The New Brand of Wealth Aggregation

Income inequality has been registered by many more people than Piketty and Saez; they simply organized a better documentation. The interesting element I find in the total debate lay in the huge resistence found in the extremely Wealthy to paying any more in absolute terms in Tax, though their Incomes have increased greatly in terms of multiples. Back when high Incomes Earners for considered to have made a couple hundred Thousand, these Earners wanted to pay only a few Thousand in Tax. Now that their Incomes is in Tens of Millions, they still think they should Pay less than $100k. There is no only a adamant Opposition to Progressive taxation; there exists a real Demand for a limitation of Taxation in absolute Terms. The One-Percenters were probably the First to surrender the ‘Trickle-Down’ hypothesis.

James Surowiecki brings forth a lucid defense of Oil Speculators which I am quite sure is based upon sound data. He expresses great Presence of Mind, and real Understanding of the Oil Pricing mechanism. How can a poor Man from Nebraska challenge such a great article? The only Option open seems to be hazarding a few Guesses on the progress of the Oil Market, which I understand will quickly be countered and overturned by competent Statisticians; I only can hope they will challenge on my Comments section. Here are the Guesses which I know will carry such Controversy:

1) There is a probable Multiple of 8 times the Speculator Cash in the Oil Market, as when Oil cost about $80/barrel.
2) Oil Production has increased by about 14% since Oil was $80/barrel, though actual Consumption has increased only about 11% in the like Interval. I disagree with several noted Economists in this Estimate, who seem to claim that Oil storage capacity has not increased.
3) Government policies and Sovereign Wealth funds have contractual agreements which have reduced free Tradable Oil by 60% since Oil was trading at $80/barrel.
4) Another Year as contractive as this Year on the World level, especially with expected Food shortages, will leave Oil Consumption at the same level as was existent when Oil was $80/barrel. It is doubtful that We will see Oil selling for less than $120/barrel under any Conditions in the future.

I am quite sure of my Expectations, even though my Numbers may be very loose. Only Time will tell; Readers, though, should be prepared. lgl

Tell Me if Any of This makes Sense to You

The LA Times may understand the current Situation more than Our Governmental leadership. The article says that current Oil prices induce an equivalent to a 9% Tariff on East Asian Goods shipped to American shores, which could increase to a 15% Tariff if the price of Oil reaches $200/barrel. Is it time for a combination Wind/Diesel powered Ship, where Docking and Exit from Harbors are under Machine-power, but Ocean-transfer is completed under Sail? This is currently not a salient option, as Sail requires almost 5 times the Crew with Sailing Times significantly longer. The Idea could be improved with Sails which also generated Solar power in addition to Wind power. Seems far-fetched, does it not? The Idea does not seem as crazy, when Ship refills cost $3.8 million Now, and are bound to go up in Price; consider that Sail Crews would cost about $20,000/Crew member per Trip, and require no more than 20 in number.

I will not even attempt to claim I understand all of Tyler Cowen’s Thoughts, but feel that qualified Students should go through this stuff. I will attach to Tyler’s insistence that a long-term bet could be made even when Futures extend only for 3 years; why would One desire to remain a Speculator utilizing only Futures, when a realizable Investment opportunity has appeared? Arnold Kling is whistling in a huge Warehouse which is totally dependent upon Fundamentals, and even lack of Capitalization works out to be a form of Hoarding. Bryan Caplan is right about his dedication to the traditional Movements of Commodity pricing, but should be cognizant that those Expectations are dependent upon a consistency of Resource Recovery Costs; Commodity prices will not reduce, if Recovery Costs have become marginally more expensive. I would not comment on Mark Thoma, or Holbrook Working’s efforts to define the convenience yield, except to say relatively no one has ever pinned down the Concept, or its impact; it reminds Me of the Tooth Fairy. I do not know what Paul Krugman has against the Concept of Speculators, forever claiming that Speculation has absolutely nothing to do with Pricing; why then do People put so much Money into Speculation? lgl

When is a Market, not a Market?

Consumers are seriously shaken, and the Outlook might meet Consumer Expectations. The worst of the Situation must be considered Speculator-driven. Oil in the Pipeline would seem to dictate a burst of the Oil Bubble, and the Economy would respond nicely to a $20/barrel drop in Oil. The Federal Reserve must raise Interbank rates sharply, but declines to do so, because it will place Bank managements at Risk; exactly where they would have been without Fed support. Exterior Government Expenditure will not aid the debacle, unless it is very labor-intensive. A normalized Economic policy would seek a standardized Tariff policy, designed to limit Trade; a factor which would both induce domestic production, and improve American economic position in the World economy. Residual fears coming from the Great Depression will forestall this Resolution, and will be the controlling element generating any new Recession.

Readership of the article should not place too much emphasis on the relationship of the Numbers to 1980. I will not go in depth on the lack of relationship of 1980 and Today, but say Students should concentrate more upon the post-WWI Recession, where there was an excess of funding without adequate levels of financed Demand. The Product is there, the flow of Cash is there, but Consumers cannot afford the lifestyle as Wages have not kept pace with Product pricing. The flush Profits of the previous Period impede the Price reductions necessary to clear the Market. This lack of Clearing is leading to a back-up of Product on the Shelves; with all their Warehousing Costs at the Retail level (Economists will say this is untrue, but do not check the drag time delay of Product on the Shelves). Continued failure to clear the Markets will bring a Trade Downturn greater than any efficient Tariff system.

One needs to study this Piece by Paul Krugman, and follow it with examination of the Piece of Steve Waldman cited by Krugman. I would first like to say that both Waldman and Krugman are right, but ignore the primary factor behind the Oil Price increase, which is the Contractual Tie-Down of Oil Reserves by Governments and Sovereign Wealth funds. Loose Oil Production on the Market have been massively reduced, with a Speculator-expanded Demand for what loose Oil is left. It is an artificial Constraint enjoined by Government policy action, and unduly hampers establishment of a stable Oil price. This is the Situation which We face, and the distorted Market We must adjust in order to return to sound Market pricing for Oil. lgl

Review Materials

The GAO has yet to tell Us what the current Executive consists in Dollars terms after Retirement from Government service. The substance of the article seems to assert that Boeing was not given the opportunity to up the ante during the bid process. The GAO claims it wishes to imply no judgement on the performance factors, though I would assert in both Cases that the tanker size itself was a demerit. The fact of the matter states that two intermediate tankers will refuel flight elements in about 40% of the Time required to empty the huge tankers (important in Combat performance terms), and the added fuel used in Transport Costs does not much exceed getting one of the flight elements to the refuel points. Equipment and Labor Costs for the two intermediate tankers would be only around 15% higher, and performance enhancement would rise with use of the smaller Tanker alignment. I would deny both Bids presented, and inform both agents that We want a smaller Unit.

Here is an article which should be reviewed, if for nothing else, then for review of the graphs included. I am not more enthusiastic because neither the 400k or 350k numbers are necessarily relevant to the discussion, now that We have shifted away from Manufacturing in the last Boom. I have not recently accessed the information, but under the new construct, regional Unemployment rates have assumed greater importance. The rationale behind This states that We are suffering regional downturns, while Coastal areas are doing relatively well; Port systems management, Transport systems, and localized Processing plants for Imports. I believe that We might soon have to split into Sector evaluations and Statements, due to an expected limitation to overall Growth coming from beginning Baby-Boomer retirements.

