other criteria. The expected outcome of the Rebates is much less, if current economic conditions are only a response to the Supply Shocks. The Rebates will function quite well, if Household Income has been financially constrained–providing relief. What is the impact, though, if both Household Income has been constrained and Supply Shocks are in force? Well, the Answer may state that the Rebates will make the situation worse, magnifying the impact of the Supply Shocks through higher Prices, and doing nothing for constrained Household Income. lgl

What was I talking about?

George Washington complained about the quality of the Powder supplied, a Complaint common throughout Military history. AEY Inc. represents the traditional military supplier who wishes a greater Profit from each Cartridge, than it had paid to obtain it. Military officers always attempt to blame the Suppliers, who remain a particularly noxious form of Agent without Production facilities, though they promise adequate Supply. The Military has to assign a military officer to either obtain the ammunition personally, or to review and accept every Consignment before forwarding any Purchase funds. No military officer ever wants to damage his career with such an Assignment, where a Charge of Corruption or Failure of Duty always follows, due to the magnitude of Consignments which must be reviewed in alternate locations. The Military always shifts responsibility to Civilian Contractors, so that they can avoid complicity in the failures eventually encountered (No Cash Cow Left Behind!). The Solution always contains the same element, which is direct Contact and Contract with the Production facilities, with the Contract provision that they must accept any Outdated Munitions for Quality testing of their Serviceability; all as the primary control of issuance of such Munitions to subsidiary military client organizations; a factor almost impossible to achieve when subsidiary military organizations do not utilize standard American military weaponry.

American Consumers are reacting rapidly to the economic downturn, at Speeds probably highly influenced by the existence of the Internet. Blowing Our own horn, I would suggest Most Household Purchasers currently read one of the many Econ or Business blogs currently on the Air. The Problems are more quickly recognized with swift purchasing changes, and this quicker downshift may actually alter the Markets themselves. Business must recognize the greater difficulty of hiding Bad News, and devise a business format to deal with Recession conditions. I would suggest that Business switch to an immediate Price-Cutting policy, where Production and Sales are maintained without Layoffs or Profits, simply paying the Cover Charge for Production Costs. Management and Stockholders might find this policy onerous, but easily shifted after Sales again pick up. The Objective is to ensure that Consumer fears are not raised by loss of Jobs, and/or forced inability to purchase.

I asked myself if I wanted to finish with Tyler Cowen’s excellent article on Rice production, or if I wanted to continue with my first impulse, and comment on this article in the NYTimes. Then I conceived of the brilliant idea of combining them with the Question: What if some idiot combined the MicroFueler with a Rice feed Stock? Congress granted ethanol subsidies to Corn, and the price of Corn went through the Roof. The high Corn prices have incited heavier Capitalization of Corn production, Corporate expansion in foreign lands to raise Corn and other ethanol feed Stocks; maybe, it would only take Congress’ promise to pay for turning Rice into ethanol to guarantee an expansion of Rice production (if I sound Stupid, think about Congress!). Tyler mentions that Government action often is a tad Retarded and retarding, but the ATF may have a hard problem deciding if Moonshiners are drinking their Car fuel. lgl

It's All about Energy, or me being nasty.

Plug Ships into an electrical outlet in Ports, rather than run the Ship’s engines to supply Power; it sounds fine, but has it disadvantages. It requires cheap Electricity, and a designed Ship’s electrical system to accommodate the Change; by the way, has Anyone tried to live in a cold Ship’s cabin heated only by an electric Heater inside a Ship designed to draw heat from the engines. It is perfect in the Tropics, has some disadvantage in the Temperate Zone, and don’t try Winter in the Arctic. There are Ports where you can get 2" of Ice build-up on your Porthole window. There have been Ships which had to divert to warmer Sea routes, in order to keep their refrigerated Product from freezing solid. The article does not discuss the BTU variance between utilization of the two separate systems. One Study I would like to see is One which estimates the total Heat generation of electrical generation units Worldwide. The simple use of Electricity in volume produces Surface Heat, and it would be nice to discuss magnitudes. It will make Us all feel ridiculous if a Car burning the worst fuel imaginable produces less trapped Surface Heat, than massive electrical power generators to supply the Transportation fleets on per Unit basis.

This article worries me, not because of the Greenhouse Price tag though significant, but because of the mis-allocation of Land and Labor resources. Suitable land is left fallow because of Labor Costs, and Labor is left unemployed due to a Corporate environment which insists on the cheapest Cost at all Points of the Production cycle. A truly Socialist Government achieving power anywhere in the World would have to consider a rational Tariff system, simply to protect their People from a predatory lowest Cost system. It is a Tenant of Modern Business that the Consumer is always Right. Fine and Good, but the Consumers want their Jobs back; and they seem to find no Response from the Profits-driven Corporate structure.

Mark Thoma presents an excerpt from Tim Rutten, then provides commentary which should be read. Read them before you read my Comments. Pigouvian taxation is unlikely to impact public practice, as long as the Pigouvian taxation remains a minor element in the matrix: A prominent Economist who I will not name to forestall any animosity being generated, publicly suggested a 11 Cent increase in Gasoline tax, back before the last Gas Price run-up; Consumers would not even be able to spot the Tax, Taxes must be seen as a Cost to have impact–most especially of Pigouvian nature. Rutten says the Toll system discriminates against the Poor, and Thoma says these effects can be mitigated by methods of Tax expenditure. None of the Proposals would seem to register on the radar of the Public, or change their travel preferences; combined with the elemental suggestion that Toll roads consume greater amounts of fuel by a Speeding and Slowing practice. I would advocate a impact-generating Pigouvian tax where every 10,000th vehicle is Fined $250, Traffic noted by Camera with capture of license numbers. Fines unpaid would be added to Californian License fees. This Practice might capture the Public’s attention. lgl

Reality as We don't want it

Here is a Story to warm the cockles of your heart, or more likely, the skin under your collar. Refining capacity, which We need, is getting squeezed with narrow Profit margins, while the relatively Speculative Crude prices are plowing ahead. Year over year, a miserly 33% increase in the former, with a 70% increase in the later. I have not checked, but expect the front end–Land Oil right–did not much better than the Refiners. The Speculative urge has to be curbed in Commodities, and my Suggestion for Oil would be assigned Refiner Delivery where failure to fulfil the Futures contracts to the assigned Refiner would cost the Option-holder an 8% Penalty upon Sale paid to the Refiner assigned; this means the Penalty is valid if such Options are resold before Delivery to the assigned Refinery. It may not work, but it could forestall the jammed Profits-taking coming from multiple Turnovers of Contracts.

Arnold Kling is still searching for fiscal reality in Government Expenditures. It is a Condition which could not possibly reach achievement where Legislators extort Campaign Contributions for their Votes on Spending legislation. Establishing a flea circus museum in Indiana wields equal weight with provision of Emergency Room medical service in major Cities. Worthy Causes become a Profit-making function for Construction and Management companies. Separation of Medicare from Social Security could only identify Social Security as sound both in principle and funding, while expressing the ridiculous nature of the state of Medicine in this Country. The Defense Budget could be cut by 80%, and the United States would be on par with the rest of the World in a decade; cutting the Defense Budget by the Cost of the Interest on National Debt for its payment would be a help. I don’t know what Arnold defines as Domestic Necessary except for shelling out for the huge Civil Service, which could probably be cut by 30% without much notice by Anyone other than Civil Service personnel (I would notice the lack of about 30 pieces of letter paper per Week!). My advocacy: kick out the Republicans, kick out the Democrats, and put in the Rednecks; it might take them 3 Terms to understand the legislative language of bills, getting nothing passed.

I could not learn the abstract, now it seems I cannot learn the Concrete examples either. Maybe I ought to join the Rednecks in Congress. The Authors do not seem to integrate the principle that the abstract must be taught in conjunction with the Concrete; I once having blown a Math Final because the Test used a Symbol construction totally New to myself, and was something which should not have been tested under the pressures of personal achievement; I would have passed the Exam easily under the known Notation, or if allowed to become familiar with the new Notation. Should I have studied more–assuredly; but it not the Issue, Concrete Examples should contain variety and the methodology to Problem formation. Here I am still grousing after decades. lgl

Do I know what I am talking about?

