When did Pandora open the Box?

Here is one argument which interests me this morning, a difficult thing today as I am consumed this Weekend with being places on time. I await the construction of a Possibilities Bell Curve showing the Average, Mean, and Median of accomplishment of the necessary purchase of Household necessities. Jobs lost are not the only thing occurring in the economy. Overtime and Bonuses are being lost, while the actual Cost of Living has actually been pushing higher at a constant rate. What I am trying to explain, admittedly poorly, consists of the fact that the Savings rate increases without individual will on many occasions, based upon individual inability to finance the purchase of Big Ticket items. This may portend a high Savings rate for a lengthy period, only shortened by labor resurrection by venue of shortage of labor under Baby Boomer retirement; sure to transform the current Business dominance in labor relations, with an alternate labor dominance of high Wages and security.

Read this general trail of banal brigandage, which reminds me Why I did not watch Paul Krugman on PBS last Evening. I am tired of congenial telling of How various opponents are wrong; all withing a format of Solutions which have relatively no effect, or impact of such minor construct that Relief might be mistaken for a simple Coffee Break. The long-term gain from all the discussion appears only as a release of emotional libido. I cannot claim any effective Solution to the current Recession, but I don’t see Green Shoots, where there exists only sour Weeds. We have lost momentum in the economy, and simple throwing Money into it will not work; especially with an ungrounded Currency which can lose value faster than gain of Stimulus power.

Herein contains most of the reasons I chose not to listen to Paul Krugman last Night. Paul always carefully outlines What could go Wrong in precise detail, then provides only a haphazard Solution set where there will be an obvious shortfall of successful Outcomes. Now, I am not trying to expound that Paul solve all the Problems of the World, or even just the ones that he highlights; I ask only for a consistent Program of established Measures, with some contextual probability of their success–I am getting easily confused this Morning. One can only hope this Drive through a land without highway Signs will not be permanent. I search for clarity in a complicated world, and find growing levels of confusing and confused theory. lgl

My yearly Socialist Day

Mark Thoma gives Us a good Explanation of why falling Wages actually increase Unemployment–I would read everything twice if I were a Student, and outline the 2nd Generation effects. A simple economic model would be to establish the basic Household Expenditures under the current Wage, and the basic Household Expenditures of a Household drawing a Wage similar to the Wage Cut; then add an Average $300 per year for Debt Service from the original Household Expenditure Pattern to the reduced Income Expenditure. You can add in the Inflation rate expected, if one wants to finesse the model. The frightening thing is the absolute rigidity of both Debt Service and Inflation. The compiled economic model gives the impression that a 3-5% cut in nominal Wages will evolve in a 10-12% Cut in real Wages. Most Economists would claim that my model reflects only a nominal Wage reduced by the factor of Inflation, but they never had to scramble to pay their bills like most Households. One has to start with brand-new entrant Households, to achieve the economic effects which Economists expound. Economic policy of Wage Cuts to incite Employment seem outright Wrong to me, but what do I know?

I find this Post to be most amusing, because of the structural difference between the OMB and the CBO. The OMB is a What-If organization, while the CBO is legislatively limited to current enactments, no matter How Likely they are to be changed. The CBO cannot legally envision alteration of the federal government, so they must base their predictions on current and future legislated Expenditure patterns. The OMB can run free, and dream of Cuts in federal spending without proving those Cuts are realistic, and even suggest that future federal spending could be more economically effective than is the current mess; which they can suggest may be an improved pattern over the general run of federal involvement. The Reader should understand that the Founding Fathers sought to limit excesses in Spending coming from Politics, by limiting Enabling Acts to Congress, without President or Department able to announce their own budget. No Decision-making process will ever survive independent of Politics–your basic Corruption process; at which time any Savings go out the Window.

I cannot argue with this Post by Mark Perry, the information is relatively correct in all parts ( I have not checked it). The Question to be asked is not concerning the data, but How the inequality in Income developed which led to this Tax placement scenario. It was not a vast increase in taxes–either on the Rich or Poor. This means it had to be a vast acceleration in Income growth for a specific segment of the Population, while Everyone else remained static in Income. Study indicates a culprit totally unrelated to economic efficiency; specifically, the defeat of regulatory controls at all levels of Government. Business adherence to regulation by Government is as low as it has even been since the Continental Congress, and the Appeals process has been deformed in the Courts, to assure this continued independence. There will not be much Change in the current matrix, until a solid Regulatory Reform system is implemented; and I feel so sorry for those One-Percenters, who make so much money that they have to pay for the Government (of course, they did buy it!). lgl

Nuts and Bolts--sort of

Tyler Cowen writes far better, and with more assurance, than I can about high frequency trading. I have only one point I would like to make: this style of Trading could well freeze the Market price for anything and everything until there is massive pressure to Sell or to Buy. The barrier shift would vary for each element, but the average Price variation might adjust to around $8 per item, as it becomes an issue of competing computers, Orders, and Cancellations. Why? Because no Order will clear until the battle of competing computers is over, and no one can get their purchases accomplished. I believe seriously that there is a point of Computer freeze, and another point of Computer burn, associated with every purchase. It could well kill the Market system.

Mish explains an email fight he got into over the ethics of Walking Away and the foreclosure system. As a realist in possession of remarked little knowledge of the area in discussion, I can still relate that due to the Conditions of past mortgage lending, an indeterminate number of Mortgages were taken out with prior Lender or Borrower knowledge of future invocation of bankruptcy, foreclosure, or necessary rewriting of Loan conditions. The financial crisis developed because of the frequency of this knowledge as much as it did because of adverse economic conditions. This was what the financial crisis was all about, no one playing according to the Rules of Lending. It was only a matter of time, waiting for the problems to develop into a full-blown crisis.

I included this article at first because I imagined that Paul was talking about my style of punditry, but decided his stuff was sufficiently decent that I could enter into a diatribe against the Fox News Network. I object to a Corporate propaganda network. I further object to Topic Choice being dictated by the estimated level of misinformation which the Public will swallow. I feel repelled by deliberate misrepresentation of policy advocations, simply because of opposition to those policy initiatives. I deplore the Sensationalism approaching the yellow journalism of Old, simply to incite Anger or Fear. I cannot find any generosity in my Soul for Those who attempt to incite Internet lynch mobs to drive responsible commentary from the Airways. I most am angered by the contempt expressed towards the Public, who are expected to swallow the distorted flow out of Stupidity. Jon Stewart and Stephen Colbert can at least claim a search for humor; Fox News has nothing to blame except a lust for creating division where no previous antagonism existed. lgl

The New Economy

Mike Shedlock has put into context what I have felt from the first, that the economy will be stable until the complete retirement of the Baby Boomers. Elements that Students should contemplate from the information are such:

1) The $400 Billion in Baby Boomer Savings: There will be practically no real Savings to the Generation as a Whole, as Unemployment rates of Boomers will chew up a lot of assets. The Net Effect of Boomer Retirement will that the Boomer Generation will still be unprepared for Retirement. Boomer Retirement will still be a vast Black Hole for Government and economy.
2) The Boomer share of disposable national Income will decrease by about 4% per year from Now until Retirement in 2017; it almost totally replaced by Government expenditure due to the Cost of medical care.
3) Boomer share of Unemployment will almost be double that of the national unemployment rate by the end of 2010 in my estimation, likely to negate the growth rates in younger groups due to Boomer control of disposable assets.
4) The economy is going to structurally Downsize within the next decade, as We have a smaller Consumer market, with fewer Consumers with Dollars. This will lead to less Employment with reduced Pay, unless the Money Supply is inflated to hide the Downturn. It is at this point that One has to ask if a Period of Deflation is actually not desirable, just to get the slower elements in the Consumption market to recognize the reality of the Recession.

