Old Views--New Views

We again hear the litany of great Growth potential in foreign nations. There is only one basic thing wrong with the two giga-nations of China and Russia for foreigner investors: the Investments are tied to the land, which cannot be up and moved. Neither nation has a good Record of protecting Property rights–recent or traditional. Governments of both have traditionally been brutal, violent, and bloody in Temperament. The last time Government in Russia thought to abrogate Property rights–about 17 million Landowners went to forced labor camps in Siberia. The last time China abrogated Property rights, about 30 million went to slave labor; actually, as did most of Those who put the first group of Landowners in Camps. Reality states that it requires Nine good years of Crop yields to fully pay for Agricultural capital, which Weather can alter into about 14 years, and Regime change can alter that time to Never. The Money men will be out of Agriculture within Three years of selling the Investment to Investors; who can exploit any of the Above options. Orloff’s conversion to Agriculture reminds of George W. Bush’s Sale of Blue Sky Oil wells during his Daddy’s presidency.

I wondered whether I should highlight this article by Louis Uchitelle, or give the Reader this article by Alan Blinder; so I decided to give both. Both explain a lot about Economics, one describing the problems with the aggregate Numbers, while the other examines the specific problems with Republican Numbers. The Reader should realize that I am not attempting to attain any Partisan position, and that in both articles, some Realities are ignored. The GDP can be as much an evaluation of Inflation, as it is of Growth; the exact split between the Two almost never given. Growth rates under Democrats may reflect a higher degree of Inflation, basically because more national Income is devoted to Consumption, than in Investment to avoid Taxation. There is also the Green Proposal, where economic growth must someday reduce: One cannot continually input Population Growth into a matrix of limited Resources and high Carbon footprint. This Later makes the entire Growth model counterproductive in comparison of human needs.

Here is one of those times where I believe Dean Baker is a little too positive in his assessments, though he is somewhat right about Ben Stein’s article. Ben is correct that the Stimulus Package did little good, and a following repetition would be equally as non-fulfilling; Dean might check to see if the added Growth in GDP actually exceeded a dollar-for-dollar expansion of the economy. I remember the arguments I had with my Grandfather when JFK proposed raising the National Debt to $100 billion, and wonder if the Stimulus grew anything except for the National Debt. I also decide the description of Windfall Gains upon the issue of whether the benefitted Companies attempt to increase Production; an example not presented by either Oil or the Financial markets (another Stimulus Package which is not going well). I would finally like to inform the Washington Post that economic issues can be explained simply, solely due to propagandist blockage. lgl

The Statistical Model

I laugh somewhat at this article in Slate, basically because I have hardly ever utilized Credit Cards in my Purchase pattern. I early on made the decision to spend the average 15% of Service charges in purchase of more Product; the spectacle of a Waiter standing over Me does bother, but it declines with the disappearance of the Waiter (try placing your Automatic on the table, instead of a Credit Card). I will now denounce my crude humor, in the interest of being Politically Correct (be sure to remove the Clip and eject any shell from the weapon–to avoid any Accident). Return to the original Argument will entail explanation there is a sincere boost to Consumption by Payment in Cash, though the range of Purchases starts at a lower Price level, and does not sustain itself in the higher-priced ranges. I have sometimes mentioned that People actually might start a new Savings cycle, if Consumers could be convinced to cut up their Credit Cards. What I don’t find is a Pundit statement that elimination of Credit Card Purchasing is a sound Green measure, where Consumers avoid unnecessary Consumption.

Mark Perry notes that Americans like their current lifestyle. It is especially true, except possibly Those who are in Mortgage default. Study of the overall Debt picture suggests that 16 Weeks of paying off their Credit Card debt would allow most Americans to go back to their old Consumption pattern–if they desired–without paying 15% Interest for the practice. It is doubtful that they would return to such carefree Buying, though, as it is harder to pull actual Coin from the Pocket (false representation: I use a Debit Card for 90% of my Purchases); it only being indicative that there are alternatives to Credit Cards.

I have a little difficulty with 54.7 billion remembered dreams per year in America, but this article should definitely be Read. We obviously cannot grasp atoms or galaxies by common Sight, but biology and Star-gazing tells Us they are there. The ideation may be a little positive (or authoritarian) but it reveals a real truth. Humanity does not really keep track of their activities, which they should do in order to understand themselves. The economically-minded should be forewarned that Numbers can be found to support anything, except outright disaster. lgl

The Times are A'Changing

An Associate of myself brought forward a Question today, which was what could be a new Cable channel for the desirous Entrepreneur. I thought about it this Morning (should never do such before Coffee), and decided that an Ad channel would be Perfect. The Concept would be a channel which would show all new Ads developed in the Country of Origin, with a Feedback payment based upon actual determinant Views of at least half of the Ad duration. It would be for the discerning Viewer who might have missed some of the high quality Sales pitches offered by the Private sector. I know that Everyone will laugh at the Concept, but Americans have become Ad Junkies; I would predict a 2-million Market share based on the idiotic Re-Run system of most Cable channels. It would be simply cutting out the Middleman of Programing, offering Consumers a spread Loop of new material on a 24/7 basis. Ridiculous? Maybe! Still, I know my fellow Americans–I will still bet on the 2-million Market share in Prime Time.

Here is another idea which seems foolish on the face of it. The actual truth states there is an immense amount of burnable residue which must be considered Landfill, but is not, simply because it is not moved off-site, and allowed to decay on the natural landscape. The natural decay process actually produces an almost equal amount of noxious atmospheric release as Pollutant, as would a burning Power plant that is ignored, because of lack of Particulate spread. The Later can be defused in acceptable manner, and We could use the added Energy. One should never consider any Idea as stupid, until the exact stupidity is found in actual fact.

Here is a traditional Trend which is suffering because of Profit margin loss. The Product is too high-priced, and Retailers are attempting to get Venders to adopt cheaper materials and manufacturing retinue. Tailoring has become an arcane profession, whose Practitioners do little to explain the Cost structure to the general Public. They suffer from a huge loss in Sales because of the lack of explanatory information presented by Retailers. Venders must learn that the Buying Public cares little for the quality of material, only for durability and the materials’ ability to present a high-quality appearance. Venders will continue to suffer until they meet the specific Needs of the Consumer. lgl

Twilight Zone Reality

There is more than a little Taste of the Twilight Zone in the revised Numbers for the 2nd Quarter 2008. The Quarter was either Good or Bad, not a Coat of Many Colors. Readers may have forgotten that statistical modeling always includes a Degree of Error; well, the initial Numbers for the 2nd Quarter should be listed as having a Degree of Error of plus or minus 200%. This is the Political Election Season, but both Sets of Numbers for the Quarter has to be considered an Outrage. Government Economists will claim that they did not realize the quantity of Exports was so high, but do you believe that? I think We should keep Government Economists after School, and have them write this 500 times: We will not fudge the Numbers for Political Spoils!

Brazil and Argentina are taking alternate paths towards Agriculture, and I actually favor the Protectionist Argentina. Brazil assumes $49 bn of national Debt to give agri-business $40 bn of Credits, leaving only $9 for small farmers. Argentina is implementing a 35% Export tax on Soybeans. Both nations belong to the Big Three in the Export of Agricultural Products, especially Corn, Soybeans, and Meat Products. Such heavy Agriculture for Export requires huge Inputs of Fertilizer and Water, and generates extreme Food pricing in the domestic economies. The One is assuming high national debt and high domestic Food pricing to adopt farm practices which deplete native soils, the Other is utilizing their Agricultural position to pay for much of Government operations in a manner which provides some degree of Soil conservation with even distribution of Profits through all economic sectors. Almost all American Economists would hail Brazil, and condemn Argentina, yet that is exactly what I think is wrong with American Economics today.

