What is Wrong with the American Economy?

The American economy fails the Test of Advertising, as this article can attest. Bovine Spongiform Encephalopathy has been linked to very few Cases of Variant Creutzfeld-Jakob Disease (I would suspect less than 10) in the entire World, while multi-billion Beef meals are eaten every year. Common Food Poisonings have killed many Thousands more than the human disease listed in the history of the World, and have come from a multiple set of Foods and Conditions. Adequate measures have been taken to forestall the Bovine disease, and there is little indication that variant Creutzfeld-Jakob Disease spreads through simple human contact. The Asian hysteria about SARS may be well justified, but fears of Mad-Cow Disease are way overblown, and American Advertising falls very short in dealing with it.

Economists ask whether the Stimulus payments will be able to sustain the Consumption markets. The Answer to that is easy–No! The Reset of variable rates in the Mortgage markets was the Death rattle for any boost to Consumer Spending, all because the Finance markets did not immediately Write-Down their Losses, which were carried forward to adversely raise Mortgage rates and Business Carry-Debt. I warned when this Crisis first started that only quick declaration of Losses would prevent long-term hazards to the Economy; Banking units dismissing this Option as highlighting their Management inefficiency–proving they were actually incompetent. We are now in the Situation I feared, with four months of Job losses, and devoid of solid Consumer Demand for Product. I am not a great advocate of Transparency, thinking it accomplishes little in forestalling Fraud as Criminals falsify Reports; yet, I am also a great opponent of Stupidity, and why try to hide Losses which will eventually have to be Reported anyway?

Here is part of the reason why the American economy will suffer in months ahead. Delta is cutting its labor pool greater than initially planned, because Workers smell that it is Time to Bail. American Axle is doing much the Same, and the problem consists of who composes the Bailouts. These are the high-Salaried employees who can demand and get the lucrative Retirement packages, and know that Now is the Time to get the good Deals. These Packages may be the Doom of Consumer Demand, which will be mainly channeled to Investment with the previously high-Paid labor downscaling their Consumption; the total bringing a smaller Labor enrollment who are paid substantially less in Consumption-directed Income. The Months ahead may prove to be very difficult. lgl

Correct Investment

I like this Piece by Mark Thoma, though I don’t agree with his vocalized premise that most of Bush’s initiatives are basically a rehash of older Food programs. The Statement must be forwarded that Transportation Costs of Food are very high, and getting far more costly very fast. Transportation Costs of American Foods to Overseas outlets were around a Guess of 11% of total Production Costs last year. Fuel Costs have probably raised this percentage to around 15%. Beat the Press previously accounted the added Cost of Food Aid to Americans to be about only $8 per American, with the Raise from $4 billion to $6 billion. This seems like nothing, except that Americans must pay for their own Subsistence, their Government, their Retirement, and their Health Care; all of which have already progressed upward by about $320/year since the start of the Mortgage failures. The Claim that Americans have the Deep Pockets does not resinate with fine tonal quality.

The various Regions of the World must accomplish their own Self-Sustaining Livelihood within their own territory. Transport of massive American Grain Supplements to starving nations will never suffice, even if it is good for American agriculture. Criticism of American Consumption habits also contain fallacy, as We live in a widespread nation which needs easy Transportation; a characteristic which cripples both the Russian and Chinese economies due to the lack of ease. It is admittedly very high Consumption, and very expensive both in Resource and percentage of Household budgeting. Reliance on Railroads–the probable most conservative of Transport systems–would quickly decay American economic performance. The final element which must be considered is Transportation Traffic; We cannot afford to jam Our Transport systems with material which will not promote economic performance in this nation.

The World must learn to live without Our material input. We need to export Technology and industrial systems, not Food Grains and Product. We need to go back to the usage of natural fertilizers, and expectation of lower Grain yields; setting Agricultural production to simple provision of American dietary needs. A Process exists which actually produces only real Constituents–fuel and fertilizer–from common Sewage and Garbage; We have only to identify and transform the Process into a industrial production. I can even visualize a Process of dredging Rivers and Lakes for the Pollutants dumped into them, solely as a major base Product for the production of fuel. Ethanol subsidies are dumb, but Sewage to Fuel subsidies might be smart. lgl

Market Impact

I find no objection to John Quiggin’s numbers, as I am no mathematician; my critique stays embedded within the fallacy of unpublicized taxation. This is excellent for raising tax revenues, though practically useless for moderating Consumption behavior. A Dollar or two Dollar Fuel Tax per gallon would be immediately noticed by Everyone, and would likely reduce Fuel consumption somewhere around 7% per Dollar, over the first three Dollars. John’s desire for 5, 12.5, and 25 cents/litre will whither Fuel Demand a potential 0.003% of total Fuel Demand, in the absence of major Fuel Cost increases (my much less influential Math; don’t mutter that Error has to be in my Name somewhere!). Do the Math yourself, and account the run-up of Fuel price and drop of current Demand. A Consumption Tax must hit Consumers in the head, in order to affect Consumer Preference Demand, the more integral the Product, the heavier the Hit; just to raise a blip on the Scope of Consumer consumption.

The World is unfair (it is called Competition), and there are Those more Accredited and Accomplished than Others; this means that Those who make $300k/year get offered Jobs making $500k/year, while the Rest of Us get to wait in the Receptionist’s Office. One may ask how this applies to the previous paragraph. Office-Seeking, like Consumption Demand, depends on a developed market; Economists and Oil Executives both being hired on the hope and desire that these Individuals maintain their previous high level of performance upon Transfer. Felix concentrates on Federal Reserve Directors, a much less competitive position with less Benefit and Pay, and a extremely large ability to destroy Prestige by association with failed Policies adopted by the total Federal Reserve Board. Bailing Out of the Job would appear to be more likely under conditions of general disagreement with Board policy; where failed Policy humiliation contains the greatest threat to personal Prestige.

I sometimes worry for Mark Thoma, though I had a similar Upbringing; Thank God that there is a Statue of Limitations to Juvenile mischief. I will not even bring up the Issue of Drinking and Driving, else MADD will condemn Us both! I was luckier than Mark at the Time, growing up on a Farm, and with a generous father: he paid me at relative Minimum Wage rates for Working on the farm (no Rent charged, but I had to buy most of my own stuff). I relate this information to express the Market practice which alters Social practice over Time, Mark and I would be committed to Substance Abuse Counseling today. It creates Problems, new Ones which have to be resolved as was Our Drinking, the greatest fear today been Overeating, by Child expenditure of total Allowance on Food with little Entertainment–leading to cultural pounding down the Calories. Students should recognize that Market Conditions affect the Social Setting, and raise alternate Causes of Concern. lgl

Disinformation

The Roof is not coming down on Our heads, Durable Goods stripped of Transportation, came in with new Orders some 2.5% higher. The Recession of 2007 may finally be over, if Bankers and Investors can be convinced of "Good Times are Here Again’, and enough Mortgage-Holders walk away from bad Paper; yes, you heard me right, We have to clear the Board of Strife agreements which should never have been negotiated in the first place. It is time to get back to Business as Usual, which when analyzed, is not such a sad thing: it brought Us our current prosperity.

The are very many segments of the economy where there should be Change, one of them the organization of an intelligent Decision-making process on the generation of Energy. This article would be irrelevant, if We had a systemic Energy Policy. Our national policy on Energy has been Confused for over Forty years, and any direction adopted with the confusion of Energy policy, will be equally as Confused. I proposed River Generators which required no Dams over 30 years ago, and have received no Response from either Science or the Power industry; the Secret of Success here would be multiple lines of Generators which could be raised or lowered as Power levels alter (think 400 in 5 miles along a major River Drop). That was my own oar of Confusion, though an organized Review process must be organized to analyze all ideas for major generation.

Everyone knew that the Bush Administration was handling all Information like a Corporate Public Relations Release at the time it was being offered; now, We have the Press Secretary at the time admit to such commission. The admission gains Us nothing, especially as Most will agree that the Bush administration has not changed either its Outlook, or the process of dissemination of Information. We now have to live with the consequences of the lack of real discussion of the policies adopted by the Administration, which become ever more bleak. There is no indication that any of the three major Presidential candidates desire to change the Information policy introduced by the Bush administration, and actually seem to have adopted the basic precepts of Opinion modulation with the same rigor. The Future is not bright? lgl

How We Organize for the Future

Here is a Story which holds more calamity than stated within the Words. The attempt of Market conditions to turn Trucking into a Minimum Wage profession will have long-term implications which most of the Business world cannot sustain. We were losing about a quarter-million Trained Drivers per year due to old Age Retirement before the Diesel Crisis. And now 45,000 additional Tractors have left the Road since January because Diesel Cost has destroyed the Profit margins. One can only expect a probable 80,000 additional Primary and Replacement Drivers have moved on to alternate Employment. The older, more highly-financed Independent Truckers are not regenerating their fleets, simply estimating their Capital is better spent on early Retirement, than only a Money-losing business enterprise. What worries me is the half-million, experienced Truckers in their early Fifties, who have decided not to buy a new Tractor again.