The impulse of economic growth has switched to China and the undeveloped World. Their advancement will be with less personal Consumption growth, due to the sheer Numbers involved. The American economy could be in a very advantageous position, if the American Consumer and Business took cognizance of current conditions. The Stupidity resides in the fact that Government and Advertisers would hide these factors from the American Consumers. We need the Price increases which reflect the increased Cost of Production, and a Government and Fed which does not inflate the Money Supply artificially. We will get neither, and it will cost Us. lgl

Blowing in the Wind

I would first like to state for the record that I don’t usually read this Guy, and sort of fell into this article. The Individual’s Plan sounds sensible on Paper, yet it seems to hold a number of defects for myself which I will outline. The first problem is that it does not address the Uninsured; doing relatively nothing to entice their subscription of health insurance; it basically granting further tax reduction for Those already purchasing the full Coverage package. The first Comment on the article defends pre-existing conditions clauses, which might give the Reader a more-rounded assessment of the article; especially as the Comment section is obviously edited for Content. I await the New Wave medical insurance instruments which will flourish after the passage of the legislation, which pays a Return without taxation on all investment premiums unused for medical costs. Some would state that such policies would be impossible, but funded by Government support provisions; it is the new medical insurance of the future, with the Tax Deduction making the Investment Cost of $45k per year with tax rebate of $15k so much easier. The real problem, though, comes in the fact that it does not touch the pool of 50 million people who will still not have covering medical insurance; and the massive Cost still thrown on City and County paid Emergency Room care.

Paul Krugman outlines the congressional framework towards health care, and insinuates that it is Big Pharma who is the real block in the institution. I believe it is far more reminiscent of the JFK era and the Clinton health care debacle. Congress does not like Obama, though he came through that institution; equally as Conservatives did not like JFK and Clinton. They, including the Blue Dog Democrats, intend for Obama to hold the Office for only one term; having surmounted the politically-motivated Black and Brown reality, they can now discount Black and Brown on the basis of lack of depth or incoherent policies. I am not playing the Racist Card here; simply stating their desire for a failed Obama administration will leave them without threat to their own agenda, which does not represent White or Black, only Special Interests. The very phrasing of the Acts under consideration preclude Congressional passage, and this Writing comes from deep within the bureaucratic structure of Congress.

A real attempt at universal health care would require Up or Down Voting on serious provisions establishing certain Goals. If I were Obama, I would call for a procedural alignment–a basic Test list of Questions for every member of Congress–which with their Answers would be entered into the Congressional Record. I would advise him to have both the Test Questions and the Request for their Answers to be ready and included in his State of the Union Address. These Questions must be specific and understandable by the majority of Americans, without allowed wiggle-room. The Questions should be 30 or less, and a campaign outlined to chastise Those who refuse to complete their Answers for the Congressional Record. Many would ask what this would accomplish, and I will state for the Record that it will probably be the only Means by which Obama will ever achieve a second Term of Office. He can afford to be defeated on even important issues, but he cannot be shown to be indecisive or easily swayed. lgl

Winds of Change

The Whole of this article offends me even if true; I possessing doubts as to the validity of Farmers killing themselves because of Agricultural prices. I had a Farmer Cousin who did commit Suicide, but only after the IRS was going to give him Prison time for some serious Tax evasion (We are not all pure of heart, even if good with God). I have watched Farmers face bad weather, Drought, Plants blights, Livestock losses, and also Mortgages requiring payment of more than $100k per year. They live in a World where everything which can go wrong, does. Farmers commit Suicide because of personal problems, they being too sensible to kill themselves over market prices; which they have watched descend on a regular basis. Farmers know it is all a question of Seasons, something akin to an abusive father; who shouldn’t be so violent, but loved anyway. Farmers will prevail, and will choose Death for something sensible–like bone cancer.

Don Boudreaux again gives Us access to his disbelief in the monopsony power of labor markets. The Argument is so ethereal, with evidence as ghostly transparent, that either Side can be argued with vigor. I happen to believe that employers divide their labor into absolutely Critical, highly Productive, and Advantageous. Bad economic times will see the dismissal first of the advantageous labor, followed by the highly Productive labor, all without hardly any danger to Critical labor; a factor of doing business. Most business managers hold to the belief that mundane Housekeeping and Cleaning duties are Critical; they immorally committed to the proposition that cleaning up after yourself is demeaning, a waste of their time, and a paid service to be maintained until bankruptcy. Can Anyone discern how the monopsony power of minimum wage labor might develop? It may be pretentious, but is also a intrinsic reward to business management. Minimum Wages are always paid and subscribed, though Economists always doubt that fact.

Anna Schwartz and I agree, though I do so with vast regret. There is no specific action which Ben Bernanke undertook in the financial crisis where he was not supported by the main of economists and the banking community. It is a sadness that the economic school of Thought which brought Us the financial crisis remains the determinant of economic policy. We are in the midst of great Change, without alteration of the leadership cadre. New ideas still don’t extend beyond a rehash of older proposals, which often had proven fruitless with their first expression. What We have accomplished is an increase in American debt, alongside a loss of American Consumption power. Stimulus effects no Shock with little Buying, because of the Credit over-extension; the true economic Shock in the economy. We need to turn it around, and I don’t expect the current leadership can achieve the task. lgl

The Spinning Wheel

Mike Shedlock presents a bleak picture for the nation’s Hotels. It is very interesting to note that a heavy majority of the distressed hotels all refinanced between 2005-07. It tells Us that business managers all recognized the altered nature of loan structure after 2004, and bankers knew of the insufficiency of collateral and Interest rates; with the lack of loan structure sure to bring the financial crisis We all know and love. It lends credence to a belief that Some have that We should adopt a policy of ‘Hang Them High’ towards the Bankers. The new finance instruments were obviously light on repayment without collateral, and possessing of unsustainable Interest rates. The most telling element is the bankers’ acceptance and rapid expansion of the style of finance; clearly recognizing lack of contractual commitment to the issuances.

The state of the economy created by the financial crisis seems no better, with all Railroad stats appearing to be down about 15-20% year over year; while the total is down drastically from a lot of years. I believe this loss of traffic in the Railroad system may be systemic rather than cyclic, and may be around for a long time. This would indicate a Sea Change in the economy, where Expertise rather than Product becomes the basic transference mechanism. It seems to me that We are entering an era of more heavily capitalized, smaller Plant capacity with higher Production per Unit. No one wants the high use of Carbon energy generated under the previous Cargo numbers, Fewer can afford the pretension of foreign luxury items, and None want to finance the expansion of the transport network. The current economic conditions suggests a spread of modern technology back to the small towns, where Pollution is actually easier handled, Living Costs are lower–therefore lower Wages, and the Community College system is geared up to train technological specialties. I think We are in for another technical revolution, one I predicted by at the turn of the century.