Here is another instance where current national leadership may be acting irrationally in the name of promotion of Trade. National Accounting rules have been established to counter potential hazards already encountered in the natural course of business. International Rules of Accounting are only adopted when there is insufficient opposition by any major Party to such Rules. International Rules are always far more lenient, and less enforceable, than the highly developed National contingencies. It is all a Question of allowing the fraudulent to run Wild, and combines with preemptive acceptance of deviant Accounting which claims the Right of Acceptance. The current Administration is committed to setting all of Us on a course which will be hard to extract Ourselves from, when We run across the criminal deficiencies that are bound to occur. lgl

Just for the Record

What are the real Costs of Privatization of Public Works?–Felix Salmon tries to present a cogent Overview of the Process. I live in a City where they have argued for so many decades as to the exact location of a second Viaduct over the Rail system, that We are soon to be left with not one; the current Viaduct must be closed for structural Maintenance. It is doubtful that Privatization will help. Most mainline Routes in this Country need to be widened, yet Business and Housing were originally constructed too close to the Routes for any Widening process. Privatization will only allow greater obstruction to any expansion program, sending all Participants to the Court system, whereas today it rests in chaotic Town Hall meetings; never support any Proposals backed by Lawyers!

James Joyner provides an interesting Post about the current level of economic expansions–most notably, a comparison between the Carter Era and the George W. Bush Period. The Carter administration was only half the length of the Bush administrations, and the economic conditions operating on the Carter economy were all generated prior to the actual administration. There is much debate whether George W. inherited the benefits and injuries prior to his reign, or it was relatively churned by the bad Air of his own Terms. My own evaluation would suggest that Bush was as responsible as any President can be held for the debacles, allowing Spendthrift practices throughout the Government from his first Inauguration (Government Contracts immediately allowed Profits-taking by Suppliers, about a 7% Shift from Social Welfare spending to Spending to provide high Corporate Profits, etc.). The Result may have been a Resource-drained Government without the ability to administer sound economic policy (notice I have not even commented on the potential idiocy of the Bush Tax Cuts).

It amuses Me that Economics excuse multiple Sins with the innocent appearance of an Angel. Robert Carroll presents an excellent Case in Point. The 2001 and 2003 Tax Cuts led to increased reportage of Income, to the level that maybe 25-40% of expected revenue loss was replaced. What is not said states that the Marginal Profit of Tax Evasion reduced in magnitude, while the Marginal Cost of Tax Evasion remained static. Great Groups of Tax Evaders considered the potential Risk of Imprisonment was unacceptable, due to the low Return coming from such Evasive practice. It is interesting to note that the Bush administration has been dismantling the IRS system to capture Tax Evaders through Budget reductions and Layoffs of trained Personnel; the Intent being obvious to allow much lower Marginal Costs to Tax Evasion in the future. I expect the current Leadership is shaken to their Souls that Successors could actually introduce adequate Tax rates. Don’t you just love the Democratic process? lgl

Adjustment of View

Why don’t I like the Fed’s use of core Inflation to adjust monetary policy. First of all, I don’t think the Fed should be in the monetary policy implementation business; and if they insist, they should utilize the liquidity issue as a Whole. It is indicative of deceptive Fed policy that they don’t include a scale of core GDP when they discuss core Inflation. Such data would highlight a liquidity deficiency in core Production capitalization; this is not to say that financial instruments don’t have an overabundance of funds because of the Tax Cuts. Inflation in Energy and Food is driven by this extreme liquidity, a Private sector replacement for the Tax Cuts; while basic Business operations are impacted by the full Value of the Inflation, though they must endure restricted finance.

The German economy is much different than the American economy, but the structural problems are much the same. The real difference in economic policy is the German refusal to fuel the economy with Tax Cuts and Give-a-Ways like the American model. Interior EU pressures forestall the German implementation of stimulus programs, while American politicians are unrestricted. We will not be able to discern whether the American stimulus package worked until the new Quarter numbers are in, which is a Statement that Economists will wait to present the bad news until they have to do so. It is sufficient to say that the American economy is only Weeks away from the same economic state as Germany. Both Sides of the Atlantic await with suspense all indications that Germany is facing erosion of their Labor markets.

Two methods to present economic data exist, as Mark Perry indicates. Every item in Mark’s Post is surely accurate, but exterior conditions are left unexplored. Most Eggs in earlier years were not commercially produced, and a significant portion of the Population harvested their own Eggs from their own Poultry, even in the row Housing of Cities. Almost all Goods in his Grocery Bag came in Bulk form, requiring on-site Distribution labor. In any Case, the Food Stores needed were only a fraction of the current nutritional needs of Our population, and advanced Production methods are needed; said Practices representing a replacement of Labor with capitalized Technology. Food prices are getting relatively high under the umbrella of intense technological production. These Price increases are coming from increased Population, and therefore Demand, and inflationary pressures on the Production Costs. lgl

Life in These Times

We are talking about the Shades of India here, but how bad is it? We are losing about 1% of the Harvest due to lack of Storage and Transportation, but can We actually get that Figure lower, or find it economically acceptable (can We afford to provide the added Capital to save the Grain in Profits Return ratios?) Grain barges and Railway Cars are not easily adaptable to Transport of alternate Goods, and if increased, would suffer from a Downtime each year, which would vastly increase the Ton-mile haulage Costs for Grain. Elevator Grain Storage is very expensive, of long Capitalization for little Profit, and Grain still best-Stored on the farms where it is grown. Farmers, though, cannot be expected to maintain such facilities which are expensive and high-Cost to store the Grain safely (Labor Wage rates); a conundrum once Solved in the late 1950s and early 1960s, but destroyed by political opposition to the then-current Farm programs, and the massive growth of Storage needs. It is probably Best to retain Ground-storage as the Cost-effective expedient today, as the Capitalization Costs are increasing far faster than the Agricultural Prices.

Paul Krugman and David Ignatius point out that Social Security funds are more viable than Conservatives would imply, with the CBO stating that the Fund should last until 2049, while Alex Tabarrok spots the better Probability that the lost Benefits paid will be less than 20%. I feel that the chances of Success exceed the 58% expressed by the CBO, more like 88% probability of core Benefits, though the System will have to be switched to uniform Benefits and limited Medical payments from the Fund. None of the Research seriously enters into discussion of the real increase in Wages in the interim Period, which combines by a better ratio of Benefit Receipt to Worker in about 30 years, to bring relief to the Fund.

I always knew that I was a Dogmatist, but now Tyler Cowen has attempted to give me a justification for my attitude. I have always felt that I should be Argumentative, until Someone proved I was a damned fool. You should not surrender your Convictions until the Police have thrown you out of the Meeting–one of the reasons why I will never get an Invitation to Jackson Hole. Just remember that you only live once, just try to stay out of Jail. lgl

The New Business Outlook

Tyler Cowen has a good article about the tangled financial structure We now find Ourselves within, and his proscription of a need for a forward-looking economic and financial policy is right on the money. The Banks are indeed trying to raise money and make fewer loans, but what is the primary Cause? They are attempting to generate enough capital to cover the bad loans which they have made in the Past; giving them the ability to continue to make bad loans is not a valuable option, even if Borrowers must come up with better Collateral and more sound business Prospectus. Understand that making it easier for Business Startups in an environment of slipping Consumer Demand may not be a panacea, though it does aid in maintaining high Employment rates. My Proscription for the Economy is the actual opposite of Tyler’s in a real way, thinking that what the Economy needs is the Retirement of the Baby Boomers. The high Wages start to disappear, the disparity between Wages in Occupations begins to disappear, and the greatest Consuming segment of the Population cuts back in Workforce consumption. By the way, Baby Boomers are the most ridiculous segment of the Home-Building sector. Retirement of Us aged dinosaurs will cure many ills.

