The Fate of the Poor Man

I must ask how many special factors will have to be found, before the economy is back on track. I have been listening to the Bush administration discuss special factors since 2001, until I reached the point where I am confused about what usual practice consists. The most important number in the article is 185,000 more people stayed on Unemployment than the Week before, meaning either the economy was offering less Jobs, or experienced Workers could not afford to accept the Salary Cuts of the offered Jobs; the later is somewhat worse, announcing that high-end Wage labor is getting the bounce. The next lame duck of a crisis may be the Credit-Card Financial debacle. When did We reach the Point of declaring the Economy is well, if the One-Percenters are still not laid-off? Side point: Did Anyone notice that the Hollywood Stars are beginning to enter foreclosure proceedings?

This Piece suits my temperament this morning, as it will be a day filled with Maintenance Costs for myself. I am sure that those Costs will all be higher this month than last encountered, so I will probably go Grocery shopping after I feel like a Poor man. Misery loves Company, but I wonder if it was wise to include the entire World in Our distress. Rumor says that American GDP hit 2% growth in the 2nd Quarter, though Everyone is hard put to find where it came from, other than Inflation. I would sincerely enjoy data on the average Credit Card debt held by Households; if it is substantially higher from January than the Inflation Cost increase, We are really in trouble. I do not want to discuss this, it making me want to go back to Bed.

This One absolutely ruins my Day, as it is a Statement that Small Business suffers from a distinct lack of Sales. Customers are paying higher Prices for slower Delivery of inferior product. Does it not warm the cockles of your heart? Life in America has descended from a luxury Cruise line, to a Tramp Steamer; the amenities are beginning to disappear. I know religious people who are dropping Church from the agenda, as Gas prices and tithing procedures makes even God too expensive (I can’t find the figures now, but expect even the cheap Bibles to cost about $16 apiece). How is a Man supposed to escape when Beer is $2 a bottle? lgl

As the World runs

China adopted the stance which had to be expected: preserving the Trade barriers on those Products where she expresses weakness–namely Food. The was the exact area where Food Dollars would have flowed out of China, as fast as Trade Dollars flow into the Country. It joined with India in maintenance of the safeguard tariffs for Agriculture. It was a sensible position for India to assert, but a decidedly insecure one for China; new wealth there will incite the flow of American Dollars out, high tariffs or not. The Chinese will gain massive amounts of Tax revenues, though, while enjoining an excessive of Social Unrest from their own Population (who are now committed intellectually to the Market ideal). The Communists should realize that they may become an Endangered Species.

This Bill was a dead Skunk before Bush signed it this morning, and all the horror stories spoken by the Economists over the last several years will come true. Fannie and Freddie will still be flapping in the Wind, on unsteady stilts which they claim is a foundation. The Treasury will be shackled to a dead weight that the CBO claims 35% of which will fail anyway. The law raises the National Debt level above $10 trillion, with the Expectation by Everyone that ordinary Spending will be almost a half-trillion dollars in the Red; all due to Democrats and Republicans refusal to accept adequate Taxation. Everyone suggests this law will cost the Treasury only around $68 bn, but you will find the likely Cost in the Allowance Limit of $300 bn. This puts the debacle at three times the Proscription D provision of Social Security. Friend Arnold Kling proclaims that health care spending is the greatest danger in America today; I would say it was his old Employers.

Is it True? Felix Salmon asks this Question, supplying all versions of the controversial material. An old farmer from Nebraska (Me, or more specifically my deceased Father) can assure that the Feed and Seed Costs are very real. The weakness of the Dollar can be attributed to poor economic policies advanced by the federal Government and financial institutions of the last 7 years; the 20% Food Cost increase due to Inflation especially True. I would loosely estimate that the higher Grain prices raised the Cost of Fed Beef by $170/head, Pork by $95/head, and Poultry by about $2/head. Ethanol subsidies made up at least 30% of the increased Pricing for Grains. They incited a reduction of Wheat acres sown, so also contributed substantially to the Price of Flour and Bread products. Even Bob Zoellick could not hide this reality. lgl

I know this sounds stupid

Marty Weitzman has easily shown that he is a smart man, but I wonder if both he and Robert Pindyck are not barking up the wrong Tree. There is a most deliberate Uncertainty which can be calculated, though there is a vast error without inclusion of Natural Event production of CO2; think volcanos, Forest fires, etc. here. The Uncertainty of Natural Events nullify prognosis plans to reduce human release of CO2, as the Uncertainties interact to prevent judgements of the value of devotion of GDP to such reduction. The second element states that the Goal of almost all Plans does not deal with the real Problem, which is removal of CO2 from the atmosphere and Water. A third factor states that most reduction programs would actually release alternate Greenhouse Gases when utilized in Volume. The last criteria is the reality that any economic activity which does not generate a self-perpetuating growth to GDP will fail in the long-run as unnecessary economic expense.

What We need is a Radiator, nth-Generation of a Heat Pump, consisting of a membrane which will capture both Heat and CO2 In a Soluble, most likely Water; then find industrial use for both the Heated Water and the CO2. Sound Crazy? Properly designed Units could act as substitute Water Heaters in homes, while CO2 reduction processes from Water could be used as a Creosote for Wood preservation. Any membrane which attracted both Heat and CO2 would also draw Smog to its surface, and Particulate could be removed from the atmosphere as well. Simple balloons of this membrane could simply be hung on a Clothesline structure at the top of buildings; advanced models providing automated transfer of Water to the CO2 Separator, Water to be advanced to Hot Water faucets, and Carbon paste to be collected in Air Pump bins for later collection by an industrial usage outlet.

Every Economist will now claim that the entire Process would have only marginal effect on the atmosphere, and would be too expensive. The real Cost in Capital terms would be the Carbon Separator, which would collect Carbon paste from the Water, while releasing Oxygen to the atmosphere. There has to be a simple process of separating Carbon and Oxygen while in Water Solution, without high energy Input. The fact stands that if such a Carbon Separator can be devised using less energy than a Hot Water heater, then We are already on the Plus side. The magnitude of the Carbon reclamation will be limited only by the degree of Capitalization; I envisioning 30 balloons above every Home and building. Will it Work? Full participation would increase Carbon sequestration by about 1400% by my muddled figures. This could lead to a 16% reduction in Carbon emissions in this Country, by my weak estimate. I use only about a 40% Efficiency for the mechanism, and will give a Ballpark estimate that it could replace about 4000 square miles of Rain forest in Carbon sequestration. lgl

The Obssesion with Theory

I know that the 2001 Recession started in February of that Year, though the Economists cannot fix an exact date, because of what in reality consists of their political affiliations. I know that the Recession of 2007 started when Banks found interruptions in the flow of Cash, somewhere around July of 2007. I realize that this Recession is over a Year old, and would not actually exist today, if Banks and Corporations would Write Down their Losses. The Trouble comes in the form that Corporate and financial leadership has become enamored of selling Stock and Speculation instruments rather than operating their specific organizations efficiently under stability. The Reason behind this debacle resides in the reality that the Paper is the manner in which to build Personal Wealth, even when this later construction can be hazardous to the companies involved in the pursuit.

Rent-Seeking does not simply infect Wall Street and Corporate boards. The flow of unattached Cash affects Everyone, and the desire to convert it to Personal Wealth corrupts All. There is little chance to control the Corruption, without the adoption serious universal Control measures. I personally think that the best Control is forestalling the flow of Cash in the first place. I would forbid the issuance of Stock Options and Grants to Management, introduce Percentage maximums on Labor Costs (stating that no Salary deduction from Tax liability can exceed 400% of the deduction granted for entry-level Labor in the business), and insistence that both Stockholders and Employees must approve of Management salaries and benefits. I will say here that most Business would face Strike Conditions, if Labor knew the total largese of Management gain from their own labor.