The grasp of the previous discussion may better integrated with review of this article. There is vast spread in the Wage and Income levels by geographical locale within the United States today. I believe that this spread is unsustainable, and Production must move to a cheaper Wage scenario; a factor which will take pressure off Land prices and Construction around concentrated areas, while raising Wages and Prices in rural areas. I simply expected the Move to be more gradual than I now consider. My current evaluation stands that it will occur within the next decade, with a Transfer of 40% of Production Capital away from the metropolitan areas. lgl

Dreams--Old and New

I would appreciate it if my Readers would read this Post. It discusses the real limitations of the use of Self Interest in regulating the market mechanism. I always begin to think on the discussion in terms of corruption, though the excesses of Self Interest also contain a wide range of benign influences which hold deadly effect. Some would acclaim that Markets themselves contain inherent evil; yet, these are the very people who would use Markets to determine political and social decisions. Democracy itself is a basic Market system, and to ignore the Self Interest innate to it would be foolish. Making the hard decisions often takes a greater discipline than which Most possess, and the greater the expected value of corruption, the greater will be the insufficiency of the discipline. The only hope past this Point remains Transparency, though the later itself contains it own inherent evil. I, as a Realist, recognize that no system devised by Mankind will be perfect, and even if it were, corrupt elements would destroy that perfection to develop channeled Self Interest. There was once a Dude ( I will let the Reader find him if desired, as I have forgotten Who–Senior Moment here) who asserted that any human activity or design will be corrupted within 30 years, even if it were run by God. Mankind simply has not been created to be idealistic.

Arnold Kling presents with this tract, in line with the previous Thought, and establishes some justification for the glorification of the Past; Finance being one of those areas where perfection may have been corrupted in the name of Self Interest. I simply don’t know if pure fractional Banking holds greater virtue than does Credit Defaults Swaps, as the value of God himself rests in the integrity of the parishioners. Holding on to traditional Truths may only grant One the potential to become a Rube in a Shell Game run by Others. I would advise all Readers to walk the financial Minefield with due diligence, with a strong grasp on your Wallet.

There is currently a Plan afoot to shrink Cities (by venue of Mish). The fact is that Cities are just as affected by the financial crisis as have been Homeowners. Cities are way over-financed, without even access to Credit for Debt Service. The basic Plan may sound stupid, as it is a simple elimination of the Upkeep Cost of City Construction, by return of the development to pasturage. I fear the Solution will work only if redevelopment in the areas reduced is forbidden, which it will never be in the Long-Run; it will only cheapen the Development Cost of the land, and will impel a Reconstruction Cost on City Services. Always be wary of the creation of a Developer’s dream. lgl

Energy Organization

I am running behind schedule this morning, and don’t much care; so this will probably be short. I will give the Reader this Post, and advise them to follow all the links inbred. I have had several ideas about the whole process of carbon sequestration, and I might as well present them here:

1) The approach to carbon sequestration is all wrong. Simply putting Carbon in the soil is economically inefficient; always maintaining the sequestration Costs without search for any economic benefit.
2) Various methods for attaining a profitable Gain from Carbon Sequestration should be explored.
3) One idea I had was so outrageous as to be turning Plants into a Lightning Rod, which transferred energy to underground plates connected to the network Power Grid.
4) I like the idea of transferring low Watt energy through the Air by means of Microwave technology, where this and the previous idea could be combined with possible Battery technology to provide a steady production of Electricity for minor Cost.
5) The greatest carbon sequestration potential resides in total dependence in surface Carbon deposits; the most fruitful being Sewage and Garbage. There should be introduced an new Energy policy whose aim is no more dumping of excrete Carbon in either land or water.

I could run on about mythical energy technologies, but think it is far more important that there be an economic conference of basically Number Crunchers with dedication to determination the final Costs of potential technology Outcomes from adoption of energy policies. We cannot determine an effective energy policy until We know the exact worth of producible benefits, and how much attaining those benefits will cost in capital investment. We have to pick Cost Effective energy technologies in a uniform format, so We can connect the Total into a national network. lgl

Working off the same Page

Mark Thoma explains the methodology of election to the Fed policy-making apparatus. The leadership issue at the Fed makes me laugh in some ways, it reminds strongly of Congress. Or perhaps I should say the British cabinet system of Government. Every decision made must be a Consensus, where its Protagonists receive the support of another member bank and/or district bank by backroom discussion. Support garnered may be based upon any range of backroom negotiation, and often that Support has been guaranteed through disparate measures functionally opposed to one another. The policy is picked, the methodology is chosen, then Everyone awaits the fate of the policy which has never been consistently supported by Anyone. The problem, though, sits within the decision process. Any alteration of policy must initiate the original selection process, with new Promises made, and new Support elements aligned. Previous policy, therefore, develops a deadweight where it is maintained until a new coalition can be formed among the ranks. Ineffectiveness becomes integral in the process, where even obvious obnoxious effect can be maintained, for failure to derive a Consensus among policy-makers.

Opponents of any political measure will always assure that the Time is not right for going ahead on any measure dealing with the problems involved. Obama is faced with the political Wind filibuster, where the foundation block of his policy is being delayed. The Opposition knows that they need to buy Time, until American attention turns to other matters. Obama needs to approach the problem of health care in simple blocks. I would suggest he start with a medical services bill, where a automatic Payroll enrollment of 1% Tax on Income would pay for a set Dollar amount towards Doctors’ fees, Clinic services, and Emergency Room Care. The Dollar amount should be alterable by medical board recommendation and approval by Congress periodically; the Dollar amount should be assessed to pay about 60% of formal bills, a position where medical Providers would absorb the lost income because of the volume of Patients and overcharging in the first place–a situation quite similar to Medicare today. Getting this position attained will allow for more fundament health care reform, without the organized Opposition currently resistant.

You can get some idea of how much health care is costing the American taxpayer, both individually and in aggregate. The fact remains that We can do little for the Individual taxpayer, as there will be continual need to expand the taxable base and the degree of Charges to the majority of Taxpayers. We can vastly affect the aggregate, though, and limit the excess Charges of health care; making it cheaper to obtain and maintain. Opponents to health care reform must be led to understand that universal measures of health care is the only effective means to expand the taxable base from the huge Public expenditures of today. Supporters of health care reform must understand that We cannot provide any freebie medical provision–as it costs too much, but We can introduce an effective limited Cost schedule of health care. We have to get both Sides working off the same page, before We can even reach Agreement on the Need. lgl

Digital in all things!