Here is an article which might explain the necessary focus of any new economic expansion. We need to restore the old framework, instead of expanding into existing Agricultural landscapes with suburban subdivisions which are too expensive, provide excessive Commute to Jobs, and heavy Travel distance to adequate Consumption Retail. I have flirted with the Concept of a Chain of small Storefronts with Home Delivery of Milk and Meat Products alongside of Deli Salads and Sides. The Storefronts would be only Retail outlets, with Finished Products furnished by Truck from centralized Food Processing Centers–hell, I could even offer fresh-baked Pizza from the Storefronts. Many a Homemaker would pay a Dollar/lb extra, if they could have the component Parts of a Meal delivered an hour before Mealtime. It is this type of Consumer service which will pull the Economy out of the doldrums.

Here is where I would advise Business to be cautious. Huge investment in Technology sounds Good, but there is a Question of Bang for the Buck. There are two Reasons for Technology upgrades if you have a functioning Business format: Labor Savings, or keeping current with your Customers’ technology. Ranchers can be Cattle-Poor, Farmers can be plagued with Prime yields, and Businesses can be technologically over-primed. I know of Business structures which lose Customers, who cannot integrate with the new technology. I know Others who could maintain a 14% Operating Profits, but drop down to 2-4% because of Tech Costs. The Days of Continual Churn in Capital outlays to maximize Capital Depletion allowances are about to end, and American Business must learn this hard lesson, or fail. lgl

The Rape of the Modern Politician

David Leonhardt has thought to introduce a History lesson in Newspaper form. His concentration on the Two Bobs, Rubin and Reich, may be misplaced; both are the residue of unresolved Problems, and a Century out of Date. The same can be said of the Conservatism of Milton Friedman and the Chicago School. I have absolutely nothing against any of the Above, but all are the Distillate of various philosophies of Public Finance which have always failed the Test when utilized. Obama must understand that he ventures into uncharted territory, a factor which McCain equally suffers without Thought. It does not help that all Presidential Candidates came from the U.S. Senate, probably the leading Candidate for Public Offense to Budget stability–outside the other half of the U.S. Congress.

Neither Obama or McCain think positively about limiting the National Debt, though honest Economists would admit it is the greatest Problem in the Economy today; not just federally spent funds, but the transference of ever-expanding Debt forward by all Consuming elements of the American economy. Some would think this effect had no precedent, but one only has to examine both Roman Empires–East and West, the Hanseatic League, the various Chinese Empires, and various political entities before and since. Both Britain and Germany, along with Austria-Hungary and Russia, were suffering from Debt growth at extreme numbers prior to 1914, and Hitler replicated the pattern with the Arms Buildup of the 1930s. It would be helpful to both Candidates, if they asked the Economist surrounds to supply them with Debt Growth models for all these political structures prior to their demise in various forms.

The modern Economic commitment to Market forces sounds wonderfully ideological, and gives Everyone a feeling of Good Will. The Reality may pose a slightly different Scenario. Unregulated Markets (Ones without supervisory Government regulation) express a real tendency to destroy as much Wealth as they create. Take the current debacle of financial instruments: Fancy Paper was conceived in an unregulated market, invested heavily within the market, then the market started to go ‘Poof’ with no equity in the Paper. Derivatives will join Junk Bonds in their rightful place in the fraudulent hierarchy. Markets without Protection remind of buying a diamond Engagement ring from a Street Vender. The Buyer might like the Price, but either the fiancée or the Police will be disappointed. Both Candidates should be aware that free markets are well-known for adulatory and adultery. The first hides many Sins, the last consists only of a Rape whose effects are sometimes felt only at the end of the month, and said effects may grow into a huge baboon. lgl

Why I am not an Investment broker

I would first like to apologize to those sparse Readers who have been disappointed by my late filing of this blog entry; I was busy babysitting a Dog for my Sister who had an operation yesterday–my parents just left Me home alone. It fits in well with the rest of my commentary, though. I don’t know what it is about Jackson Hole, but everyone reaches for the Big Sky speech, whoever goes there. Ben Bernanke finds himself describing the financial crisis as ‘gale force’; a subject that can be translated as a lot of people he grew up with in the Banking world are going to lose a lot of money before this is over, though it might have substantially much less impact on the general economy. He imagines that the Fed can save these people from the losses inherent, but that may be a forlorn hope. Ben dreams of a Day where Financials actually respond to the Fed, doubtful of conceptualism, and perilous of implementation. He has yet to answer ‘What if’ Fuel prices and Inflation does not abate through the rest of the year.

Some people may have made some Money over this One. They should realize that $114 is a current Touchstone, and no one should be Short or Long in my estimation until some Trend has formed. There will be Players in the Oil markets, but I expect they will take a bath, though I might change my mind if the Oil price were to drop below $110. There has been some shaky activity in Natural Gas today, and I expect it will impact the Oil price. Don’t think too highly of Energy until the rationale behind that is pinned. Last of all, Never Take My Advice!! I have been known to lose other peoples’ money.

The last Point I would mention today is the value of the Euro. The British economy is stalling, so the Pound should lose value. The EU most closely resembles the American economy, and Fed interventions, if Bernanke keeps to his goals, will bring a closer alignment. This tells me that the long-term trend of the Euro should be down, to more closely align with the American Dollar. I don’t think this will be a quick shift, but the potential exists over the next 48 months. People will ask me to quantify this information, and I will say the Euro is not likely to drop below 1.22; the real Problem here is the length of Time which it might require. lgl

Corners--Good and Bad

Talk about things which I have never heard of, rhenium would be very high on the list. It makes not difference; anything which costs $11,000 per kilo should be known about, especially as it is up from $300 per kilo in the 1990s. The Production rate of 50 tons per year makes am excellent Holding asset. The only danger would be discovery of some great deposit of the Stuff somewhere in the ground. I would be looking for about 50,000 tons of the metal, if I were a young geologist. I can only wish I was Anthony Lippman with his little Corner so vitally desired. Us ordinary people find it so hard to make a Living, kids!

I like the Sense of this Post, but understand the terrible destruction of the Goals inherent; Politicians are not about to surrender their political patronage regime. None of these Enactments will work unless Caps are first placed on assumable Debt by the Legislatures. Government Expenditures must be cut, of course, but will not be curtailed without Constitutional amendment. The trouble comes in the fact that it must be done at the State level, as the federal Government is already too overpowering with extreme reach into the lives of ordinary Americans. I would like to see something like imitations of the Federal Reserve in every State, with State Constitutional amendment stating State Governments could only borrow from these central Banks. Normative Banking procedures could bring some restraint to Legislative excess.

Mark Thoma does not see much manipulation of the Oil markets by Speculators, though I might disagree. Fundamentals rely on Supply being tight, and advances in Inventory will bring Price relief; a marked Event not truly witnessed in the Oil markets, after Saudi increases in Production, or reduction in Consumer Demand. I have also often witnessed a upward flair of Oil price shortly before the close of Markets, to insure Overnight, After-Market Sales range higher than the normal daily Run; most obviously to impact Asian markets. We get a new vetted Oil price by Market Open because of this practice. It must be said the entire Argument revolves around the exact definition of the Word: Fundamentals. lgl

Can I borrow a Buck?

Cactus at Angry Bear has a Post on actual Tax rates since Eisenhower. Study the graphs he has put up, and then imagine what a graph of growth of Government Expenditures would look like over the same Period superimposed on the charts. Remember that We have been engaging in Debt finance in all but a couple years of the Period. It is always beneficial to realize how much that Congress itself screws up any sound fiscal policy through catering to Special Interests and Politics. I would establish a Chart outlining the potential Strength of the Dollar over the Period, if deficit spending was not used, versus the actual Strength of the Dollar during the times involved; that is, I would do so dependent upon a greater success with charting which I don’t possess.