Alex Tabarrok believes that the current method of electing Presidents does not work, and People are led to Vote on the basis of whim. I beg to differ, thinking the Election process is the only manner in which the Electorate can voice their own desires, Candidates responding to any antagonism to their own vocalized Statements, thereby setting the limitations beyond which the Candidates dare not transgress. I do think that We do need a Game show called ‘Who wants to be President’. The Contestants will be any Private Citizens, who would be asked any range of political, economic, or diplomatic Questions which are Open-Ended (no Answer supplied), free Public voting between every three Contestants; the highest Adoption response to each of the five Question will advance to the next Rank. The following would be three Questions asked of five of the primary round Victors, the Winner would be designated as a Representative. Five Representatives would compete for a Senate seat, getting the highest average on the Answers of 10 Questions. The Final Round would be all Senators desirous to answer 25 Questions, the Winner he or she who attains the highest Approval Score, named as President.

The Rules for such a Game show are easy: every Question is to be Open-Ended–absolutely no Answer is provided, Contestants must win previous Winning approval to participate in following Rounds, and any entry of ‘No Comment’ is considered to be an Out–Zero Score but added in the Average of Questions. Contestants can advance as far as they desire, but lose their current Status under any failed attempt: such Status carrying the same Salary as would be provided to their equivalent Elected official for the Term of Office. The Game Show may prove a Success, or might fail; the Contestant answers may show higher performance than Our actual Elected officialdom, or worse hazards; and the American Electorate may decide to alter the Electoral Process based upon the success of a Game Show. It is a Thought! lgl

Is Anyone Listening?

Can any Government actually gear up to meet any Problem; this article casting great doubt as to this capacity. Local Commanders will always want the Funds provided to be directed to what they perceive as the greatest Problems, while national Commanders will always concentrate on ‘Role statistics’ which inspires ‘Bragging rights’. Local officialdom want the onus of Failures shifted upwards, during which time national Superiors will complain about lack of effective assets on the ground. Allocation of funding for specific purpose always faces some degree of failure when the design spread of funds do not match the Threat levels endured by individual local officials, who want to devote the funds to what they consider their pressing Needs. The Situation is not helped by 'Top Down’ dispersal of funding. An alternate Budget Request system should be implemented where Superior Government entities would only approve the Budget requests sent by subordinate Government levels if those Requests conformed to national policy, and never at finance levels higher than requested by local administrations. The perfect Solution always is to inform local Government to design their own defenses, and fund them through local Taxation; a conceptualism unheard of in a corrupt political environment.

Small Business, like local Governments, continually face higher Costs which they cannot immediately adjust within the parameters of their Cash flow. They are both right on the Firing Line where excess Costs are outsize, Gains are minuscule, and immediate Budgets consist of hardened Concrete. The Rules of the Road find no observance under these Conditions; most often, Thousands of laborers will be laid-off, before Managerial Salaries are touched. This Later, by the way, is probably the worst Scenario to adopt, as it is Labor Spending, not Management Spending, which keeps overall Consumer Sales at high Peak; management policy containing the threads of its own destruction. Everyone attempts to avoid the economic terror of Job Insecurity, and they only accomplish a repetition of such Threat.

Here is another Example of helplessness and social drift. News Coverage of the Wars has dropped to a practical nil, People tired of another Problem where there seems to be no Solution. All three major Presidential Candidates hold a shared responsibility for the Wars, belonging to the Senate throughout the Periods of Intervention. All Three seek to avoid their own culpability in the activities of the Senate and Administration, all wish to avoid recipient anger coming from their previous colleagues with resultant backlash, and all Americans recognizing that Everyone with previous position on the Wars will propose some ‘Stay the Course’ alternative of Option, simply to avoid Social Indictment from previous participation. Reader Interest always drops on News issues where Readers realize that viable Solutions to those issues will not be entertained, because of previously-vested interests in the Status Quo. lgl

The Sense of Nonsense

All the ‘Old Hands’ are dying off, what with the Reported Death of Manuel Marulanda today, and the obituary of Dick Martin. FARC will be crippled if Marulanda is dead, but is left to the College School Boys and the Criminals; a genuine Revolutionary Movement for the Poor fought by the Peasants themselves having been lost. Honest fervor has been lost to a Corruption which children may not be able to detect, One in which a Privileged Class is trying to displace the traditional Privileged Class; the Poor left to the same, identical desperation no matter who succeeds, simply enduring the ravages of the Process.

Here is more of the same thing, though Most would not understand the Connection. It proposes an attempt to limit the Market to Those affected by the Market in an immediate way. It may likely fail, as Speculation simply moves its focus offshore, but there is hope for an oversupply of Oil: the Worldwide Recession, combined with the lower growth pattern of the U.S. economy, will join with the Price-suppressed American Consumer Demand for fuel to bring relief. The Fact remains that even if Speculation equals the Demand of Chinese Growth for actual Oil, Storage facilities for that Oil will eventually fill because Oil Producers will maximize their Production under high Pricing, and there is an outsize limit to Storage capitalization.

Robert Frank wrote an excellent article for Student to read. Adam Smith believed that Markets were basically benign, but that there were Exceptions to the Rule. I, on the other hand, believe that no Market can be benign, because of the Capital aggregation function that Markets fulfill. Prices are set not simply to pay for Costs of the Product, but also for Capital formation to create greater amount of similar or alternate Product. In all Cases, the Consumer is paying for more than the Product itself. Excess Capital aggregation practice (Monopoly) charging exorbitant Prices for the Product stands as the rationale for Revolutionary Movements. Denial of this Reality has always brought on the Shooting Wars, though it is not the only reason for War. lgl

Economic Analysis

I read this Post by PGL at Angry Bear this morning, and think it is about Time that Congress pressed the Administration, and a separate Joint Chiefs Issue, for an official Mission Statement for Iraq. We need to finally establish a formal Debate on the Goals of American military interventions in the World. Some would say this is all that Congress does anyway, but like all such things, it is not true. It is like the Greg Mankiw link found in the Post, which does not mention that Hay is over $60 per ton, and a Return to Animal power for Farming would absorb more farmland to feed the animals than has Urbanization since 1960. An Overview of practices, both Military and Economic, has not been made in a long time. A Factor Priority system should be created, and any deviation from the practice outlined, should be specified and justified.

I follow the previous Insistency with this Post on the Opportunity Cost of Religion. The Reader should read it, then go back to PGL’s Writing. Consider that military intervention has assumed the same weight as a religious act of faith, and ask how Administration and Congressional action have limited the Opportunity Cost for such Intervention, and thereby opened the way for expansion of such Intervention beyond the initial stated formulation defense for Intervention. What I am trying to highlight is how has the institutional power of Intervention construction impacted the model formulation for Intervention in the first place. Does the past expenditure of huge amounts in Transportation, Construction, and Placement Costs govern Our desire to remain in Iraq and Afghanistan, and to what degree if such effect is found? Is it a really an Intervention which We want to underwrite, when a major element of the Opportunity Costs involved consist of Killed and Wounded, without observable evidence of Intervention impact?

The Need for analysis can be witnessed in most arenas of Economics, as shown by this Post, especially the link to Bryan Caplan’s Opinion. Bryan’s basic assertion states We should back the Clinton/McCain Gas Tax Suspension, simply to forestall any other Public response; even though the Tax Suspension will only benefit an already-rich Oil industry. How does this cynical hypocrisy relate to the previous paragraphs of this Post, and reflect the institutional power of previously-made Commitments? Would the simple continuance of practice impede any relevant Change, and to what degree will it constrain Options? If kids can ‘Walk like an Egyptian’, then they can ‘Think like an Economist’. lgl

Product Position

A sign of the Economy–Picture Tube TVs are enjoying a comeback, as plasma endured a slide behind the Picture Tubes in the First Quarter. Unit Sales for Flat Screens dropped 36% between Christmas and First Quarter readings, much heavier than expected, though a traditional occurrence. The economic climate might have been sour for Consumer Spending, but I still would bet that 70% of the Foreclosures since the start of the Year, had a Big Screen TV sitting in the Living Room. RCA though is enjoying a revival for its Tubes, now that it belongs to China’s TCL. As an aside, I will state that digital television had better get it together; I have suffered successive Outages of Service from my Cable network.

Do We use Food Crops or Weeds for biofuel production? The invasive species planned for use tend to escape and damage, and Scientists claim the biofuel industries hurry to Production too rapidly, without adequate controls. Second-Generation biofuels take less Care than Food Crops, and can be grown on marginal farmland unusable for high intensity Crops. The also cost less in the Fuel Exchange of Energy Gain in Farming, but take about as much Water and potentially even more Fertilizer mix–though raw Sewage could be utilized. The estimate of damage from invasive species of $1.4 trillion must be considered a vast overreach, as negligent agricultural practice produces almost half of such loss.