Macroeconomics fails of Insight in the current Crisis, according to this Post. Many come up with rationales, but all seem to be a little too insignificant to bring on the level of distortions. I don’t study these models myself, because Booms are all different, Recessions are all different, and transitions from Booms to Busts are all different. I also have a theory about the magnitudes of an Economy, believing that massive deviation of capital investment will radically alter the manner which an economy will react to things like Stimulus, Inflation, the Money Supply, and Resource Costs alterations. A large Ship is much slower to respond to the Wheel than is a smaller vessel, and economies are perhaps the most massive vessels in existence. There is also the fact that any model in which 4 or more Inputs vary drastically will inform as much as Toilet Paper. The only good thing about Macroeconomcs consists of there being only a likely half-dozen outcomes for any Issue, so Most of Us can maintain a 20% Average in forecasting.

I bring up this Post, because it has links to interesting elements, and David is brave enough to risk jogging on Texas roads in early morning; exactly when previous night Drunks are racing for Work. I will believe in Deflation when I see it–a probable never–and cannot integrate How it could possibly be damaging, if lasting less than 2 years. I do dread an ingrained Inflation propelled by injected amounts of Cash from Fed and Treasury. The Fed says it can sell Treasuries fast enough to slow Inflation when it appears, but it will not appear in Treasuries’ pricing. It more general form is in Resource prices, and I don’t understand How the Fed is going to convince the Investment world to buy Treasuries rather restock their Inventories. A Stitch in Time–but hey, We already dropped about 30 Stitches.

Nouriel Roubini has been predicting averse economic results for as long as I have known of him. He can find a half-empty glass, even when there has been a little overflow. The trouble is that he is always so close to Right, but not really there. The law of probabilities suggest that he must get it right on the money soon; so We can all congratulate him on nailing it. He states Recovery may be a U, but more likely will be a W. My greatest fear is the belief that it might be a Internet Recovery of www. This monotonous crap may haunt the next decade. lgl

Hole in One Golf

Greg Mankiw could be asking a Question which he might not want answered. His implication suggests that healthcare reform must help reduce the long-term fiscal deficit. It is a very slippery slope, this one; and could be too easily turned to favored economic elements. What if the Bush Tax Cuts had to be revenue productive, or canceled for the year? What if those wonderful Business Tax Exemptions were treated in like manner? How much chagrin would Conservatives undergo, if Tax law was based upon fiscal neutrality, and the federal government absolutely had Tax rates based upon elimination of fiscal debt? It is sad that Conservatives can come up with fiscal neutrality only after a 20-point deficit in Tax revenues. He who was associated with the most Spendthrift administration in history should not throw stones at the Glass house created by Conservatives; the last time I reviewed the material, Clinton was still paying off the national debt up to leaving Office.

I ran across this article through the writing of Gavin Kennedy. I have always believed in Adam Smith’s Invisible Hand, but not in the manner most cited; reread the previous paragraph, and ask whether the fiscal deficit as described is not a failure of a universal turn to that Invisible Hand. The award of Tax benefits without universal application negates the operation of the market, and the dysfunction of fiscal balance comes from the loss of guidance from that Hand. Here is a hopeful greater clarity to the Point: You first accept a situation in economic run by market forces. You then introduce an unequal Tax impact on such operation, thereby altering the payment schedule to the elements of that production. Will not this interference both alter the revenue generation of the Tax, but also the economic performance of the activity? It is very easy destroy economic function, when you have introduced both Debt and Debt Service in addition to additional tax to any element in the economic matrix; all of which have been introduced by the skewed favoritism of the Tax policy. Many Economists praise the glory of Tax reductions, but would deny the decisiveness of revenue neutrality of the Tax impact on all components in the economic process–not just Business interests.

One can find the lasting impact of distortionate economic policy impact, and the long-term outcome from the policy. Everything We do has down-the-road implications, and those effects clearly are not what We desire. The Stimulus is a case in point. Everyone is trying to figure out what throwing a half-trillion dollars into the system will do to long-term payment schedules, while trying to ignore the fact that the Stimulus shows no stimulus effects. Now, We are talking about Doubling Down, and gambling that something which had no observable impact, will generate vast reward if We spend twice as much or more. It is going to be a long year! lgl

Growl and Snarl

Mish has a very dim view of the operation of the Fed. My problem with it remains that he is mostly correct. I cannot come out and say that the Fed, as developed by the Keynesians and Mometarists, is the worst mistake adopted by the Government; though I feel that way about 5 or 6 times a year. The Federal Reserve is the Bank for Bankers, and should maintain a policy of sound collateral policy. The Concept that such a policy does not exist at the Fed should embarrass Us all. All you need is State or Federal registration of charter, and the Fed will extend one Cash; some States will grant one such for extremely little Cash. The greatest hazard of the Fed, though, may be the failure to acknowledge their own failings. The Fed refuses to publish their own record of loan failures, a record which must be worse on Paper than the Consumer Credit industry. It would also be nice if they would record publicly their Recidivist rate of bad loan lending. My major point here must be a request to know How Much Money has the Fed cost Us in bad loans over the years, as Private deposits make up their collateral. Just wait: they will explain I do not understand fractional banking; yet, an implied investment is receiving a negative rate of Return.

Go through all the links at this site, then ask Oneself whether ‘Own to Rent’ policy would ever be a good policy. My understanding of the Concept may be flawed, but it is much like Fed policy, without and resort to collateral outstanding. I sort of like the idea, though, and believe the only element lacking is uniformity. I would have a law or regulation by national entity insisting that all Mortgages include such provision up-front, with initial listed provision of Pricing and Cost; this means reduced level of monthly payment, and largesse and extension of the added mortgage obligations. Only these provisions could make ‘Own to Rent’ a viable financial element. Anything less would lead to another round of second mortgage foreclosures.

Reading this blog entry depresses me. The current level of political performance raises my ire, and this is because of the major dependence on Face–like the Chinese. The Post states that the major impediment to the Obama use of the Veto remains the factor of a Democratic Congress, and the chance of an Override. Neither should have the slightest influence in the use of the Veto. It is a Power granted to the President to forestall legislation which is particularly unworkable from an administrative Standpoint. I will imitate the drunks at a local bar, and state that if I were President; I would have a dozen overturned Vetos by the end of my term of office, all based simply on my disagreement with the terminology of the legislation. Of course, I have always been considered anti-Social. lgl

The practice of Malpractice

I was reading this thing, and besmirched by many ugly Thoughts on Health Care in general, and Medicine in particular. I then felt like cold water had been thrown on me, as I realized it was Tax and Corporate policy I was mad at, and the confusion created by lawyers constituted the major Culprit. I delved into the depths of my mind, and reached the realization that the Original Sin flowed from Liability Law. I decided I should bore the children by examination of the Situation, just so the Way, the Truth, and the Light could be divined (God will condemn me for the metaphors).

The first Step will be to outline the hazards of the current Liability Law. The first destructive force resides in allowing the Gamblers to establish the magnitude of their own Wagers. Congress or Court should limit the amount of financial transference, just to remove the smell of a Lottery from the Courtroom. The second evil resides in the lack of relationship between judgement award and medical practice. The later becomes a pattern of eliminating Courtroom risk, rather than maintenance of health, or reduction of medical care Costs. The third evil comes from the Jury selection process, continually asking totally unqualified personnel to stand in judgement over professional practice–whether as Jurors, legal Representatives, or Judges. Now We turn to the manner in which Order can be derived from Chaos.