What is the value of Tax breaks? This article will give an efficient rundown of the economic data on the economic growth rate of the last Expansion. The key element of the data may be missed, which is that Tax breaks are good for Corporate Profits, but show less welcome effects elsewhere. The last Expansion was slower to increase, was smaller in increase, and dropped off more rapidly. The probable cause of these Results probably appeared due to the high draft of Investment resources from the matrix as Corporate Profits–issued both through Dividends and Corporate Executive Salaries, Benefits, and Stock Options. Integral Investment potential was distributed through non-productive dispersions with lack of measurable return. The rapid decay of the Expansion can be attributed to realization of the above dispersion of Profits through massive absorption of outside debt against business assets, which again reduced the viability of integral sources of Investment. The visualization can be expressed as Businesses deliberately dropped their desirable Credit ratings to scam the Companies for the benefit of Corporate leadership.

I basically agree with Tim Duy, having already said in a previous Post that I believe in a L-shaped Recession. I worry about Fed policy, thinking it may be as equally Short-Sighted as it’s policy in the 1930s, though from the opposite direction. They are already pouring Money into the Markets, when Commodities are on an inflationary spiral; they have already let Inflation get out of hand, and are set to give it spare funds to grow. No Economist seriously expects extra and cheaper Cash will incite heavier Business investment, in the face of declining Consumption Demand for advanced Product (means that they are paying their bills and buying only Necessities). The current optimum approach is to force fiscal conservatism upon Businesses, making them follow Consumers in paying down their debt. I advocate setting the Fed Funds rate at 4.2%, and leaving it there forever, as I have always doubted the power of Monetary policy to aid, though its power to injure is massive.

Menzie Chinn is willing to give President Bush the benefit of the Doubt, though I think there may be more Politics in his Statement, than there is Economics. It all comes in the definition of a Slowdown. I am of the persuasion that the GDP will not increase for a lengthy Period, though it may not classify as a real Recession. I do know that both American Consumers and American Business must clear ageing debt, before there is likely to be significant Gain in the GDP. Time will tell, and floating at current levels could be the best hope. lgl

Not as Easy as It Seems

I don’t comment much on Nouriel Roubini for two important Reasons; one, he is a trifle too radical in his approach for my own taste, and two, he is more firmly grounded in economic thought than I, and possibly more intelligent as well. His analysis of the type of Recession that the United States is entering requires some Cosideration. I don’t know as the American Recession is as important to the rest of the World, as it was in Times past. Most of the World have left Technological Poverty, having acquired educated Elites to run the complex technologies now available for Sale elsewhere; America could potentially drop out of the World economy for an extended Period, without notice by the rest of the World. The worst aspect of an American Recession may be getting their invested Capital away from American shores.

Studying Roubini’s Post leaves me with a shiver, I feeling that Someone has walked over America’s grave. American Copyrights and Patents are finding lessening compliance, as American holders insist on ever-increasing Return from them; within a Scenario where the World can now devise their own technology. The leading American Products provide very little financial Return to American Households, where the Profits are not split up by high Wages, and much Corporate share is owned by Foreigners. Actual Wages have been stagnant, if curio limited Labor is subtracted from the Wage mix. The greater amount of World Investment still expects the American Consumer to pay for the Production and Start-Up Costs. The Weaning of the World from the American nipple may inflict the greatest impact of an American Recession. The entire Above discussion, though, fails to impact American Wage stagnation at all.

I am afraid I disagree with Roubini, thinking that the Recession will be L-shaped, after the Japanese model. The causation is the Same: Excessively large Capital Investment in dated Technologies, which are still unpaid. Does this seem like a Re-Do of the Tech Bubble? This is the direct result of a earlier Fed policy which trained both Business and Consumer to accumulate as much Debt as allowed. It meant that adequate Capital repayment was delayed; remember the old ‘Guns and Butter’ mythology where so many Economists and Politicians claimed We could have both? I believe in the L-shaped Recession because We still have to pay for that Capitalization, with Aged Capital, Aged Technology, and Aged Labor Force. Most Economists will claim there is an Escape Capsule, but I do not see it; new Investors will not be found, until old Investors have been paid. lgl

Twilight of the Gods

One of the quaint habits of modern American politics consists of enumeration of the vast Tax Savings of a proposed Tax Cut, while adding the substantive Cost of a Government program only as afterthought with a quick skip to alternate discussion. Democrats and Republicans are equally transparent in their discussions of Taxes, so it is immaterial to take Sides on the issue. The three elements which should be remembered in any Tax discussion: any benefit to Taxpayers in marginally very small, Most finding Tax replacement through Inflationary Income and marginal Tax increases elsewhere; Government programs start drafting budgetary funds from the first Day, generally with a huge Startup Cost; and both Tax increases and higher Budget deficits come immediately after national elections. The hubris expressed by Politicians on Tax and Spending policies stands as the greatest Bull spread in America; Corporate Executives and CPAs would be in Prison if they spouted such garbage, and most Americans would consider These to be the most powerful leadership in the Country.

Here is an example of the stretch of the Truth in the discussion of a Government program. The Federal government deplores the threat to Student loans, so it plans to purchase Student loans from the Private Sector. Get real!! Student loans are among the most difficult to collect upon; it being hard to draft funds when the Student remains unemployed–either in his chosen profession, or as an aproned Waiter. The Government would issue such loans itself, if it were worried about the provision of Cash to Students. They do not do this! They resort to buying bad debt from financial institutions, who feel the threat of unpaid Notes; it all a backroom deal made by Politicians with the Banks, to garner their support in the coming Elections; notice that all such Deals are brokered and implemented before the national elections, to preclude Politicians from authoring the same style promises issued to the Electorate.

Here is the Hook where Politicians and Economists hope to get the added fuel for the Economy. Every good Economist roundly criticizes the Farm programs, but this is the exact time for such Programs. DuPont reports a 6% increase in local Selling prices, and says it expects a 9% increase next year; not mentioning that the Pricing is averaged throughout World markets, and hoping that Everyone misses the 1% loss in overall volume. Most Farmers I talk to in the American Midwest state that Fertilizer and Seed Costs are up about 20%, and like Diesel, shows not Sign of slowing. The foundation prices for Agricultural Supply Products will be up 40% by next year, and American Consumer Retail pricing with not go down on Food products. The Hands-Off policy of the current Administration towards industrialized Agricultural Supply (who have adopted the pharmesuetical mode of operation) will destroy the integrity of millions of American Households, and generate intense Inflationary pressure. lgl

Changes

Are We about done, or are We only getting started? Paul Krugman did sound pessimistic, but not as bad as I, and Ryan Avent presents macro material to justify that pessimism. Tyler Cowen would assert that it is the internal Migration from rural to Urban in China which is the basic cause behind the Commodity markets run-up. What I know is that the price of Oil, now at $118/barrel, will continue to go up if OPEC refuses to increase Oil production, until such time as the urbanized West cuts back its Oil consumption to counter the increased Oil consumption of the urbanized Chinese. Someone has to decrease their Oil Consumption schedules. I ask myself now if Consumers hate me sufficiently at this time, or if I should provide some Tax advocations which will eventually cushion the Crash of defeated Expectations.

A prime Tax would be a $30/Person Boarding Tax for Air Passengers; the Passengers will be paying the added Expense as Fuel Cost soon, and the IRS seems like a better Recipient in terms of down-the-Road Tax reductions than do the Oil companies. A Tax I really like is a Pump Tax, where the Pump meter starts from a position of $5, and goes ching-ching like a trolley after that; the Overhead of Fuel stations could be minimized by granting them half of the revenue from the Tax, as Collection and Transmission Cost. Such a Tax could equally be imposed upon Electric bills, Heating fuel bills, and the enviable Natural Gas bill. I could even be so Rude as to insist that all Retail Outlets position Coin-operated Attendance wheels at the Entrance, where you have to shell out Quarters to simply get in Groceries or Clothing stores. Consumers should understand that Government could make life much worse and Time-consuming.