Felix Salmon mentions that Bank Boards have faced little attack or opposition, though they were technically in charge under the late Crisis. Responsibility cannot be determined or found, and let’s face it, Bank Board membership is basically a Peerage award; they have little connection with actual Bank operations, and are granted Reading materials based solely on the favorable nature of the material to Bank operations. Most Board members possess a Working Knowledge of Banking equivalent to having fulfilled Past requirement to acquire a loan, and probably only from a separate loan institution and years before. lgl

Approach, Approach, and again Approach

We are back to saving the Rain Forest, but with a twist; I don’t know whether the current cattle removal from range is a good idea. I know that Brazil should seriously enter into a Tree Replanting program, though to eliminate grazing at this point will only breed growth of adverse Weed and Brush formation. The pursuit of heavy Canopy Forest replacement could very well be wrong. I believe that the best Oxygen replenishment with highest Carbon sequestration comes from Groves of Trees dotted through a landscape of grassland. Water drainage is least constrained by this ecological balance with a projection of highest Carbonized Plant growth. Both Animal grazing and browsing must be minimally maintained in such an environment to break up dead brush, and fertilize the land with the spread of desirable Seed. An Agronomist should always be included on environmental committees and Studies.

It may be time for Economists to stop talking about Core Inflation. It is going to come up a tad! Dow Chemical is jumping Prices by 45% in One Quarter, and intends to impose Freight charges on top of the Prices. Steel prices appear to on the Road to increase Steel prices by about 50% within a year. Producer Prices rose 7.2% year over year for May, and it looks to be one of the last single digit entries for quite a while. One of the Economic theory benefits coming from the coming debacle may be middleman understanding that increased Producer Costs should be immediately passed on to the Consumer, so that Production level adjustments are made immediately and accurately. Waving a flag on a sinking ship is not only Costly, but life-threatening.

Business Development has again found auctions. The later are the best medium to establish a market evaluation for Property. Closed Negotiations Sales propel an artificial Price escalation, as the highest Priced Negotiations are always cited at the standard Market value in later negotiations. I would pass legislation (if I were God, or even a good Senator) mandating that all Property must be sold after Open Auction, and Closed Negotiations Sales cannot be approved before both Buyers and Sellers have evaluated and Signed all Bid notifications from the Open Auction. Hell, I might even be able to make it as an Auctioneer under such a law. lgl

And Some People think I know nothing about Nothing

I will give my Readers access to an article with which I cannot agree, though it should be Read. I do not agree with the thesis, because I believe the Climate changes have relatively little to do with the increase in Greenhouse Gases in the atmosphere. They are warming the Planet right enough, but the melting Polar Caps indicate a more substantive impact than rising Sea levels. I believe We are in the beginning stages of a Shift in Magnetic Pole positions. This implies that a rise in Greenhouse Gases may not be a culprit, which is simply a Shift in Planet weight distribution to follow a transplant of the Poles.

Does this seem far-fetched? The Magnetic Poles endure pressure to move, not because of forces on the Earth, but due to alteration of the shape and depth of the Magnetic fields enveloping the Planet. I should not write about this, when I have not studied any density Reports on the Magnetic fields. I do so, out of a lack of desire to talk about anything I know about Today, and an even greater laziness which does not desire to study very boring diagrams; though such Information may inform of Racial genocide. It should be estimated that the Magnetic fields should have the greatest depth and density over a circular band encompassing both Poles; something which be the Centering force. Solar Winds of high energy determine the positioning of those Magnetic bands, and I believe there has been a Shift in Solar Wind forces hitting the Planet. I suppose I should make some Commentary of likely outcomes, if this is the Case.

Magnetic field density and depth actually must limit the amount of solar heat which reaches the surface of the Planet. This likely occurs because the Magnetic bands convert the solar heat into electrical static energy to feed the field. It is therefore much cooler beneath the heaviest Magnetic band. Current Solar Wind patterns are creating alternate Magnetic bands in competition with the primary Magnetic band, and the combination of alternate band pull is dragging the Magnetic Poles into Movement. Ice fields drifting outside the primary Magnetic bands is likely melting at a faster rate, than the Ice sheets under the denser Magnetic bands. Sufficient weight redistribution with change in Pole orientation will cause vast Continent plate alterations. I would place more faith in new Mountain ranges, rather than in sunken Coastal areas. lgl

Do You Want to be a Millionaire?

Paul Krugman identifies a real level of discrimination against Renting, in favor of Home Ownership. I agree with his sentiment, but fear Students will not grasp the essentials of the Argument. The Mortgage Tax Credit propelled the subprime Mortgage Crisis, led to an over-evaluation of Rental Capital and extreme Rent formulations, effectively put a hidden Tax upon normal Savings, and only helps financial agents to sell Paper. It brings an over-expansion to the Construction sector, which is later plagued by under-financed Development having lost their initial negligent financing. Much Income and Profits have been extracted from high-Risk paper which held together only sufficiently long enough to present Gain for the Paper Preparers. Paul is correct to state that the number of Homeowners will be lower than when Bush took Office by the Bush Leave-Taking. It will probably take a decade for Economists to admit that the entire American economy has been scammed by the fraudulent Paper-Makers, but it will come after the American Public loses interest in Prosecutions.

Mike Shedlock expends good effort in the description of the backside of the Hurricane caused by the Mortgage Crisis. Everything was great when the Paper was being Sold; People gaining listed Equity, and therefore increased ability to borrow, Banks were still receiving Income from Debt repayment and Equity refinancing, and the Government could finance from Overseas borrowing because the Dollar was strong. The Merry-Go-Round has stopped: Property-Holders are losing Equity, regional Banks are losing both Debt Repayments and Paper Profits, Debtors have lost both their ability to Pay and to Borrow, and the Dollar is beginning to strengthen after a long degradation. We could start working out of the Mess, except that so much of the Economy has lost necessary Credit extensions on which they depend for normal operations. The worst aspect of the Situation states that regional Banks and normal financial Institutions have already reached the limits of their Loan extensions, and cannot provide further Credit without Risk to their own stability.

I must say that I agree with this Post, but I use it mainly for its description of Milton Friedman’s Thought. Friedman always shorted his categories through his lack of identification of whether the Expenditures brought Personal gratification in the Expenditure. Spending other Peoples’ Money on Others is far more creative, if the Expenditure Decision was made because of a personal profit to Oneself. A fellow Blogger likes to portray Markets in Everything, but I would always revert to the old adage: Follow the Money. A Voter casting a Sentiment to help Others remains at great distance from an Office-Holder collecting a Salary and Incentives for distributing Funds. I have often thought how wealthy I could become if I Tax-farmed the Medicare Payment structure: I would cut Medicare payments by 17-18%, listen to the Screams of the Health Care industry, and award myself a 5% Bonus of the total Savings; using obstructive measures to ensure I could keep the Position for 10 years. lgl

What to Do when We Do.

The attitude of Government sets the tone of Agricultural success, and in India, the tones remain discordant. Tillable land exists relatively throughout India, though the lack of Water stands as the great impediment, especially under applied fertilizer; which actually insists on about 30-40% more Water to actually not burn the Crops. The amount of Sunshine in India, combined with the periodic nature of the Rains, dictate covered Run-off tanks from buildings, and earthen berms (think root cellars with block walls and ceiling supports); worked in conjunction with individual Plant irrigation as pioneered by Israel. The trouble with this approach lay in the Indian farmers need for Capital, and a typical Indian bureaucracy which would never provision block and building materials in Real Time. The Result produces an Indian drain of Export Credits to finance imported Grains and Oils.