This article informs why Trade Agreements are foolhardy at best. Japan maintains the domestic Rice Price basically to keep domestic suppliers on the farms, preventing an outsize migration to the Cities. Other Rice Growers have insisted Japan import 700,000 tons of Rice per year, and Japan has finally found a viable utilization for the Rice. The Rice Growers are outraged at the practice, though no one expects the Gift of Rice to needy Countries to affect World Rice price more than marginally. The article does not mention that foreign Rice invasion of Japan’s domestic market will not raise the World Rice price either, though it will destroy the stability of Japanese Rice farmers. It is also not a necessary expansion of World Rice markets, as the major Rice Growers can easily sell their Product. The final element states that if the Poor in the Philippines and Africa have to pay the World Rice price for their Rice, then they will be malnourished. Trade Negotiators do not know when to keep their mouth shut! lgl

Another Tax Witchhunt

Is the Glass half-empty, or half-full? James Hamilton suggests that at least for the next year, it is too early to tell. Readers can assess the Threat level best with the understanding it is the most productive Oil fields which are starting to decline; a most definite half-empty Scenario, if major new fields cannot be found. Are We going to be hit with a Crisis next year? The Answer to that Question will restrict the Crisis only to the Speculators in the Short-run. The Speculators, though, will be bad enough to rob Us of vast financial resources needed for devotion elsewhere.

I will state Now that We need a liquid Explosive which must meet a great number of conditions to match Our desired Needs. The very first Condition must be that it is explosive under only very precise detonation sequence, relatively only reproducible in a complex, machine-fired order. It must have a consistently fluid nature at all temperatures, and must be produced from waste biomass. Fresh Water restrictions will insist that the Conversion process achieve liquidity with the use of Seawater; hopefully, with even a by-product consisting of additional Fresh Water. The prime Solution would be that the Salts of Seawater could be utilized both to maintain the fluid nature of the mix, and be utilized in construction of the explosive itself; all in the effort of eliminating by-product Disposal Costs. The Output of Production plants must be huge in amount to meet Market needs; We are talking about a million barrels per Day production plant capacity. It is the Reality of Energy discussions that no one can talk about ‘Mom and Pop’ stores for Energy production, there being no Relief within such Concepts.

The Research must be conducted before the Capitalization can begin, and Oil Company taxation is the superior form to generate sufficient revenues. I would advocate a Windfall Tax upon all Energy Profits exceeding 40% on all Profits above normal Production Costs, if at least 30% of such Profits are not devoted to Research and Development of new Energy sources, whether such development is traditional search for Oil capacity, or the new Search for alternative Energy through Research and Development. Such a Windfall Tax will seem alarmist and unfair, with a discriminatory impact on one industry; the fact remains that the Energy industry has a responsibility to provide Product to their Customers, and should not be allowed to evade this responsibility by extraction of Profits without provision of future Product. lgl

Wrong Approaches

One of the great series of trouble Today infecting the American economy resides in the reportage of economic news. Journalists go out of their way to identify the Advocates of the worst scenarios, and then harp on their predictions. I did not really need to know Arjun Merti, or the fact that he owns two hybrid cars; I simply complacent in the knowledge that Someone would be predicting $200/barrel Oil. Hell, I will even predict $500/barrel Oil sometime when the young children are Grandparents themselves. I could be wrong, of course, and potentially very wrong in prediction that We could witness $40/barrel Oil again (The Secret here is a huge alternate Crisis which will absorb all the excess Dollars). Just because some Events have occurred does not mean the practices of Old are permanently gone, or even that Our performance has improved.

Has Anyone but I ever cut Sunflowers with a Corn Knife (machete)? One cannot understand this article and its potential, unless One has undertaken such a Project, if only pulling Dandelions from the lawn. By the way, Sunflower Oil can be produced easier and cheaper than Corn Oil, but I am not sure of the sugar content for ethanol production. I enjoyed the sentiment of the article itself, which introduced the problem of Water absorption in the production of biofuels, the first I have read which actually suggests the Desert conditions potential of growing Our Energy needs. In the Spirit of allowing Anyone to proclaim any Salvation for any Problem found or designed, I will now advocate a new Law mandating all Lawn clippings be turned over to ethanol plants for the cooking still, with the residue being turned into Silage for cattle feed (We could get the Price up to the Cost of Dog Food currently–the present highest-price Animal Feed on Record–be sure and check his Numbers–I have some doubts on that One).

Why do I feel in Tune with this Post? I have never been content with Seasonal Adjustments, believing that year-over-year assessments held the only predictive positive in the Argument. Inflationary adjustment of these figures reminds me of once being called a black man, because of a pimple on my forehead (anathema to the neo-Nazi, Aryan bastard such as I–will I ever hear from the relatively minuscule number of black friends I have). The Concept I would try to inflict on the Children states that a refined judgement (remember that term) which is a reevaluation of a refined judgement is like asking your neighbor’s wife if she would like to go out on a Date, in front of your neighbor. Personally, I was always hot for his daughter, being old enough to be her grandfather holding some disadvantage. Why am I being so offensive this morning? Simply because refined judgements bring on such refined animosities, and hold as much value as ‘Tempests in a Tea Pot’. lgl

Deficiencies in my Research model

I ran across this Post by Mark Thoma at around 7a.m., so one can imagine my trepidation at reading this Excerpt; I had to pinch myself to assure that I was not in Nightmare mode. It was not the Content on the Message, only the Construct, almost making me wish for established firm loss solely as defense and justification for puzzling through the Excerpt. I am not perfectly positive of the loss of firm profitability through the Minimum Wage without reading the entire Paper, but I do know a personal loss of profitability in tracing a path through the qualifications associated with the Findings of the Paper. I think it states that firms lost out on Profitability, though Wages increased significantly and the effect on Jobs was nil. The Whole holds some insignificance for myself, after the found lack of effect on firm entry rates.

I slipped from Mark Thoma to this Post by Edward Hugh, and I knew it was going to be a bad day. His first Graph contradicted the Contention of his Review, and I knew that I was in hostile country! This is followed by a Japanese Services index which is basically unchanged year over year, and tertiary demand (here I might help–think Maintenance Spending) has fallen for two Quarters, despite the fact that the Japanese economy is supposed to have been expanding though tertiary demand makes up 60% of the economy (I could have bought a Monument business once; think Tombstone company with a constant Sales performance). Household Spending purportedly decreased at the fastest rate in 15 months because of Price increases in frequently purchased Goods, though they are still supposed to be frequently purchased. Japanese Exports grew at the slowest Pace in 3 years, and Production fell the most in March of any month in 5 years. The Bank of Japan ceased its Interest Rate increases due to the information, but still said that continuing to keep the Rates at such Lows would lead to excessive Investment, and hamper long-term growth. It is too early in the Morning!

I trudge ahead, undeterred by attempts to defeat my pursuit of Truth, though already burdened by an overabundance of internal economic conflict; until I come to this Post. Everyone knows that Treasury Secretary Ken Henry of Australia would not seek to confuse; then I read the Excerpt. I was confronted by a lag of recognition of the activist counter-cyclical fiscal policy. Any policy based upon Ricardian equivalence or import leakages does demand a permanent Income hypothesis, though I am not sure what that means. I persevered, though, as undoubtedly will the counter-cyclical fiscal policy, in spite of the automatic stabilisers which may or may not work. Feel heartened by the fact that there is a 1.3% Cash surplus estimated; I having the suspicion that they are going to need it. lgl

Peace of Mind

The conflict between Alex Tabarrok and Daniel Gross first hit me as humorous, my innate sentiment with Tabarrok; finally evolving to the Gross position. It could have something to do with $127/barrel Oil, the limited Acreage of tillable land, the number of Calories necessary to obtain obesity, or with the environmental imprint of a technological Labor hour; still, I began to feel like Daniel Gross. My hesitancy may be based upon establishing Heat tunnels in the path of traditional Monsoon Winds, which feed our Agricultural base in the first place. I do know I dislike both India and China adding a million new cars every year, as the average Oil Well gains a probable 700 Average feet in depth. I am a fervent advocate of the American Style of Life, but fear I am becoming an Elitist in old Age; maybe it is the payment of current Gas bills.

My Heart resides with the Protectionists, but my head sort of joins Surowiecki with Mark Thoma’s caveat; while my Common Sense states that World Trade consumes too much fuel. Who is Someone who agrees with Everyone, yet thinks everything is definitely wrong? Is the term simply ‘Confusion’, or are there things like Economic Viruses which eat at Economies, exactly like Computer Viruses chew up Computer programming? I simply know that as I age, my life fills with increasing uncertainty; whether it is founded upon enhanced Awareness, or simply stumbling into new Problems remains the Question. I estimate that Problems to economic advancement always existed with the same abundance, though the Cost of their Solution has grown with the years–Inflation and Markets in everything!