I would limit all Court judgements of Liability to a set amount per year–I would suggest something like $25,000 per year for the length of period of the Injury, plus the full Costs of the recuperative medical measures up to $100,000 per year. Legal fees are to come from the above stated amounts, but at no greater rate than $5000 per year for each legal firm. Legal awards are to be paid by shared Costs of Doctors, Hospitals, and Insurers. Doctors, Clinics, or Hospitals are to pay up to, but no more, than 1% of their Net Income after Expenses and Taxes per Award; Insurers legally bound to pay the rest of the Judgement Costs. Medical personnel, like Driving a Car, must have malpractice insurance; but Insurers should be prohibited from charging a greater amount than the above stated amount of 1% per year of Net Income of Doctor, Clinic, or Hospital. Insurers will be far more capable of establishment of Medical Review boards, than will be Courts or the Doctors themselves. Attorneys will be far more capable of establishing rightful Injury, if they perforce must bear the Court Costs until they are paid through the proscribed Payment schedule. Juries should by law be constituted so that at least One honorably employed medical professional be included in the Jury, and two previous Patients of the Defendant also are chosen for the specific Jury duty. It may sound a little unworkable, but such a Process will carry long-term benefits. lgl

My cynicism knows no bounds!

David Merkel provides a good link list, even if his postulates could use a little work once in a while. I agree with David that China may be imitating Japan of the 1980s, bringing online a huge capacity for which they will never find sufficient market. The only difference may be a possible creation of an internal market for the Product, though this is an impossibility unless and until China can find a way to raise internal Wages in the traditional Production sectors. I believe that the U.S. Dollar will lose its appeal as a World Currency, but no one Specie has the depth to replace the Dollar; the later backed by years of practice. China always fails the Test of Progress, although American commentary has asserted that there would be vast change in China, going back as far as the Opium Wars. China, like Iraq and Iran, still gets entangled in the personal corruption of their own decayed cultures; a circumstance where society long developed the path of personal corruption, and such corruption allowed the only permanent familial gain. Americans always fail in the Export of American values, and always wind up with a sense of betrayal although it is only common Native business practice.

This Washington Post article worried that Congress almost cited Henry Paulson for twisting Ken Lewis’ arm to get Bank of America to take over Merill Lynch, whereby both Concerns seem to have made money. They did not see the true drama of the Day, where Paulson was almost cited for Contempt, for playing with his microphone. Leaning forward and backwards in your chair must be as bad as talking to your classmates during Tests. The aftermath of the debacle will be that Everyone will make more Money than they should, now that they have been cited for being impolite by Congress. I bet that Bernie Madoff would treasure the rigors of testifying before Congress. Still, We must press on!

Arnold Kling will teach you the elements of Economics, even if he cannot tell you exactly what happened in the financial crisis. I actually enjoy his first Question the most, knowing that the excess Cash flow of the non-Tax years of Bushism injected a bubble everywhere it turned. It was only a game of Musical Chairs to determine which bubble would burst first. His third Question remains the pertinent element; to wit, What would have happened with no Bailout? It is what I think should have happened. The Threat level existed only in the minds of the Big Bonus boys, later transferred to Congress; Americans have survived multiple Hard Times, and more than once having to re-Start the Banking system. Bank Management simply managed to keep their Jobs, by Government paying about 200 times their own proclaimed worth. I have never witnessed a place where exchange rate regulation ever affected capital flows, but Arnold might know something I don’t (Please don’t say probably, I feel sufficiently outclassed as it is). I also would ask what a ‘systemic risk’ regulator could possibly look like which could not be sidestepped–I imagine a passing similarity to Congressional legislation. lgl

Dirty little Secrets

Some old-fashioned Economists may think it is important when the Numbers do line up, but it All means nothing unless People are being paid good Wages for purchase of their product. I wonder if it is time to tell some of the dirty little Secrets of the profession. Stimulus, as a process, is highly akin and related to Inflation. Both elements artificially suppress the purchasing power of stable Incomes, diverting it to rising Incomes with enhanced Need to Spend. Each is a Tax upon previous Earnings, with the larger denomination of funds to hide the suppression which is present. These stable Incomes are expected to stay Silent; the whole Process helped by the fact that most such Incomes are already saturated in Household Goods. Economists rely on these facts, even if they don’t comprehend them clearly.

Recessions are over in actuality only when Consumers have adequate Income to purchase necessary Household Goods, without dipping into their Savings. Some Economists would contend that this Condition can never be reached, while Others will suggest that the Average of Income can be used in this determination; One has to utilize the statistical Mean. You can inform Any who ask that the Recession is far from over, and it will be a long one; I even suspect that it will not be finished until We Baby Boomers leave this Earth; distributing our stored Wealth. We have been the most innovative generation in a long time, yet Our amassing of Wealth was consistently High for the effort expended; Labor being underpaid, while Management vastly overrated in Dollar terms. The previously Successful are again an impediment to advancement; a common characteristic of Recessions.

Labor is overtaxed, and has been for some time. Management is overpaid, and has been for some time. Labor cannot sustain more taxation, without significant loss of their Standard of Living. Management is highly adverse to increase of their own taxation, and control sufficient Votes in Congress and Executive Government to ensure their current immunity from taxation. Their Solution to Government Spending–accumulation of Debt–is fast losing its reputation among Lenders, while Debt Service is becoming an additional burden for Labor. There are Some, maybe only Me, who think the financial crisis will not reduce, unless the Debt bubble of federal debt is also burst; and Congress is forced to increase Taxation where it can–on the Wealthy. A new Boom in the old style may never again be with Us. lgl

Playing with your Mind

I glanced at this Post, and immediately had visions of glory. I first contemplated the impact of a California script, but my Mind started doing Loops and Spirals after that. The distillate of the entire Thought pattern began to be a Horror Story. It is still very unclear and lacks real Thought, with a probable wealth of problems internal to it. The End-Goal, though, could be the eradication of nominal taxation. Everyone would applaud the Effort, even though they will likely deride the stupidity of the foresight. What would happen if all Government paid their bills in special script, which by law must be redeemed by jurisdictional stores at some stated rate of exchange with the value of the U.S. Dollar?


Hypothesis: The Law would force all Receivers of Government script to raise their Pricing to ensure that they were not bankrupted by the forced redemption of the Script. This forced increase in Prices would be its own form of taxation, where the Public would have to pay the higher Prices to underwrite and subscribe the Government Expenditures. There could even be multiple Scripts representing their Government entities–all with their own redemption values. Governments would be limited to purchases within their own jurisdiction, except for an adequate Script Trading Market on a national and World stage. The Scripts could be banked by law, said banks instructed to translate the Scripts into real Dollars for Deposit; the Script sent to the Federal Reserves for destruction. The Price increases in the economy would substitute for the current imposed Taxation, and though highly regressive, would be a real drag upon Government expenditures.

We would face the eventual demise of Taxation, along with the final demise of the National Debt. The Governments involved would by law be prevented of Debt financing; forced to issue Script at established redemption rates expected necessary for a proper taxation. This taxation could not be averted or delayed, and the pressure against the higher Prices would be directed at the genuine Generators of the higher prices–Legislators. I know there has to be something wrong with this idea, but it fascinates me! I await the derision which is sure to follow. lgl

Musical Chairs, Anyone?