There are obviously some unpatriotic Consumers who would scream about the new Restrictions at high Cost; but all of the devices utilized not only aids in funding Government without more disadvantageous taxation, it forces Consumers to consider their Energy consumption patterns. Housewives will think to concentrate their Shopping without the necessary Quarters to get their kids through the Turnstiles. They will, in consequence, buy more appropriately in larger quantities, without the kids screaming for trash Products. It will mean less traffic to the Retail stores, less crowding in the stores, more detailed lists canceling Impulse buying, and lower Shelving Costs for the Retail stores. A Quarter/Person Turnstile Cost could save up to $.40 of Energy by altered Consumption patterns, with only about $.14-.16 loss of Consumption dollars. Does that make Sense?–only to an Economist! lgl

Dungeons and Dragons, Anyone?

James Hamilton establishes a good foundation to attribute the Run-up in Commodity Prices to the low interest rates and loose money of the Federal Reserve. Paul Krugman, on the other hand, suspicions that Commodity extraction is actually very strained, and We are reaching Peak Commodity extraction points. David Beckworth forwards the View that Innovation will see Us past any Commodity shortage. I tend to adopt the gloomy Outlook that We are at the Dawn of a Civilization Decline. Civilizations are always based upon some format of economic conditions, producing a exact industrial base to exploit the advantages of Resources found in the area, or in Time. Civilizations have always fallen when there has been an impactive loss of the initial Resources, if there has not been diligent and sufficient Innovation to replace the Resources lost.

Modern Civilization revolves upon Goods production and Transportation. The United States was substantively organized in the context that the venue for Transportation utilized for Migration West was insufficient for the Transport of produced Goods back East, or to Europe. American Farmers in the old Northwest needed the River system to transfer Goods for Sale from their Production center. The River system through New Orleans had to be taken to forestall imposition of disadvantageous Tariffs, and the American Indian tribes had to be moved West of the Mississippi. The Gold and other Metals of the West could not be transported to the East without Railroads; for that We needed sovereignty over the land, and settlement of that land. Overpopulation insisted that horses be moved out of the Cities, and We were Saved by the invention of Cars–not of singular design conceived by any one Individual. The Conversion, though, created great dependence upon fossil fuels; forms of specific order to be readily acceptable for propulsion. We are at a critical Point now, even if equal amounts of Oil can be pumped for the next few Centuries; such Point compelled by the monetary and Energy Cost of extracting the Oil necessary.

The Student should realize the fundamental underpinning beneath the entire Discussion of Innovation: any Replacement system must be as economically efficient as the replaced system, else the additional economic Costs will erode the current economic position which We enjoy. The Energy system must be unitary in nature; i.e., it must be able to be integrated into a Whole supply of the necessary requirements, otherwise, It will be too costly and Labor consumptive. It must supply all the basic Needs without being an expensive system to operate. It must also satisfy environmental needs as well as Production needs. The Solution is bound to be exotic in comparison with current operating systems. I myself am personally contemplating altering the genetic structure of Plants, allowing them to generate solar energy through their leaf systems, and store Energy by Plant trunk storage system; Energy drain to be accomplished through a uniform Root system throughout the field or forest. Do I sound like a Nutcase? lgl

How It Is!

The NYTimes again adopts Journalism’s bias against perceived Conflicts of Interest in this lengthy Commentary about Pentagon association with military analysts. The later Group are hired by News networks for their communal links with military officialdom. The Relationships are as old as Hades, and as financially valuable to the Networks, as they are to the military analysts. Many of this Group would not have their relationship with military contractors, if they did not have a relationship with the Networks; their contribution would be Zero, if they did not possess access to the Pentagon. The NYTimes is trying to criticize the very Contacts which make the military analysts valuable. The fact remains that the Military has attempted to influence Public perceptions about their efforts since the French and Indian War, and American military failures have always been associated with failure to maintain the support of the American Public. Rants against the Pentagon, no matter the degree of sophistication of its influence over Journalists, should not be made; both as a matter of Patriotism and of National Security. Here again We concentrate on the Pentagon’s use of Tactics, rather on the real pressing Need to discuss the Strategic implications of the success of those Tactics.

The real Question which should concern the American Public is whether We should be in Iraq and Afghanistan, not how the Pentagon generates support for those Wars among the American Public. The first Point that American Journalism must highlight is that this Question supercedes the issue of On-Site military successes in Iraq or Afghanistan. Do We belong in Iraq? Do We belong in Afghanistan? Those are the questions to be answered; not the question of are We successful in either Country. The U.S. Military should be more successful in both Countries, but that is an entirely separate Question, and should be regarded in that Context; though not distracting Us from adequate analysis of whether We should be in those Nations in the first place.

American Exit from either Country would have relatively no Military loss for the United States, much as the current Administration would like to justify its earlier policies. Terrorism would have no heightened capacity to conduct warfare on American soil, and the loss of American prestige would not be so massive as to alter Our foreign relations to any great degree with any of the World–even in the Mideast. Whatever Loss is entailed could not justify the expenditure of American lives and American military capacity in these nations. I could even give a detailed Projection analysis of the Gains, as well as Losses, of abandoning both Countries with the expected progression of Civil War in both Countries. I am sure, though, that such analysis would not endear myself with Anyone, and it is still Off-Point as well (the incitement of Civil warfare in both Countries could be utilized to greater advantage to American foreign policy, than is maintenance of defunct Civil administrations seen as basically Quisling governments). It still remains the fault of Journalism itself, that they do not keep the Discussion focused on the Primary Questions to be answered by the American people. lgl

Six Degrees of Association

The younger Bush administrations take on the appearance of the Gaulacter administrations of the Third Reich, as it nears the end of its own rule. This article may define how a Deception of Disbelief was utilized by Participants in the debacle to hide their activities. This Disbelief system consisted of Follower incomprehension that leadership could be so raw and violate commonly-assumed Standards of Conduct so completely. The German defense after WWII that ‘We did not Know’ held more validity than Allied historians were wiling to grant, then or Now. The Civilized segments of Society were kept from knowledge about the subsystems, sort of akin to placing Barroom bouncers in charge of the judicial system. The decisions taken were too violent in Intent and too Radical in Implementation, but the Social Elites imagined their behavior conformed to previous Practice. It is the innate Problem, when Power is extended to People who have no Shame.

This falls fully in line with the Above argument. Those who believe all Participants will consent to previously-devised Social restrictions believe that financial institutions should be left basically unrestricted by Government supervision. They refuse to accept the Reality that some Individuals will commit any offense, simply to generate Wealth for themselves. They delude All with the declared presumption that they are following traditional Rules of Behavior, when nothing could be farther from the Truth. It is not so much a lack of ethics, as it is a refusal to accept the constraints of ethics. Libertarians and financial enthusiasts deny that these Rebels against ethical behavior exist, and need to be controlled.

The unease which People felt at leadership behavior was mainly focused in the economic sphere in the last Eight years, as it was during the Third Reich. The new methods of doing Business have held down the traditional Wealth holders–the Middle Class–while rapidly enriching the new leadership and their environs. The Middle Class were told they were rapidly gaining in non-liquid wealth by Property value increases, and supplied with new Means to derive liquidity from this wealth. They were not happy with the proclaimed Increase, thinking they should be making new Work Income advantage of Wage increases; but accepted the leadership advocation of Debt accumulation to maintain their Standard of Living, though they were uneasy about the facade quality of such Practices. They are slowly coming to realize that the entire Scenario was a Scam, with declining Property values, continued liability for Debt, advancing Inflation, stagnant Salaries, less Work, and the leadership leaving with vast amounts of personal wealth gained from the Period. People are again learning that they should not ignore Problems, until those disasters cannot be stopped. lgl

Strange Twists of the Mind

Strange is the manner by which the Mind works (don’t just say I am a Fruitcake!). I was reading this missive by Tyler Cowen, Mind rattling down the corridors of Emptiness, contemplating the futility of any Measure to control American Carbon Consumption; American notorious for ignoring Reality under any threat to their Expenditure patterns. I suddenly felt the huge impulse to turn into a Wild Thing, though I don’t think Anyone will love me. A massive new Transportation system flashed before my Eyes, and I knew I just had to anger Everyone!