Mish shows that Fannie and Freddie suffers from the same budget accounting as does the federal Government, and suggests that the Financial markets will not handle the $223 billion, which is too large a sum to be rolled over in the next six Weeks. I will agree with that assessment, and state any Treasury absorption of the Debt will be totally Inflationary. My Solution would be to allow both Organizations to fail, a Crisis which would be less than the dragging decay of the Financials today. The major element, here, it the stoppage of these Two from issuance of further bad paper, either to Investors, or the private Mortgage companies. We will never get such bad practice stopped, unless We first stop the Organizations.

Mark Thoma and Jonathon Chiat espouses that the Bush Boom and Two Recessions were not so much a Recovery inside flanking Recessions, as it was simply an increase in Public Debt plus Tax advantages for the Rich. I can’t find much to digress from that evaluation. One has to search for any economic growth which was not financed by either Public or Private Consumption debt. Borrowing other Peoples’ money does not a Boom make! One has to worry when these same People desire for a return of their money, a Subject relevant in the discussions of Fannie and Freddie, and also in foreign sales of U.S. debt. lgl

Real World Pricing

The rise in Wholesale Prices may sound worse than it is, though the long-term implications are very bad. The reason lies in the fact that relief in Fuel prices will be absorbed by Business attempts to recoup earlier losses from inability to pass on Costs, and Wholesale prices are unlikely to drop significantly with cheaper fuel. The Wholesale Price Index can be viewed as a Benchmark, very directional in nature, and highly resistant directional change. What that means is that Prices flow to meet it, which will not turn to meet them. I wish I had done more work in the area, but believe it takes about two Quarters of persistent lower Prices to reduce such a Pricing Index.

Do you want to start a Hedge Fund? You may want to read this article before you start. One must have access to large amounts of Investment capital, hold down your Payroll, and possess a good Investment schematic. The best Investment capital is that which the Investor will not take back, even if Hell froze over. You should be advised that One must be able to supply one of the employment blocks for a Hedge Fund; notably, One has to be his own Stock analyst, and good at it. I know One who did not even hire a Secretary until his third year in business, and it still robbed him of 30% of the Hedge Fund Profits; he tried to make more than any of his Employees, but the Accountant continually beat him. I liked this article, as it teaches how Dreams translate into the real Business environment.

I stand on the opposite Side of this Issue, believing that Corporate taxes do nothing to inhibit participation is the strongest market on Earth; but in the interest of knowing One’s enemy, I present this Post. We are in an environment where Consumer Demand is slacking, though there are few Signs as yet. There is the Argument that Those who make the Most from participation in the economy, should pay less taxes; the hypothesis being that it would incite greater investment of Time, Energy, and Funds. I hate to be so rude, but must suggest that the Incentive remains to keep One’s money where it generates the greatest Return, even if it is highly taxed. We are at a Time when it is prudent to make Consumers feel wealthy, even if they are not. Asking them to shoulder a greater burden of taxation to make up for an abandonment of Taxation by Businessmen, may not be the most sound of economic principles; especially as there is no real indication that a greater supply of Investment funds will become available through lowered taxation. lgl

Inflation Strategies

Here is a Statement which stands as ridiculous. Opposition to one Trade agreement can only be construed as an increase in Isolationist pressures by a political hack, and committed to the propagandist ideation of the Double Lie. This is where a Position is named as a more adverse Position, then Supporters of the initial Position as slandered as the worst of the Supporters of the adverse Position. It has become a common trick since the advent of Dick Cheney into American Politics, and here I expect most of you would have thought it to be Karl Rowe. This chicanery has been going on longer than George W. Bush, and perhaps as far back as the Burr/Hamilton duel.

I think this might be sloppy Economics, something quite unusual for Mark Perry. Much of the M2 growth in the last decades has not been growth of Money, but growth of Consumer Credit. The huge advances in this area has substituted for M2 growth, and has added a further inflationary pressure in the form of high Interest rates seemingly independent of Fed monetary policy to great degree. Any Money-making system must be considered within the formulation of M2, even on a prorated basis.

People fearful about Inflation should read this Post, plus its varied links. The chief Problem with Fed Monetary policy consists of the fact that the policy measures drains Household resources prior to initial reaction, so that the Fed’s attempt to promote business has to deal with an already-stripped Household budget system. Conservatives and Business personnel must realize that We cannot await Bottom Line shortages to liquify Markets. I personally believe that Monetary policy itself should be discarded by the Fed, the fed funds rate set at 4.2%, all other Interest rates pinned off the fed fund rate, and that the Fed should concentrate on maintenance of proper Reserves in every part of the financial world; whether it consist of Banks, Credit Card companies, Fannie and Freddie, or the major financial brokerage houses. lgl

Chaos reigns (either in Mind or Life)

There once was a Time where Farming was an occupation and avocation; now it is only an Investment portfolio. The Change came from the management of Risk coupled with the elimination of hard labor, farmers replaced with Agronomists, and All dependent upon a high-fuel technology which is becoming super-expensive. The only Problem foreseen contains the kernel that farmers are being priced from the Market, and education in current practices of Agriculture comes with excessive Cost which cannot be spread. Long-term Trends will assure that there will be shortage of trained Labor within the next decade for Agriculture, and without this skill, there will be a loss of Agricultural Profits. Various methodologies to recapture trained Labor will fail, due primarily to the investiture of the new Investment capital which absorbs the farm product Profits.

I include this Piece simply because I want to cause confusion in my Readers. I challenge them to explain how this Post impacts the previous paragraph, and why. The growth in IT has brought both knowledge and Profits to Agriculture, but Production Costs maintained by Corporate suppliers have compelled the reeducation in IT for Agriculture. Risk Management, on the other hand, has insisted on academic accreditation in Agriculture; this means that Practitioners must have collegiate Degrees while continually updating their IT capacity, before even turning to the real labor of farming. Labor entrance is too expensive, and Agricultural Pricing remains too low to pay both for Investment and Wage Returns for Labor specialization.

I love this Post from Arnold! It actually highlights one of the growing Problems with Economics. I call it the Inflation of Management Risk. Here is how it reads: Economic models are continually being developed by bright young Economists. Hard data and Testing assure that the models actually express real economic reality. Everyone says ‘Wow!’ and adopts the model in question. This is all well, but then sensory factors take hold. The incidence of Exceptions increase with expansion of the program (failures increase in number), and the Cost of those Exceptions appreciate in Value (double-digit inflation over the length of the Risk management). Economic models tend to breakdown at the extremes, and economic programs erode under the impact of inclusion policies which both multiply the potential Risks, and eliminates potential cushions from Risk implementation. Anyway, any Government program begins to fail once you start to pour Cash into it! lgl

The Poor Ideas Some People Get!

Economics is the ‘dismal’ profession, but no one has ever considered why this is so. One has to consider the basic conditions of Journalism to understand: ‘Who’, ‘What’, ‘When’, ‘Why’, and ‘How’. Economics will always be able to tell you what happened to whom, make a good guess of how it came about, and cannot pin down When even after the fact. It is why I enjoyed this piece on Nouriel Roubini. I share the sentiment of Anirvan Banerji that Roubini stares into the Dark Side. Jeffrey Sachs and Stephan Mihm claim that Nouriel could be optimistic, even though they cannot cite evidence of that Truth. Proclaiming a Recession could be Right almost 11% of the Time, all dependent on how One makes the Claim. Predicting a Boom may give One a 90% Average, depending on exactly when you make the Predictions. The Economics stuff is too easy, so I will predict something else: Humanity will suffer another Ice Age before humanity leaves this World–Date optional! Let the Doomsayers top that!