David Smith has this article which extends the Confusion while assuring the quandary is not limited to this Nation. I guess my Question must be: How can Anyone determine the natural flow of Market expectations, when Government has so many economic Stimulus policies and Incentives while continually maintaining a deficit Expenditure flow? A Natural Flow economy probably has been impossible to determine since the Kennedy Tax Cut Package in the 1960s. Everyone states We have so much more because of Government intervention, but the ‘so much more’ may only be unfunded Government Debt, undercapitalized Private Debt, major Waste of economic resources, and an atmosphere of Crisis Management. I contemplate if a simple Head Tax coupled with a Prevention of Government expenditure above their Tax revenues might bring a sense of Calm. lgl

Governmental Services Provision

The World continues to change, and We are not ready for it. The Ageing Syndrome has smashed into Northern cities and Regions, accompanied by the predictable shift of the Tax base away from the area. School systems are in decline, and Elderly Health Care is in the ascendancy. The Question is how to pay for the change. We are presently attempting to throw the entire Cost upon Medicare, Medicaid, and Insurance, but finding a tremendous hazard without adequate revenues to cover the Cost. The Deficit will not go away in the relative Future, and an alternate methodology of payment will have to be devised. There is a Time Constraint involved, as the Solution must be devised before We encounter a breakdown in State and Local services.

Chavez is still working to turn Venezuela into a Socialist State, but doing so in a more intelligent manner than expressed formerly. The United States has forwarded the Oil Dollars to pay for the Transfer, and Venezuela is achieving a decent growth rate, much as Western Economists would like to protest otherwise. The real Question becomes whether it will be sustainable. Both Iran and China, who are the major Lenders to the Chavez Government, are facing severe economic difficulties at the domestic level, and probably will not be able to fulfill their signed Commitments with Venezuela. Chavez will need the very Investment partners he is currently alienating. Again, We are back to the methodology of financing Government programs; one in which Venezuelan Oil will not foot the bill.

Here is an article which tells more than it expects, and contributes to the general argument of How to pay for Government Services. The standard Economic argument that a weak economy will slow the Inflation rate seems a lot weaker than the economy. Inflation will not slow as long as less Production conducts within an environment where Liquidity continues at the same level; a supposed Need of Federal Reserve policy. The Fed does not understand that unprofitable Production can be more Inflationary and destructive, than is shortage of Cash. The Call for the use of TIPS to counter Inflation is ludicrous, as the greatest majority of Portfolio Investment is not Inflation-adjusted, and if it were Inflation-adjusted, then the Fed itself would find a distinct shortage of Cash and central bank stability. This leads Us to the proposition that if the Investment portfolios fail, then Government Services will triple in Demand, coupled with a vast Inflationary Cost for that fulfillment. lgl

The Export Model

Why does this refrain sound universal, with a remarkable American downbeat? The children of the original ground-breakers won’t follow in their Parents’ footsteps. Everyone wants the Money; no one wants the Work. Japan is running out of Engineers, a most virulent hazard considering that the Japanese economy depends upon high-Tech productivity; Japan not enjoying the Resource capacity to endure a Second-place Finish in the Tech races. Demographics will destroy in Japan, where it will only lead to a slow deterioration in the United States, after which a new Generation will again develop high Incentive. Island economies risk the British model, which chose to import their necessary Labor elements; now facing a cultural diversity in a compacted, over-populated arena of limited Options. Exporting their Manufacturing will leave Japan in the same Situation as the OPEC model–which do not have the domestic viability to maintain themselves when faced with a loss of their Operating revenues. The World economy is becoming too complicated, and acculturation factors are becoming too expensive; just ask the Somalis.

The lack of primary Incentive is the major Woe of the American economy still, this article providing a capsulated Picture of the effect on the American economy; one where there is under-performance coupled with over-expenditure. The American economy attempted to overcome the lack of performance since 1970 with what could be basically called the Reagan model of development of domestic infrastructure–with development of high-profile Retail outlets and Housing; a model only recently being shattered by Housing and Financial Crises. The younger Bush model of dependence on Exports–which really started mid-way in the Clinton era–will fail because of the high Costs of Energy, Transportation facilities, and lack of sufficiently-funded Trading partners; note that the heavy foreign investment is only the symptom of the inadequacy of the Export model. Foreign funding of American infrastructure does not equate to development of sufficient Trade volume to maintain the infrastructure.

Here is the notification that Siberia and Russia in general has begun to follow the American model, and seeming successfully, as the region still contains major primary development incentive because of Resource and Labor; Poland also doing a like business. What signals Success here in these areas is a trained Labor force organizing basically still-untapped Resources. They, though, face the same hazards as Everyone attuned to the Export model–a rapid fill of Consumer capacity, need for added Labor cadres inspiring trained Labor recruitment through Immigration, and Second-Generation desire to move to nicer Climes. The long-term economic value of this style of Export model has yet to be proven. lgl

How to alienate what Friends you have left!

Why does Energy always compel Subsidies, when it is apparent that they are probably the worst Incentive program possible. Germany is trying to underwrite the Solar industry, in a Country without much Sunshine in comparison with Everybody else; though, of course, they are paying three times as much to keep their Coal industry in business. I am trying to sell a derivative based on the expectation that I will draw a Salary equivalent to Auto industry CEOs within a year, but do I get a Subsidy from the Government to get me started? No! Governments never pay attention to the real issues of life, only idiotic appeals to a Public worth; they likely to contemplate subsidies to those self-same Auto industries this year, not when Production jobs are threatened, only when those CEO salaries are at risk. What ever happened to the old idea that worthwhile ideas would be funded because they are Profitable?

I agree with George W. Bush that the Farm Bill should be vetoed. It is another of those omnibus bills which covers so much, I could probably get a Bathroom remodel from it (dire Lie: I rent). The CBO states on 35 billion is the measly amount which actually goes to Agricultural commodity programs; my Question is how much of the Money goes to Agribusiness Concerns which make over $1 million Profit per year? Another $209 billion is supposed to go to Food Stamps and Food Banks; okay, sure, but this brings Us only to $244 billion, what happens to the rest of the $307 billion? I guess that We are back to Subsidies for ethanol and whatnot again; has Anyone ever heard of Cost Effective. Economists do not utilize Benefits Costs analysis anymore, probably because they would be cited for Contempt of Congress.

The Federal Reserve does not help with my general mood with this Report. Remember what I said about Auto subsidies earlier? My idea of a real subsidy would be the purchase of 20,000 electric vehicles for Government use; sole restrictions being they are all produced on American soil from American Design, they can meet current American Driving standards, and hold a durable Driving charge to travel at least 300 miles per charge. Another subsidy I might endorse would be Federal purchase of 50,000 Railroad freight cars under the same commitment that they be American-designed and built, with the provision that all unused freight capacity be rented to Railroads at current Rental rates. I would cancel the Farm subsidy programs for a much simpler Program of paying Farmers a planted acreage subsidy of $11 per planted acre; no one giving a Damn about what happens down the Road, simply call it the Agricultural fuel subsidy. lgl

A Prayer for the Old Tax

I should present some scathing attack about this Piece, but will only mildly suggest One does not want a Barber to do brain surgery, though he is often close to the area, and possesses most of the requisite tools. The Fed has as task only the provision of Nutrients; nobody has ever before suggested they be licensed to proscribe Drugs–whether they be Stimulants or Depressants. There seems to be a real confusion of Roles here, and a complexion bound to dilute all possible policies undertaken. The Federal Reserve Board may see themselves as the Cavalry coming to the rescue of the Settlers from the horrors of Recession attack, but I think We should skip the Saturday Matinee.

Dani Rodrik appears to use misquotes of Larry Summers, to again misquote Larry Summers. Mr. Summers’ basic Contention (which I could misquote) establishes the Truism that Globalization creates unequal Prosperity leading to Income Inequalities, and that some effort should be undertaken to preserve the Income balance for Those not directly connected with Global Trade. This basically says that Native industries have the same right to thrive as do Global industries, and Native industries pay noticeably higher taxes, larger Rents, and must finance the entirety of the native Transportation infrastructure. I am not a great Fan of Protectionism, or am I a believer in the innate evil of the Substance. Reasonable Tax upon Imports may seem like Protectionism, and I will not quibble about definitions; but a unity of Social Cost imposed upon all Product seems like a rational hue as well.

One can, of course, adopt the ideation that any form of Taxation is Theft. This might seem somewhat amusing, if not for the fact several individuals are quite serious about the entire matter. I might agree with them that the only Good Government is a Dead Government, but this venue has several distractions: one, the claim that the Government is already Dead and beginning to smell; two, cessation of Government Payrolls and Social Welfare benefits will lead to wild bands of beggars spreading out across the Country, and settling in one’s front yard; and three, the immense Business Cost of added Security personnel Payrolls, coupled with the fact that only those Businesses with weaker Security Services would pay their Bills at the end of the month. It might only be a skewed personal outlook on life, but I believe some form of Taxation is better than no Taxation; check out the Movie classic–The Magnificent Seven–all the Problems of a lack of Taxation can be found. lgl

Name-Dropping Again

Why do I like Joe Stiglitz? It might be because he has a Writing style simpatico with my own. It could be that it is nice to cite a Nobel Prize Winner; it making my own stuff sound like it is worth reading. I like to contemplate that it is concise and informative. He does not possess much belief in Monetarism or Inflation-Targeting; no one has ever asked my Opinion, but I have agreed with him since the early 1980s. Inflation importation is a Reality, and one that has a coaxial feedback (this meaning that all Prices adopt the highest range of Pricing throughout the World–Highs join with Highs with spread elimination of low Pricing). The Result of this co-active integration states that Inflation in lower GDP Countries cannot be fought, except in suppression of Inflation in the Countries of highest GDP–US, EU, Japan, and China (don’t get Me started on the recumbent value of Deflation–a postern which I suggest would have less disadvantage than traditionally implied).