The Concept is a truly, fully-automated Train system: One composed solely of the transport of Vehicles and Passengers. Loading of Vehicles would be accomplished by an On-Ramp system similar to Interstate access, with Speed limited to 5 mph, necessity to follow the Green lights, and Drive channels to position the Vehicle in the correct Axle clamp alignment. Cars could be positioned 5 to a Train Car, Trucks at Two per Car. The automated Train system would not leave until the Train was full, and Passengers had paid the requisite Transport fee, and would run at constant Speed with full Safety Distance technology, supervised by a centralized, manned Control room. Passengers could pay the Transport fee only is Club and Dining Cars on the Train, which served Meals and Drinks through Coin and Bill Operating systems; all Passengers would come to these Cars, as the doors to such Cars would be locked during Passage. Transit fees would be set based upon Carbon usage, Capitalization, and Fuel Costs. Exit at Destination would be accomplished by a 90-Degree Turn of the Vehicle in Question, unlocking of the axle locks, and straight Drive down the unloading ramp.

A fancy Train system, but undoubtedly unpatronized under normal conditions. It is sad, because it remains an excellent system to reduce Carbon burning, relieve Driver fatigue, provide more Scenic travel, and relatively equal Speed movement over long distances. Now to adopt a Totalitarian approach, while maintaining a Democratic appearance; my Answer is Selling Interstate access in special circumstances. My Suggestion would be to impose a 30-Day silent beeper for a 200-mile Interstate access; the Beeper electronically programmed for the Consumer choice limits, while the Beeper must be carried in the Vehicle used. Movement outside the area of choice would award the Driver with notification to the nearest law enforcement official, with an extremely high associational Fine imposed--especially if caught on the Interstate system without a beeper (I would suggest Confiscation of the Vehicle, potential additional $10,000 Fine, and possible 30-Day Jail stay--any or all of the Above, depending on previous offense). Beepers could be exchanged at Periodic booths (actually simply reprogrammed for a $25 fee with free battery recharge, and beepers presence can be checked by Patroling officers). Local area Residents are served with less than $1/Day fee, while long distance travel by Interstate quickly becomes more expensive than the enjoyable Train system, which may even give a free Beeper at the Point of Destination (for a 200-mile radius).

The new Train system would admittedly be vastly expensive, but all Fees from both Train system and Interstate system (including Fines) would go specifically to funding the new system. The Local area Fee feed would maintain the system through amortization quite well, at a very low Tax which aids in economic performance. Train Access Terminals would be minimized at 200-mile Intervals in the West, and Population concentration would assure easy Payment for the facilities in the East. It would dictate a Sea Change in human Transport in America, and none to soon, at a very reasonable Price and Value. lgl

The real Signs of Success

The phalanx of Bankers and Politicians who wanted to get a Bailout in process again did too good a Sales Job, and We are likely to enter the Election season in a Recession. They convinced Everyone to economize, a factor that can choke an economy as badly as a Bubble collapse. There had been excessive Housing construction which had been too expensive in the prior Five years; yet it could have been contained, and In-Process Construction could have been finished. The lack of Completion of such Units, and their widespread visualization on mainstream media, shook Consumer Confidence to pieces. Not only did foundation Stock Orders disappear, they turned into immediate Rush Orders where Businesses could not downsize without risk of a long-term Customer loss on their Service list. The Result could be called Slow Starvation; did Anyone come up with that term yet? These attempts to Save by cutting Stock and Warehouse Costs will destroy Us, and I who hates and detests the provision of Tax Credits, must degrade myself with a Call for a freebie Tax Credit for holding constant Warehouse Stock supply; an idea sufficient to give a man Hives.

Floyd Norris described the entire performance of the Housing industry perfectly in his blog Post: Ponzi Squared. Hyman Minsky was a smart Economist who knew that Greed always enticed Investors to pick up Fools’ Gold. Nothing breeds Failure quite as well as Success, where previous Windfalls demands repetition of Reward. There are Those who would claim that there are always Fools among Us, while I have always asserted Business acumen starts at the Genius level, and descends to the level of Idiocy. Such Individuals would not be on the Radar, except that they had somehow fallen into Success–the noted Genius. Bill Gates found Wealth primarily because he was a poor Poker player, and had to give up the Game because of insufficient funds. Warren Buffet found Success by being a fussy little bureaucrat willing to spend the huge Overtime hours studying abstract Markets no one else had barely heard. (By the way, they have the inherent right to call me any Names they want.) Bill Gates made his incredible fortune by Doubling Down, no matter what Risk level was involved, Warren Buffet still takes Joy from studying obtuse Reports; Everyone else failed because they lack the animated dedication to the extreme. I won’t comment on Carlos, because he would send Scissors to admonish me!

Some People simply do not know when to quit the Greed process, as they have become addicted to the Corruption process. Lee Kun-hee has been caught Time and Again, but like many Asian families, holds the ambition of starting a criminal Triad. They steal Billions to make Trillions, when they should steal Millions to make Billions; their ambition clearly assuring their downfall. Why do the Powerful imagine that Wealth brings Immunity, as Everyone should know that it only brings Notoriety, leading to the necessity of abandoning previous Profits-Making capacity? American hedge fund managers are only beginning to learn this Lesson, but it will bring as great an economic disappointment. lgl

Where are We going?

I remember vaguely long gone Arguments with my Peers on the question of Size, and how it affects the Signaling system which is Money within the Economy. It is hard to determine how I arrived at this theme coming from this article, but you really have to read the article to grasp the context of the Argument. Money is a Signaling system, though a poor one; the numbers of Participants in the Markets change the exact nature of the signals sent, but so do the quantities of Cash available in the Market, shortages of Product in the Market, the difficulty of Transportation of Product through the system, etc. Rice is being aced out in Australia by White Grapes, not because there is a greater Market for white grapes than Rice, simply a result of directed focus upon Participants within the Market structure (think white grapes need a tightly controlled weather environment, Rice does not; Grape production is concentrated on areas where it can be grown, while Rice uses standardized World-wide Rice Rents). Here Rice, a Staple, gets undercut by white grapes, which is a variety specialty food; all because of the intrusion of greater Cash held by the Consumers of the Products involved. Examination of the Process will outline the fact that Rice Consumers can be mutual white grape Consumers, without impacting the allocation of resources to Rice production; the greater Size of the Rice Market combine with the lesser average Income of Rice, lowering the Return to planting of Rice; it being immaterial that Rice is the more necessary Product in greater Demand.

Central Bank policy to effuse liquidity into financial markets has the unenviable effect of presenting liquidity to white grape Consumers at far greater rate, than enhancing Income of Rice Consumers; the basic transference mechanism based upon relationship of all Consumers to the central banking marketing systems. Easy Money policies are simply destroying Consumer access to the Rice Market far faster than it is destroying white grape Consumer access to the white grape Market. It highlights the vulnerability of traditional economic practice to Ravages produced by promotion of more technologically-advanced economic practices.

It is instructive that another Staple, Oil, faces an equal impact from liquidity measures of central banks. Traditional economic practice cannot endure Oil price increases, because Market Consumers cannot pay for the Increases through traditional low Profit margin economic activities set by the low Incomes of their Consumption markets. It is especially disingenuous when Central Banks realize that increasing liquidity will have very little economic incentive for high technology markets, due to a lack of funded Consumers in technological Product markets. One has to ask if it is wise to make economic conditions worse for traditional economies, when there will be very slight promotion of high-Tech economic performance. lgl

The Easterlin Paradox

The Easterlin Paradox has been with Us since my early college career. Now, Stevenson and Wolfers come along, and challenge Easterlin. I am a devotee of Relative Income, knowing that Consumers comparison-Shop; all based upon the Consumption-style of their Income class. Stevenson and Wolfers ignore the modern channelization of Consumer discontent; people claiming they have superior happiness, though they possess great animosity to Sector segments of the economy. I find extreme disgust with Drug Costs, Hedge Fund operations, and the management of Expenditures by the U.S. Congress. The modern Generations do not express their discontent in general terms, while Optional purchasing develops into Necessity spending far more rapidly than in prior years. I will finish by stating that you Spoiled Brats, born as you were with Play Station controls in hand, know not how to rough it. There is a real-life commentary in the previous Statement, something like Our later-day saints (no insult to the Religion intended) know not how to appreciate lack of hunger, and warming Shelter.