Tim Harford suggests Wine connoisseurs taste the Price-tag with the Eye, rather than the juice with the Tongue. He hints that there may be something illicit about buying the cheap stuff, but as long as you don’t pour it into fancier bottles, you remain well within the bounds of decorum. There has even been a California Bottler who made a fortune injecting Grain Alcohol into grape juice at Six-Pack prices; tried the Stuff, but will stick to my Chevas. Tell people that they are supposed to like you for other things than just your Money!

I cite reference to this Piece because of its importance to just Anyone who has ever been engaged in Management of any type. I would first note that Economists adopt ridiculous Names just to embarrass me, in any attempt to provide them with honorarium of no Pay. The second, most important aspect states that Management must set Deadlines well in advance of the mandatory Schedule, in order to stay within the Time-frame of the Schedule. Time Overruns are the source of Cost Overruns, and Downtime is the bane of Management. Your Boss may come out and witness 90% of your Crew idling, while One is working incredible hard! The Boss will do something Stupid like Fire the entire Crew, rather than the hard-working member; who could not get his Work done according to Schedule. lgl

And along came John, smooth-talking John

Economic theory and modeling does not do well in Transition periods. The Contemptuous should be reminded that Readings from various areas of the economy are subject to a flow pattern, where the same impact from an economic trend with affect the total economy across about a 14-month spread. Anytime you dip into the Numbers, about 70% of the Readings are the new Trend, and about 30% of the Readings are the previous Trend. This is a real indicative hazard when the difference between Boom and Bust may not extend beyond 3% of the economy in real terms. Nervous Economists and Educators who face derision from Hecklers should refer to my argument here, though one might again face growing ridicule. The article, here, is trying to imply that things are not so bad; when in fact, Production is still being conducted in high-Cost formulation, while Sales are being made only in heavy Discount mode.

This article explains how Income is not keeping up with Prices. This explains the impact of the previous paragraph, but does not identify that this Purchase pattern robs about 80% of the Profitability of Production–all without the advent of a Wage Increase. Will there have to be such an overall Wage increase?–Yes! What worries me is that Resistence to such a Wage Increase will be great enough to delay the Increase, until such Time that the Wage Increase has been drained of any economic stimulus through the development of further Consumption debt. Commentators should understand here and now is where Inflation and its impact attains the greatest importance.

I think there is more nostalgia and wistful dreams in this assessment, than there is hard reality; at least in the Conclusion. GDP expansion due to the Rebates is unlikely to increase in Q3 higher than it was in Q2, the expansion coming quickly, but dropping off equally quickly as the unbacked funds are not renewed; the Consumers go out of Play past the initial Expenditure. The real Need for successful Stimulus through Rebates comes only by the purchase of Inventory by Retailers; simple Sale of Inventories means no economic stimulus. Here is the crucial Question: Are Businesses building Inventory stock, or are they unloading it? We do not even have to get snide, and mention Autos. We have only to say that Wages declined year over year in July–can We downsize the Government yet? lgl

Why are We here today?

Bartle Bull has made a sensible evaluation of American expansion in Afghanistan. It would take too many American troops and military resources to accomplish even a mediocre performance. Many conversant with the Country think We made a vital mistake in disarming the Village Bandit Chiefs, in the vane (or vain) attempt to strengthen the central government in Afghanistan. It created a vacuum easily filled by Taliban and al Queda. The central government proved to be only lightly benefitted, while disarmament left the Villages open to Taliban terror. The only viable American military objective, the closing of the Afghan-Pakistan border, has never seriously been attempted. Stationing American troops in Afghani villages, or regularly patrolling them, will simply feed Afghani antagonism to American occupation. Americans have yet to learn that any occupation, no matter how benign, can only generate hostility in Populations which are culturally dissimilar. Bull discusses the real futility of current American mission goals in Afghanistan, and the doubtful character of further American intervention.

Europe may get a Gold medal for Honesty, as I believe that the American and Euro economies are about Par. Simply put: I don’t trust the Bush administration Bean Counters. They has a horrible tendency to proclaim good Numbers, implying that the Bush Government is meeting their economic policy goals, then sliding in further Comment a month later without fanfare, stating that the Numbers were really not that good upon reevaluation. They were given the benefit of the Doubt in the early years, but consistent practice and declining fortunes has generated some complaint–at least Mine! George W. Bush likes to suggest he is a wild Cowboy, but how does one play Russian Roulette with the Cylinder empty of Shells?

Traditional Banking has weathered the Financial Crisis without relative harm. I think it not only proves that sound Lending practice could show a Profit without resort to risky financial instruments which could not be devolved, but that there was sufficient liquidity without such Instruments to fuel the economic development. I believe that distance will attribute the Finance Crisis to Bank Management malfeasance in 20 years time. It was most like scalping Tickets to events; a certain segment of the Market insisted on a Profits share where they had no interest or business. The financial instruments generated about a 9% Unload fee on Average, and the Crime was that Investors listened to their avaricious brokers. lgl

Bad headed towards Worse

The Day is really blah, mainly because of these Releases from the BLS, but connected with the fact that Consumer Demand will not get substantially better, until the Job loss slows. No one expects any bright glow from traditional economic industries in the foreseeable future; a major factor channeling a downturn in Business movement. House Construction has left the realm of the individual Household; these Entities will buy, but lack real impetus for anything but a Completed Buy. Retail Construction will not recover if Developers have to finance the Construction, with eventual Title transfers eating up too much Time. American Exports will begin to shrink from two Sources: the strengthening Dollar; and shrinking American Imports will leave foreign economies from purchasing a more expensive American Product mix. Oil is going up again, and it is probably reversible in the Short-term, but will again face a Long-term creep upwards. No one is happy with the current Mix, and Investment Agents are simply interested in maintaining a stable Schedule without enthusiasm for any Development.

Economists express the general feeling of the American markets. We are coming off the Rebates in traditional bad shape, with no discernible Gain derived from those Rebates. Oil is not a stimulus Package either, as it will not generate new Retail Sales unless Pump prices return to original Gas prices before the Oil runup; a factor likely only in one’s dreams. I could almost wish for economic policy power to insist on a Across-the-Board Wage Increase of 3%. I would rather lose Marginal labor Jobs, than I would knock down Solid-Wage labor because of inability to shift Production Costs onto Prices. I will really be declared a Communist!

Arnold Kling worries about long-term entitlements. I agree that the Numbers are atrocious, and are about to get worse in the Short-term. The Long-term impact is quite another matter. There must be erosion of Wage scales in Health Care as its labor rolls grow. This will be in combination with another Condition I must mention: previously in this Post, I have already established my bonafide disrepute of being a psuedo-Communist; now, I can be acclaimed as murderous and unfeeling, by the revelation that I expect Life Expectancy to start to decline in the next couple of years. Lack of universal maintenance health care, in conjunction with the over-medication of American and World Patients, will join with general Starvation in poor Countries to lower the Life Expectancy Worldwide, but especially in the United States. (There will be Those who doubt, but degrading Antibiotics will combine with ingestion of artificial substances, with delays of diagnosis, will start the downward Curve which will accelerate). lgl

Does Any of This comes with a Warranty?

Use of Private Contractors to fight Wars have been criticized since the time of Carthage, another War which did not work out well for the Employer. The Bush administration will finally reach $100 billion spent on Private Contractors this Year. The article does not relate how much of those funds went to actual Mercenaries, but I would estimate their employment cost about 40% of the Total. I have considerable ambivalence towards such Expenditures, sure that highly skilled professional soldiers deserve the higher Pay of Mercenary Contract. Patriotism is fine, but does not grant what is a healthy retirement anymore. The opposite Side of the Coin says that War becomes too expensive (not a bad thing!), and that the Hiring Agents make too great a Reward for Recruitment–which is far easier than ordinary military recruitment, due to the enhanced financial payments. I personally would attain the military training associated with regular military service, then opt for the higher Wages; what this does for maintenance of regular military forces stands as the real Issue.