The South Koreans accepted the new Restrictions on American Beef which were reluctantly advanced by American trade envoys. This was expected, because South Korea needs American Beef to supplement their Protein needs. The Article itself, though, expresses the lack of Sensitivity to Korean fright which has been fueled by years of close examination of Japanese Public denunciations of American slaughter practice; it left the main point to an Add-on Statement at the end of the article to wit: that cattle brains, eyes, skulls and spinal cords would not be exported to South Korea. The Japanese focused on the Nerve systems of cattle as the major potential Infection source, it mattering not at all whether the Science supported the belief. It is restricted information in American Papers, hoping to forestall a like psychosis within the American Consumer. The entire Reportage expresses the American refusal to face unattractive Issues in a forthright manner in order to dispel such fears.

Oil remains that nerdy Cousin for whom the family insists that you find a Date. Everyone knows that the Price of Oil is driven by Speculation, nothing else makes any sense. There is more Oil, and less Demand for Oil, than there was one year ago; when Oil prices were half of the current Pricing. Pumping more Oil will not cancel the effect of Speculation, unless the industrialized nations undertake Measures to stabilize the Oil markets. A simple Measure would be to demand Registration of Storage facilities for Oil and Natural Gas, with a Fill fee of significant size for any lift of the floats in the Tanks. It would, at the least, dictate purchase of Oil and Natural Gas in Tank-filling portions, without Signature moves to establish Prices by slight Purchase amounts. People always ask how much when it comes to Taxes or fees; so I will throw out of Suggestion that it take $250 to screw open that Intake Port. One has to hit Speculators where it hurts. lgl

Travel Hotels

The Transportation industry needs an Overhaul in total, but especially so as far as the Rail system. A lot of Proposals enter Congress every year, but few deal with the problem of how to deal with the fundamental issue, which is what to do with the misappropriation of the Means of Travel. Far too many People are entering the Air, burning too much fuel per travel mile, congesting Air and Air terminals with excess Flights, and multiplying the problems of misplaced Passengers and luggage. Air Travel is additionally subject to Weather constrictions, and Passengers are overburdened by unending Terminal delays. The Whole Transportation system has become a snarl of Problems, whether insufficiently funded Bus Routes, delayed Train Schedules, or canceled Flights.

My Resolution to the Problem may seem asinine to Many, but it is the creation of a system of Travel hotels. People will automatically ask what a system of hotels will do. The Answer states such Hotels can do a lot, if organized in a proper form. Tickets Sales would be transferred to these Hotels, removing such facilities from all Terminals; eliminating a vast amount of the snarl of the Terminals. The later will be closed to the Public except by venue of Commuter busing originating from the Travel hotels where all Tickets are sold. All Luggage will be transferred by Bus or Rail system, deposited and delivered at such Travel hotels; a system saving of both Security Costs and Fuel. The Travel hotels will provide sufficient Room numbers to make delays of travel minimally acceptable to Passengers, with adequate Dining facilities to accommodate a large number of delayed Passengers. The entire Concept of such Travel hotels could provide Solution to the extended Problem of Weather delays, which cannot be permanently eliminated.

The only Question remaining is how to pay for the whole system. The Answer is Congressional action demanding that all Passenger Sales on all Transport systems require a Ticket price increase to pay for Two Nights of Hotel accommodation; said Ticket Sales increase divided between Bus, Rail, and Air traffic based upon average Expected Use of such Accommodations. The Travel hotels would possess a guarantee of consistent Income for Construction and sustained Operation. All Transport systems would have a desire to maintain cheap, but efficient hotel service; simply to maintain their levels of Sales. Passengers will have a resource to which they can resort in the event of Weather delays, no longer burdened by overbearing boredom.

The sheer Introduction of such hotel accommodations will save on Fuel, both to Terminal locations, and in Transit. An interesting aspect of such a system will be a Downgrading of Ticket Sales, as Busing and Rail transit become more attractive alongside a increase in Flight pricing. The construction of such a hotel system will generate Demand in a declining Construction industry which has an automatic funding system for Mortgage payment. It would be a real Win-Win situation. lgl

Again with the Carbon Tax!

Most of what I find wrong with Cap-n-Trade can be found in this article. It basically highlights that the Process has turned into general lobbying Politics, with increasing Carbon emissions, and literally a decrease in Investment in Carbon-conservative technologies. It is the likely Outcome of any such system in the United States. The final failure of such a Cap-n-Trade formula will come in the form of Court defense that sufficient Carbon Permits cannot be purchased to maintain the business structure, which every major Carbon emitter will likely use as Challenge in any application of Fines. The real Answer is a Carbon Tax, especially a Progressive Carbon Tax where emitting Carbon above an industry Standard gets One an additional 70% increase in Tax.

Current Economic Thought registers a proclaimed Goal of revenue-neutrality in any form of additional taxation. No one has positively proved that Tax reduction actually favors the conduct of Business. Ever since the Kennedy Tax Cuts, Economists have extolled their great advantage, but that advantage did not develop until after a huge Government expenditure for the Vietnam War, and yet again, Cutback from these Expenditures led almost immediately to a downturn of the Economy, in spite of the Tax Cuts. The combination of Tax Cuts and War expenditures did bring Us a healthy Inflation rate until the Fed passed truly repressive measures. I seriously doubt if the absence of revenue-neutrality in a Carbon tax will bother the current economy any more than its current hazards, and a downturn of Expenditure in Iraq and Afghanistan will lead to a economic downturn anyway, whenever such occurs.

The Carbon Tax pleases me in other ways. Corporations and Business has been shedding their Tax burdens from the Time of the Kennedy Tax Cuts. The Tax Load has been shifted to the shoulders of Consumers and Income-Earners, with multiplex methodologies for high Income-Earners to shed their Tax liability through Retirement and Deferment mechanisms. I understand the standard Economic argument that all Business taxes are actually paid by the Consumers. A Carbon Tax, though, has the advantage of Collection and Payment by Business interests, prior to it being recorded as Personal Income. Business has an easier Job of making complicated and large Tax payments, and Personal Incomes possess the ability to Expense the Tax liability as loss of Income. This may not seem like much, but it could probably increase Personal after-tax Income by a probable $20 billion; this while the same amount of Carbon Tax is paid. Cap-n-Trade has no possibility of easing the Expenditure patterns of either Business or Consumers. lgl

The Search for an Affordable Job

Do We need more cheap cars? I personally, as a Poor Man, could employ a cheap car with good Gas mileage; but I would not want to get rid of my Pick-Up. This could be the Problem in the first place, with about 450 cars per 1000 people in America. We luckily cannot drive two vehicles at once. The Reader should understand that Americans suffer from a Vehicle crisis, requiring Miles of Farmland simply to park Vehicles, let alone supplying Road surface for these Vehicles to run across; oh, I forgot, and putting fuel inside of them. I have never found a bright young Economist who estimated the fuel storage capacity of the Vehicles themselves, though We could travel a substantial distance just running the tanks dry. It may be the great Conceit of Americans to believe Everyone should have a Car to drive.

Inflation is finally beginning to impact the People who actually work for a Living. They are trying to economize wherever they can. I personally know some surprised kids, whose mother has stopped the use of Paper plates, and has drug real Plates from the Cupboard; estimating she could save about $8/Week. She does feel bothered by the loss of leisure time, and the kids should worry about her bringing back another tradition–kids doing the Dishes! I am still buying Coca-Cola in the usual size, but am highly irritated by the expenditure of numerous $5 bills. Such Stories express the malaise of Our economy, where tasks are imported back into the Household, instead of exported to Contractors. The diminishment of low-Wage Jobs always presage declining numbers in Supervisory personnel.