Gavin Kennedy might find my position offensive to his own view of Market rectitude, but We agree in principle. Markets are the foundation of successful economies. Any potential conflict between our positions may reside in the degree of information that is released. Gavin would undoubtedly opt for that information which the Market can extract from Business entities, while I would insist on Command revelation of financial structure simply to provide the full Market interaction necessary. The American economy follows a limitation of Information, while the cited Finland demands a priority more in line with my thesis. Any degree of Market flow remains better than any amount of Command compulsion, but Open Information probably holds the Turning Point. lgl

Rewriting the Labor Landscape

Beware those Authors who offer a Modest Proposal. Alan Blinder wants the Federal Government to become a Used Car dealership. His plan would work if it were basically unknown and small. An enlargement of the program will simply generate a new criminal practice; of course, defrauding the Government is nothing new. Half of the Corporate fleets will soon be regenerating their Capital even if it required the purchase of old junkers, by simple absorption of the above-market incentive advertised. The first Sign of trouble would come in the form of a huge rise in Corporate fleets subcontracting to individual Drivers who owned their own vehicle for a year, then traded their traded vehicle back to their Employer to go on salary. The average Economist will say this could only be a minor problem, but a simple sketch by myself suggests that any fleet of more than 40 vehicles could save about 12-14% of their Vehicle Replacement Costs through prior purchase of aged vehicles through vehicle swap Sales to poor people at a reasonable Sale value. A possible Cost of such a Program could reach $20 billion per year.

I worked 60 hours per Week, back in the days when I worked. I was overworked, always behind in Household duties and responsibilities, and saved Money because I was never around to spend Money (I once spent 10 months without a Day off, except for Thanksgiving and Christmas). I am glad that those days are behind me. Years of Observation has led me to approve of long 4-Day Workweeks, rather than any extended Workweek format. Real Work enjoyment demands a concentrated Downtime, something longer than a Day buying, and a Day going to church. A 48-Hour, 4-Day Workweek gives a sense that a Task has been completed, even if it was a normal Production Week. A Workweek grinding into Six Days turns into nothing but a Sleep Reclamation Sunday. The impediment to a shorter Workweek comes from the added Cost of Hiring with Worker Benefits programs; the greatest Cheat are those People reduced to 31-Hour Workweeks to forestall payment of such Benefits. I would favor federal regulation which states that all Work hours must be accorded the same Benefits, and that all such Benefits must be paid in a Dollar Settlement along with Termination of Employment. It would not only provide fairness to Labor, but would allow for proper adjustment of Work schedules.

The lamentations are high, but the closing of the Coffee shops may be a Godsend to the Nation and economy. Peoples’ utilization of the expensive fuel generally expend almost One-Third of their daily expenses on good-tasting Highs, which add about 500 calories to the Diet, and require the expenditure of about 0.4 gallons of Gas per Trip to the Coffee shop–whether you use the Take-Out Drive, or the interior decor. The Coffee machine may have disappeared from the Office, but it cost an amazing amount to the Labor of the Office; no one could estimate the range of Cost, but think of $50–100 per Day. lgl

How much Economic data is there?

Russians are critical of the Bush Proclamation equating the evil of Nazism with the evil of Communism. Americans spent Years and Lives fighting the Nazis, and the Years of the Cold War fearing threats to their lives and Nation. Russians claim a distinction which does not exist in the Perceptions of the rest of the World. World War II was not simply a War between Democracy and Dictatorial regimes. Democracy would not have won, if the two great Dictatorships had not torn each other apart. This does not alter the fact and nature of either regime, or nullify the survival and success of Democracy. Success should not provide accolades for Repression, or hide the glory of the Victory for Decency.

I am not as sanguine about the economic reports which appeared last Week. Almost nothing about which they discuss is untouched by an increased level of Spending by Government entities. The one aspect which seems beneficial comes in increased business capitalization, but I think this only reflects a lack of Investment opportunity elsewhere. The New Homes Sales data still expresses a high Inventory with little capital assignment to improve the Sales performance; this aspect probably will continue the drying up of Construction capitalization. Exports were carrying the economic performance I have seen, and will have to carry the burden until Demand for Transportation products increases; an indication that the domestic economy needs added Transport. They cite the increase in the Orders for Metals, but I cannot detect where it is going, and expect it is all in Government-financed infrastructure construction–a worse than bad Sign. I really need data on Retail Inventories; if they were in decline, We may be in Trouble.

I would advertize this Post from James Hamilton. It has all the Speculations plus Links to relevant information. James presents a good operational analysis of the Price Elasticity of Oil, but also shows the fallacy of a strict reliance on such analysis. Marginal increases in Demand could not invest such a huge swing in Price, unless the original Price structure was vastly undervalued. The very analysis involved, though, proves that over-evaluation or under-evaluation cannot exist beyond two Accounting Periods; Oil pricing relatively consistent until the sharp Rises over the last eighteen months, so the original Oil prices must be considered economically normative. The rapid Rise in Pricing hardly seems consistent with ordinary Market structure, without real Shortage conditions appearing in daily operations. It is the vast volume of Speculation–my friends! lgl

The Suffering Oil Industry

One asks continually if a Garbage conversion to a biofuel will ever be marketable. I have always favored fuel from Sewage over fuel from Garbage, but understand that Researchers possess a great reluctance to study fuels made from Sewage, though a heavier volume could come from Sewage. My main Concern with this article lies, though, within the continuous duplication of Research within such fields, where numerous small companies repeat the same lab techniques of dozens of predecessors to their great Tax Credit, while the actual production of fuel remains remiss. Study of existing facilities may suggest there is an unenviable Production capacity for such fuels which lacks a Market outlet. There really must be a Federal clearinghouse of biofuel information available to Everyone, with little consideration of artificially-construed Patent Rights that are easily discernable, and limitation of Tax Credits to Processes which can be determined by a academic search. Such a Clearinghouse would be valuable in so many contexts of industrial production if it covered all economic activity, and federal law mandated Tax Credits could not be obtained for laboratory research already available from academic research.

One has to admire Putin’s Russia for the brazen criminal intent to maximize their Profits from the Oil Boom. It ranks up there beside Chavez’s Venezuela. Both understand that the World thirst for Oil will allow any level of banditry below Iran’s drive to develop nuclear weapons. I wonder, of course, what will happen when the Consumption of Oil becomes as equally ruthless as amplified by China. It would not be so monstrous for Americans, if all efforts were not fueled by American dollars. Why do all Wars have to be essentially funded by American Consumers–are We the only ones who can afford War anymore?

This article provides some Insight into what is at Stake in the Oil industry, and why Everyone is so dedicated to cutting out a position for themselves within the Market. BP complains about Putin, while posting Replacement Costs of 44% for the Second Quarter (what this would mean is repayment of Capitalization within Four years, with about 85% of the Reserves still in the ground). All Oil companies are claiming a huge increase in Operating Costs, Royal Dutch Shell some 20%, but such Operating Costs are only increasing at Inflation Rates for drilled Wellheads, and new fields are paying for themselves in increased Oil Reserves yet to be sold. Taxes are only the attempts of Government to get a share in the Windfall, and should not be considered as a great effort to destroy the Oil industry. Anyone who can pay for all new Capitalization now from what are basically Sales of older Product is not in financial trouble. lgl

Traditional Practice--Good and Bad

I enjoyed the entire tone and beauty of this article. This type of congested housing was lost in Europe a half-century ago, and never appeared within the United States; it still being apparent south of the Rio Grande. Americans have never learned of the creation of Privacy in the middle of Population compaction. I would advise the Reader to pursue the Photo album first, before reading the article. The Economic issue involved states that the rest of the World traditionally puts about Eight times the Population in the areas of their cities, as do Americans. This is a huge waste of Land, building materials, and Transportation capital. The horror resides in the fact that the rest of the World is adopting the American model of middle-aged spread. It should really be contained by Zoning policies.

Life in the old Soviet Union has not changed much under the current leadership, and foreign Investors should beware. William Browder is not as innocent as the article implies, and he managed to move a lot of Cash from Russia West. This obviously does not put him on the A-List in Putin’s estimation. There are two sides to every Story, but Westerners need be warned that sending Money into Russia will not even guarantee its eventual Return; a description which covers China as well. It all revolves around who owns the Court system of the nation, as any Precedent or law (however obscure) can be found to say whatever is necessary, and Evidence becomes the Property of the Prosecution when the Prosecution is owned in itself.