I disagree slightly with Joe in his Proscriptions for altering current practice, mainly in thinking that high Interest rates do not forestall significant Investment, but truly ensures adequate Investigation before Capitalization. Management and Investment Profits need be curtailed, both in order to return Investment to the adequate supervision of Banking controls, and to improve the Wage and Salary positions of Labor; I could even envision a mandatory Investment law, with an automatic investiture of Company Stock for every Series of Labor hours employed. This would take Stock Option speculation away from Management, by granting the privilege to All, while limiting the Stock Grant process in entirety; functionally raising Stock prices over the long-run, bringing back Wage equalization policies, and establishing sound Stock Buyback policies.

We need to rescind bio-fuel subsidies as Stiglitz asserts, but this is best done with the implementation of a Carbon Tax which cannot be Gamed, so that there is real Incentive to find and develop alternate Sourcing of Energy. The unemployment and underemployment about which Joe worries is fundamentally mythical, as sharp Return to normal Marketing conditions will alleviate all such symptoms within short years of implementation. All that Said, I agree with Joe Stiglitz totally. lgl

I am not Anyone's Friend this Morning

Americans recognize that We consume too much, and that India has some grounds to be critical of President Bush’s Speech; most People get outraged generally about what Bush has been known to say. Knocking Bush has become more than an American pastime, and Americans should not be reticent about the rest of the World joining in the Fun. I have personally been verbally pounding Bush since the late 1990s, and feel ambivalent towards foreign criticism of my favorite Punching Bag. What bothers Me is the fact that no one ever Strikes back in this verbal Boxing Match. We need to cut Consumption of course, but the rest of the World needs to cut Population; gauche is my Commentary, almost as bad as Bush himself, but certifiably true. Our American beef eat relatively no more than Rats and Insects eat of any Indian Food supplies, and there should be National Choice in our Food Preservation decisions. The ethanol subsidies are an Insult to both God and Man, but hell, employ a lot of Americans; giving them the ability to over consume. The World should be ashamed, for not allowing the Titanic to sink with all lights shining!

Fertilizer Corporate structure fails the Test of provision of World Demand read it here. One finds the stupidity of transfer of Food Products at the rates currently undertaken. One can find many of the reasons why Farmers cannot supply the World’s Food needs; I have suggested previously that American lawns should face Public Condemnation, and replanted to Gardens and Orchards, maintained by Public Cooperatives. Here One can find that modern Engineering is left idle, because Cooking Oils have become too expensive. What is the World to do? (Specifically, do not comment that I have utilized these Links in previous Posts)

The World seems to be falling apart, and Everyone chooses their own set of Evil-Doers, while avoiding glimpses into the Mirror. Some simple Draconian measures should limit the excesses expressed by Everyone. A World Treaty agreement that Countries can not transfer Food Product through Trade would guarantee adequate Population controls, general employment in Food production industries, and place the entire World on a Diet governed by their own Food production capacities. The pain of this Decision could be eased by heavy Fines imposed on News agencies if they report Food Production difficulties elsewhere in the World–other than their own native lands. This might seem like a cold assessment, but I am in a foul mood this morning. lgl

It is more than the Fine Print

Where do We sign up for total opposition of Cap-n-Trade altogether? I favor Carbon Taxation, rather than Cap-n-Trade. I personally have objection to John Whitehead’s objection to the 100% auction, as there actually exists no Incentive to injecting a pluralism into Profits; Companies will neither enter or exit such industry, based solely on the amount of taxation they face, or even alter their Investment schedules. Carbon Credit Giveaways simply give these Companies ability to further profit from a basic Cost to Consumers.

Elemental to my belief in the superiority of Carbon Taxation over Cap-n-Trade is the sincere fact that it throws the entire Cost upon the Consumer, rather than a hidden total shift of the entire Cost of Tax unto the Consumer in Cap-n-Trade plus the Profits of Companies from the Sale of excess Carbon Credits. A 100% auction of Carbon Credits reduces the Management fees that Companies will extort from the Consumer, but will leave a residual Management demand for about 8% Profit on the total Cost of the Credits. Outright Carbon Taxation will provide the most Incentive to Consumers to cut their Energy usage, while presenting the actual least Cost.

A primary fault with the entire Discussion comes in the belief that We want Corporate participation in the basic program of Carbon taxation in whatever form. Truth states that We want an exclusion of Corporate interaction to the same degree as the Consumer holds. What is important in economic policy is the equality of impact on all Players, this means the elimination of Gaming the policy; only with this elimination can economic policy be sure of the Participant reactions, a determination necessary to meet the Taxation requirements and the foundation impact desired. I would not sign the Economists Statement, but my rationale comes from the exact opposite direction as John’s resistance. lgl

When is Opposite, Opposite?

Most often I agree with Paul Krugman, at least about the economic aspects, he having a real Record of being very good at playing Horseshoes in intellectual Economics, where Close counts. I am not so sure on this one, but not because of his Precepts. Paul’s basic contention is that Speculators are not responsible for the Oil price seen these days, a sweeping Statement with which I have difficulty. He implies that long-term Speculator pricing must have some element of hoarding of Product, for the high Pricing to be maintained. I find this highly debatable.

I choose to approach the Issue from the arena of Monetary policy. Speculators are in perpetual pursuit of high Profits. They are notorious for desertion of markets of low Profitability, or those with a delayed Turnover profile. One finds little Speculation in Bond markets, at least in terms of the Stock markets; this due to smaller Profit margins and longer Transfer periods involved. A glimpse at Commodity markets notes two special facts: the first being the rapidity of Exchange of Product, the second consisting of the volatility of Prices. Two elements protected Markets from Speculators: the first being that the various Markets operated according to different Rules and Operations (methodology), the second that Markets depended upon their own Income generation. Along came Monetary policy with its dedication to maintained liquidity, and suddenly, Money was slushing between Markets; gaining rapid transference as Markets proved to be periodic Speculator duds, and Speculators became more comfortable with the operations of different markets.

The culprit behind the new Speculation stands as Monetary policy with its commitment to Liquidity. The new Money flows drain excess funds to alternate Markets because of the lack of Profitability and rapid Turnover in the Exit markets. Monetarists spot the drying up of funds in these markets, and proscribe more liquidity measures. Funds continue to flee these Markets because of the low Profitability, and it excites even more liquidity measures. All of the later does not improve the Money levels in the Exit markets, or is it helpful in the Entrance Markets; which endures rapid Product price increases, and no leveling process as long as Money continues to flow into their market. The Cure for Speculation in the Commodity markets is a tight Money policy, but Fed officials cannot understand We face an almost exact opposite Situation from that which the Fed faced in the Great Depression. We need to shut off the Spigot to level Prices in the Markets, and to engender a reversal of Money flows back to their original markets. lgl

Teeny-Weeny Mistakes

I get real tired of "Core" readings in everything anymore, basically for the erratic skew of ordinary statistical measures, plus their inapplicability in successive readings. Eliminating high Rollers also explains very little without comparison of the variation with and without the eliminations. This all said, Core Retail sales dropped 0.7% since the end of February, and volume did not increase in Energy–solely a Price increase. I will have to find sometime later if the volume of Food sales increased, or if again it was simply an unmeasured increase in Prices. SpendingPulse also ignores the vital area of building supplies, the arena where volume sales determines growth of real Household Income with the heaviest capitalization (you have to spend decisively more to gain increases in Labor Income). One may ask why go into such detail, but such elements are necessary to establish a comprehensive judgement of Household Expenditure patterns; in which this information implies around a 4% reduction in Spot Consumption, mainly hidden by massive focus Price increases in the Maintenance Expenditures.

China is having a worse Inflationary cycle than Americans, coupled with a 1% reduction in the Trade Surplus. It would make a whale of a difference if this Drop was in Western purchases, though it seems obvious that it is increased Energy purchases by China in a rapidly inflating Energy market. China faces a 22% increase in Food prices, including a very expensive growth in Rice prices, while urban Chinese expect to eat Pork at least twice a Week. Disruption of either Food schedule has led to Food Riots in the Chinese Past, with no indication of any reduction of the Sentiment with the massive introduction of rural Poor to the urban matrix. Producer prices are going up by 8% per month, hampering the Government’s efforts to bring down the Pork Price increases; an effort necessary if Pork prices are to be forestalled from the new prices being kept as the the Price Trend-setter for all Chinese prices some two Quarters hence. The debacle will have Chinese Economists grinding their teeth, especially as Chinese Exports have little elasticity leeway to raise Product prices.