Here is a Piece from Felix Salmon about an Individual who chose a House because of its vicinity to an Amtrak station, for a cheaper ride to his Workplace. I would suggest that a 85-mile Commute is too great a distance even by Amtrak, and could only be sustainable if actual appearance at the Office could be limited to twice Weekly. I have a brother-in-law who will not show up at the Office anymore, because of a 65-mile Commute. He simply asks them politely to deposit his Wages in his Checking Account; God, where do these guys find understanding Bosses? lgl

Cynical this morning, are We?

Parke Wilde brings Us a good Review of the Agricultural policy and its implications, now that We are internalizing the worst flood conditions in 15 years. The Post provides access to Congressional desires to curtail the Cost of Crop Insurance in the Federal budget; one can only say that it is beneficial that Congress can never manage to get Anything done. Agriculture will have massive Clean-Up and Replant Costs over an Interval of extended Loss of consistent Farm Income. Conservative Congresses seem to possess uncanny powers to destroy efficient programs right before the greatest Need for those programs. Bush and Congress came together to functionally cripple FEMA immediately prior to Katrina, and were trying to ‘gut’ the farm programs right before the floods. Leave it to Congress to pick the intrinsic Loser every time!

Tyler Cowen may be attempting to massage guilt feelings about his, and Everyone’s, use of flying to arrive at places. This undoubtedly holds considerable importance to Tyler, who has a Conservative bent, and vast subsurface angers at Government regulation. I, on the other hand, love the simplicity of potential Government interference on multi levels; I would allow Flight with Business trips and Responses to Medical Emergency, and forbid airplane use for domestic Tourism or Holiday reunions. I would naturally insist all using Flights pay the full Cost of flying, and adequately fund Amtrak. We could finally get up to Speed in slowing American travel, by allowing Gasoline Prices to spiral upward out of control. The Whole could pull tons of Tin out of the Air, though this might not have been Tyler’s intent.

George W. Bush has decided to side with the Oil companies, what a Surprise, and eliminate the ban on off-shore drilling of Oil. Somewhere in this unholy dedications to filling Oil company coffers, Congress should fund Inspection teams to assess how much Oil could be withdrawn from closed American Oil fields, if modern Drilling methods were utilized. It is my belief, totally unfounded on Science at the current time, that many fields could be reopened with the simple expedient of drilling another 750 feet in depth. It might be more Scenic to tear up already torn-up locales, rather than destroy future ecological environment. lgl

Core Inflation

Some Kids (somewhat derogatory towards Those whose only crime is being younger than your own advanced years) asked me to explain the difference between the Inflation rate and Core Inflation. I knew immediately that I was in trouble, as Someone was trying to pin me down on a definition. Think of the Inflation rate as a Highway Speed you are traveling at, 0% Inflation increase is the Speed at which you would most enjoy to travel, and Core Inflation is the Speed at which Everyone is traveling after Everyone has applied as much Braking as they could safely apply. Such an idiotic Reply could get me thrown out of the Bloggers union, but there it is!

Core Inflation will tell you little, unless and until One understands how the Brakes are applied in this formula. The rationale for this Braking in the maintenance of Current Sales levels for Business, and avoidance of later Pay Increases to Labor. The methodology of Braking vary into multiple forms limited only by the inventive capacities of Business management. The most desired form is to increase the Productivity of their own Employees, but there are limits to this radical Driving, mostly shown as long-term Employee exhaustion and loss of Incentive. The most common form of eventual Braking is by increase of Operating Capital, and reduction of Profitability per unit of Product; adopted by Management only within the presence of dropping Sales. The thing which must be remembered is the Speed can never reduce to 0% Core Inflation, as long as there is volatile Commodity prices on upward trend.

The Above does not proclaim that there can’t be Deflation, which can occur under the right circumstances. The major characteristic necessary for Deflationary conditions again centers on the prices of Commodities, for which there must be oversupply and falling Prices. Simple declining Prices of Retail Product will not generate Deflation, only declining Production Costs can actually produce the Condition. Everyone argues about the exact conditions necessary for Inflation and Deflation, but I hold that Inflation starts after Core Inflation reaches a -0.2% Core Inflation rate, and Core Inflation must be below -0.7% for two months serially for Deflation to occur. Does all this sound like Bull? I try! lgl

Explaining What?

Everyone quickly increases their Food intake upon a rise in their Incomes, with an incredible resistance to a Return to previous levels when it proves to be only an inflationary increase of short-term exposure (think a short-term advantage creates an image that the Recipients attained a permanent increase of personal Income, which later evaporates under a round of overall Price increases). This is the basic Scenario in China and India, and it has put huge pressure on World Food prices. Then came the Deluge! (An actual real one in the American Midwest), and this article lists the Result. World Agricultural markets have been over-massaged, like Kobe beef, and structural Prices will not come down for quite a while. I estimate that We will have to lose the equivalent of 200 million Customers for Agricultural Products before there is any Price relief, and that Relief will only come in harsh Dietary measures.

An example of the Diet on which more and more of the World will be shoved, can be shown in this article. The EU feels the first effects of a ‘Displacement’ Recession, where Regional Consumers face new funded competition for necessary baseline Goods. The needed elements can still be obtained, but only with impairment of the Price/Profits Markup structure. Previous sustainable Production systems lose Profitability, or the capacity to obtain cheap Operational funding. The instability of the Production systems will remain, until the Profits structure of the new Entrants to the Markets equalize with those of the older Participants. It seems real easy, does it not? The Truth states that economic conditions must alter the Expectations of Millions of Participants in the Markets, and mostly to their disadvantage. It is not a philosophical argument!

Chris Dillow has an innate sense that cheap hooch available to All suffering from economic downturns is incredibly safer, than is not bottling up those angst feelings felt by the Unemployed. A semi-state of Drunkenness can make the hunger of your children, or yourself, more palatable. I have always wondered why the Prohibitionists always arise during Hard Times; Periods best left in a State of mild euphoria. So few People understand that humanity is not equipped to absorb any Shock ‘Cold Turkey’. People need both Companions and Anesthetic on their Road to Hell. lgl

Harsh Reality

How do We get to an article written in this style? The Government has been outsourcing Intelligence gathering for years, though it has rapidly accelerated under the later Bush administration. There are many reasons for this redirection, which the article does not discuss. The primary object of Outsourcing Intelligence remains Deniability; either the Information sought can only be obtained through illegal means, or what is desired is falsification of the data; in either case, Outsourcing grants claims of Innocense. Another recourse from Outsourcing is ability to hid culpability, through allegation that responsible persons are unknown, or cannot be found. Many find that Information is unclassified, therefore salable; even though it has been paid for by Taxpayer funds. Most Analysts would acclaim that these factors listed were only the by-products of the new Intelligence-gathering style, which was mostly entered into for cheaper Intel, with greater long-term viability. The IC will always deny when correct motivations are identified, and nothing read should be taken at face value when discussing Intelligence.

I, like Arnold Kling, have a certain fascination with this chemical process; something with which I have had a long-held belief would be a serious curative for the Energy needs of the future. My only complaint is the Chemist mental state which insists on fermentation, rather than the original process of Cracking Oil. It leads them to concentrate on Sugars as Feedstock, when they should center on Sewage as Feedstock. The bacteria need only take complex Carbon chains, and break them into simpler Carbon chains capable of being processed for fuel. The secret of success is not growing a Feedstock, but getting rid of an unwanted Waste in a manner which produces recoverable value.