Oil is trying to regain its position on the economic stage, but cannot until and if Consumption starts to return to its original level. There are several reasons why this will not happen, the basic foundation being that Gas at the Pump has to drop faster than the price of Oil, which it won’t in this lifetime. The rationale for this is the addiction to greater Profits throughout the path of the Pipeline, exactly like farmers will not get Seed and Fertilizer Costs to reduce simply because the price of their Market grains has decreased; please inform Me if Anyone sees Hamburger back to $2 per Pound. The Coup de Gras will be decreasing Consumption throughout the rest of the World, only Now being hit with the Trade-back Costs of maintaining high Production Costs with lowered Profit/Unit item. Government subsidies for Energy, whether internal or external, grow at extremely rapid pace with fuel price increases, and always leads to Budget overflows with legislative disinclination to expand the drain. Oil will hit $100/barrel this Year–now Everyone can claim I am a fool! lgl

New Juice

I have always been an opponent of the ethanol subsidies and mandates, knowing there was something wrong with a basic Production process; business would develop its own infrastructure if there was any viability within blending ethanol and Gasoline. Why pay an immense subsidy under mandate for an industry of low efficiency (about equal to the Power production of the Internal Combustion engine itself) where high Energy Inputs are required to draw off marginal amounts of added Energy at great Cost. I am not sure what bang there is in the fuel, but One will not find straight ethanol vehicles around, because straight ethanol has lousy mileage. I do know that farmers cannot endure a reduction in Corn prices, as Input Costs have reached incredible heights, effectively higher than Supermarket pricing.

I ask occasionally whether one can trust Reports produced by a Republican leadership committed to a rosy Picture being presented to the World, and the Results of this Report is another area where I wonder about the level of fudging. The Report cancels any impact from Speculation, when there has been a virtual flood of Cash into Oil industry paper, while Oil exploration has been finding new fields consistently, and the Rise in Consumption has also been consistent. I would speculate that the real Agent for Oil price increases resides in Oil company desire for hugely increased Profits. It is under this Scenario where Consumer Energy prices will not decrease, even if Speculators leave the Oil markets.

Nissan will go entirely electric in their cars, if they enter the market for ‘Green’ cars. I would suggest their current models will never sell, due to the unexpected long Trips which so many Consumers are subject. An automatic Switch to Public Transport remains unsavory in almost every Country outside of Europe, and it is getting worse there. I do not think Nissan has a chance of capturing market share without development of a Battery trailer which can be consistently Rented with Charge at properly spaced Recharging Stations. Such Trailers must be sturdy but lightweight, carry a long distance Charge, and have possess a easy, back-into Connection of both Trailer hitch and Electrical connection. Forget any Trailer which gets less than 500 miles per Charge, and make sure such Trailers can be mass-transited themselves for constant distribution. Can such a system be devised–Yes! Is it likely–No! lgl

Sound Rationalization

Locally-raised Food will be the wave of the future, though it does not have to look better, taste better, or be harvested by Fruit barbers. It may or may not be ecologically sound. It simply has to be a utilization of spare agricultural resources in a functionally Profitable manner. I enjoyed Reading about the advantages of Cooperative ventures, Processed Gardening, and the Venting for real Freshness, where genuine Ripe has again entered the lexicon. I also viewed the Slide show of farming between Apartment buildings in Egypt. Some gifted Graduate Student who wishes for a great Name in Economics should set up a economic model showing the long-term fuel Savings of raising Food within 10 miles of Home (Product Volume, Miles of Travel, Cost of Travel of Inputs, Added or Lost Labor of Production, and the adjustable Rate of Product price per Pound delivery by Gas prices). I await localized Production which does not have to be Trendy.

This Post practically offends by its egocentric ideation. Thousands of Bloggers now exist, and it is an experience unique to each Author. No One wants to hear of myself getting up two hours early to blog something, simply because I will be busy later in the Day. Every blogger knows of the compulsion We each face, knowing that there are Readers out there searching for their daily fix of smart-assed commentary. I might just be getting Old and Sour in the world of blogging, but think that the complaints of a Start-Up Kid should be made sometime after experience has afflicted the Soul. The generation of interest in people used to short Time Spots is not easy, or is finding Story material which captures a jaded Reader mind. Newbie should be forewarned!

Here is the modern World in a Nutshell. Pilots and flight attendants are getting frightened by their own Passengers on commercial flights, as Conditions worsen at both Airports, and in the Air. There are too many People trying to travel along Choke lanes, and Cutbacks in provisionary services for the Passengers lead to antagonism against Service-Providers. Reality states that Airlines are trying to pound too much Profit out of a Business which is over-booked and under-staffed. The real Solution remains to pass all fuel charges onto the Passenger, and cut the excess Crowding; a Policy, though, which will transfer the antagonism back onto the Airlines themselves. The final decision which must be made is for the Government to limit the number of Flights, and charge Ticket prices reflecting a limited number of Seats; all to switch the hatred back to the Government where it belongs. lgl

Intellectual Integrity

Business reportage has been attempting to guess which way the American Consumer will jump this summer. Daniel Gross makes good Try, but expresses the lack of real direction shown, even now in late July. The fact that We have not seen a lot about the Independence Day celebrations says a great deal for its absence. No one can pin down the exact reduction of American Gas consumption, though We know We are riding light in the stirrups for the first time in 17 years. As Grandma often said, ‘Those Pies are getting a little brown on the bottom’. It is at Street-side where We will find the Smoke and Smell. The later may already being drifting upward, and there is likely to be some char on the underside, as pleasure disappears before the Pain of an empty Gas tank.

Mike Shedlock reports a Corporate Bond Sale collapse, which is not quite true with $5.3 billion in such Sales last week, but it compares with a yearly Average of $21.2 billion per Week very poorly. It was fueled by a large increase in the Yield demanded, but was based on Investor knowledge that many businesses would need further finance in the face of poor economic performance, and are saving their Cash for better Yields which will come. Mish’s Statement that the rally in Stocks will fail because of the Bond market activity may be misplaced, as I do not expect the rally to last under any conditions, unless Oil companies start to fashion heavy supplies in Natural Gas and Heating oil for the coming winter. This is basically written declarations for Tax purposes, but will engender a decrease in Utilities Costs.

I had written a Paragraph about this Post earlier, then deleted it. I was asked by a co-Conspirator why I deleted it; an earnest attempt to artificially corrupt my blog, I totally responsible for the idiocy of the Remarks. I hit the Delete button because it did not reflect my real resistence to multilateral agreements, though it remained essentially true in my eyes. Multilateral agreements on Trade bring on Compliance Costs, while curtailing the negotiation parameters for both Government and Business, thereby narrowing the Profit margins both ways. Understand that Trade agreements are Business deals, which become quickly unprofitable where marginal opportunities cannot be exploited. Multilateral agreements will eventually bring less Trade at less Profit, while increasing all Trading Costs. lgl

Choices and Outcomes

Tyler Cowen writes a good article, but may be equally as famous for not saying as much as what he does say. Tax rates will never rise to a crushing level, a prospect neither the Economy or the Taxpayer will abide. The Tax rates he mentions could only occur if We waited to the last year to begin paying the bills, something like the Credit Crisis; where Everyone put the bills on the Cards, until their was no Credit limit left. Means Testing for Benefits is Crap; Accounting of Medicare Payments as Income is not with the ability of the indigent Poor able to apply for Medicaid. Switching Medicaid to the Federal budget is wrong-headed; Health Care savings will never be found by Washington bureaucrats. There will always be hiding of Assets in Means Testing, but efforts to detect the fraud is simply added Expense, and does nothing to lighten the burden; plan the Programs to eliminate the benefits of this evasion. Tyler finishes with a Claim that balancing the Budget is popular, but that cutting Benefits is not. This Role would actually be reversed, even though it doesn’t actually appear to exist, if Recipients had to record the Benefit payments as taxable Income.