"Look, Maw, those damned Kids don’t know how to manage their (401)k Funds. When are they going to learn that they have to spend 20 hrs. per Week evaluating good potential Investments. Listen to them complain that they don’t have the time–between raising children and working a 50-hour Workweek. Hell’s fire, We used to let the kids run wild, and quit at 5 p.m. every Friday no matter what, so We didn’t miss the Saturday Night dance. Course, We done told the Bankers to give Us a good rate of Return on Our Savings, and let them worry about making the Investments!" Corporate leadership in Political positions often complain that Citizens fail to take advantage of all the Investment opportunities they are granted; I think it is a Question of replacing all those $400k/year CPAs who are just not doing a competent job of handling Worker portfolios. lgl

Buddy, could you spare some Cash?

What is Peter Goodman trying to tell Us? I cannot really tell, except that the Dollar may be acting irrationally in economic terms. There is a buoyancy to the Dollar for which no fundamentals can be found. Many claim it is the huge Holdings of Dollars held by central banks and sovereign Funds, which are adverse to selling Dollars normally due to the fall in Dollar value for themselves if the Dollar slides. My own Take on the Dollar states that the American Consumer has become the Consumer of Last Resort. No one is willing to call the U.S. on its bad I.O.U.s because there does not exist sustainable alternate Consumer Demand to maintain 40% of the World’s production of Consumer Goods–the high-Tech and high-Volume set of Goods in specific fact. An actual American Cut of 20% of its draft on Oil would generate about a 9% overcapitalization of Oil Recovery and Refinery capacity. A balanced American Trade (Imports and Exports equal in value) would close half the factories of the World, if a financed alternate Consumption could not be found. The alternate Consumption platform is not existent, and cannot be financed within the immediate economic context. The residual effect would be a massive slide in Value for the other major Currencies, under a massive slide of the Dollar.

Here is a Piece which may help explain the difficulty in establishing an alternate Consumption platform to replace the American Consumer. Citigroup plans to sell or downsize its Japanese Consumer Finance company. The financial group is in trouble, planning to sell $400 billion in assets to cover expected Mortgage and Credit losses in the United States. Their Option is to make it harder for the Consumer, while increasing their holdings in the more profitable brokerage business; abandoning Banking for the service of richer Investors. It is not remarkable, except for the fact such reduction is being conducted throughout the World by almost all financial groups. Consumer markets will not be created without Consumer Credit, and the Banking industry is leaving the markets unfilled or overpriced. We Americans are still the only People who can finance a bad-Risk Mortgage, even in the midst of a financial crisis.

I might as well include this Piece from Dean Baker, as this Post has turned into a description of why the Dollar holds Power. Dean believes that Fund managers lack fear of Losses if dealing in major Currencies, but know they face unemployment if said Losses occur in unconventional Currencies. I cannot say that I disagree with him to a great degree, but it should also be understood that Fund managers can understand the volatile elements which affect the major Currencies, but know little about the transitional effects which might threaten the value of other Currencies. I don’t know a damned thing about Money either, and therefore, I risk my Dollars on what I know what I know about. lgl

Selective Purchasing

The Numbers may seem small when discussed in Percentage increases, but counting physical bodies in Movement becomes more impressive, though I like the traditional (Right!) estimate of transportation of biomass tonnage. I think that the Energy Dept. should put out a Computer program where you plug in your destination, original Starting Point, number of Round-Trip rotations per month, with an estimated Fuel usage of 20 miles per gallon; the program to give an immediate Read-Out of the Fuel Cost in gallons per Trip, Week, Month, and Year with comparison figures of Mass Transit Cost per Individual for such Travel at 80% Passenger capacity. This Program should be widely advertised with Internet address for access, along with a Suggestion that Everyone use it, and an additional Cost ratio of the fuel at current Previous Day national average of Fuel Cost for easy estimate of Daily, Weekly, Monthly, and Yearly Cost to the Commuter. The Energy Dept. should also promote Advertisements highlighting the number of gallons of fuel Drivers must save Daily, Weekly, and Monthly in order to cut Fuel Consumption in this Country by 10%, 20%, and 50%. Knowledge may not be Power in more than the metaphysical sense, but it most definitely constitutes Empowerment.

What cancels the stimulus of the Stimulus Package for Consumers? Almost Everyone loses Sight of the advantage of the Stimulus, which is the greater independence of the Consumer to allocate their Household Budget by settling their most pressing needs with a pool of unallocated Cash. Retail suddenly wants to Step-In, and replace the oppressive suppression of Income by Government with a fixed limitation of Consumer options. Where is the stimulus of freebie Cash, if it is in fact locked into a set Expenditure pattern devoid of transference to clear pressing needs? Such Conditions literally makes more stimulus by leaving the funds in the hands of Government, as Consumers under such restrictions are bound only to increase their personal Household liabilities. What makes Mad Money? It is a basic Kid loose in a Candy Store with Change in his Pocket. Retail outlets would basically change it to a CPA buying from a Grocery List in comparison shopping.

It seems Others are listening to my monologues, or else see the same need to break down the Trade report effectively. It pleases me that the Trade deficit widened with the EU, Canada, and Japan, and narrowed with China; this means that the American economy restructures away from the least-Cost Products, in favor to the greater-utility, Energy-conservative technological Products better suited for the American lifestyle. The drop in American Exports are not burdensome, as March reflected an end to the New Year purchases of Airliners and luxury items. The purchase of American Food and Beverages highlight both Our provision of high-quality Product at competitive pricing, and our position as a major Food supplier in the World. The decline in Oil imports is a very good Sign, and I imagine it will continue to decline as Americans realize that they can actually cut their Energy Costs in half with selective Purchasing and Travel. lgl

Are We in Bad Shape?

Methinks that the Spooks are getting spooked again, though the Risks be great. Bad English, and bad Spooking! The Reader should know that there are two types of Threat–Open and Closed. The later is Spook heaven, where the Threat level is known, and the avenues of Threat are limited in number and identified. Open Threats are the 32nd level of Hell; nobody quite knows or understands what is down there, but it looks bad! Open Threats cannot be assessed competently for degree of Threat, manner of Attack, or methodology for identification of the Attacking Force. The equivalent in military terms would be a Commander who has open Flanks, insufficient levels of Scouts, and knowledge there are multiple, potential Partisans out there; sort of like Downtown Bagdad today! Threats are too diverse, too complex, and unrecognizable until close to Impact; while surveillance stands functionally useless, as Security elements can cover only a minimal number of the Threat Partisans. The Proscription is to take Two Aspirin, and Call when there is a Flare-Up (the Worried can translate this as concentrating on early Detection Assets with minimal Expenditure on Surveillance assets).

The Trade Deficit is down as recorded here, the one bright spot in Economic News, if it is actually a good thing; rapid Movements in Economics always foretells disaster. The drop in Petroleum imports (5.9% decrease in the Oil bill) vindicates my previous assessment that the Energy Dept. was playing with the March Consumption numbers. Imports were down $200 bn which I have not investigated, but would imagine came in losses to Trade with Canada and Mexico, rather than the desired Chinese reduction. This would indicate that long-term economic contracts have been Downsized to match current Purchase patterns (limiting Inventory build-ups), while allowing the volatile Spot Markets free rein; the former cutting future industrial potential in the United States, doing relatively nothing for the American Consumer Compulsive purchase pattern. We need some bright Econ Grad student to break down the Trade Report, and define the exact non-Oil Sinkholes.

Sweet Crude came close to $126/barrel on the London market at the start of the U.S. Trading Day. Does this sound like a Speculator Push trying to influence American Prices with relatively marginal Quantity transference? A sincere Cut in American Consumption, if it has been existent, will probably drop the Price of Sweet Crude to around $100/barrel when such a Drop is recognized in American markets; remember the 5.9% drop in Oil importation. The American markets are being played by Speculators, and at great damage to the American economy; Production Cost for Sweet Crude remains around $45/barrel. The humor in the entire situation resides in the fact that the current Oil prices can only hurt China, Japan, and the EU worse than it affects the U.S. They have already functionally curtailed their Oil commitment, and still draft too great an Oil volume without immediate chance of further reductions. Americans, on the other hand, have potential to further reduce by almost 20% with strict Conservation measures; something which will be attained with current Oil pricing. lgl

Bad, Bad Debt!