I will not say that this Post is wrong, simply that it is not quite right. In-bred conditions are not fixed with quickly implemented Solutions in the economy. Billions of paper dollars are being pumped into the economy, from which massive loans and Profits are being paid out, all for operations which should not occur in the first place. One of the real Problems coming from the current financial crisis consists of the complete inability to separate real Profits from artificial Profits in terms of which items of financial paper to repay. The Answer came back that We should repay All, though it was clear that many of the assets were empty of value from the Starting Gun. We are again attempting to pay people for nothing, and the price remains extremely high.

Have you ever felt that people were trying to undermine your Confidence? Check out this Post by Richard Florida, courtesy of Felix Salmon. Everyone knows the intense value We all place on location knowledge, which is required for vital connection with Others. Old parochial attitudes towards Strangers come to the fore when discussing location, somehow imaging that foreign elements should be punished for some undefined Sin. I advise the Reader to be more skeptical of all who would help, as they are the most likely to deceive. I cannot place a real value upon the cited delusion, but We have always lost dollars because of it. The worst human design to enter the economic world is the concept of hotel/motel reservations, especially where such establishments are situated away from the common Thoroughfares.

Here is another individual who would brag up their own location. Sorry, but I still like Sagebrush and cattle, even if it makes slightly less money. Real men might use Antiperspirant, but why wear a Tie. New York might make the most Money, but it also may be the sole place where Anyone suffers from Deflation; the Authors of the first article might study on whether Deflation could be limited to the financial markets. Real people only pay bills, which are usually Inflationary. It is like that old basket of Goods on which Inflation is determined; the basket may be cheaper and inferior in quality through the years, but the Goods still cost more money! It is amazing How no Economist considers Stimulus itself to be an increase in the Cost of Goods; talk to your average Taxpayer. When they cobble up the Fix to make sure no one has to pay their Taxes again this year, comfort yourself in the knowledge that those Taxes will have to be paid sometime by Someone. lgl

The Joys of Deflation in all forms!

There will eventually come a Day where the Efficient Markets Hypothesis will be throughly discussed, then discarded. The major problem with it comes in the fact that bubbles are created with periodic frequency, bringing real Inflation into the economy, then Monetary policy is utilized to ensure that the Inflation is not vented from the system as the bubble is dissipated. Strangers to the Street cannot understand the dangers of an economy based upon the glories of past bubbles. No one really understands this hazard, where burst bubbles have greater reach and depth, due to use of older, established pathways of Retreat. Refusal to allow the Money Supply to shrink insists that the next bubble will be more expensive, and more destructive upon bursting. Economists have always concentrated upon the establishment of the next bubble, rather upon the creation of a sound economy. It will be their eventual Downfall!

I liked this Post from Mish, but he doesn’t delve into the most important aspect of the Robot layoffs. They are very expensive equipment, with huge amounts of Capital invested within their construction. Humans, on the other hand, can be created much cheaper, and their Training can be accomplished at much less Cost; though there is still the factor of rated Production failure; humans produce less with a much higher Mistake level. There is no real competition that humans can prove superior, except in the areas of lower Initial Cost, and in ease of retooling for alternate production. This is where humans may beat their counterpart machines; they being capable of Upgrade or Downgrade, switch of industrial sector, and even provision of insufficient fuel to maintain current economic function. The role of the Machine will eventually fail, because the degree of specialization will travel only so far on the Cost-savings scale.

Leave it to Paul Krugman to come up with a disjointed Thought, then twist it around to serve his purpose; he is almost as bad as I. He speaks eloquently of the lost Millions with their lost Jobs. I myself like to call the current Recession the mandatory Retirement of the Baby Boomer Generation. Paul waxes robust on the creeping nature of climate change, but fails to mention that no reconstruction of the economy could actually have an Impact upon the environment within a Score of years; much too long to forestall any danger within the Pipeline. No one can answer the eternal Question of what God wills. The forces affecting this Earth–Sunspots, volcanos, earthquakes, foul Wind patterns, and Ocean currents–all are massive, and outside the current capacity of humanity to alter. A single small volcano could overturn the most rigorous Emissions policy for any nation or planet. We should turn Our efforts to affecting that which We might, and forget the more extreme activity. lgl

Normal People Operations

There are reputations on the line here, as I predicted Oil to reach about $54/ barrel, and stay there for the rest of the year. Now, Phil Verleger comes along and suggests that Oil will drop to $20 a barrel. I don’t think either of Us are Crazy (???), and Oil has a habit of defying all Expectations. One has to ask if the Oil Producers will pump at $20/barrel–I really don’t think so; it is even a place where Creditors will grant loan extensions for a premium. Oil did drop to $31/barrel in December, but then We find the fact of the Run back to $70/barrel; a suggestion that exactly such an accommodation had been reached with Creditors. The second Fall-off is only indicative of the limitations of such adoptions, though they are powerful enough to keep the price of Oil above $40/barrel, combined with the wonderful World of Speculation. I still believe in the $54/barrel price with a Plus or Minus of $4. I am happy no one keeps track of my miscalculations.

Mark Thoma, Robert Frank, and Paul Krugman give Us a very presentable exercise of Why the interest of the individual participant in an economy can be adverse to the entirety of operation of the economy. Individual Gain festoons the economy, only if there is ancillary benefits to the greater economy. The one point that None explore, which separates the economy from the environment, remains the factor of limited resources on which all must rely in the Economy. Individual activity in the economy places limitation of the venue of opportunities for all participants in the economy; this limitation exhibits by way of higher Resource pricing. Individual efforts which do not expand additional performance in the greater economy can choke previously effective sectors of economic performance. Am I flying through the Trees here? It is sufficient to state there is major impact from this element.

Bad mortgages are with Us in huge Waves, and people ask Why Lenders will not renegotiate the loans with a lower Principal balance; considering the immense losses incurred in Bankruptcy. There is the fact that 30% of the bad mortgages are successfully paid off, with only delays in the Payment schedules at Interest. There is also the fact that approximately 20% of the total loan repayment has already been made by the Time of default by the Lender, and the Housing enters Bankruptcy Court at full value; from which Lenders have an actual less than 80% Stake. The rationale which I find most compelling, though, is the Tax Write-off of the Loss as justified by forced Sale; rather than a contestable loss of internal Lender decision. Lenders are not actually known for being Risk-Takers, even under the best conditions. lgl

I can claim Sleep depreviation

I arose early this morning, basically due to the fact that I didn’t sleep at all last Night; for lack of an unknown reason, I am grouchy this morning in looking for something to discuss. The Internet reflects my mood, exhibiting little stir to the heart, or more importantly, the Mind. I therefore present this Post; all about what you should already know, though there are hidden truths for all but the grizzled veterans. I would challenge the author’s claim that the Fed creates the bubbles through their monetary policy, if I felt any significant Will to do battle. I will state that the most proactive bubble policy was the Bush Tax Cuts in the first place, leaving too many people with too much money they didn’t earn; all expecting to make a high rate of Return on those invested amounts–the total much greater than the actual Investment need. I just can’t get over Bush yet! Notice of Record: I opposed the Tax Cuts from the 2000 Presidential campaign, when they were first proposed by Bush.Growl–Snarl; God, it is going to be a long day!