Here is something which nullifies some impact of absolute Income; where exactly do you place the division between Relative and Absolute Income? Consumer Price inflation remains a function of Relative Income, Increases coming from Product sectors where there is heavy Demand for Product, retarded by lack of Consumer Interest. Research would probably find that Increases in Income go to segments of the Economy where Inflation is most active; this translating as maintenance of Relative Income standards, rather than a compulsory demand for Absolute Income magnification. I must say, though, that my Argument may not apply to hedge fund managers, who appear to carry pliers around to inherit Grandma’s gold teeth!

Here may be my best defense of my allegation of the power of Relative Income. The Easterlin Paradox held up since 1974, but the Stevenson and Wolfers Paper might not be able to withstand an immediate repetition of the Polls. The power of Absolute Income fades before Relative Income, when Fuel and Health Care Costs inflate by more than 10% per year. The greatest majority of People simply want to hold their position, but it is the innate genius of economics that Most cannot without an enhanced search for additional Income; the great Innovator of the economy. lgl

Not enough Sleep!

An old friend once told me that a cheap and easy Invention existed for Everything, but It sometimes had not been found yet. We need an Energy storage capacity for solar energy; We don’t have an effective system at this point in time, though Someone will think of something sooner or later. I have been toying with ideas in the area, and believe some young brilliant Student of nature should contemplate the expansionary characteristic of Water with the internal increase of Energy. This, along with the heavy weight of Water, could create a compression Generator of some type; the Constraint being the huge volume of Water which would have to be utilized. I once thought of using Ocean water to evaporate ocean Salts to a higher level, where the heavier material would provide greater generating capacity, and industrial resources when returned to Ocean level. Sound Weird? It is, considering the volume of fluids which would have to be used, and the distance such Salts would have to raised: something like millions of gallons, and a minimum 30 foot Rise.

The Above process would be greatly aided by design of a permeable membrane which would itself generate an electrical current, simply by the liquid passing through it. Does such a membrane exist? Not yet, but the frictional characteristics of permeable materials dictate that some such design is possible. It would be Nice, and possibly Science Fiction, to generate Electricity by simply pouring Water unto mass layers of thin sheets of material–say about 5000 layers, each producing a certain Wattage per penetration; simple Evaporation and Condensation could provide the motive power, with a potential Power generation through both Processes. One could even dream up a Design to utilize Tides to incur the necessary height of the water, by a Step ramp process; Readers should be warned that I get a little Nuts, when contemplating technical designs.

Here is a sensible, economic disaster to contemplate. The real meat of the problem is in the year-over-year increases, especially in the Core Producer Prices. Economists will criticize this assessment, but Core PPI can easily translate into Increase levels in the Cost of Living. These Prices, minus Wage Increases, directly devolve into Decreases in the Standard of Living. A Core PPI increase of 2.7% year-over-year must have a matching Wage Increase level to hold a steady Standard of Living, and I suspicion that 80% of the Labor Forces lost about a Percentage Point in total Labor Wages over the past year through reduction of Work schedules. It gets foggy on a cold, dark Night, and the Werewolves are out! lgl

Too Late for Me to get Religion

The basic problem can be formulated about the new Tier 4 program adopted by Insurers: They slip in the program without fanfare, and no one learns of it until they are in a position where they cannot avert the impact. It would not be much better, even with advanced Planning, because of the Costs involved in the new Drugs. There is a fundamental inequity in the methodology of Payments for new Drugs, which will not be solved by a rationalized Payment system. It is Time to subscribe to a Drug Payment schedule where All using Drugs pay a constant Cost per dosage, Payments being made to a floating Fund; it paying individual Drug Makers a set fee per Drug, which has been negotiated between the Fund managers and Drug companies. Drug Royalties would have to be limited to a Percentage of Drug manufacture Cost, not to exceed an amount of 2% of the Production Cost of the Drug, and supervised by the Fund managers. Royalty Conflicts will be resolved by Drug Manufacturers filing Suits against the Fund, and the Fund alone, while the Courts are legally constrained to resolve such Cases in favor of a Percentage normalcy within the Fund for all Drugs; simply put, Drug research must be based upon percentage amount of improvement in the state of health of Recipients, where such Improvement must be Cost-effective.

Here is the other story which hit me immediately upon opening the NY Times this morning. I am of the worst of Catholics, but was a parochial school Student and a Traditionalist by nature; also having a couple Priests in the Extended (distant) family. One out of Six Catholic churches do not have a resident pastor in this Country, the Catholic schools are going the way of the Dinosaur, and We have a Pope who is old; and elected by a college of Cardinals equally as old, many of whom are already dead or retired. We are confronted by massive diocese Maintenance Costs combined with a Realtor management mentality committed to raising diocesan Operating Costs above all else, even if it means complete erosion of the ability to provide technical support for Parishioners. Many ask what could be done, thinking there are no Solutions. Such an attitude outrages this Author, as some traditional Readers realize, leading to even more outrageous proposals.

The Shortage of Priests can be averted. I would attempt a massive campaign to recruit among the middle-aged Catholics. I would grant Annulments Of Marriage to Candidates of the Priesthood with double Party consent, even if they occasionally take Time off for Grandchild visitations. I would allow Divorcee candidates for the Priesthood, suggesting the Sacred Sacrement has cultural complications. I would suggest that Retirees from previous employment could utilize their Retirement programs in place of high, necessary priestal Salary; and might even enter into self-maintenance programs for their own churches and parishes. I would recruit Retirees of Public School systems as Teachers and Instructors in Parochial Schools, through college levels. I would seek active parochial Grade School Teachers from retired Grandparents. I would actively campaign among Catholic Corporate Executives for financial commitment to maintenance of churches and Parochial Schools. I would recruit Retired and Laid-Off Labor from the Parishes as a cheap Construction and Maintenance Crews for each diocese. The great danger is to allow an old, Traditional Head of State set policy. lgl

For Love of Small Investors

Universities cannot seem to limit their Administrative Costs. Now they will probably need a position such as Dean of Donor Restrictions, whose sole preoccupation will entail convincing Donors to grant Money without restrictions, or else for something meaningful. The trouble will remain, though, that the focus of Research alters over Time, and money will always result in over-funded ventures under what is a sort of half-life exercise. I personally would like to employ some form of 100% tax after 35 years, but Academia will pressure for freedom from Restrictions after some probationary period. Everyone’s desires would be fulfilled if they would send all Gratuities to myself; I promise to expend the funds in appropriate manner, and keep Expenditures in Las Vegas to a minimum (no more than a $100k per month).

Gretchen Morgenson needs to keep her Contacts within the Finance industry, so does her best to clearly explain the debacle without naming Names. Everyone noticed that the auctions were going South, meaning that the Money was not flowing in, and the heavy Players were quitting the auctions because of the lack of Capital generation. The heavy Investors, who had major influence at the brokerage firms, told those firms to find ‘Some Rubes from Kansas’ to buy themselves out of the auction securities in 2007. The brokerage firms complied, and Everyone’s Profits margins remained Good for another half-year, except for the small Buyers who got trapped with the down-rated Securities. The small Buyers, rooked by the touted Credit of the auctions which had already become history, now seek to draft Water from a Stone; the Funds already spread throughout the Investment firms, with the brokerage firms short on Cash due to the whopping Bonuses given out to Employees for the successful Sale of these securities. Welcome to the wonderful world of High Finance!

Here is a basic Advertising gimmick, a Statement which will outrage all Parties concerned with the preparation of the article. Small Investors should know and understand that the Predators are out there, want your hard-earned funds, and care nothing about the Returns you will receive; except that it may inhibit their own personal Profits growth. Small Investors who forget that basic formula may as well forget their Money also. There is no implied Safety in Investment, unless and until you have the said guarantees in legally-enforceable Contract form; this itself a highly doubtful and Time-consuming process. I know a Person whose Estate was finally paid the final Payment of a 30% Settlement of a S&L failure covered by State and Federal agencies. The Point in the Story was that the Failure occurred while he was in his Sixties, his death was in his Eighties, and the Payment to his Estate finally brought the Recovery up to 30% of the invested value. lgl

United We Stand!