My Question with this Report is why Ford did not invoke these Plans 28 months ago? They might have believed that Americans had to be paying an equivalent price for Gasoline as Europeans before any Switch, but they could see the mid-Truck crisis on the horizon, and already have formulated the Transfer plans. This delay of Game can be squarely placed on Mismanagement, and there needs be greater Stockholder Voice at both Annual and Board meetings. My Guess Estimate readings would suggest that overinflation of Profits projections cost about 8% of residual Profits from Sales in the overall Corporate structure, even before the vast Payout of Management Bonus and Stock grants. I am still an advocate of only Cash bonuses which are a percentage of Salaries, directly linked to the Profits Percentage claimed; 20% Profits should gain a 20% bonus based on Salary, no Profits Percentage means no bonuses for Management.

Bryan Caplan refuses the rational analysis. What are the rational States of Outcome?

1) Murder of NA by II
2) Recovery of NA and mutual friendship.
3) A potential State of Enslavement
4) A sexual relationship–Consensual or Forced.

There are four Expected Outcomes, only of which One seems beneficial, though it may extend to Two depending on the interrelationship of the Two individuals. Option 1 seems unlikely of completion, due to the need for Speed, and the natural disinclinations of the Participants. Option 2, on the other hand, would seem like an equally distant completion mechanism, due to the potential lack of cultural affiliation and affection. Option 3 would seem the most likely event in question, except that the sexual exuberance of at least one of the Participants would dictate a combination of Options 3&4 over time. Myself, I would rather be alone with my visions, and go insane in isolation and Peace. Did I forget the last Option: NA killing II? lgl

Empty Saturday

I have been surfing through the economic venues this afternoon, trying to pick a Lead for a Post today. It has been equivalent to the Softball Tournament which I attended this morning, all due to a Promise made to a Grand-Niece. Her Team lost, but not from a great defeat of Spirit on Our side, or to any wild enthusiasm on the part of the Opponents. All economic bloggers retain extreme anxiety over the confusion of directions indicated by the current Markets, a Condition identically expressed by the playing of all three Teams playing this morning, my Niece’s group losing on the second-round. Evaluation of these forces, under such diverse Impressionism, proves to be subtly boring throughout the matrix. Translated into English: I am bored out of my Gourd.

Everyone is talking about Fannie and Freddie, and sound a little Fruity. I would suggest to all Those hyperventilating about the Financials, should grow a Pair. Others wax Poetic about $130 a barrel Oil; please give me another $30/barrel Drop before the 64-Trombones. T. Boone is spending his own money, and Al Gore is planning on spending Everyone else’s Money, but why rage at Either. I can’t understand why Brad DeLong feels compelled to defend Greenspan’s Monetary policy; or why Tim Duy feels forced to respond. I expressed opposition–totally ineffectual–back in the Day when Greenspan was the law at the Fed. Who cares about Ancient History today, especially as all leadership willfully refuses to recognize the hemispheric duality of their current policy; Everyone committed to attainment of previous Short-term Gains, irrespective of Long-term performance. The Whole is a Demand of the children to break their Toys in like manner, after Daddy has bought them new ones.

Here is the Post which expresses the futility on modern Reportage in the Current. No one care about the Entrance Salaries (except the College Graduates themselves). Almost All need to know the Salary settings of Those with 5 Years of Experience in their profession, also the level of in-block Unemployment. Do We get these Numbers? In case you are unaware of the Answer, pursue the BLS. lgl

Advise from a Man with little Position in the Market

Americans need to export the true methods for Crowd Control. We are not talking Cops swinging Clubs here, but numerous Tire Recycling Centers. We might also go foreign on some things, like rioting outside the Stock Exchanges when Stock Prices drop. Americans have lost their sense of adventure, Rioting only over something like Rodney King; hell, most white Americans have not been in a Riot since the days of their Great-Grandfathers (A Word of Caution: Don’t try this at Home–the Construction industry has built too many Jails and Prisons). It does express the futility of affecting Market conditions by ranting at the Government. We might be in a Economic epiphany where We finally recognize that Governments are worthless for Market Interventions; they only generating Inflation, and buying out the real culprits of the Situation before these extreme lobbyists lose any real Cash. The Concept of knowledgeable Investors might harvest low-hanging fruit.

The Chinese Olympic Games may be doomed to experience Rioting in the Streets, a horrible Prospect for a Country dedicated to expressing itself as a prosperous, growing leader of the World economy. China’s largest asset, an excess amount of trained labor, has turned into a Trojan Horse with the Price increases for Food and Energy. I expect that the July numbers, August numbers if delayed, will show a decline in actual Exports; not just a loss of Export growth. This would be a disaster, in the face of 7% Inflation. A less satirical Evaluation would state that economic conditions are becoming volatile, with loss of Profits and Income descending to the level of Labor and individual Households; always a dangerous territory leading to extreme reactions.

I agree with Alex Tabarrok and Dean Baker that We should allow the Short-Sellers free rein. The only flaw in their analysis lies in the fact that Short-Sellers only aggravate economic conditions, once an economic degeneration has started. Short-Sellers show relatively little foresight, and too often only Sell short when the declines have already started, when they should have started on the Uptick. Their practice, like the Government, tends only to worsen the economic losses to the Stocks involved. I personally vote for actual Closing of the Stock Exchanges, and moving them to the local Walmart, placing them beyond the Check-Out Counters; it might bring a greater Rationality to Stock movements. lgl

Fuel Efficiency

Why the major drop in the Price of Oil in the last two Days? Why was there such a Runup in the Price of Oil this year? We have seen both, but are not even close to an Answer for the behavior. I personally believe it is a model based upon Oil Storage capacity, where Managers must clear the Pipeline to meet future Committed Deliveries. This, of course, could only start an Oil price run; the continuance of the Run would rely on Clearing the Market, which means eliminating the Speculator positions taken prior to the Run. I cannot see any other influence on a Market where Demand is persistent and steady, whether it is on the advance or in decline; understand it takes about 4 months for a change in Demand to even appear.

It is nice to know that I am Mod, and have been since before Others began. I still drive a Pickup truck, but it is an obsolete model (I actually get 18mpg City, 21mpg Highway–it is a Sonoma by the way). My thirst to be Socially Correct lay in the fact that my Car Windows may have been open about 10 times in its lifetime; the AC remains On constantly, with only Settings change from Winter to Summer. A Pickup is like a horse, if you treat them well and do not change your Riding habits, they will respond well. The Car Radio is shut off only when Others are in the Cab, and even then Not, depending on the Conversation skills of other Occupants; it stays On even in travels through West Texas, where my Eyes roll in boredom at the Sermonizing on the Bible stations. I avoid Gas Pump Shock by refilling when the Gas gauge reads a quarter-tank low. I can even imagine Sometimes that I am in the 1980s.

The major Input to save fuel in Airplanes may be the sacrifice of Speed for Efficiency. Airlines cater to the needs of Business Travelers, and ferry Commoners to pay for the heavy fuel usage. Too many Passengers are moving too rapidly through the Air, and such Dispatch supports a extreme fuel usage; as well as inciting a Travel philosophy which is unwarranted. I would have to check the fuel usage of various types of Aircraft engine, but would advocate a very expensive Travel in small Jets, with a much cheaper Travel in Propeller engines with much longer Travel times. The Regime would cut Travel quite substantially in all Classes, leading to uncluttered Airports, and recapitalization of land travel facilities. I may just be old-fashioned, but do not believe that Everyone must cross the entire Country a couple times per year. lgl

The Werwolfs are Out

The Words say it all: 5% year over year Inflation, with 2.4% Core Inflation, with 0.6% Price increase in May, and 1.1% Price increase in June. Such Numbers would destroy the Mortgage markets, even if they had been stable prior to the Price increases. Walmart and Menard’s might be tempted to alter their Construction schedule due to the adverse economic conditions. The Grocery chains try to dodge the Transport Costs; still, their high-Profit luxury foods are starting to be left on the Shelves. I fear for the Lawn Services, and wonder if Lawnmower Sales are going up. We are a Generation away from the last Inflationary Period of high Order, and we Baby Boomers remain Tired; are We too old to go to the Mattresses? We sure can’t Drive back, Gas being as High as it is!