I read this Piece from Mark Perry (very effective by the way), and consider several unmentioned variables. Vehicles have the initial Sticker price, fuel costs, and Maintenance Costs. New Cars have indeed become cheaper against other Consumer Goods over the last 30 years. Fuel has taken up the slack Price variance, and absorbed the freed Consumption. It seems like a Zero-sum game, until One examines the Maintenance Costs over the same Periods. Engines have gone from $800 to $4000 apiece, and physical body parts (Bumpers, Fenders, etc.) have skyrocketed. Windshields have went from $200 to $600, and Headlights from $20 to $70. Everything else about vehicles has endured an equal Price hike; I remembering a Golden Age where I spent $.70/Quart for Transmission fluid. Things are not perfect in the World of the Automobile! lgl

The Economics of Tomorrow

I found this Piece by Paul De Grauwe which should seriously be Read by Graduate Students in Economics and Above. It tries to critique DSGE-models which ordinary people should ignore, else tainted with a Faith which would be misplaced. The basis for these models assume that there is a rational ‘Perfect’ Player, who has immediate and competent assessment of Market forces, and therefore can make highly accurate judgement calls within the Market in Real Time. This rational Player has not gulped that Coca-Cola to drown the hangover of the Night before, has read a half-dozen Trade papers on the Ride to Work, and has not been asked for a judgement call from a subordinate prior to his turning on his Computer. His Secretary has not forgotten the Stock Quote opens he had asked to be tracked at Close of Trading the Day before. He most definitely does not wish he had been so impulsive as to have put in the near-Close Buy order yesterday, as he examined the Commodity price quotes of the Day. He is so Perfect that the Market is only a backseat Driver following him around. The DSGE-models say that this Dude exists.

Arnold Kling presents a rundown of good articles which tap a select list of Topics. Why does Wealth always think that they work harder than other People? Pro Sports stadium bleachers are not filled with Welfare brats–at $60/Ticket. Would turning College Education into another Derivative market really work? College Students have rarely liked to repay their Student loans, and Academia may be searching for a new Sucker. I wish that Conservatives would finally accept that what is wrong with Health Care is not Demand, an normative universal, but excessive bundling of Rent-Seeking on the Supply side. We need 100,000 Doctors making $60k per year, not 10,000 Doctors making $600k per year. No one is going to come up with another 12 million barrels of Oil per day by 2015, so the growth of China and Oil seems a little academic.

Singapore is a great place to live, if One has the wherewithal to enjoy the bounty created by the economy. It lacks only a few things to spur future growth: cheap labor, cheap access to materials, and expandable Transport facilities. Singapore has yet to endure the Reconstruction radix where Capital has to be destroyed to build new Business. Singapore has a Planned City, if not a Planned Economy, and is constrained for space. The future may be bright for Singapore, but it could also contain hazards. lgl

Food for the Mind

Dean Baker again goes far in a short Post. Health Care Costs stand more as function of Government protection, rather than any form of Market protection. What are these Government protection systems? Patent extensions, enjoined Licenses, mandatory Internships and Residencies, prohibition of local Druggist compounding of Drugs, and mandatory floor pricing for medical services. Limited Medical School Certification and controlled Enrollment is another aspect. Ludicrous is the concept of Americans attending inferior foreign Medical Schools to get Training which qualifies under American law, because American Medical Schools will not accept the extended Student body, due to limited Enrollment, Poor Grades of the Students, or insufficient Undergraduate work by the Students (I want to be able to take my Med Boards, as I attended the Easter Island Med School). There is the counter-cyclical Thought that if you know the necessary material, it does not matter where you learned the information (One should try my surgical skills: I tie a mean Stitch).

I have long been an advocate of solely issuing Patent Rights in a Dollar evaluation, all in order that there be a limitation of the Windfall Gain of Drug development. This means there would be a set Royalty per Drug unit, and any Drug supplier could produce the Drug with the payment of the set Royalty to the Developers. There is also a lot of Hipe today about the FDA lack of funding to find contaminated Foods. Spot-Testing of Drugs should cost a tenth the cost of Food testing, simply order local Pharmacists to send every 1000th unit of Drug to the FDA to examine for purity. Sub-contract Labs could easily handle the Traffic to be examined, and the Results sent forward. Such Procedures would cut Drug prices in this Country, by my estimate almost 50%.

I will get requests to answer how easier Food testing can be accomplished. The nature of bacterial and Virus cultures makes it almost impossible to adequately test for Food contamination. The first tomato past the One tested for contamination may be the exact Tomato which delivers the culture contaminating Processing equipment for later Produce. Testing every item of Produce remains un-accomplishable, because of the Mass of Produce to be checked, and due to the fact that the Testing itself will often destroy the Food value of the Product. Food Poisoning has been with Us since the Beginning, and will still be existent when We are all Dust. The real Problem here lies in the fact that about 20% of the human population is highly Sensitive to Food Poisoning, while the Rest of Us simply curse, and go to the bathroom. Medical Research should be directed to finding a Universal Anti-body serum inoculating against Food Poisoning. lgl

Economic Theory in Action

Mark Maremont lists the glories of the ‘Golden Coffin’. When is Enough enough? The trouble is not simply that Executives want the Operating Profits coming from their leadership, they also want the Operating Profits past their own death. The article clearly expresses this is not singular incidents of Family greed, but systemic throughout the Corporate world. No good young Economist has yet developed a model of how great a Percentage of the Operating Profits are directed to such types of CEO payments, but reading through the array listed soon notices multi-billions coming from Dividend checks to pay for the benefits. The Move I find most entertaining is the Stock Options granted to heirs to exercise, so they do not even have to pay any kind of Inheritance tax. Stockholders may come to discover that Corporate Income taxation has been replaced by Death Benefits for Executives.

Some of the reasons why elements of Economics and Journalism can be considered Short-Sighted. Mark Gilbert thinks that a 3.6% Inflation rate is beneficial, if it allows ease in writing more bad Paper; suggestive that he finds it easy to ignore a negative Interest rate and loss of Savings, so We can hide a loss in Unemployment and Real Estate values. Chris Farrell and Daniel Gross cherish the blush of Bubbles, denying notice of choked industries who lack fundamental Cash as they cannot declare the imagined Cash of Bubble industries; said imagined Profits, by the definition of Bubbles, which never materialize. Dani Rodrik presents some accolades for the Spence Report, which basically concludes that Model form will not work as well as Individual response to local conditions. It could have just said We need competent Businessmen on the ground.

Tyler Cowen notes that ebay auctions are in decline. People are looking for Fixed prices on Goods. Tyler does not extrapolate the data with an economic assessment, so I will rationalize a Scenario of possible impact. Auctions do wonderfully well within Periods of low Inflation–especially if that Inflation is relatively consistent. Auctions, though, integrate an unstable or high Inflation rate by a drop of Participation. Why? Inflation is affecting personal Incomes are altering rates, and Incomes which have not internalized the Inflationary pressures by higher Wages or Profits, find disadvantage in Bidding at auction with Incomes which have already generated higher Income. This inability to compete effectively creates a double-tier for every Product at auction. It seems inconsequential, but will destroy the auction format over time. lgl

The Proper Response to high Oil prices

We find increasing difficulty in explanation of the Oil Pricing mechanism, mainly because even the major Players misinterpret the meaning of the data. Oil exists within a Demand and Supply model like all other Products. It alters from the normal Demand/Supply Curves only in two factors: Demand has a elemental floor limit where Consumers has absolute need for Energy supply without Variation in the Short-term, and a relatively set ceiling on Supply in the Short-term. This means that Speculators can quickly influence Oil prices by buying and storage of Short-term Oil supply, quickly raising the Oil price. Those who insist that Speculation has little to do with the run-up in Oil prices lack understanding of the Process.