I read a lot on the G7 Meeting and Plan to handle the World Mid-life Crisis, a specter where Currencies are beginning to act a lot like Commercial Stocks; they go Up, they go Down, they go Round and Round–where they stop, no one knows. It makes it somewhat difficult to assign Interest rates to those Currencies, where Returns are governed by Market flux. I do not think it need be mentioned that settling upon Commercial Contracts, the current State of Being makes Business Planning somewhat less than stable. The G7 says it has a Plan to introduce Stability to the Process, but like Mike Shedlock, I discern only further confusion by Spokespersons’ Statements on the Resolution. I think I would prefer a Statement from them claiming they do not know what to do, and so throw the Question open to Debate. Of course, that is asking the G7 to be more honest than myself; who knows Everything about Anything, but says little about a huge amount of it.

Those who remain committed to understanding of the G7 position can rely on David Smith, though it may not tell you as much as would be desired. Long-term economic performance based upon no defined factors, but Short-term weakness; okay, this may be a realistic presumption, Things are bound to get better sometime. Redefinition of Risk, de-leveraging, and accommodating balance sheet adjustments; translated to my mind as admission of losses, writing down of those losses, and cutting loose the bad Investments (socking it to Investors and Depositors); still with them on that! The third Step seems to be finding new Rubes to invest, while hiding the deficient skills of the Bankers who brought Us this mess; all without promise of superior future performance by any Participants. I guess I could accept that as a Plan, though I wonder if I would care to Invest.

The WSJ apparently claims that the G7 has taken a position to defend the sliding Dollar, though I did not read the article because of the Cost factor; something which I hope that the WSJ article may have entered into with vigor. Here again it seems that the Plan lacks for dissemination of details of the Dollar defense, else some commentary would be found in the blogosphere even on this boring Saturday. The Mysteries abound, though Things are going to get better, and if they do not; don’t blame the G7, who are trying hard to decline admission of distress and responsibility. Could I tempt Anyone with Taro cards or Crystal balls? lgl

To Hell in a Handbasket!

Are We really so much smarter than our Ancestors? Everyone likes the Thought that the World is getting better, and that the threat to our racial existence has been lessened, if not eradicated. It is less frightening to the Mind in the belief that our Ancestors had less to lose in the first place, and that the underlying causation for the downfall of Civilizations has been suppressed by the superior knowledge of Ourselves. Historical studies, though, continue to cast doubt on those assertions, finding highly advanced systems of Manufacture and Trade in the long-ago Past, and modern Sociological studies find that rates of literacy are easily lost by modern forms of Insurgency and Warfare; it seems easier and cheaper to train Barbarians than Students. The former group also seems more capable in training succeeding generations in their Craft, than the later group expresses capacity to replace their own generation. Some may think I am making a Joke at the expense of my educated Peers, but try building some Probability Sequence models.

Felix may be wrong on this One, as the Educated have been threatened by the Mortgage and Financial Crises. People are taking time from their busy schedules to attempt to understand what is happening to them, a practice much aided if you have already been downsized from a good position, and are awaiting the next opportunity. It might not have so much to do with improved talent through competition, as it is a more impatient hope for Salvation. Real admission of the Losses endured may be an enlightening help, something which Those involved in the specialized markets already know, and all Educated are coming to understand. Comparison could possibly remove what complacency remains. The current Crises have cost about three times as much as the S&L bailout of the 1980s, and threatens to cost up to 10 times as much if Anyone does anything real stupid. The present position can even be written off as normal business losses, with Recovery as accomplishable as the S&L bailout–it is a simple question of the magnitudes of GDP. It is another complete Story if these Markets unravel; I will simply state you don’t want to hear the rest of the Story! (By the way, my estimates are considered extreme by most financial authorities; of course, they brought you these Crises in the first place.)

I will be criticized for not knowing this stuff, and therefore, Readers should lack confidence in the above assessments. Here I am only trying to adopt John Kay’s advise, and use Common Sense, rather than risk models which accept inadequate assumptions as correlations. I, myself, would like to get an advanced view of Basil XXVII; will it include God’s arrival on the earth, and the Day of Judgement? In the absences of advance Rushes, I will continue to utilize Basil only as a garnish. lgl

Adverse Government Interference

What are We to call this Situation? Possibly We could call it the Disintegration of Confidence. It is basically over-excitement of the Markets. A structural reassessment of the Price formation process could present some Price avoidance practices to restore Confidence, removing panic reactions from Price-setting. The Kids probably do not understand what I am talking about, and Business will scream I am attempting to punish small business for Market practice. What is this terrible Practice? It is a formalistic Shutdown of the Economy to force Conservation, for the sole purpose of bringing Prices into conformance with economic needs; a practice similar to throwing a bucket of cold water on a Patient in a hospital, who has too high a Fever. It’s effectiveness resides in the raw power of the force utilized; I will try to explain the decadent practice by examples.

One Prime example which I would advocate would be a law shutting down the national Interstate system for one hour a day, any day that the Price of Oil exceeded $100/barrel. The best hours for the Shutdown would be 9:00 a.m. to 10 a.m., or 1:00 p.m. to 2:00 p.m.; and usage of these two hours could be better than utilizing just one hour. Ambulances etc. would be excused, but law enforcement officials would be charged with ticketing all moving vehicles on the Interstates during these Periods, said Tickets to cost $1000 per occurrence. The impediment of economic Transport will obviously slow economic activity throughout the economy, and physically reduce the consumption of fuels by Transport vehicles during these Time-Outs. The existence of these restrictions automatically destroys Speculative reaction in the Markets, where Speculators realize that automatic Product utilization slowdowns are in place.

Another example of such atrocious practice could be a mandatory limitation of Bakery operations to a 32 hour Workweek, when Wheat exceeds Ten Cents per lb. (Gave this One to screw up the kids; Trade weight of Wheat varies from 54 to 70 lb./bushel–a standard of 64 Pints–with the Wheat of 12 Percent moisture or less). Now the Kids will ask why I would get so technical: well, it is exactly the Concept We wish to introduce, pressuring Uncertainty of Return into Price matrix. Artificial constraints could be implemented which would cancel Trade profitability, which would not inhibit necessary procurement of Product, but would make Speculators hesitate to search for Gain in the market; Government interference would inject a greater fear of loss into the market structure. Shortages would still govern the Markets, but that impact would be based on reality, based upon the arbitrary response of Government.

Does this discussion remind of the Third World stupidities imposed by Governments? The Intent is for that exact influence, though the economic thought is more advanced. It is all Government impediment of Trade, but the impediments specifically geared to generate real Trade advantage. The whole performance will be haphazard and poor, but would initiate the desired performance; removal of the Profitability of Speculation through desirable reduction of adverse over-Consumption. Is it the Way to run an Economy? No, but it inhibits the thirst for adverse Profits. lgl

Corruption in Detail

Boeing has been a spiral Discovery of the dangers of Outsourcing as it attempts to put the new 787s on the Runway. They are planning to get 25 new 787s built next year, down from the 100 which they had originally scheduled. What is the Problem? Well, the assembly plant, new without experience, is staffed with new personnel–some with experience, some not. Only Someone experienced in translation of schematics to final product can understand this next difficulty; getting the necessary Parts to the assembly plant, thereafter testing each and every Part for assembly capability and Field Test for Part function in conjunction with other component Parts. I cannot be certain, but I imagine the 787 will be the last plane model designed without overall assembly supervision, especially if a whole range of Parts will face redesign.