Democrats are pushing for further economic stimulus, while Republicans are showing resistence. The first Stimulus Package is rightfully being eaten up by Inflation and correction of the economic errors of the flush Period, but there is recognizable Danger of simply feeding Inflation with further stimulus. I fear I must stand against all economic proposals, and seek the death of the Bush Tax Cuts; a Stance which would dampen Inflation, cut most expansionary plans, and bring the Layoffs which are bound to come at this Point. It might seem like a most unnecessary bucket of cold water thrown on the Economy, but We need immediate relief in Commodity pricing, and current Growth schedules are totally unrealistic and inconsistent with current Household Consumption patterns–the quicker We change, the easier will be the Change. We have to redirect the Economy.

Tyler Cowen probably thinks as much of my Answer as this (be sure to Read his commentary section). It is all becoming a Combat between left-wing radicals and black-horde reactionaries! I probably would vote to ‘Do Nothing’ if I were not already on Record (reread the previous paragraph). As the NYTimes and Tyler prove, sudden economic measures are almost always excessive, most impractical, and will not alter the economic condition with the immediacy necessary for Change. lgl

How We Got Here

Here is the Evidence that the euro adoption increased Trade within the euro-zone; something which Everyone accepted and expected, but now with a presentation of data. The trouble lies in the fact that the article provides little data itself. The real value of the euro comes as an alternate to the U.S. Dollar, increasing as a replacement Trade unit with its spread across Countries and Trade Products. The Dollar’s supremacy has been challenged by excess borrowing by the Federal Government, and the growth of the Dollar-traded Energy pricing Worldwide. I believe that both the American Consumer and American Business would be better served if the Dollar was replaced by the euro as the dominant Currency. The devolvement will actually raise Wages, and dismiss the excessive Pricing of Corporation Trading–$52 bn for a beer company?? (think of the Asset Profit Gain in the Century+ existence of the Company in average yearly Gain)

This passage from Bryan Caplan can be related to the above declarations; consider the huge increase of Replacement values for destroyed Property. Properties from California to Florida worth only some Tens of Thousands are now worth Hundreds of Thousands if not Millions, and much of it has been paid for by the Federal Government. Andrew Healy imagines that any of the Involved Parties–Contractors, Realtors, Home Owners–would want any emphasis on disaster prevention; especially with Early Warning and Evacuation. Many Property Holders currently do not even ‘Board Up’ in the presence of adverse Weather, or ‘Wet Down the Roof’ in the Fire Zone. A Tornado Strike can increase the value of a farm by up to a Million Dollars. Being in a Flood Plain can actually raise the value of Farmland. Who wants Disaster Prevention?

Menzie Chinn gives a good discussion on the definition of the Consumer Price Index. I include the evaluation here because none of the Indexes to define the Cost of Living broker in the vast effect of Third Party replacement of excessive Property damage. This creates an artificial Demand for Construction–raising such Costs, generates a false Market for Retail Goods, and artificially expands the Mortgage market–put in as respect for the current financial Crisis. The real false Reading is not the CPI, but the extended level of Governmental expenditures which are not accounted in any of the Indexes; though they probably double the actual Inflation rate with redress Expenditures (don’t think Government is cheap, or ineffectual in the Consumption markets). lgl

Asides on Direction

We found this article deploring the loss of Newspaper might as expressed in reduction of Income and Staff. The theme of the article, though, leaves me doubtful; because Newspaper and Magazine reverses come from the presence of free information from alternate sourcing. Here again is a relative untruth, in that the free information from the Internet is not actually free, but tied to a Package network of coupling to the Internet; the free information serving as enticement to underwrite the expensive Internet Costs. Newspapers and Periodicals become an expensive additional Cost to the expensive subscription of Internet service. Most Economists would disagree at this point, thinking that Internet subscription is relatively cheap and easily paid. I wish they would pay for my $140/month Cable package, $800 Computer, and $40/month maintenance Costs. The combination of provisions make it necessary to carry this Package without relief, and paying for Newspapers and Magazines of which Time eliminates the capacity to read over about 5% of the provided Information seems redundant.

The above process reminds me of another theme I might explore someday: the transfer of Profits from Labor to Business structure. Newspapers and Periodicals depend on Information provided by Journalists of high Salary, while almost all new Business structure relies on basically low Wage positions of Service provision, to the benefit of Management and Shareholder. This is reenforced by Business abandonment of Service Providers who attempt to pass Labor Costs to their Customers. Such behavior is understandable among Retail Customers, yet its adoption by Business reacting to fellow Business presents a real retardation of Management provision of benefits to Labor. The compassionate Boss becomes an Ogre, a fit specimen to himself be Downsized. It is this Insistence on Low-Wage Labor which has characterized the Business environment under the Bush administrations.

There is every indication that current practices will be continued under a McCain administration, as emphasized in another article. McCain economic policy stands willing to constrain adequate payment to individual Suppliers’ of health care, but will insist on continued overpayment of HMOs. The article makes much on Republican allegiance to Private Provision, but the dedication actually relies only on the provision of Corporate Profits, which depend heavily on political contributions; both Parties being highly active in absorption of these funds, and provision of wasteful health spending. Tis a Sad World. lgl

Some of my Rebel Musings

The Complaint addressed in this article compels commentary. The Costs for Small Business constitute a real destablization of their business format, with real potential loss of Sales competing with the loss of Profits if they leave their Prices unchanged. The real element causing the maladjustment, though, lies in the abandonment of Minimum Wage as a Living Standards control in the 1990s. A standardized Minimum Wage correction formula would have avoided the current debacle, where the Wage Increase is in direct conflict with rising Costs. We left behind the Concept of a justifiable Wage increase long ago, and now, the justifiable Wage Increase is not only very large, but directly set against the Incomes of Patrons of the Minimum Wage services. Steady, efficient Minimum Wage adjustments through the Years would have been as unnoted as the persistent Inflation itself; People attuned to the slow Creep of Prices. The coming Wage adjustment holds all the difference as represented between a Tide and a low level tsunami. We are forever paying for Past Sins in Economics.

Here is another debacle basically generated by a political platform adopted by both Parties. Fannie and Freddie should have tightened Mortgage requirements long ago, so transfer of debt to Banks and Investors would have held high security. The political platform, though, wanted easy Money for Mortgage Credit, and Mortgage brokers went along because of the rapidly accruing Profits for quick Mortgage turnover, no matter how bad the Paper was. Now there is a Mountain of bad Paper. Arnold’s formula of extending laxity to Bank regulation probably will only lead to a greater long-term Credit crisis, but Options are limited, and there may not be alternate venues. I await economic commentary of the possible consequence of a reinstated collapse of the Credit markets–something which in effect could equate to the constricted Credit following the Crash of 1929. The Later was occasioned by a Bank insistence on sound Collateral, the Present will be caused by Mortgage broker resistence to Mortgage renegotiation which abandons the lucrative terms of loan repayment; an Insistence made of debtors who are facing rising Costs in all segments of Household expenditures.

I will leave this article for Readers, and then ask, What is wrong with the fundamental Proposition of the Article? How does it apply to the previous Arguments? Hints: Inciting high Income Personalities to work harder curtails Employment in high Pay occupations; alternative Paper investments had the highest rate of growth, and highest rise in Income, as well as foster the fastest Employment–all enhanced by high marginal Tax rates; the later constrain excessive Work patterns, leading to replacement training of Substitute labor for Off-Periods; higher marginal Tax rates also lowering the Rewards of extensive Training, so that the Costs of such Training reduces to incite a greater number of Trainees. Everyone explains the advantages of low marginal Tax rates extensively, but where is the Examiner of the potential values of high marginal Tax rates? lgl

The Nature of Speculation

I ask myself why I post certain links when the viability of the assertions are at risk of being wrong. This Post is a Case in Point. Chris Dillow asserts that Carrots work best with the Rich, and Sticks work best with the Poor. I think that is a particularly British thing, and Americans react in an opposite manner. Lottery Tickets are not bought by the Wealthy, and they will spend more than it is worth to avoid payment of Taxes. American Poor will avoid Candy and Treats to maintain sufficient funds to buy Lottery Tickets. American incidence of sending back Products which do not meet their Expectations, even if the cost of Shipping the Product back exceeds the price of the Product. I think I include the link because I like the Reward of presenting a well-thought Post, and estimate that the loss from Reader adoption of spurious accounts for personal behavior is small.

