Friday, August 15, 2008

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

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