Farmers have to expand their acreage, and Commodity prices have to reduce, though not in a Scenario where the Farmers’ Profits margins reduce. I, though, have real doubts that it will come with seamless outcome by any utilization of a Government program. Paying Farmers some $51 per acre stands ridiculous in the face of Food Riots in a quarter of the World. Fertilizer and Seed companies raising their average Price by 27 and 31% appears equally stupid; We must not forget the Truckers, and their vast increase in fuel Costs. The Whole appears sincerely idiotic in an environment where Everyone claims there is Recessionary conditions, though no one has yet spotted any contraction of the Numbers–in nominal or real terms. I might suggest We need clear and defined Government policy, with unity at the Top; rather than Special Interest Logrolling of industry advantage. By the way, I think the Government should restrict itself to being a Commodity buyer in the markets, Buying and Selling to stabilize all Product prices; do I sound like a Communist?

Here is the classic completion of my primary thesis for the Day, as the responsible and responsive Federal medium to save the Private Sector at risk, stands at the door of insolvency itself. I await the Federal Reserve announcing failure to meet its immediate commitments because of Accounting issues; do not think the later is so far-fetched, as Inside information at the Fed state that many Accounts at the Fed have errors which documentation cannot resolve. Printing money is not perfect, when you cannot keep track of how the printed money is transferred, either in the physical world, or as smelly little Electrons. The modern world has brought Relief for the Shredder, by venue of the Delete button. I smell a Revelation that some 2000 Accounting records are apparent only to the Ozone, another potential legacy of the long Bush administrations and their Oversight potential. lgl

Tradition and Law

I will probably be crucified as a Racist for saying this, though I am a resident of the United States if slightly Caucasian, but no one else has mentioned this aspect of Immigration: the importation of new and different styles of Criminal activity. Previous expression of reverence lose relevance as the culture of Criminals change; Churches are under attack by Vandals and Thieves, sexual slavery has returned, criminal gambling syndicates are coming back–even though it is becoming extremely difficult to violate current Gambling laws, and a wide range of laws are flouted as cultures ignore medical practice restriction etc. which are in confrontation with cultural practice. The Way of Life which Everyone accepted is suddenly under assault, solely because it is no longer traditional practice. My main point stands is the Question: How does one establish a uniformity of law in an multi-cultural environment?

The Answer of the above question resides in the degree and strength of assimilation in the society analyzed. It may devolve into the most horrid practices from all cultures being outlawed, with anything that does not seriously offend may be allowed. Can such an accommodation be acceptable? Every culture has practices which are offensive to other cultures, and observance of the desires of all cultures means great restrictions; they will have to pry my cholesterol-forming Breakfast bacon from my dead hands–Jewish and Islamic resentment be damned! Southeast Asian kidnaping of young girls for marriage or simple sex sounds great, though my Sisters might disagree; come to think of it, Same-Sex people should forget the idea as well! A second approach to definition of law could be establishment of levels of reverence; the problem here being religious fanatics would be frustrated in lack of outlets for their normal spleen. There has to be some criteria for establishment and enforcement of law, and it must have uniform implementation and practice.

One aspect which I find violated is Respect for Age, an increasingly offensive element now that the years have proliferated within my own lifetime. This brings a real image to mind, that the entirety of law must be consumed with the concept of Respect. Real legal practice must be based upon the respect of Others, but is the law something more than the simple definition of Respect for Others? Does not the law simply outline the veneration Everyone should be granted in their pursuit of daily activities? There are troubles with this Concept as well, as different evaluations of veneration hold sway in alternate cultures. Can brothels be banned, if houses of worship are allowed, from the simple position of veneration; remember, some societies center their cultures in very Male-dominated cultural aspects, and houses of worship endure in mostly female-dominated social settings (I will hear about that Statement immediately, but it still must be said by a rude, abusive Male). I must get back on track, so I will simply state that multi-cultural movement will lead to a necessary new orientation of the definition of law; one which is likely to satisfy no one. lgl

Simplification of Problems

Everything, or Everyone, is turning to Sawdust as this article outlines. I await the moment when City Maintenance efforts capture the Concept of selling their Refuse as Product. Few are the Communities that lack fleets of Wood Chippers, all chewing up brush in very expensive, individual hammermill operations. These Chippers, individual units, probably use around 7 gallons of fuel per ton of chipped material. This is highly expensive at $3/gallon. Finding a Market price of $40/ton would be a Fuel Budget boon, if over-the-road Transport Costs did not add too much Energy Cost in transference to Usage Site. The traditional End-use of such Material is some area landfill open to the Public, where Citizens can obtain free mulch (bring their own Transport containers) if they pick it up. The traditional usages for the material mainly relies upon the absorbent qualities of the material, which is quickly lost if it gets Wet. Joining the Sawdust Market would require dry storage, enclosed Pump truckers trailers loaded easily, Truckers dedicated to serving several Communities in serial fashion, and some skill of Marketeers on the Internet. Some would look wide-eyed at my tirade, but there is potential Profits now observable to replace all necessary Capital Equipment and Fuel for the Enterprise every nine or ten years, paying for all Maintenance operations; the price of the Product unlikely to actually reduce in Price.

Bryan Caplan searches for absolutism in the purity of Concepts, denying any flavor or influence less than total. Being a little bit Capitalist is equivalent to being a little bit Black, or the equal little bit Pregnant. This is almost a Lie in discussion of Politics, if you can understand Politics, but Real World efforts are built on the foundation of Success. Why do We have a Social Security program?–Because the greatest majority of the Populace finds the program highly successful. Why has the Anti-Trust legislation been amended, but never ended?–the Polity finds that such constraints upon businesses have their uses. Why is Medicare in danger of extreme amendment?–because almost Everyone realizes it does not work. Politics, like everything found to possess an economic base, works on the principle of efficiency; though it recognizably has the longest delayed reaction to efficient alteration (an estimated half-Generational length).

Here is John Whitehead blowing his own Horn, though it is actually a very good Quote, and he is right to note his contribution. It also fits within my theme for the Day somehow, so I pass it along. Coasean Payments will always run into trouble when discussing Health Care issues: admittedly the greatest Cost, but always generating extreme inflationary pressures. I would favor Court judgements which dealt only with the Costs of the already Dead, and the health care Costs already incurred, rather than deal with Expectations of Cost. No One discusses the Costs of the TVA coal plants being closed, the loss of Health suffered by the loss of economic productivity in the region, or the Costs of alternative Energy sourcing. Inability Substitution Costs should be reducted from any judgement, but Courts and lawyers cannot seem to integrate such economic simplicity. lgl

Moral Philosophy

The entire Concept of Compensation amazes myself, who has systemically been ignored for my stellar performance. One should accept the idea that Those allowed to set their own Salary will always possess a highly successful Income, in comparison with Those whose Salaries are set by Others such as myself. It still can get somewhat outrageous when it creates a totally new separate class of aristocracy. There are some measures which can inhibit excessive Pay, but it is the sad fact that such limitations always incite a rise in industrial espionage and Sales of Intellectual Property of Employers by Employees. People infected by the creed of ‘Greed is Good’ (the Business class) have always shown relative poor performance on ethical Tests of any kind, either in Intellectual environment or the real World. I have always preferred a statutory limitation granting Executive bonus share a maximum of 8% of total Profits without reliance on other criteria, realizing the propensity of Executives to represent Losses as Profits under such scenarios.

I find that I fit uneasily in the Profile of the traditional blogger, having had a massive heart attack at age 56, constantly driven by the search for drivel which will interest my Readership. I also deviate from the classic Profile massively, as I do not advertize on my blog, or do I receive any Income from the blog. I write only one Post per day, except if I am in the mood to write a second, and most often provide only shallow analysis to the Day’s events. I made the decision long ago to specifically ignore any scroll list of Readership numbers, consumed with the Thought that it made it easier to accept that many found me boring. The Pressure is there, of course, as Readership loyalty must be rewarded by constant performance, though life would far less complicated if I threw the Computer out of my front window. Maybe I need to find an Employer to get the Incentive to do so, under the famous proviso of ‘Take this Job and Shove It’.