This article sounds good, but is it? Fuel, Fertilizer, and Seed have all raised in Price since the run-up in Grain prices, with Property taxes to follow. Farmers can raise soybeans for $11.50 per bushel, and Wheat for $6.50 per bushel, but cannot raise Corn for $5.90 per bushel. Business personnel who doubt this should check out the Price-tags placed on Agricultural Equipment; such equipage necessary to attain the new Grain yields. Economists complain about the Farm Support programs, yet the operation of American Grain markets dictate such Support features. Elimination of Farm Support will automatically raise Grain prices about $2/bushel, after swiping out about half of the Farming operations, and the hoped-for recovery.

I will throw in this Post by Tyler Cowen about Walmart. Many may have misgivings about Walmart including myself, but I took a payoff yesterday; obtaining a new battery for the old Pickup truck for less than $60. It carries a 2-year Replacement warranty, plus a 72-month pro-rate. I had not bought a new battery in about 15 years–Good Luck and Car replacements, though I remember than the battery with installation cost me $140 then with a 1-year warranty. Walmart may owe its success to the fulfillment of Consumer needs, not simply low Prices; I especially enjoyed the lack of Cost for Installation. Know ye the Beast, before casting it into hell. lgl

The New Profitability

Petrodollars will be with Us forever, and will be screwing up Investment schedules for an equal time. Oil is a simple Mining operation, and as such, should be equated an equivalent Pay. The huge evaluation of Value of Oil in the ground results from the universal need for fuel, and the direct manipulation of markets to maintain high Oil pricing. Sovereign Wealth Funds will fail, as have previous efforts to dominate the World Investment structure, because they must! Efforts to pay off a foreign Investment structure while, at the same time, attempting to award the Managerial ingenuity will always destroy any Investment initiative through a loss of Profitability. One or the Other of the Mouths at the Trough must be eliminated. The One that goes is the Investor who is useless to the enterprise, even if it takes massive Inflation to nullify their share of the Profits–the truly great worry behind all this Greed.

Here is the base Excuse for the Above effect, with the Managerial class demanding an equal share of the Profits of their labors. The Pay Raises will always keep pace with the Gains enjoyed by the Investment class of Shareholders, fueling Inflation while cutting the Profitability of backing Investment. The real Problem is not only overall Inflation, but the fact such activity place Management in direct competition with other elements of Labor for financial Reward. Enterprise labor finds itself a loser in this battle of the Giants!

I am not as relaxed as Greg Mankiw about American ability to exist with low Interest rates. He assumes that the American economy is immune from hyperinflation, which has been seen in the Countries of the EU. I ask whether the activity of the Fed is not as much Mask of Inflation, as it consists of economic fuel. I remember a Day when discussion of Billion dollar deals was unheard of in the context of Private Enterprise; now, any deals of less than a Billion will hardly find notice in the major Trade papers. I am still trying to figure out How they are planning to extract such funds from Refrigerators, Couches, and Shoes. lgl

How You Organize

Israel is finally suffering from a Condition I warned against some 30 years ago (no great Thing–most everyone else did as well)–Drought! My Solution remains as simple and idiotic as it did back then; fill the Dead Sea and sharp Arroyo dams with Seawater pumped from the Med, utilizing nuclear power. Underground Water reservoirs would turn brackish, but still sufficient for irrigation purposes; desalination plants will have to be constructed anyway for Fresh Water. The immediate Complaint here lies in the increased Salts splayed on the land, making the land unusable for Agriculture. They do not understand the method to my Madness; the basic scheme is to lower the actual Temperature of the Land, leading to greater Evaporation from the Dead Sea and Dams, and higher leaching of Salts from the surface of the land from Rain while irrigating from Fresh Water reservoirs. The lower Temperature of the Land mass combined with the higher Evaporation rate will create heavier Cloud formations above the Land mass and more Rain. It is all about eliminating low-level Heat inversions. It is a very expensive program to implement, but acceptable in Cost because of Israel’s placement alongside the Mediterranean, and short transmission across to potential Dam sites.

Professor Shiller regrettably enjoys a belief in regulatory power; an unsound belief which threatens economic policy because of its shortsightedness. There is always an excess flow of Entrants into any Sector which expresses high Profitability, who are always willing to push the Envelope in that Sector to extract maximum Profits. Regulation only incites these Participants to develop more intricate Loopholes around accepted practice, to escape the potential Profits loss of Regulation. There will always be many Times the number of Escapists than there are Writers of regulations, always designing new Escapes from regulatory controls. The best method is simply to prevent Fraud, and prosecute Those who are obviously Deceptive.

Some Readers may not understand the previous paragraph. They should read Dean Baker’s Post, then read the article cited in the Post. Simply substitute the word ‘Regulation’ for the word ‘Competition’. It states that original Practitioners of bad loan policies face competition from Lenders who are willing to engage in even worse loan practices. The original Practitioners are failing because they cannot provide the implied Profits advertised by the newer Participants, though all agree that such Practices are basically fraudulent and Deceptive, because the Profits from the Instruments will never be achieved. Such is the nature of any business, where huge Profits can be organized. lgl

As the Plant Whistle Blows

Bad Export numbers for Germany can only mean bad numbers for the United States. Japan also is expected to show bad Export numbers mid-Week. Germany is off 8.4% year over year, the real trouble coming from the other Euro-using countries. The Euro has been too stalwart in recent months, but gaining no help from the shaky Dollar, so there was no relief from American or Japanese competition. Britain is providing little aid to Anyone, internalizing their markets slightly within the past year. South Korea has made a major effort in China over the past few years, and will find uncoupling from this economy to be hard, if Chinese growth starts to subside. Both Africa and South America is trying to curtail Agricultural imports, but it is an effort leaving behind a damaged Exchange rate with the major Currencies; making high-Tech imports hard to pay for with stabilized funds. The Worldwide Web might be here, but We are still working on a sound international Market system.

We are paying the Same for Less, but how is this New? The article acts like this is a new ploy, but has been around since my childhood. I remember a Time when Hamburger consisted of Meat and Fat, though We have long become accustomed to Water and Bone Meal, even at times, Soy product. I simply wish they would also cut back on the size of the Cereal boxes, as they are hard to store; I am thinking of going to sealed Containers, now that Overflow is not as great a hazard. My Doctors all tell me I have to eat smaller Portions anyway, though this Smaller is Better attitude is galling when it comes to Fruit. I actually wish that Less is Better would arrive for Medical bills.

This scenario harks back to the first paragraph of the Post, where the EU countries seem to be sinking faster than the other global economies, though China, Japan, South Korea, and Brazil all share the problems of industrialized nations. It is nice to know that the American economy is holding up well against the other economies, though it might consist of being on the Bridge of a Sinking ship. I had better qualify that, as itinerant Readers will believe I suggest there will be a Recession. I do not! What gives the appearance of a Recession is the alteration of Profitable sectors of the economy, where Trade is on the downslope, and Native package Retail is on the Upswing. American labor does not think so, but We are getting a slightly better Price in Income than other lands, due to the hardening Dollar and curtailment of foreign Package Products. lgl

What really shakes my Bank

Arnold Kling suggests Someone write a book about Freddie Mac. I would suggest Readers ignore the potential book, and simply read Arnold’s Post; which actually details the motivation behind the transgressions, and the futility of assigning culpability. The Memo was generated by people whose only Interest was covering their ass, and assisted throughout in the degradation of the financial instruments. I remember well that all 30,000 German Labor, Concentration, and Death Camp Guards insisted it was all Hitler’s fault. Syron initialed few of those instruments, and undoubtedly wrote none of them. There are Those who insist that ethics must come from the Top, but One has to ask what Organization Training can achieve in such manner, as subordinates rise.