This article, along with a rise in the price of Oil to almost $124/barrel, was bound to make my Day; except only Dirty Harry gets to shoot Somebody. The data explains how Americans put the March Expenses on the Cuff, Credit Cards are so much easier than writing all those I.O.U.’s. Americans borrowed $15.3 bn in March; a true Economist would have by now have found the amount of Income Tax paid in March, as a Comparison number. You will not find such as Me descending to such a Work-exhibiting effort, and it would not show any real impact anyway; the real Number desired being in fact next year’s March Income Tax contribution. I could give a brief analysis of the greater power of Credit companies to collect Debt, rather than the desultory efforts of the IRS; it, though, would be equally futile effort, as no one would care sufficiently to propose doing anything. My only Question will be: Who is going to pay the Fuel bill for the entire summer, as I imagine that the Credit companies are already getting tired of Paying, now that they have to represent a position equivalent to the U.S. Treasury?

John Lipsky of the IMF is beginning to worry about Inflation, as stated in this article. It seems that global Inflation is running about 5.5%, up from recent years of 4% Inflation. I have proposed a theory on Inflation where it actually consists of the Process of absorbing unearned Profits achieved by skewed Pricing in previous Periods, and that the damage from Inflation derives from the mal-Consumption created by the previous existence of those Profits. It is a basic Statement that the mal-Consumption of Resources has a visible representation of unnecessary Debt to pay for the Inflated Prices of Product, and the erroneous Debt must be paid or discounted before normal growth rates can be achieved. The sincere bite to this News lay in the fact that the false acquisition of debt must cease, prior to such debt being discounted. Inflation is channeled by this false Consumption, and increases in velocity because of it; all this means is that a global Inflation of 5.5% states that We already have runaway Inflation.

Jeff Cornwall always comes in with the right advice, even if he limits his scope to business management. It is a Time to pay down your Debt, and eliminate venues which lack good sustained Profit margins. He shows some doubtful advice when it comes to cutting Overhead Expenses; now is not the time to cut staff which will worsen the economy, but to move such staff to improved Business potential (previous competent Hiring practices allows for such transference). Business should remember that Government economic policy has never generated a Boom, or curtailed a Recession. What cuts Booms are loss of Profit margins by Business, what restarts Economies after Recessions is efficient Business practice. lgl

The Reality of Numbers

I find I must present a ‘mea culpa’ to one of my Exercise partners, because I told him at last Conversation that American Oil consumption would be down 3.4% (a most hoped-for Target) this year, but the Energy Dept. says a loss of 330,000/Day, something less than a 1% decline. I could claim a defense in that Energy estimates are traditionally erratic at best, or suggest I was surrendering to Wistful thinking. Instead, I have decided to take a aggressive and belligerent attitude, and provoke an angry Rebuttal with the Statement: Energy Dept. officials have been ordered to play down Consumption declines, to hide the per barrel Profits of the Energy giants; Americans have never rioted over the Price of Food, but are known fanatics over Gas Prices. I would suspect that 330,000barrels/Day is the amount which cannot be hidden by reduced Refinery production. Why do I think it is ‘Little Bush’ at Work?

Read this article by David Leonhardt, and I will seem like even more of a Crank. Inflation is only showing up in those Prices for Product on which We are likely to spend half Our Income, while the Prices of Products on which We are reducing Our Consumption are seemingly dropping in Price. This could well be true–it holding some type of economic rationale. There could be a flawed economic concept involved, though; an overactive Imagination could even propose that Inflation readings should be scaled for enjoined Consumption Demand reductions, due to the pricing of heavy Demand Products (Translation: Production reduction due to Consumption Demand reductions because of fundamentals Pricing should be accounted as an Inflation Cost–basically added, not subtracted). Such idiom would make Core Inflation the Enemy of the People, not a sick Cousin who must be nursed to health.

Here is another Piece to please the Heart of all! It seems We are paying Labor less than expected this Year, now that both Core Inflation and Consumer Basket Inflation are about twice and four times as high as the Unit labor Costs for the consumed Product. Does my tirade today make me appear as a wild-eyed Communist fanatic? Could I be risking my amiable Relations with both the Austrian School of Economics, and Strikebreakers of the Pinkertons? It must go back to my Irish/German, Working Class Roman Catholic conservative upbringing, which has been angry ever since the Irish Potato Famine. lgl

Where is the Fear?

Ben Bernanke easily expresses the degree of his submission to Bankers, by his reflection of the fears of financial institutions. Foreclosures are the central Topic of Discussion throughout the Banking sphere, and reactions are extreme. The amount of Money at Risk is overly large, but is fear for the Money the real driving force behind the rhetoric? The underlying fright is that Americans will get into the habit of Walking Away from their Mortgages. It has been an oppressive fear ever since Consumer Credit has been increasing since the Reagan years. These individuals worked hard to tighten the Bankruptcy rules to forestall financial escape by Debtors, then find that the number of Bankruptcy filings just keep on increasing. Now, there are literally millions of Mortgage-holders posed to send the House keys to the Bank, and Move to a high-end Apartment of which there is an abundance, due to an oversupply of Funds to the Construction sector. Bankers truly fear this newest form of Bank Robbery, which lacks strict Restraints, and is almost Socially-Acceptable to engage. Here resides the true Panic of the Banking industry.

Pete Davis explains it well, but fail to emphasize the main point: High Capital Gains taxation impels greater investment, because Investors do not want to take the penalty of high taxation of their Gains; Profits-Taking always follows a reduction of Capital Gains taxation. The Whole has connection, but few are Those who will admit it. The real Smoothing of economic performance to eliminate Booms and Busts will only be realized under two Conditions: persistent high Capital Gains taxation, or persistent low Capital Gains taxation; variance of Tax rates will introduce the specter of Profits-Taking with vast flux of Investment funds (not really–simply switch from High-Risk to highly-secure Capital ventures). This may translate for the Reader as stating it is best to project a high degree of Risk in Tax rate placement, inciting Investor desires to take added Risk in Investment procedures; coupled with the Understanding that low Capital Gains Tax rates not only provide a sense of security to Investors, but inhibit the desire to acquire any Risk. Both Investors and Bankers prefer absorbing their Risk sitting on a beach towel in Florida, rather than chained to their desks; but Economists should not be worried about their Degree of Comfort.

Read this Piece by Mark Thoma, which does not justify my assertions Above, but does present the balanced assessments available, as to the motivations of the Fed, the Investors, and the Banking community in general. I don’t agree with the Sensitivity of the American economy which Mark espouses, knowing that Americans will continue to go to Work, at least until their Jobs are Downsized; a highly doubtful Outcome, considering that American Business Management is already pressed for sufficient Labor to meet their Production needs. The American economy is still on the Move, and the Age of Downsizing is now primarily focused on the High-Skills labor which Mark has advocated in successive Posts; it is a fact that specialized advancement brings its own special Risk. lgl

Signs of Decay

I wonder if a Pale Recession is like a Pale Ale, something with no real Kick or Taste, but will make you Sick in the Morning? Greenspan is beginning to sound as bad as myself, coming up with metaphor straight out of Dick Tracy. He says that the Recession (which no one can verify yet; it is all a Question of Inflation-scaling) is not producing high Unemployment numbers, and uses the Word to imply that the Recession will have a very shallow Impact. I do not worry about the Recession, which I believe is already over; my fears contain the long-term horror of Speculation-driven Inflation, based on the Expectation that the World may have reached its Peak economic performance–similar to the projected Oil Peak, it implies a lack of economic resources to devote to Production increases. I suppose I should discuss the theory behind my thesis, which simply states that the Wear and Tear on current Capital Assets (given their current Size and Degradation rates) can match or exceed current Capital Construction rates; all within the Scenario of a shrinking Labor Force (again Ageing Population).

Paul Collier presents Commentary fully in conformance with my thesis, and draws a great deal of Agreement from Others, but I have trouble with his proposed Solutions. The small Farmer is not the Solution, but neither is Agri-business, which drafts a huge Profits Return for Capital investment only with an inflation of Food prices far above adequate Rates of Return for Capital Investment. The key here remains a demanded Shift of Food Pricing to a higher Percentage of total Labor Income, a factor which can only adversely affect Standards of Living. Most Economists miss the essential consequence of absorption of Household discretionary funds; past a certain undetermined Point, a reduction of these discretionary funds will destroy the necessary supply of varied Consumption Products to the Households; a Spread necessary for maintenance of current living conditions. We can easily win the battle, yet still lose the War.

The New York Times gives Us a Graphic from which We can gather some comparison input. What happens when the Cost of Electricity in Size challenges half the magnitude of Recreation? What happens when expenditure on Gasoline exceeds the expenditure on Hotels and Vacation homes? What occurs when Car Insurance exceeds expenditure for College tuition and fees? What can be expected of economic performance, if the Cost of Food triples the amounts spent on Communication and Education, a factor which will apply within a short interval if Agri-business Food pricing is allowed free rein? The rate of growth of Energy charges will lead to expansion greater than the expenditure to Restaurants and Fast Food outlets within a Period of months, which will constitute a real Problem; it is a sad statement of human growth, to perforce state that Nutritional requirements will be lost if Restaurant provision of balanced Meals are canceled because of Price. It’s a sad life. lgl

One the Job Security

Why do We always find Kellogg, Brown, and Root behind every debacle of military supply in Iraq and Afghanistan? Simple malfeasance and professional ineptitude cannot explain flaws of performance which are endemic to Halliburton provision of military supplies. The current idiocy is a Case in Point: Domestic Electricians normally and sensibly ground their installations to protect themselves, as any opening of current will wipe them out instantly without Grounding, and Open electrical systems can possess unknown Connection Points. Failure to ground electrical systems could only occur where the entire Grid is assured Dead, and where there was no expectation of further Maintenance connected with the system. The real anger coming from the faulty performance in this construction follows from the knowledge that the only real Savings from curtailing Grounding of installations came only from labor hours non-expended, as Grounding equipment and wiring is not that expensive. Why did Electricians prostitute their professional standards for what was effectively Pennies?