What Commentators on the Oil debacle, and Speculators themselves, fail to understand is the limitations of the Process. Oil Demand is maintained only through continuous Production as current levels. That Production can be generated only if Households repeat previous Spending patterns. The Repetition can only be held if the Sector percentages of Household Budgets hold to previous division. This means that Oil, and Energy in general, can enjoy a certain level of Price increase, but only of Short interval, before it begins to eat into the Household percentages devoted to alternate Spending. Production will be adversely affected, once other Household budget deployments are impacted. Production will drop, Oil Demand will decline, and Oil price should come down. The only impediment to this Market reconstruction are artificial Market interventions, whether Public or Private.

Government subsidies for Energy will create artificial Demand for Energy, which would not exist without Government intervention. Private Speculative action to withhold Oil supplies from the Market will be assisted by the inelastic floor of minimum Oil Demand, generating an artificial Price increase in the Energy sector. The interaction of the two Movements can often quadruple the effect of either in isolation. Still, the Government cannot subsidize the entire Production economy, which will start to shut down Production operations if the Energy prices get too high, and Speculators will endure decreasing Prices anyway. This is a natural Curative to excessive Government intervention or Speculation, though it is rather too harsh on most Households.

There is an alternative, saving Household budgets, and canceling Household Demand for Government subsidies for Energy. This is a Oil Storage tax per Day, on all Petroleum Products and Natural Gas. Storage beyond a 14 day limit would be assessed a $1.25 Tax per standard evaluative unit for the Product involved, determined solely by Bills of Lading. The Holders of Ownership will be held taxable. Actual Delivery Stations would be exempt from the Storage Tax, if the Petroleum products are held on site of Service. Such enjoined Movement of Product will facilitate the domestic Market, and negotiations with other Nations could incite similar taxation to the benefit of Consumers. lgl

Food

We may be talking about disaster pending, when the discussion turns to Agriculture. The Problem comes from the Weather: too much Rain in China and the United States, Drought in Australia and the Philippines, a descending Sahara, and still unexplored Cool weather in Eastern Europe. Great Plans for ethanol from Food Crops have wiped out Food Stock Reserves, while the Agricultural Needs of Fertilizer, Fuel, Herbicide, and Pesticides are still rising in Price faster than the rapidly increasing Food prices. Another unnoted area consists of the quick Rise in Wages within the developed Agricultural sectors, simply to provide Workers with the ability to travel under the new Gas prices for Work. All the problems of the greater economy are concentrating on the Agricultural sector with the greatest impact. Welfare Costs are bound to explode with a sharp reduction of Food Products to distribute. I would seriously advise Homeowners to tear up lawn for Gardens this Year, simply to avoid extreme Food prices if nothing else.

This Situation falls within the realm of idiocy, as S. Korea faces the possible worst placement within the World Food battles. I do not possess the hard data on the matter, but expect that South Korea can provision only about One-Quarter of their Food needs. The rest must come from Import sources. Rice is at an all-time High price if only in nominal terms, and the major Rice Exporters are already showing shortfalls. Argentina still has restrictions of Beef exports, and Australian and New Zealand Stock herds have been reduced. Protein production is down throughout Europe, and Canada has more Mad-Cow threatened Beef than anywhere but Great Britain. Central America is hard-pressed to process their own Protein needs. S. Korea has no other qualified Protein supplier at the Present than the United States. The Protesters should realize that they are much closer to the Starvation Line than is the United States, and that this disruption of Trade agreements will only make the Price of American Beef higher.

This Post by Dani Rodrik enjoys little place in my Post, except it should be Read, and defines where globalization anxiety should be placed. Beef Imports, and Food Imports in general, lack a worldwide Rating system which is commonly enforced. Disease cultures travel rapidly when poor Sanitary practice is utilized. What amazes me is the World’s mistrust of American sanitary practice in the production of Food. What further disturbs me is the American acceptance of Food Products from some of the least sanitary Food producers in the World. I know much of the Cause for both activities derive from Republican anger against Regulation of any stripe, and Business pursuit of Profits in the face of any Danger. The best construction of a Reputation remains an adherence to operating according to your own sound Rules. lgl

The New Business Matrix

Here is probably the prime Comment for the Day. Rural folks could tell you that they have always been exurban, and the Driving Time will remain the same. I still have visions of starting a new business in my Senility, and a rural Bus route could possibly make the Grade as a profitable enterprise. One could use high efficiency Vans which received good Gas mileage, quartering the four sectors of the Compass, with centralized Vans delivering Customers to desired sites. Incentive for Consumer use would be a published Statement that fares would equal one gallon of Gas in Price for complete One-Way routing. The centralized Vans would deliver to Work-site, with Pick-up at the same location. Efficient operation would set the Goal of only a 20 minute delay over personal vehicle use in Travel time. Sector Buses and Centralized Buses would only run twice in the Morning, and Twice in the Afternoon.

The best form of business organization for such a Bus system would be a Cooperative, whose members would provide both Capital and Labor; creating a reasonable methodology for Job creation, while gaining potential capitalization with Commuter membership carrying sustained Bank financing. A effective system could even get potential State support, or Business subsidies for Workers carried by the system. Many would claim the busing system itself to be inefficient, with a lot of wasted miles of travel, but Routes could be specifically sculpted for least fuel consumption, and Work Schedules of Commuters could be easily adjusted; even if there had to be a late Night clean-up Route travel. I would have to run the Numbers, but Profits should be accomplishable with a 200 Commuter/Day average.

The Business format may, or may not, work better with higher Commuter traffic, if the Cooperative offered Home Delivery of purchased Product in a separate Delivery route starting out at 5 pm. Participating Groceries would have to properly store purchased Product, with a one or two gallon Gas equivalent fee for Pickup, while Consumers would be required to pay a one gallon equivalent delivery fee. This might seem like a high Price, but the Delivery Van must travel throughout the four sectors. Normal Commuters would be allowed one bag, though they might have to hold it on their laps through the entire Route. The major hazard to my Participation in such enterprise would be too many people who want to see me fail. Ah, the Price you pay for being a Genius. lgl

Experimental Math

I, as usual, did not read this Dani Rodrik piece until another blogger thought to cite him (Mark Thoma–common habit with me). Sensible people will understand I should not comment on Dani’s Piece, as it required Math (I am probably more Math juvenile delinquent than Math Retarded), it being a Sunday Evening and I ready for bed. It simply found that I had to establish a more-advanced Equation for the shorted Equation which Professor Rodrik presented.

His Equation for total Movement to Free Trade:

0.5 x [t/(1+t)}^2 x m x e

where t=the Tariff rate, m=Import share of GDP, and e=the Price Elasticity (absolute) of Import Demand. It indeed leads to a rather minute number of Trade Gains for GDP. I am quite content with the general direction of Dani’s argument, but find I must adjust it to show that there would be negative aspect–or GDP retardation.

My Equation for the Movement to Total Free Trade:

0.5 x [t/(1+t)}(^2 x m x e) - {(Ctr-Tfr)/Ctr}

where t, m, and e remain the Same, and Ctr=the Capitalization of Transport and Port facilities, and Tfr=the Common Transport freight rates. It is Late, and I am tired, as well as not being that Good at This; but I think this is what real GDP that We can expect. What do I know! lgl

What We Know, and what We need to know

We might be in a Watershed economic model at the present time. Economic Thought since the Reagan Era has always imagined that the Key to high economic performance was low Prices for Consumer Goods. Keep the Production line bare of people, but pay them well, and derive your Profits from the Sale of high levels of Product. There was little attention paid to the creation of Consumer Demand, assuming that expanding Markets would achieve the high Sales volume necessary. Economic and Business leadership relied on the basic assumption that the Cash would always be out there, because of the creation of loose Consumer Credit. Few considered the real Problem of Consumer repayment of that Credit, or the expansion of the Debt once it reached stretched limits. A relationship between the Credit Crisis and high Prices exists, though there has been little effort to understand the exact nature of the connection.