It is interesting to note that so many Commentators must insist that high Oil prices are not the fault of Speculators. They sometimes enter into incredible calisthenics of logic to achieve their end goal, which is a defense of Speculator behavior. The real reason for high Oil prices is that there is an immense amount of Investor Cash out there, combined with little opportunity to invest wisely at a Profit; they take the open Option of dumping the funds in the Oil market, hoping for potential Profits in the most volatile of the Commodity markets. The vast influx of Cash into the Market is driving up the Demand price for Oil. The obvious Solution for the Situation is adequate taxation of Investment Profits, which would limit the excess funds, and lower the Profitability of high involvement, high-Risk ventures; no one, of course, would consider such a venue for Price controls.

Richard Green asks a Question which may be relevant to the discussion. Delinquencies at .81% at Freddie Mac are recognizably slight, but represent an image of a Stick. The sheer magnitude of Wealth may change the visual representation of Carrots and Sticks. The Poor’s Lottery tickets may be refocused as the Wealthy’s speculation in Oil. Lack of Food may be a strong Stick to the Poor, while the threat of Taxation stands as a major focal Injury to the Wealthy. It is my belief that Carrots and Sticks work equally as well for Rich and Poor; it is just that the content of those Carrots and Stick alter. The Chance of Winning the Lottery may be less than the Chance of winning Profits from Oil Speculation, but the Wealthy have always shown great acumen concerning financial matters; nothing altering the human nature to achieve quick, unearned Riches. lgl

New Ideas for Old Concepts

I applaud the Blackstone Group’s foundation who intends to establish a Course curriculum in Colleges and Universities focused on fiscal irresponsibility. It is a laudable enterprise, and I wish them well. I do not applaud their attempts to blame Social Security and Medicare for all the ills of fiscal irresponsibility. My estimate of a 2.2% increase in Social Security taxes–1.1% for Worker, 1.1% per business–will see the Fund through until 2100. Doing nothing will leave the programs viable until 2017; if the Federal Government pays its debts–until 2043. No one admits that the initial program has been in operation since 1935, and the later program since 1965. Both witness vastly increasing Costs, but Costs which have been planned for since the Start. They are simply matching long-term Expectations, without any sudden investiture of wild Cost.

One War less could wipe a trillion dollars from the Payment List, actually delaying any Social Security shortfall to 2085, if the funds were added to the Social Security Fund. I don’t know about you People, but I am planning on being Dead by then. One irreverent dude (Me) has estimated that a Social Security shortfall could be delayed until approx. 2150, if Pork Barrel spending was diverted to the Social Security Fund. A Social Security Payment schedule transfer to a Unitary Payment size equal to the Minimum Wage of 40 hours for 52 Weeks per year would not only delay the Social Security shortfall for 200 years, but probably bring a Living Subsistence measure to the Minimum Wage scale. Calls for the destruction of two successful programs of long duration and high popularity is not only Short-Sighted, it is ridiculous!

I will freely admit there is a real Problem with Medicare and Medicaid. I believe in the Concept of Congressional sponsorship of Joint Medical Accounts. The basic principle behind this idea is usage of the Extended Family. There would be automatic deduction from all of the Group at some rate, with deposit of said funds into a special Account, the rate likely to be 7% of one’s Income. All Registered Account-Holders would access such Accounts to pay abnormal Medical bills. Both the rate withdrawal and the initial Medical deductible would be registered with the creation of the Account. The Extended Group could be family, Business Workers, or fraternal organization. The Social Security administration would be entailed with the management of said Accounts, and the additional dispersal of funds from the Accounts on a equitable basis. It is possibly the only Health Accounts system which could work. lgl

The new Power Politics

I read this Post by Stormy at Angry Bear, and wonder if the emphasis of the World leadership may be misdirected. We worry about feeding the Poor, and designing Shortcuts to get Populations past agricultural production failures. Export restrictions are decreed to be hoarding. It examines several Issues which should be studied, but only in full Context, fully outlining the Problems. Fertilizer needs a secondary condition of sufficient Water; but not too much, maybe about 8% of the yearly supply of Fertilizer has been washed from the Soil this year due to flooding, most within the highest Price belt for Fertilizer. Criticism has been placed on the use of foodstuffs as animal feed, but few note that most land devoted to animal feed is unsuitable for growth of human food, or lacks sufficient Distribution outside of concentrating the production in forms of Meat; it mentions the Costs of Transportation of Food, yet leaves unmentioned the quadrupling of Transportation Costs of Food transference in Processed or Bulk human food other than in Meat Products. Bio-fuels can be seen as an enemy, and their subsidy is a stupidity, but still provides high feed content for animals, and Fruit Lactose saves Thousands of acres of farmland for alternative Food crops rather than Sugar Cane or Sugar beets. Know thy Enemy, and give the Devil his due!

Greg Mankiw points out that politicians are going to a lot of Work to avoid the Word ‘tax’. I would adopt a more diplomatic (yeah, Me!) Response, simply stating that Everyone is beginning to realize the extreme difficulties arising from Cap-n-Trade, which is the Start of the Social central planing which doomed the Soviet system. The entire Carbon debate itself remains crippled by the Demand that bureaucratic mandates be fixed on the Issue. Simple Taxation has always been the simplistic answer to a vast conglomeration of Issues, many of which could not be resolved in any dictated fashion. Taxation, though almost All will not admit it, relies on the Market system; allocating usage according to Profitability.

The Reader should preview this Web site, and read the article. Why has every American come to feel hostility to a Government which they purportedly elect? Why do Americans hold animus for institutions which are presented as a Salvation from hazardous economic forces? Why is even FEMA considered a invasive foreign national corporation? The Answer to all Questions can be reduced to one Word: bureaucracy. We have too many People telling Us what to do, and We don’t even know who most of them are! lgl

It sounds worse than it is!

Oil dropped this Week, the Question becoming whether the Trend will continue. One can ignore the early Morning Trade because it is only the Trading houses trying to establish a rally, before the major Buyers have their Coffee. This Trade is minimal, and designed to create a Purchase environment. I am inevitably wrong when it comes to concrete Investment decisions, but expect a Price of $120/barrel for Sweet Crude within 30 Days. Two Reasons guide my expectation: the half-million barrel/Day reduction of American consumption of Oil, and the consumption of foreign Dollar stocks by the purchase of Oil for their own economies.

One of the qualifying elements of the modern Oil market has been the loss of Sale power of Wellhead pricing. Shipping, Refining, and Distribution has frozen out the operative ability of Oil Suppliers to control the Market. The key mechanism here is Consumer control of especially the later two facilities, both dependent on Consumer satisfaction: a dependency sharply reflecting in Consumer reduction of fuel consumption because of disturbance in Household and Business budgets. The realistic Content of this argument would state that the reduction in Consumption will be permanent, as Households are committed to an Energy reduction program, and Business is investing in costly long-term Consumption reduction procedures. We are in the unenviable position of facing Refining and Distribution overcapacity with excessive Capital Ageing. Refining and Distribution needs to Upgrade, but confronts a declining Market.

I would not put much faith in the Rebound of Stocks from the lowered Oil price. It will continue to fall in Price, but Oil should also be decoupling from the Stock markets. There are also two Reasons for this expectation: the first being Commodities has far more effect on the increase, than expressed on the decrease; and second, the Stock markets has too much Paper outstanding, which cannot maintain P/R ratios or sufficient Dividend rates. Stock expansions work great in expanding markets with high Product sales, but contractions require high-priced Quality controls to sustain Product sales, especially under Household constraints like rapid increases in Necessity pricing–like Food or Energy. I do not expect, but would not be surprised by, a decrease of the Dow below 10,000 over the next 18 months. lgl

Shame, Shame!!