Felix Salmon wonders if the TARP fund is a all-purpose slush fund. He may fail to see the color of the black cat. The TARP funds are proposed for so much, because the Government just can’t seem to get the Money spent; an near contemptible event for Politicians in a proclaimed Recession and financial crisis. No one wants the Money because of the Strings attached too often, and Those acquiring the funds with Strings find the later to be offensive. It is an extreme embarrassment that they could get a second Stimulus package with a total of over a Trillion dollar allocation, with nowhere to spend the Money. Modern America–don’t you just love it?

I am tired of trying to find something interesting for the Reader, though this Post by Mish might do it (I only glanced at it). Furloughs are inconsequential to save State funds, unless they are consistent Periods within a tightly controlled schedule. I think all State offices should reduce to a 4-Day Week, and all State employees should be made to take as much unpaid Vacation of equal length that they receive in paid Vacation benefits. I am going to quit now, estimating that I have made Everyone as mad as I am with the lack of Sleep. lgl

I will take the $2000 Question, Alex!

It amazes me how well Paul Krugman can answer his own questions. We have declining Numbers throughout the economy; yet Paul wants to throw in more Cash. He would probably state that I misuse the term ‘Stagflation’, but what should We call the current Process? The only exact aid to the economy by Stimulus would come if the Cash went directly in the Pockets of Consumers, and they would probably decide to Save the Money! READ MY LIPS: Nothing is going to raise Output except Sales. Nothing is going to raise Sales, except for greater amounts of Disposable Income. Here is the tricky part, as greater amounts of Disposable Income generally needs a reduction of financial commitments. We most definitely do not need more Bankers willing to lend more money, even at cheaper Interest. We don’t need Government to give Business the Profits which could not be earned by their operation. We either need higher Wages, or more Aged Consumer Product, in order to increase Consumption. I am Waiting for the ole Mule to get too old to get up in the Morning, afore I shoot her!

Jeffery Miron makes a very compelling argument with which I basically agree. Neither of Us like the concept of Big Government, and We both hate the Government Buyout of Investment Risk when it goes bad. Of course, We are both badly outvoted in Congress, who basically ‘Kiss the Hands’ of Those who feed them. Jeffery does not mention the obvious Necessity of removing discretionary Cash from Those who made the bad investment decisions in the first place, he probably doubting the veracity of honest bankruptcy. There is something Wrong with poor Investment Risks getting Government loans though they are poor Credit Risks, simply to sell ‘Blue Sky’ Investment to lesser nobles, who are granted Tax Writeoffs at worst repayment process. I need a new Pick-up, so if you advance me the money, I’ll will explain How to bundle the loan with other loans of like nature and value; later getting Government to pay the Investment back with Interest, after I default on the loan. Sound familiar?

I sound a little sour this morning, as I detest Cloud formations in July; especially when they do not produce Rain. I have not really seen the Sun in 6 Weeks except for short Interludes, and I and the Corn feel the same way. We might get a good harvest, but like the Government; this is not the Way to do it. We are getting the watered down version of good health–whether in Life or the Economy–and I do not admire the effort. We need a President who is busy with designs to cut down federal expenditures, not One dedicated to shoveling more Cash into the economy. I will not speak about the dangers of politicalization of the Fed and Treasury; simply expressing the Thought that Government and/or Banking should not be turned into a TV Game Show. lgl

Representation before Taxation

David Leonhardt failed to understand the real context of medical research today. He would imagine that Researchers are thinking to find the absolute best method to treat Patients of any Disorder. The reality is that they are seeking to justify their research budgets, and the Concept of Best Treatment has little sway in the analysis. The world of Medicine has found the Value of Confusion in the discussions on research fund allocation, and the good little bureaucrats have quickly learned to adjust their written Requests for Funds. No medical doctor will go on the Record as to the effectiveness of various Treatments for any ailments, as they face the serious ostracism generated by a institutional Special Interest group for doing so. A probable One-Third of all medical treatments are either Worthless or Obsolete; but you will not hear this from Doctors, who must face the funded Wrath of Drug companies and Research facilities. Of course, Doctors live in a Glass House; 80% of all medical treatments satisfy less than 20% of Patient desire (the statistics outline only the Opinion of the Author, not effective economic research).

Ezra Klein may be like unto myself and only marginally Correct, but I enjoy his approach to the medical problems of the Age. Administration Costs always expand with the employment of labor, who find a compelling need to earn their Keep with some false sense of financial savings in the employment. This artificial industry catches little fraud in terms of total volume, but grants Everyone a sense of purpose. I personally would take the Doctor’s word for it, along with assigning heavy Penalties for violations; a favorite of mine is a 3 for 1 repayment of false Charges; no Prison term, as this only increases Cost, while taking their House has real value added. A real repayment could be guaranteed by restricting their ability to practice Medicine until the bill is paid. One has to threaten all those years of hard-earned position.

Does doubling down on a bad bet work? There are Some who say that We did not blow enough Money the first time, and Some who disagree. I believe that three very important Questions should be asked and answered concerning Stimulus. The first is ‘Did the first package achieve desired goals?’–the answer is No! Will a second Stimulus package help the Obama goal of reducing Unemployment?–the answer is No! Have they even found methods to spend the first Stimulus package?–the answer is No!. Stimulus which does not get spent creates only Debt, not Employment or Business performance. Why do I feel like there is a dis-associative quality to all of this debate, where over-active policy has no viable Vent? I have an alternate Plan: I would open up every Voting booth in the Country, and pay every Voter $25 every time they Voted on current issues of the Day; it would not only give Stimulus, but eventually develop general political trends which Politicians should follow. Sound Crazy?–it is early this Morning. lgl

What is Wrong with This?

I am linking to this Post basically due to the fact that it was written by Arnold Kling and very good, and it made me think of alternative forms of Employment. I do very well at fantasy games, and believe that I can present a stellar performance. There simply had to be a better method of Hiring, and Retention of Labor. The first Need I found was that the Employee must have much greater Protection than the current system allows. I quickly decided that We must have a universal health care system, as much for Business as for Labor. There had to be a limited expansion of health costs, no matter the depth and length of the illness; only a universal system and overbearing Government could ensure that medical benefits achieve the practical results. I envision a relatively cheap general Coverage at a low monthly rate supplied by both Employer and Employee; I would suggest something like a matching payment of $300 per month. Private Insurance could provide Specialty policies, whose rates should remind of Medicare Supplement insurance today. The Specialty policies would guarantee medical treatments potentially disallowed by the universal insurance because of Cost–this health care system would likely have fundamental base around Hospice Care. People will wonder How it helps Business, and I would state that the underwriting enactment should prohibit Employer contribution to the defined Specialty Insurance.