The onset of higher Resource prices has brought a crisis to the matrix, and the leadership thinks to counteract the Problem with great injection of funds into development of Production technology. I fear that the measures will fail, because All try to extort even higher Prices from Consumers, who cannot pay. What is the value of medical advances, if only a shrinking segment of people can afford such medical treatment? What is the advantage of a fuel-efficient vehicle which can make 100mpg, if that vehicle costs as much as a small house? Where is the advantage of a Central Air unit for your house that will lower your Expenses by 50%, if it costs equivalent to a Second Car? How beneficial is an electrical Power plant which can produce sufficient power for an entire region over the next Century, if your Electric rates quadruple? There is a Cost constraint which must be realized and set, before much of the new innovation takes place, a position which responsible Economists must carve out.

This Post by James Hamilton fits into my overall argument, though one would be hard pressed to define what it is. Study the graphs which express malaise in the economy cannot be limited to simple definition of Recessions. Long-term economic trends bring more information that Crisis numbers. My Solution for the Economy: Outlaw Curbside Parking in major Cities, doubling the number of traffic lanes, providing a boom to the Towing industry while raising City revenues through Fines, cutting traffic into the City by an estimated 20%; the Whole probably giving the Vehicle mpg rating a 3-4% boost as Gas travels to $5/gallon. Am I serious? Only if you are a Environmental freak. lgl

Empowerment--And the Cost of It

The Shipping or Baltic Exchange enjoys a Heyday, though the nature of that expansion should worry Economists. There are an estimated 10,000 Ships on Order which will require a $350 billion payment for the Ships, a potential oversupply of Ships by 2010, a massive increase in Fuel usage (I think about 1200 gallons per Ship per Day), and a World benchmark for shipping rates that have increased 365% in under Two years; all in hopes of financing the expansion. The Whole will require vast new Port capacity, with Downtime probably estimated as about $20,000/Day per Ship waiting for Harbor. Any Economist will recognize that Trade itself is becoming far more expensive, and Freight Costs can destroy far worse than any regressive Tariff system.

The Story Today must be the jump in Oil prices. Speculation is driving the Price, as there is no Short-term threat to Oil Supply, or will the Dollar weaken much further; there being great debate about this, because We would have to sheer off major amounts of Employment which will not happen. We already running Production a very lean levels. The Jobs We are shedding are Energy-intensive labor, which is not Cost-effective under high Energy pricing; where Product benefit is not great. The Herd mentality shown by the Market remains disappointing, expressing the fact much of the Money does not study long-term trends; relying on statistical models which over-weigh Short-term Conditions (Oil Purchasers–whether actual Oil or Paper–will lose an expected 8% upon Sale of the Oil, in the face of alternative Sourcing). Speculators love volatility, but artificial injection of it can only bring grief.

Tyler Cowen created a stir through his description of libertarian heresies, as described here. I must first say that ‘descriptions’ of anything becomes the prevalence of a affluent, basically leisure Class; by the way, I agree with Tyler totally at least from what I have read. The access to Money and Time imbues Everyone with humanitarian impulse. He highlights the need for the Rule of Law, a substance necessary for Business to rise above the level of a Drug Deal. Tyler enters the dissension with his identification of ‘positive liberties’, causing some consternation in declaration that most liberties are Those of what I would call ‘Empowerment’. We want to do what We can, without restriction from Others; said Restrictions limited only to protection of physical person, Property, and Wealth. I would utilize the adage that ‘Law is Wonderful’ but lawyers are Tramp Prostitutes, as they confuse and choke efficient Law. lgl

The Old Energy Problem

Do Investors actually spot a contribution they can make, or do they really only mean to avoid Speculation limitations in what they consider as a sound Speculative market? Agriculture has repetitively endured Raids of Speculation, rarely attaining the huge Profits desired by the Raiders, or proving of Investment value to Agriculture. I already estimate that there is an actual overabundance of ethanol Plant capacity, unless and until an alternate high-yield vegetation is found which can be grown on scrub land unsuitable for Food Crops. Monsanto pledges to increase Crop yields by 50% by 2050, but such Thinking is at best Wishful. The Dept. of Agriculture should have already issued a Warning of Crop tonnage shortfall, considering the necessary Human and Animal Feed requirement, if current ethanol Plant capacity runs at over what I estimate as 60%. This is a Problem which Economists must announce or contend.

This Post has nothing much to do with the preceding paragraph, except that when Arnold Kling speaks with his own voice, he should always be read. He outlines the differences between Billers and Players, insinuating that the best combination to become a Player lay in a marriage of well-paid Professionals where one is a Biller, and one is the new Player. The building of affluence stands as a real incentive to become a Player, but the fall-back positions are also vital. This can be extended to the greater Economy in a way, and also tie into the previous element, by stating that Speculation in Agriculture almost never succeeds, unless there is a heavy Profit, fall-back position for the Speculator within or without Agriculture.

Brad DeLong makes a good contribution on my previous discussion of Carbon Tax v. Cap-n-Trade. He states that he really does not have a preference between the Two, as pluses and minuses basically cancel each other out. I believe this is wrong! I also believe that a Carbon Tax would be easier to initial than Cap-n-Trade, simply because Gas is at $4/gallon. It only would take a Economics PR campaign. I believe whole-heartedly that a $1/gallon of Gas Carbon Tax would lower the current price of Gas by approximately $.80, so that the Tax would cost the Gas purchaser only as $.20/gallon. There is the additional impetus that the Carbon Tax would suppress total Gas price throughout the range of Prices for Gas, actually increasing over $.80/gallon if Gas Price dropped below $2/gallon, where there would be actual gain from the Tax–say about $1.40/gallon of Price decline We as Environmentalists do not really desire a serious decline in the Price of Gas, but as Economists We can prove a majority of the Carbon Tax would shift upon the Producers rather than Consumers. It finally has the value of lowering the potential of Speculation in Energy Commodities, as the elasticity of Consumption is stretched, and the initial Down payment of investiture becomes higher in actual amounts. lgl

Practical Reality

I have been studying this Debate for a couple of days, though I basically agree with Robert Samuelson. Tyler Cowen stands as also correct. Ryan Avent, Brad Delong, and Matthew Yglesias can’t tell the difference between a Cat and a Raccoon. They insist on discussion being limited solely to the theoretical aspects, and ignore the methodology of implementation. The Cat and Raccoon would act the same in a Perfect World, but in reality, one is a wild animal and the other has undergone multi-Generations of domestication. Cap-n-Trade (or Cap-n-Tax) in this Case is the Wild Thing.

A straightforward Tax holds a declared action and measurable Cost. Cap-n-Trade holds great uncertainty; heavy restriction of Carbon Permits will suppress the economy, too lenient expansion of Carbon Permits will not sufficiently curtail Carbon Emissions. Carbon Permit extension also becomes a Political Tool, which Politicians and Lobbyists will exploit to their own advantage; a circumstance hazardous to both Consumers and the Environment. I could make a simple Exposition that an adequate Carbon Permit extension would automatically eliminate the Trade aspect in Cap-n-Trade. That is a simple "Hands-On" expectation.