I find some justice in a George W. Bush Sewage Plant, like Mike Shedlock. I could get nasty, and find the Name ‘Processing George W. Bush Plant’ more apt; the Events in Question, though, are best left to be evaluated as the Problems they are, without the Late Night Comedy. Time will outline that Bush did some things right, and many things wrong. What worries me is the Leftovers from the Bush administration which cannot be removed because of implanted opposition. The Tax Cuts need to drift into history, but will not. Privatization of Social Security and Medicare have both proven a failure, costing the American Taxpayer far more than the original programs; still, the medical lobbies will never let them Rest in Peace. Iran and Afghanistan Wars may eventually be considered the least of the Bush Crimes against the American People.

China is subsidizing Exports and working hard to hide that fact. A new Paper advertized here studies China’s attempt to eliminate Subsidies to meet their WTO commitment. China admits to the provision of $2.4 billion in Subsidies in 2005. There may be no central planning in the usage of Subsidies, but I am a suspicious man; especially with the high growth rates China has been experiencing with massive Export growth. I could believe that much of the Subsidies granted to State-Owned Enterprises (SOEs) consists of underpinning of low Cost materials to Exporting industries, until such industries win a significant World Market share. Such a Reality would not be kosher, or in conformance to WTO guidelines.

King claims that the McCain economic plan is a Start? It seems more like ‘Let Everything go on, until the Country falls apart.' Of course, the Obama Plan is not likely to do anything either. I could try to shame Candidates into proposing something New and efficient. I know the Campaign Pledge I would use:

Vote for Me, and I will guarantee you a 2% Surtax on all Taxes paid to the IRS. This I will assure will eliminate the Deficit, even if I have to impose higher marginal tax rates later to accomplish Same.

It might work, especially if I spiked the Punch outside Voting Booths. lgl

Ownership???

Paul Krugman advances three factors causing the current economic mess We are in, providing an excuse of nonentity escape for the Bush Tax Cuts. Those factors were the Housing bubble, rising health care Costs, and the Run-up of raw materials pricing. It is a good evaluation, if One accepts that the current economic structure is basically sound. Democrats have to join with Republicans to support the position which Paul espouses, simply because of their past involvement in the Process. An alternate interpretation of any circumstances can always be found, and I might as well spout one.

The overwhelming Cause of the economic malaise has been the huge Increase in American Debt, both Public and Private. No other factor has had the same impact, weakening the Dollar drastically here and in the World, and granting an avenue to finance American Imports other than the traditional venue of purchase of American Exports. The vast aggregation of American debt gave access to the American economy without buying American Products. This was the deliberate result of American Tax policy, a policy supported by both Democrats and Republicans, which insisted that Our Government must run in deficit. It is not helpful that most Economists and Business leaders were in full support of this chicanery, believing that such deviant Accounting was good for the Economy.

The second great Mistake was the belief in the Government policy ordered to turn America into an Ownership society. Mortgage credits allowed Homeowners to buy above their Means, crippling their ability to sustain economic shocks so prevalent Today. The worst effect, though, came in the 401k programs; all directed to reductions of the Tax base while fostering a false sense of Ownership among Labor. The Tax-evading programs all propelled Business leadership to dilute Paper stock ownership of their Concerns to serve a new Market. Now, when economic conditions are worsening, there is too much Paper out there, and no way to pay Dividends upon that Paper; effectively canceling any Resale value on the Paper. The Whole of Government policy mismanagement has introduced a parasitic middleman class into the matrix, absorbing the Profits without economic gain, and deceiving the owners into a belief that they possess a real Ownership stake; it will never be one which they can exercise possession rights for economic gain. lgl

Pleasantries

Is This the Real Story? Dogheimer (I assure that you don’t know him) insists that it is Gospel, though I possess certain reservations, the worst being the knowledge that such Prices reset completion lasts 7 months (the estimated time necessary to reach a complete Refill of the system–Wellhead through all Consumption, Payment, and Refinance). This means that the full Impact of the Price Rise will not arrive until the beginning of the new Year. The finance of Energy to 14% of GDP cannot be found; the Cash is simply not there to be extracted. Back of the Envelope calculations tell Me that any Payment above 9% of GDP means change of lifestyle for the American Public; Gas guzzlers, Housing Sales, Name-Brand clothing, and Intermediate Retail Products taking the initial Hit, but almost certainly followed by Unemployment. The Big Picture criticizes the European central bank for hiking Interest rates and weakening the Dollar; We must face the fact that the Fed must follow Suit, before both Economies are unbalanced.

I enjoy reading David Smith, basically because it is nice to know Our Brothers across the Water suffer Our same fate. I agree with the Bank of England holding their Interest rates; now, if only the Fed would join them. What bothers Me about all assessments comes in the form that all Economies must enter into declining GDP sooner or later, as Employment Rolls start to decline, or is switched to Environmental concerns out of absolute necessity. I often consider if the last Quarter century has been the aberration, propelled by a forced expansion of the Labor Force in Baby Boomer numbers. The later could cause a Series of Shudder-back recessions through the duration of their retirement (think 2020). It is a pleasant Sunday, now why did I bring that up?

I will leave the Reader with this Gem which incurs fright, but does not explain the horror. Bulk Freight may be one of the most erratic of all economic venues. Freight, whether Ship bottoms, Trucks, Trains, or Airplanes, must be continuous else the price of Shipping will go up, not lower. Partial Loads are the bane of Freight, and Freight venders functionally have to maintain full loads for 12 years to avoid Mortgage refinance. Partial Loads bring equal Costs, but no Income for the empty space; a situation which can eat up all resident value in the existing Mortgage because of the necessary refinance. This devolves into the Shipper eventually absorbing all the Costs of the Carrier, even if the level of Shipping declines. lgl

The New Direction

I may not be a noted Optimist, and this Post by Big Picture can be exact in nature and very true. Why am I so sanguine about the state of the Economy? It is not because of the Exit of the Bush administration without Criminal Charges being filed. It is not because of great faith in Our Presidential Candidates. The development of a Corporate sense of Social Responsibility cannot be the Cause. Some Defeatist sentiments would even claim it is the fact that I am in a medical class with low expectation of long life. I fear I must rely on economic fundamentals, but maybe not in a manner which is pleasant to All.

The average American Household could Save a remarkable amount of their Income by Purchasing for Cash, not Credit; I am not sure, but would estimate that the amount of Income paid for Interest on Debt has reached 11% of total Income. The fact unmentioned by most Commentators is the declining market for Credit expressed by American Households; a combination of excessive Product Prices and excessive Interest rates on the Debt. This means the pressures to absorb increasing amounts of Household Income for Debt Service has continued, while Household ability to accept this loss has been curtailed. No One has an adequate measure for the rate of Saving among American Households, but it is obviously on the Rise, as Households need greater liquidity to endure the more erratic Price changes on Basics.

It is in this area that I find the greatest optimism. The American Households collate larger amounts of liquid assets, and store this Income in short-term Commercial Paper. Their disconnect from Immediate Consumption is allowing them to pay off resident debt, and store a higher Assets value. The Process is only in its infancy, but will continue long after the current Commodity Crisis has abated. The reaction of Business will be equally as beneficial, as major Retail outlets must switch from provision of luxury items, in favor of the provision of functionality items simply to engender the Sales necessary for their survival. This is the Economic Turn which I await, thinking it can only be better for both Consumer and Business. lgl

I am not really as Bitter as This sounds!