We are again back to the Question of what Economists are for, and why do they so often not do the job, whatever it is. I will try to give the Reader a Hint: Economists should determine the viability of existing systems, and whether there is sufficient Resources to maintain the performance of said Systems. Such assertions may too grandiose for John Whitehead, and I acknowledge that statistical accounting error starts with gross data, and extends through model processing. Still, Economists should be able to answer some of the great Questions of the Age, like will We still be driving fossil fuel vehicles in 50 years, and if We are, where does the Oil come from in the matrix of the World economy. Deny it thrice, but there will be Those who demand an Opinion Paper.

Felix Salmon seems overly irrate at Alan Greenspan, but it basically appears to be on account of his approval of the current Bernanke policy. I tend to agree with Felix that Greenspan may be Senile before his Time, though I disagree strongly with the Bernanke policy. The Fed funds rate should be at 4% today, and should stay that way forever. Economics’ dedication to Margins stands as great Overkill, extracting a few extra Dollars out of the Boom, and saving a few extra Dollars from a Bust. It lacks real power, though, in any alteration of the Conditions which develop Boom or Bust. Sound Banking practice suppresses far more of the Conditions which threaten a Boom, and does soften a Bust. Tampering with the solidity of Banking practice afflicts every aspect of the Economy, and protects almost nothing in the long-run. We do not need intricate, new policy initiatives for Banking, simply the good old plodding practice of Old. lgl

New Ways for New Times

What level of compulsion should you introduce in going ‘Green'. An authoritarian approach will anger, through its excessive Cost placed on the Homeowner. There is also the real degenerative economic aspect, where ‘Green’ industries and suppliers enjoy a greater freedom from Price competition by creating a monopoly of regulatory Demand. Rebate systems lack financial sway, as they must either be Windfall, or non-influential. My personal Choice has always been to insist that all Electrical equipment should be Utility-owned, maintained and owned by the Power companies; Homeowners limited in their Right of Protest to esthetic declarations settled before a Local Commission. It is still too dictatorial, but Homeowner compliance and Energy policy must achieve a balance.

The Job numbers are bad, and the Federal Reserve expects them to worsen. I always ask myself why deteriorating conditions come right before the Christmas Season. Economists continually utilize the same old Rationales for the declining Labor Market, and they sound as bad as when first uttered. Reality states that higher Fuel Costs translates into higher Utility Rates, which incurs higher Pricing of Product, requiring less Product and fewer Workers to produce the reduced Product. Some form of regulatory power to protect Labor interests seems the optimum adoption, but the Conservative bent observable arising with Reagan, and now backed by heavy Money, would appear to deny any deviation from cutthroat Job eliminations to meet a highly variable Production schedule.

It is amazing how the treatment of Labor never intrudes into the Boardroom. Could Rick Wagoner or the GM Board be blamed for the lack of Sales?–No. Can they be blamed for the Management payscales in light of the massive loss of Sales?–Yes! A simple Federal law stating there could be no Salary increases or Pay Package increments in any Tax Year for any Business which laid-off personnel from any Production operation. Unworkable?–Yes! Could there be insistence that Pay Package Increases not exceed more than 10% of Wage Savings accomplished by Laid-offs or Downsizing?–equally Yes! Predatory slicing of Labor Rolls to save Executive Pay Packages from reduction can be stopped, with the proper authorship of financial rules by the IRS and Tax law. lgl

There will be Change

I have never been benevolent (translate that as ambivalent) towards Export of Intangibles. Focus of American Restaurants if foreign Countries has always curtailed concentration on American Tastes in the American market. Dedication to economic needs of foreigners in Management programs allows slippage of identification of American Business needs. Foreign Distribution has traditionally been financed by American Price increases for Product. Integration of foreign Management personnel substantially alters the old adage: The Consumer is always Right. The Outsourcing of Service personnel turns the Telephone into an Adding Machine, to speak finally to Someone who almost speaks English. I may be an old Grouch, but I expect at least 70% of my fellow Americans agree with me.

I would advise all Students to read this Debate, though I have not; I still might later if I find the time. Food Prices have been deeply affected by ethanol subsidies. A second Problem which I do not know whether it has been touched remains the Urbanization of prime agricultural lands in the highly capitalized agricultural Countries; the most productive land in the World is being converted to Houses, Businesses, and Streets at exactly that Time when huge new Food supplies will be needed. One of the greatest hazards which exist lies in economic sectors where the common Business alignment remains dependent upon international Corporate structures. Fuel, Seed, and Fertilizer extracts from the international Corporate structure has already sucked the Profitability from Agricultural enterprise which depends upon a spread market for their own Sales. Now, I should go back and see whether Anyone has agreed with me in the Blog.

I would not mind this set of reactions from Fannie and Freddie, if there was any break in the Cloud cover. The reality states that We are still in Gloom and Doom, with almost All assured that the reported Losses are not over. The long Drag is turning everything Sour, and the foundations are still shaking from Earthquake tremors. The Solution is actually Open Market sale of not Fannie and Freddie stock, but of the Mortgages, and not in entangled Instruments. It won’t be done because it would notify of the real problems with these Mortgages, and due to the fact that Fannie and Freddie would have to replace Management out of sheer embarrassment. It would finally get the Mortgages refinanced or foreclosed. lgl

The Thrill of Victory, the Agony of Defeat

The modern Business environment must be lived to be understood. It is the Land of ‘cover your own ass’ Memos, which provides Protection from any counter-cyclical degradation of a business initiative. They come in all shapes and sizes, covering almost any extension of Risk by any measure. This CFO probably even sent a Memo stipulating a Drop in Profitability, if a certain level of Loan extension was not maintained. I even know of a lawyer who sent a Memo detailing the dangers of not settling a Case out of Court, when the Jury was already deliberating the Case; predated of course. Memos extend the life on practically no Executive, as procedural arrangements are examined instead of Memos, but Journalists actually believe Superiors should remember them longer than their TV Guides.

The Fed is in a remarkable position to scare the Markets, like quenching hot metal by emersion in water. I will advocate a full Percent rise in federal funds rate. It is SOP to state that raising rates would kill the Recovery, but I would ask what Recovery. All the Numbers are headed down, with expectation of acceleration. No One expects that easing Oil prices will stop the erosion; what they don’t tell you is that raising the fed funds rate will likely produce no alteration of pattern in these economic events, as current commitments maintain the loan levels. The increased fed funds rate, though, would introduce a greater Profitability to the Banking structure, now that there is real suffering from Write-Downs. I guess I must play the Ogre again.

This simply proves that no matter what you do, you are screwing up when it comes to the economy. Gas tax revenues are necessary to build and maintain Roads, but Consumers are saving their Pocketbooks, rather than the Road Maintenance crews. I would explain that such Problems always exist when economies are over-capitalized, and Maintenance Costs exceed capable Payments from normal operations. Some Readers might not understand, but the essential Problem is that Cars and Roads are both too expensive, and too many Vehicles have been sold already; the excess number having driven up the Oil pricing, and cut down the Miles driven. Way too much Capital investment, way too much utilization of Capital. Does it remind One of health care? lgl

Walk on the Wild Side

I agree with Felix that it makes a good First Order approximation, but I wish they had set an inner parameter with an Estimate where miles driven were reduced to 24,000 and Gas mileage had increased to 24.5 mpg. What bothers me is the fact that Transport miles seem to be on the increase, though I have not researched hard numbers. They are bound to start a decline soon, though, and World Demand for Oil is going to Dip, before it continues to expand. I cannot see miles driven to increase either in the Short-term or the Long-term; a bad sign for the Tourist trade, most evidently in the RV Parks (I imagine there will be a 14% reduction for the Year here, and double that in the upcoming Year). There is no Quick Fix for the current economic infrastructure, because the Profits Turnover is not there.