The real political aspect that any Lobbyist could attest to in Court (the only place they would do so, then only under Oath) states that no Politician will stand in opposition to any growth potential backed by financed Interests. This means that there will be ever-occurring extension of Carbon Permit limits, while underfinanced business elements will not be able to purchase necessary Carbon Permits; these industries often quite vital to the functioning of the economy. Greenhouse Gas emissions will continue to expand, while Cap-n-Trade proves to possess only about 20% of the efficiency of a Carbon Tax in operation. lgl

General Slop

G.M. may be making a Mistake with its current Policy, though I do understand their basic Problem. The Hummer division has a military underpinning, therefore potential solid Sales throughout the World; it could be made Cost-competitive for those Customers who absolutely must have both great durability and Over-the-Road capacity. The Tahoe could be converted into the small Bus vehicles which will be needed in the future; rural School districts would find them much cheaper, and safer, than the traditional School bus, which consume too much fuel and are far in excess of needed Capacity. My estimate is that G.M. will be closing Plant capacity which they will later need, because the Markets are still there; who themselves need a cheaper Operation Cost, and G.M. could currently provide sufficient Capacity at half the Vehicle Cost at greater fuel economy.

The ISM numbers say the Economy is contracting, but the real Translation states the only real loss is in Autos and commercial aircraft. I would hazard that We would have a 1% gain in Durable Goods, if these two areas were adequately removed, pushing actual Total Demand to over 2%. Do I believe that We can hold here? No! Systemic factors will contract the economy, with higher fuel costs, lower Home prices, and Baby-Boomers starting to Retire. The Question becomes whether a natural Contraction will cause the same difficulty as previous eras. The Answer is still No! The real fear for the Economy comes in the switch of Household Income to Energy and Food; a permanent shift indeed posing a Problem.

Ben Bernanke is again out to create mischief, though I am glad that he did; it at least put a floor under the policy-dominated Fed position. I wish he had not come out and said that Fed rates are in a good place, because they most decidedly are not. Ben must be as willing to raise rates as quickly as he dropped them, else We are in trouble. The Fed rates will have to come up rapidly by mid-Summer, else We will have a gushing Economy with worthless, dropping capitalization; the exact medium for Inflation culture growth. Maybe next Month’s numbers will propel the Fed Board to a necessary 100 base point Increase. Remember that I still advocate a 4.2% Fed funds rate which does not alter. lgl

Sage Advice from the Cheap Seats

I was reading this article from Felix Salmon, and it started a train of Thought in my head. I know functionally nothing about the new financial instruments, yet it seems to me that the Investor has no chance of a Recovery with a Profit, unless the financial instruments remain unique with the additional addendum of retaining the lack of a cipher. They have to stay unique to command a high price, and a familiarity with the Paper brings exposure of the real overcapitalization. These things are written to obtain about a 20% Profit for the Authors upon Sale, and mix Crap with good Paper; dumping rotten apples in the Apple Barrel. Profit is totally dependent upon Clause fulfillment of both the Primary and Secondary Paper wrapped into the mess. Thanks a bunch, but I think I would rather invest in something with greater Security expressed, like Playing the Horses.

I started reading Richard Posner, and realized he was trying to make his Point the Hard Way. Want to privatize the Road system, simply pass a Federal law mandating electronic Counters in Cars which no only counts Miles but actual placement of Emitter units at staged Intervals along all Road systems. Vehicle owners pay their Mileage tax when they pay their Registration Tax and Wheel Tax; a Payment which is directed by the placement consumption; then all that is necessary is to sell segments of the Road system–split with primary and secondary Roads included–with sharp Fines to any Toll-Holder who did not maintain the Road system up to Quality standards of the Community. Public Education could be improved simply by obtaining Parent involvement; their Labor required 15 hours per Week to clean and maintain the School (Teaching, Cleaning, Child Supervision, or School Accounting), or pay a $15/hour Replacement fee. The trick with Airlines is simply to limit the Flights to each Airport, getting rid of the Congestion, and breaking the American Drug habit of jumping on an airplane in worthless Trips.

One cannot give Time to Richard Posner without mention of Gary Becker, who also focuses on the loss of Labor in Dollars because of Traffic congestion. Cities are natural Congestion Points; it is why they are called Cities in the first place. Cancellation of Traffic congestion is easy: introduce a Entry fee upon All; forget all about charging more or less, simply tell them there is a Vehicle Entry fee of what I think is a justifiable $6/vehicle. Trains are nice, Buses are nice, Transit helicopters are exciting, Taxis can be restful, Subways are useful; and Cars incite traffic congestion, along with 2 gallons of wasted Gas per Trip combined with often $40 Parking fees. The Answer is always easy: make it too expensive for the Cheap Seats, whether it is Planes, Trains, or Automobiles (Secret: Those that must adopt the cheaper Transport constitute the least loss of Productivity). lgl

Swing Taxes

Greg Mankiw provides Us with an excellent Rundown of the cinematic outline of the effects of the Corporate Income Tax, though I must admit not without the old Saw that such Corporate Tax Cuts will pay for themselves; as dubious and stupid as Mao swimming the Yangtze River in his 70s (I have always wondered how good Swimmers had to be to hold up an underwater platform while it was being pulled). Corporate leadership, though, may have found some truly fine Swimmers. Does it matter either way?

Greg, like all such advocates of Corporate Tax reduction, lacks the courage of their convictions. They claim that Corporate Income Taxation destroys Business initiative, and should be reduced; but will not take the final Step and call for a complete elimination of the Corporate Income Tax. It is bad, if it is bad, and should be reduced to Zero if it destroys. The fact of the matter, though, is that they are unwilling to face the Spectre of a 14% loss of Federal Income. I, on the other hand, would like to see this elimination, solely to force a restructure of the Federal Tax system.

Readers should recognize the real elements of this Debate. Bush gave Corporations a 15% Corporate Tax rate once, if they would bring their Profits home. Some did, Others refused to do so; unwilling to endure even the reduced Tax rate. The Corporations which did bring their Profits back paid the reduced Tax, then shipped the cleared Profits back Overseas in foreign investment. The Corporations which didn’t bring back their Profits, simply derived a 15% leg-up on the Corporations that did return their Profits. In no way, or at any time, did Community-based Corporations gain anything from the Exchange; it being a Benefit attainable only by the international Conglomerates. It has been awhile since that Exchange, and the international Corporations again want a Reshuffle paid for by the Government. States and Localities favor the Tax remission, as Community-based corporations currently have to pay the high Corporate Tax rate, plus their increased Property and State Tax rates, which the subordinate Governments want to increase. No one truly expects any but the Internationals to benefit from any Tax Cut.

I mentioned that I would like to see a complete Remission of the Corporate Income Tax. It might be the necessary Propellant to gain support for the necessary proper Taxation: Tariffs; long derided by Economists of all stripes. Tariffs have been ostracized since the Great Depression, they being the claimed Evil generating the disturbance. Study of the Clearing Costs of such a Taxation, even under the usurious rates passed during the Depression, would not have impeded any vibrant Economy. The Cause of the Great Depression was a Warehoused Overproduction of Industrial Goods which had a limited Consumer Demand (the Question of whether that Consumer Demand was properly financed is an alternate Question highly debatable). Business cut their Labor Force, not their Prices, and the Overproduction refused to clear with intense additional loss of what Consumer Demand did exist. The actual revision of Tariff charges did not make any difference, or would the elimination of those Tariffs have made a difference. Tariffs still remain the primary vehicle for proper regulation of International Trade, and it is Time that Economists get serious about regulation of that Trade. lgl