We even have a Name for it: Rovian Politics. Karl Rove may last longer than George W. Bush in the conduct of American affairs. That is if We can credit Paul Krugman’s commentary, which We can. Republicans managed to get two Democrats painted as unpatriotic, even though One had landed on enemy soil under Fire, and the other was a multiple Amputee resulting from enemy fire. Wesley Clark simply wanted to express that John McCain’s experience was about halfway between George W. Bush’s National Guard Service and about 70% of McCain’s Service Class at Annapolis; John may not have been the brightest brick in the Yard. Neither Candidate is particularly gifted for the extensive Job of bringing the nation’s Wars to an end. They at least seemed not to notice that the Incidence of Terrorist attacks is again on the rise, even though the Troop surge has not really ended on Schedule; something that a C-n-C should be required to notice.

Here resides another Oligarchy at work. Entrance into Ore production would require at minimum of a probable $1 billion, while entrance into Steel production would probably cost $10 billion. Ore production insists on Mine ownership or Mining Leases of huge Up-Front Cost, while Steel production generates huge Capital and Operational Costs with no actual Open outlet for finished Product. It is a Situation reminiscent of the military/industrial complex and the U.S. Military. Suppliers and Buyers are closer socially and economically to each other, than they are to Anyone else. It is always easier to find a Need for Prices increases, when eating in a 5-Star Restaurant with wives and friends; especially when the Suppliers are willing to pick up the Tab.

Bryan Caplan remains a main-force blogger, and should, but probably represents the Rovian Creed most among Economic bloggers. Defend your own position on ideological grounds, never letting the argument descend to technical questions, but always focus your offensive upon technical questions of Opponent practices. Justifying a freedom from Taxation because of a belief in Small Government appears sound, if One can expect any Politician will adopt a reduction of Government size. The only restraint from growing Government past the Political decision in favor of large Government consists of the Demand that Government pay for itself through heavy Taxation. Bryan cherishes the intellectual freedom of advocating Small Government, but would forestall any attempt to seize it; it would require him to put his Money where his mouth is! lgl

Handling Corruption

I don’t agree with Mark Perry on a lot of material, and it holds true with this Posting, though he has relatively justifiable numbers. The idea that One-Quarter of all Wealth was produced in the last 7 years is a little hard to swallow; it basically only showing the absolute need to adjust for Inflation. I believe that American families have actually grown a tad in size since about 1984, but that information might be as solid as Mark’s provision. The 9.2 million Jobs created since the Recession does not list the number of Jobs lost in the last Recession. I agree with Mark in most of the rest of his Post though I probably should not; remember, the Concept of opening new Resource fields without utilization of up-to-date Technology for extraction of Resource stands as foolhardy. Mark and his Conservative friends must realize We must finance the optimal Extraction methods available; We cannot allow for cheap, slip-shod partial Recoveries which eliminate successful complete withdrawal of valuable resource.

Arnold Kling, Tyler Cowen, and Bradford Plumer all identified the Problem in China, and it ties in somewhat with the previous Paragraph. Law Enforcement is only noted for its failure; the real demon is Corruption. It survives because the benefits of itself occur immediately to all Participants, while the benefits of Law Enforcement accrue to All only after a substantial Lag-time. Corruption inevitably grows with Population numbers, as the Points of Enforcement multiply both the Law Enforcement Agents necessary, and the number of supervisory reviews to be made. Criminals lurk in the Walls, and the Corrupt sink into the floors; all, like Rats, coming out in force when it is Dark or Cloudy. Mao’s only mistake in calling out the Red Guards to combat Corruption was a belief that the Children could themselves stay free of Corruption.

The only sure method for suppression of Corruption consists of draconian Punishments for any Violation of the enforceable Code. Example: Anyone who consciously creates a Biohazard which endangers any Citizenry, Society, or Community will be put to Death if convicted; all within a 30-day Resolution of Appeal, where every Guilty party is fried if Judgement is still Out. Such Punishments may not diminish such Crime and Corruption, but it sincerely reduces the number of operating Violators at every Point in Time, and gives lawful Citizenry a sense of Accomplishment. We should take as many of the bastards with Us as possible, if We are going down. lgl

Role of the Speculator

I tore into David Leonhardt’s article, expecting some examination of the competing philosophies attempt to define the current Recession, if it exists. I found a ‘wringing of hands’ over the bad Job Reports, and a denial of Price manipulation by Speculators. David mentions Labor Dept. Tracking of ‘gross job losses’. I could mention that American Business has been cutting the fat from the Job Rolls since the Reagan administration, and this elimination by itself never achieved any Profits improvement. I also know for a fact that there is over 16 times the Speculator Cash in the Oil markets than there was in 2003, and all this Cash is making at least a 8% Profit on every Dollar, else the Cash would still be in the Stock Market. The creation of a new ‘middleman’ position within an established Market may not seem like a Price manipulation to some Economists, but that is a lot of Salary, Bonus, and Dividend Checks to pay for on the bottom line.

I ran across this address to Creative Capitalism, which I suspicion may devolve into a PR hotbed, protecting the delicate Flowers of American Capitalism who happen to be billionaires. The exact position of Bill Gates stands as a Object of Debate. I myself think that Bill went from paying himself to run a Business, to paying himself to manage his own money; likewise for family members and friends, all for a Dispersal Rate rarely in excess of an ordinary Capital Gains taxation if he paid it. The Gates’ Tendency has caught on rapidly with some of the other ordinary billionaires.

Political Calculations states that China is burning up the Commodities, a view which is enticing even if erroneous; simple economic lesson: the Commodity Price leader cannot individually maintain their Consumption, they require the involvement of exterior Investment to sustain the expansion. I would not call China innocent, but Speculators are again the culprit, who are looking for the quick, rollover Profits. These Speculators can consist of Anyone–foreign Governments, sound Central banks, Sovereign Wealth Funds, or Joe Six-Pack sitting in the local bar utterly dependent on some Hedge fund operator. What is the Driving Force behind them all? The Expectation that Production Startup Costs in developed economies are too high to generate Profitability of Enterprise. They all hope that the Wildcatting Business practice of undeveloped economies will pick up high Cash value. lgl

Explanations which do not please

The Commodity prices begin to grind into Manufacturing activity around the World, hallowing out the foundations of Business. Back towards my Youth (don’t ask, but Long Ago and Far Away), CEOs and CFOs talked of Commodity Price increases in terms of months of Corporate Profits lost per year. This was great for Economists, but bad publicity for Investment bankers, so the Practice was dropped from the Business lexicon. The vicious and black plague nature of the Oil markets may bring back the reportage, as Economists really need the information to construct a visible model for evaluation, and one which they can take to the Public. It is still bad publicity, though it might become the only drain of Speculator Cash from the Oil markets, as they realize they potentially will lose that Cash if not withdrawn relatively rapidly. It will be at that Point when We can determine if the massive influx of Speculation Cash in the Oil markets had actually fixed the Prices for Oil, as I suspect.

This article highlights the level of increase in Speculation since 2003, with a rise of Investment Cash from $15bn to $260bn. The International Energy Agency disagrees with my viewpoint on the impact of Speculation on the Oil markets, but has yet to show there has been an equal appreciable rise in Recovery and Refining capacity; understand that there must be a measurable rise in Present or Future capacities of relatively like amount to justify the spread of Oil Profits across an increased base of $245 bn, else there is actual real Inflation in Oil price. The difference between the Cash and actual Investment establishes the real degree of Inflation in Dollar terms. It isn’t that simple! Yes, it is!!

Here is a Piece which purports to show that Speculation is having no impact on Oil prices, but actually shows the Opposite. OPEC is pumping at Record levels, and Emerging Markets are beginning to show evidence of slowing in the face of the higher Oil prices. Iran cannot threaten the Oil Supply in real terms, without Iran losing most of the Good Will they have garnered from both the Western industrialized nations and the Emerging Markets. It would be suicidal for Iranian leadership to actually impede Oil Deliveries, the Gulf War reworked but with Iran the center of attention. Our Argument, though, remains: rising Capacity coupled with dropping Demand will not normally bring increased Oil pricing without Inflation. Is it the weakening Dollar?–Doubt it! The Dollar, if anything, is hardening in Value. Is it the spread of Profits across a vastly increased Paper Investment base?–Of course!!! lgl