Warren Buffet missed his Golden Departure Date in January, and now is missing his golden Profits from the glory years. The miniate aspect of the Profits report can be directly tied to the $40 billion Exposure to Derivatives, 94 in number if I read right; too few for that level of Investment, incredibly less than needed to spread Risk. Berkshire’s Moves have been ponderous in the Market of late years, getting in before Peak of course, but allowing Speculative price-driving before investment, and with ill-planned Exit strategies. Berkshire is beginning to express all the foibles shown by the Dollar against foreign Currencies, trying to exploit a Profits base which it had already telegraphed. Of course, Warren can always counterclaim that he has a lot more Money than I do!.

I still manage to make it though, basically with the help of my non-friends, a typical example expressed by this article. Certain tenets should be exercised in reading this Piece: central direction and control will bring 3x the Savings as individual, sporadic Choice; Rate-setting based upon the provision of individual Choice will eventually eliminate the desire for Individuality; and Meters which run backward to pay for generated Power by the Household propels the greatest Consumer investiture within the program. The concentration of PR should be on the Gains to be derived for Households, not the increased Profits for Utilities; even Teenagers can be enticed if Parents promise Utility Savings will be devoted to Allowance increases. Two Hits on Electricity bounding a lack of Electricity is enough for one Blog entry! lgl

Economic Revisionism

William Polley probably has the most balanced View of the Gas Tax Holiday for the Holiday Season. His Account, though, does not mention Oil companies’ ability to manipulate Production facilities to maximize their absorption of the gains of the Tax Break. Here We are talking about the velocity of Fuel Sales, where Production Costs are minimized rather than Production Output maximized. Production scheduling can greatly expand the elasticity of Tax incidence of the tax remission to the benefit of Oil refiners; it carrying hazard only to Consumers, who will finding factors of Supply constraint generating actually higher Pump prices. Economists may decide I over-think the process, but still, I expect Oil companies will not accept any Sharing with Consumers which they can avoid. Non-cognizant Individuals can understand my Assertion that a Gas Tax Holiday will actually generate higher Gas Prices.

Those who would mistrust my words of wisdom could view this Source, which would break down the statistics in an excellent format to inform little. The numbers simply inform of the expected Gains and Losses, if and only if, all Things operate by one of two separate sets of Expectations. Hardly Anyone expects those Expectations to operate in the manner suggested, and intelligent Observers would not expect even a intermixture of the two Sets. The Whole of what I have written seems like a Cop-out, and so I might turn my Intellect into what is wrong with the Gas Tax itself.

The primary error of the Gas Tax lay in the fact it is a Tax upon Volume. No Tax is efficient taxation which relies on Volume, except and until it is a simple tax on Money itself–i.e., Income. The reason being all Taxes upon Volume will affect the Price of the Product itself; the Tax becomes a percentage of the Price. It devolves into a Production Cost for Producers, and a non-Volume tax upon Consumer Income. The Result consists of Business Suppliers passing the Production Cost to the Consumers, who are burdened by a regressive tax on their Income. Economists enjoy a minor Sunrise trying to account the placement of Tax incidence.

My Proposal of significant genius would be to assign a Tax upon Access to Product, say a $2 fee anytime One turns on a fuel pump. A regressive Tax? Certainly! It, though, would be a regressive tax upon Access, not Volume. Tax Collection becomes simple, a simple Recording of the number of times the fuel pump is Turned On. The Tax is higher than the regressive tax upon Volume, so Tax revenues would be higher, but Consumers can Save on Tax Impact Cost by emptying the Gas tanks before Refills–a sensible Tax impact avoidance. Fuel pump traffic would reduce, lowering the Operating Costs of fuel Stations. Oil companies could not avoid the Tax incidence by alteration of Production schedules, so the principle of Production maximization at minimum Operating Cost would become the guiding Business policy. Economists will find capacity to debate whether a Tax on Access is a more Normal Cost, than is a Tax on Volume of Product. lgl

Who has Time?

Every once in a while, more often than any of Us care to occur, a Paper comes along which We know requires in-depth study; We knowing that it is just not going to happen. Such it is with this Paper (pdf). The Construct of the Paper provokes interest, and the Conclusion practically begs for investigation:
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In this paper we demonstrated the positive effect that internal migration in China has had on the consumption per capita of households remaining in migrant sending communities, and also showed that these effects are stronger for poorer households within villages. Indeed, increased ease of migration from villages of rural China is associated with decreasing inequality within communities.38 Increases in out-migration also lead to more pronounced increases in the income of poorer households, and poorer households supply more labor to productive activities and experience more rapid income growth.

With respect to the impact of migration on investment in rural areas, we find that increases in migration from rural China are associated with increased accumulation of housing wealth and consumer durables, but we do not find evidence of a significant relationship between migration and investment in productive assets. Evidence that migration might affect investment in agriculture and promote specialization among poorer households is mixed. While we find no significant increases in investments related to agricultural production, poorer households are observed to increase their land holdings per capita, and thus expand their scale of agricultural production. Contrary to assertions in the China literature and evidence from the literature on Mexico-US migration, we do not find any indication that rural-urban migration in China is associated with increases in household investment in non-agricultural production. The lack of a robust impact of migration on productive investment stands in contrast to recent findings from the literature examining the impacts of international flows of labor (Woodruff and Zenteno, 2007; Yang, 2008).
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The mechanism of transference of Capital to rural areas seems immune to Migration aspects, though there appears to be a build-up of Capital assets within rural Households. This would imply that rural Capitalization is a subsidiary generation effort, as a new labor force enters the market structure. I would also doubt the robust model of Migrants sending funds back to their native areas regularly, believing that the urbanized increased Consumption Costs will quickly sever any long-lasting familial ties with rural areas. This would mean all the meters registering growth in the rural areas must be somewhat skewed by the indications that rural populations are Ageing more rapidly. Another thing that need be studied, but will not be! lgl

Decentralization

How does your Light shine in the Halls of Avarice? Thailand wants a Cartel of Rice, and the other major Exporters may be expected to go along, all in the interest of maintaining the current price of Rice on the World market; a Price which has tripled within the last year. My attitude says this is outrageous, but my economic sense states this may be one of the most advantageous economic options available to the World. It might do more to equalize Wage rates in the World, than any other effort attempted in the last decades. China, India, and Indonesia will obviously capitalize and modernize their Rice production because of the Gain to be realized, and the Philippines would finally drain and convert much of their Wetlands and Swamp to Rice production. The nascent Fertilizer industries of these nations would be quickly developed, and the disease-producing sections of Rice-producing Countries would adopt Drainage policies which would effectually control Swamp-borne diseases. The final real advantage could be bringing Agriculture back as a viable alternative to City-concentrated industrialization; a spread of Population back to the Land could be accomplished while maintaining the quality of life and opportunity for Residents.

My leave-taking from the operational Thought of this Post came easily after reading this article. The Theme immediately became the impulse of Decentralization currently in force throughout the economy. The major Drive behind this impulse resides in the failure of major companies to fulfill a Labor-generation facility. The major companies were simply not incorporating the level of Student cadres entering the Labor market over the past 30 years. Graduates perforce had to generate their own Work opportunities. This Necessity combined in recent years with the growing Costs of Transportation, maintaining a national Sales network, regional outlets of national networks being given greater autonomy, and the ease of Credit. Small business suddenly became the Wave of the Future. The Power continues because of the ability of Small Business to keep Operational Costs low. The main Threat to Small Business is an old Threat, which is the ability to keep Accounts Receivable current. It is the mainstay of their Credit foundation, and has yet to endure a severe Recession.

Small Business holds an advantage with its ability to quickly alter the Product line it offers, with a traditional orientation focused on the Product Necessities of the Consumer. Niche location is an important part of the Small Business Construct, where the new Entrepreneur can identify an unfulfilled capacity in their own Location. I am an Age-Disadvantaged Individual, else I might take a flyer at opening a new Bakery is my current small town, currently serviced only by formula Baked Goods provision of national Grocery chains. I have often contemplated the potential practicality of establishing a Salads Shop, where a variety of Salads (30, full Meal or a la carte with Speciality Dressings) would be constructed in both Individual and Family sizes as you wait (did you notice fat old men concentrate on Food ideas?). The major idea behind all Small Business must start with the Savings to be gained by minimization of normal Chain integration Costs. lgl