It is an incontrovertible fact that One should find an alternative method of making a Living, but this article stipulates that such an effort is in itself difficult. If a Reader needs extra Cash, he is advised to become a Corporate executive; in the absence of such opportunity, he should attempt to find a good Investment Fund. He should try Working for a Living if all else fails, but I must insist it is not likely to be a Rewarding field; I probably should have procured a Teaching position, but then I would have been in daily confrontation with Faculty and Students better organized than myself (don’t you just hate that!). My only consolation being that the next world will be easier than this one (a matter intensely debated by Those who believe in Hell, but I acclaim that it could not be worse than here!). I have a 31.4% possibility of being wrong about that, but I always was a Gambler about the important issues. lgl

The New Myth

The Airlines are shutting down, though the traffic is there, all because of the fuel Costs. It is probably for the Best, as Most of the air traffic was nonsensical in terms of pure economic advantage. Americans go into Everything in a big way, exactly as they adopted air travel; then found raising that many People that high into the air everyday was too expensive. The airlines must be saved for very serious economic reasons, but with less passengers and greater service. I favor a more integrated system of air travel, where Airlines adopt the mantle of Tour centers. Travel would become more leisure with mainly high-density Prop-plane flights, scheduled Motel accommodations of set durations (with supplied guided Tours, and inlaid Car rentals) for lengthy Stopovers, and Pick-up flights; all set within a format of a Two-Week transition of the Country, unless an extremely high Express rate is paid. This would eliminate Christmas and Thanksgiving Disaster Weeks, and would promote localized Tourist attractions. Vacations would resume actual Relaxation Standards, air Passengers being forced to choice their attractions with normal transition schedules, and Business elements would regain adequate Movement capacity though paying the premium for that travel. Consumer flow could finally be spaced through both Terminal and Airport.

The Bankers found their Rubes, and sold the new Gold bricks known as derivatives. JPMorgan is the purported Savior of Bear Sterns; and one wonders where they found the Cash. The Sheep-shearing was conducted without fanfare, and Thousands now pay Hundreds of Dollars now, to pay Bankers Millions off Deals from which they divorced themselves from all Risk. All it took was a friendly face and a handshake, prior friendship beneficial but optional. This Country has no financial Poaching law, but it should; such a law forbids the Sale of any financial or Commercial paper to Anyone who does not understand the Risks involved, said Penalties being total repayment of any incurred losses. It leads to a minutia legal filing of initialed and signed declaration of Trade terms and charges by all Parties. The Polity will eventually have to protect itself from the new 3-Card Monte called derivatives.

I don’t agree with Brad DeLong, but it is no reason to discriminate against him, and this should be read by Everyone. It is the most coherent Statement which I have read by Anyone, concerning the proper approach towards Central Banking and Monetary policy. Read this tract of Thomas Palley as Counterpoint. I favor Palley’s views to much greater extent than DeLong’s, but also doubt the extent of the disaster to the American economy. Neither worries excessively about those economic sectors drafting too great an amount of Profits, thinking that anything doing well is good for the economy, not matter what injury is may provide to other sectors. The essential fault with the economy is way too much Paper–financial, Commercial, Residential, or otherwise. I used to listen as old Farmers and Ranchers talked of being Land-Poor or Cattle-Poor. The Day will come when Americans will realize that We are Paper-Poor, with Everyone granting this excess Paper an added Hand in the Till. The Paper is eating real Productive Profits, and feeding those Profits to worthless expenditure generating only more Paper of all types. Americans owe the inevitable Someone (Mel Gibsen claimed They in The Conspiracy) somewhere a high share of their Income for Paper; this translates to Americans owing 80% more than they should, 40% of the total debt being simply Paper which generated nothing for No One. lgl

Will I ever hear about this One!

I am truly feeling quirky Today, and this Post led me into speculative Thought, which I know that no one will appreciate. It takes me back to my first economic learning experience–study of the World Wars economies, something I dabbled in during my High School years. I turned my fond memories to the current economic mess We are in, and came up with the Proposition that what We need is the old Gas Rationing system; the good old Gas Ration books and Tickets, where you needed scraps of paper besides Money to fill the tank. Do I sound insane? Please allow me a miserly defense, before commitment to an insane asylum.

The sheer Production of the Gas Ration system is exactly the proscription for Our current economy: a two-tier Gas price system–Black Market and legitimate, Fuel Shortages in the legitimate market alongside with oversupply of the Black Market, expansion of Oil refining capacity coupled with published shortages, high Fines for Ration violations to ensure proper capitalization and efficiency in the Black Market, reduction of non-productive utilization of fuel–which either had to conform to Ration decrees and awards, or pay the extreme maxima of Black Market pricing. There would be an immense reduction in Soccer Mom usage, as violation of the Ration system became too expensive, whether due to Price or Ration ticket limitation. Car-pooling would be maximized, as Gas Tickets were saved for Household needs. Public Transportation would receive an immediate and immense Subsidy, funding by an impatient Consumption Public. The Black Market would supply any necessary Production needs, those needs defined by the profitability of the operation; which would possess the additional necessity of funding Black Market premium price. Vast advantages to economic activity and performance would soon appear.

The only Question remains if Gas Rationing would have better effect than either Carbon Taxation or Cap-n-Trade policies. Carbon Taxation, in my belief, will only diminish economic production with higher Retail prices for their existence. Cap-n-Trade policies will generate Windfall economic Profits for Trader and Producers, while producing even higher Retail prices for Consumers to fund the additional Profits. Gas Rationing will produce higher legitimate Prices, as Oil Producers and Refiners proclaim Production shortages, all in order to fuel the more profitable Black Market. The Black Market pricing will have limitation, as such Prices must still provide Profitability to the Consumers utilizing the Black Market. I believe that Gas Rationing will provide actual cheaper Product than even current free market operation, which wastes too much fuel on nonessential, nonproductive deployment of resources; where long-term fuel pricing will reflect the greater expense of Extraction and Refinement of fuel. I guess I am a free market Trader who believes in a good old-fashioned Black Market system. lgl

My Bad Attitude

Here may be a Case of biased reportage, though totally accurate. 11,610 projects of total value of $17.2 billion seems like an incredible lot, but contemplating other federal expenditures, the American Taxpayers might be better served by insistence that legislators devote their entire attention to Pork Barrel spending; avoiding legislation entitlements of Defense, foreign assistance, and incursions into Iraq and Afghanistan. One Suggestion would be to close all federal offices for one week without Pay, probably saving Taxpayers about an amount equal to the Fiscal Stimulus Package. Another Suggestion would be to lock Legislators out of the Capital for one Week, undoubtedly saving the American Taxpayers more than all the Pork Barrel projects. A Constitutional mandate insisting that Congress take an additional month of Vacation per year could possibly negate the Medicare deficit over the next Twenty years. Another venue could be a Constitutional mandate paying Senators an additional $300/hour of timed filibusters past 6 hours duration; which might actually save American Taxpayers anywhere up to $3 million per minute. I am just full of ideas this morning-- heavily caffeinated coffee.

Mike Moffit joins Palmer in disregard for the Solow model, denying the exogenous technical change in production environment as important. There is room for real discussion of the Propellents for growth, but Mike deters off-course to harangue the Coase theorem. I myself doubt the actual Review powers to Coasean negotiation, which will always diminish the Property Rights of the Affected, without total restitution by the Polluters (defined as Anyone who impairs the Property Rights of Others). Still, this is discussion of the construct environment to promote and sustain economic growth. I believe there is a Take-off Shelf of economic stimulus precepts necessary for the stimulation of economic growth, but past that level, further stimulus of any type provides motivation; i.e., domestic Consumption patterns set the generative motivation for economic growth.

Here is one of those times where I disagree with Mish, but not really. I agree with Soros of FT that the Markets are not self-correcting, and with Mike Shedlock that the Fed becomes part of the market by its activity within it. An outside Agent is necessary to correct Market mal-direction, but this interference becomes integrated into market performance, unless the outside Agent utilizes criteria not fixated upon the Market itself. Distortion and mis-direction enter the matrix just as soon as intervention is geared to Market reaction. The Fed’s responsibility remains Commercial banks, not Investment banks, and drawing intervention criteria from Investment banks makes the Fed a Player in the Market; one easy mis-guided Step away from a brokerage firm, committed to maintaining a Boom environment. We do not need a Glad-handing Fed hipping momentary Treasure Stocks and Bonds; We do need Commercial bank system stabilization. lgl