Arnold Kling may possess too optimistic an attitude to economic disaster. I was just drug away by Washing Machines and Dryers, so I almost lost my Thought; but the doubt on the economy can be found in the drop of hard Capital in Percentage terms to soft Capital, basically accounted as human resources and/or Intangibles. Simply put: soft Capital will not make a Profit, unless it has a sound foundation of hard Capital. Soft Capital is like unto a jackrabbit, while hard Capital is like the tortoise; this never more so than in the area of Profits. Hard Capital rests on solid Investment Contracts, with rigid Payment schedules and constant (will almost never lower) Overhead Costs in its use. Few rapid Turnover Profits can be ground from hard Capital; thereby ensuring there will be almost nil economic Profits. Finance flows to soft Capital, on the other hand, because of quick, temporary economic Profits can be achieved. This Practice eventually drains capitalization funds from hard Capital, and the foundation of the infrastructure erodes.

I don’t want to blame the Victim, I don’t want to take a Bermuda Vacation, I want to blame the Government. I am going to anger Everyone, and now propose a $1/gallon tax at the Gas Pump. I have did this before, but there is greater reason for it now. The Tax would flood the Treasury with Cash, at a time when it is getting very valuable to cancel Congressional action. The Tax would be almost a dead loss for the Oil companies, who could not maintain their Profits under the potential loss of Consumer Demand; they also will not reduce their Exploration, Development, and Drilling because they are going to need the new Wells. Consumers will not be able to reduce their Consumption in the Short-Term, without unloading their SUVs for more economical fuel models. By the way, don’t blame Me; the Devil made Me do it. lgl

Book Value

One cannot agree with Mark Perry all that often because of his Conservative radicalism. This One, though, stands right on the Money. We have had a massive loss of ‘book value’, but no real loss of anything else as yet. Most Americans enjoy a Capital Worth greater than they possessed in 2001 due to several actual mediocre years; still, where they were employed an Asset aggregation. I have not done the superimposition of models of 7-year Intervals, I leave that to the Working Economists; factual reality still impels Me to state that We have done well in the most recent Interval. Capital Asset flow patterns follow the GDP lines, and are always generally higher than previous Periods. Everyone needs to stop and take a Breath, while letting Production Profits pay off outstanding debt; the whistle will blow to start the Race to Wealth again soon.

Floyd Norris ignores the entire Scenario of Windfall Profits and Losses. Do I feel sorry for GM?–Not on your life!. Do I feel happy for Exxon?–Get real! Neither Company had much to do with the alteration of their Profit margins, or do they present any superior or inferior Service. One would like to claim that Exxon is Inventive, though their relative refusal to expand Drilling operations makes this doubtful. One can assert GM lacked foresight as to Consumer desire, though that is a Crock; Consumer desire did not change until Gasoline started to head toward $4/gallon. Both Companies show the Profits degradation consistent with massive infrastructure and bureaucracy. Neither Company has forwarded a truly Original Incentive for decades. My Suggestion is rank Communism: force Oil and Auto industries to pool their Profits, and then Average the Total, with equal Payout. Guess What?–Private Enterprise did not do so good!

Greg Mankiw criticizes the right Stupidity, but for the wrong Reasons. The United States does not want a leadership role in the WTO in the arena of universal Trade agreements. We should not surrender major Trade advantage with large Inputs, in exchange for small Trade advantage with light Inputs. One does not build a viable Business structure by subsidizing Operations making no Profit with the Profits of highly viable Operations. One also does not subsidize Operations making great Profits, but where there is little chance for expansion. Both the ethanol subsidies and the Farm Bill are ridiculous, but giving away Profits to gain Trade expansion is also an idiocy. Someone, someday, may even insist that Government neither help or hinder economic production potential. lgl

The New Commons

What may be in bad Taste could be the fact that every Candidate We have for President has been a Party is the most Spendthrift Congress ever seen. Each has said ‘Aye’ to more corruptions of financial integrity than any Group before in History, Everyone claiming great value for the Country. The only Worth of the Tax Rebates consisted of ability to get reelected to Office, and all Projects simply paid-off Campaign Contributors. Every Candidate can be blackmailed by co-Conspirators in previous Crime by members of Congress. No Candidate can deny purveyors of insidious theft of Taxpayer dollars, because they previously also had their hand in the till. Some may call this Post Slander, yet I await any Campaign pledge from any Candidate promising to veto any and all bills which would put the Federal Budget in deficit. Libel or Slander can never be proven, unless the Budget is balanced within their Terms of Office.

The development of ‘the new Commons’ are just as corrosive as the old Commons. The ideology should be extended to the concepts of Social Security and health care. The Commons will always be over-grazed as long as Those who do not need are allowed to feed at the trough, as do Those who have Need. All Those who gain from this Practice will acclaim its rectitude, but it is exactly the reason for the destruction of the Commons. Social Security should only guarantee a minimum level of Income, and Medicare and Medicaid should only pay if the Recipients cannot afford to purchase Private Insurance. The Commons, in this Case, consists of Social Care of the Needy, and cannot be granted to Those not in Need, unless All face a loss of financial viability for the program.

Now that I have provided a Sermon which probably angered Everyone including my Readers, I will let All munch on a good Economist, who does not think the current GDP readings are anything to celebrate. I agree with him. The entire Scene fails to appeal to Me, and while I do not believe a major Recession will arrive, I think that there will be a slow deterioration of the American economy until the Federal Government achieves a balanced budget. I have listened to People describe the National Debt in terms of personal Consumer debt, but it is not; it must be ascribed to the a part of the Commons of earlier Note, and is being vastly over-grazed. lgl

Inspirational Message for the Day

All of the data which sounds good, but isn’t. Non-residential Spending has passed residential Spending. Translation please: The concentration of Retail outlets and Offices are increasing faster than is the concentration of Population; a good Proscription for loss of Profits based solely on the spread of Retail Sales and increased Distribution Costs in a conflicted, Transport Shortage. I know of restaurants out there paying their Overhead Costs, who rely on less than 10 Served meals for their Profitability. A whole range of Small Business will lose their battle with closure, if their daily Sales decrease 10%, and have major competition moving into their Service area. About 7% of curbside businesses are losing Customers due to lack of Parking, and facing a half-dozen new Entrants to the area. Do I make too much of This?–not according to the Small business managers.

Everything which you did not want to hear about the economy can be found here. Business Inventories will not pick up until Retail Sales pick up. Only Economists assume that Business managers will spend on the future, when they cannot meet their current bills. I wish I could find sound data on Business Carry debt, and can only assume that it is on the Rise. It is not a scenario where Managers want to build Inventory stock. It is flat wrong that annualized GDP would have been 4%, if Business had maintained Inventory; GDP might have been pushed up to 2.3%, but is debatable. It is known that Shelf Rent for Product has increased markedly over the Period, the known factor for Inventory Cutback. The Wage spiral is nonexistent at Present, though it will arrive with the increase in professional fees; something which the Fed cannot stop, the Professionals having lost almost all Trade except for the wealthy. Arnold Kling is correct as usual, and We have already killed the Geese who laid the Golden Eggs; it is not their fault that the Eggs turned out to be Iron Pyrite.

Felix Salmon poses the eternal Question: How does GM survive? The Answer states that too many major Players are tied to the Company–millions of Stockholders, dozens of holding financial institutions, thousands of Business fleets composed of GM Products, a Service and Distribution network employing Thousands more, and the forgotten memory of Dinah Shore singing ‘Drive the USA in my Chevrolet’. Americans are unwilling to surrender their fortunes and their nostalgia, in like manner that Putin is unwilling to surrender the old Command methods of Government. The problem comes with the fact that GM is getting as unstable as the old Soviet Union, overburdened with everything except Efficiency. lgl