The second Need in Employment has to be greater protection for Labor. I think Congress or State should enact legislation creating a formalized Labor Contract, and insist that these Contracts be filed with a Government agency, who would be entailed to Hear all initial Labor Employment cases. The Contracts would have to be filed before Employment is recognized–which means Business cannot record Labor Costs until they are filed. The uniform Contracts must list the Probationary Period length, the rate of Pay until Probation is over, and the agreed Buyout price if the Employer finds the employment unworkable. All Contracts would be no longer than 5 years duration, when a new Contract must be negotiated between Employer and Employee. All Contracts will stipulate How much Salary or Wage must be granted in each year of the Contract, and the alternate Cost of Payment for being Laid-off after the Probationary Period. The Employer will also have greater Protection in the Contracts, with stipulation of a Cost to Employees which must be paid to the Employer upon failure to maintain labor service; they having a limited power of garnishment against labor’s future Wages and Salaries, if the Employers can prove abandonment for higher Wages or Salaries without proven labor service duress.

I look at my previous paragraph, and think it is way too complicated. I am continuing to think, though, and find it is too efficient a system to be discarded. Both Sides gain, and with the current Cost of Employee Hires including Search, it is something whose Day has come. I don’t know if I would like to work under such Constraints, but there has to be relief from the current Personnel dogma. I await commentary, as I know that the Subject remains disliked by both Sides. lgl

How to Define Economics

I just hate it every time Dean Baker gives Us a Post which just must be read, because then I have to type the complicated link phrasing; so you know this one must be Good. The real gem of this Story lies in this paragraph:

The story in this picture was an $8 trillion housing bubble. This hugely distorted the real economy by causing housing construction to expand as a share of GDP by 50 percent above its normal level. The bubble wealth also generated an enormous wave of consumption that pushed the saving rate into negative territory. It was inevitable that this story would end badly, because there is no easy way to replace the loss of $450 billion in annual demand generated from construction and $600-$800 billion of housing bubble wealth driven consumption.

I will try to provide a little more Insight by explaining the paragraph. About $4 trillion of an overextended economy dropped from Sight almost immediately, along with about an initial million Jobs. The $450 billion of annual demand generated from construction became about $275 billion in about one month annualized. The housing bubble wealth driven consumption disappeared relatively in total, and the economy lost another million Jobs from the loss. The Downturn began to make Bonuses and Incentive Pay evaporate, which has an almost 1:1 ratio in lost Consumption Demand. There was not only a loss of Consumer Confidence; it was based upon a real loss of Consumer Paycheck. It was only the coup de gras that the Banks stopped lending Money.

I will refer my Readers to this Post, although I wonder exactly what William Polley is trying to promote. He and Chris Dillow would criticize the principles of economics, while I ask if such principles actually exist. The Student must first realize that the economy is not a mathematical model, but a wild beast which wonders human affairs for Grazing; something it finds ample, or sometimes not. The beast depends on the Inputs as Feed, and bad provision from humanity can injure the Process. Free Tech can improve the Inputs system, but lack of payment does distort the Consumption cycle. Central bank policy follows the same path as Free Tech, an here, lack of payment also possesses its own danger. My only advise to Students is this: The World is not a simplistic place, and the economy which feeds upon it cannot be any more rational being; economic models look for standard and uniform Rules, which will never be found. A wise old man once said that the World was a place abused by God, and economics was what the Devil could make of the mess. I suggested that the deities should be reversed, and his reply was essentially that it would not matter. lgl

And then It exploded!

I would agree with Paul Krugman once in a while, except for the fact that it is so much Fun disagreeing with him. Paul is looking to create 8.5 million new Jobs; not even God could do this, not in 7 Days, not in 7 years. There are saturation limits to almost every economic endeavor, and the Unemployment data simply reflects We have reached a saturation point in the labor market. This will alter drastically with the retirement of the Baby Boomers, but it will still result in a low Employment number for the current administration. We have an overall reduced Consumption level, a reduced Import quantity, a smaller Export level, and a Pile-up of experienced Technicians who insist on a higher Wage level than Business is currently ready to Pay. We have to face the issue of whether We want to go back to the fraudulent flow of Cash which brought the Financial Crisis, or exist with a lower GDP; the Reader should recognize that the Unemployment numbers only express a Withdrawal from such financing. Paul would replace it with Government Spending, itself just as delusional and fraudulent; simply utilizing a new group of Investors–this time mainly foreign central banks who can ill-afford a loss of capital outflow with no Return. Further Government Spending will make the United States responsible for suppression of the World economy.

Here is an article which explains to great degree How We arrived at the financial crisis in the first place. The Reader might want to play a Game, and I suggest that Everyone read this article replacing the word ‘Bank’, substituting the word ‘Government’. Does the Game seem stupid? It will not in the months ahead! Brokers want easing of regulation for these brokered Deposits, which means introducing more Wildcatting into the matrix. It will always be a battle between Those who wanted rapid Growth, and Those who insist on something left at the end of the Day. I belong to the later Camp, if any of you wonder at my own allegiance.

I am going to quit Now, because I have criticized Everyone’s opinion except my own; and Someone told me once that one should not put yourself down, there being multitudes who would enjoy doing that for you. I wish you All well, and happy 4th of July. Fire off a firecracker for me, just not under my lawn chair. lgl

Outrage reduced to Outrageous

William Buiter effectively explains, though a little long-winded, why the central banks are playing to an empty house. No economic ploy like quantitative easing, credit-easing, or enhanced credit will work without two conditions being served–both concurrently: 1) the lending institutions must make a higher Profit from the easing–at least the promise of higher Profit; and 2) the lending institutions must have the confidence to lend without extreme Charges or Conditions on the Applicant. The two factors work against each other in practice. Doubt has been introduced into the Collection process of lending. The higher Profits insist on the full Return of the funds, and the derived Interest. Before the Crisis in the midst of the Boom, loans were extended on a vague Promise and provision of a Rose; Now, if you are in need of the loan in the first place, you are likely to be too great a Risk. Banks have to be reassured of a Profit prior to lending; and under these Conditions, the Applicant would be better served finding investment partners–think of Public issuance of bonds. I once proposed a Store booth in retail outlets, offering bonds backed by company assets at 2% over the current Bank rates locally; evading bank regulations if issuing only their own company bonds at the outlets. A clearly written liability would likely receive a greater Subscription from a Consumer, than it would from a Banker; and will probably be of less Interest than the Borrower would have to pay a Bank.

Stan Liebowitz goes to the trouble of analyzing the Causes of the foreclosure rates in the Mortgage industry. He finds that walking away from negative equity mortgages was the greatest culprit, and he blames the insufficiency of Down Payment amount as responsible; a factor which I might suggest is doubtful in the Consumer decision. People were taught to live off their net equity, establishing their expenditure patterns from the amounts that Credit Cards would allow. These were effectively cut down and further taxed in Interest with the Crisis, and Mortgage holders dismissed the Mortgage payments in favor of paying the Consumer Debt; especially after cheaper commercial housing became available. Stan himself highlights a false Curative, as mortgage holders will walk away anytime the Mortgage turns into their enemy.

Only the diligently deceitful could ignore this charade. It shows the value of risking other peoples’ money, rather than your own. A year into the worst Recession since the Great Depression according to many economic sources, and the heavy Movers in Wall Street have deemed it necessary to almost double their Salaries and Bonuses. What was the major source of the sleazy economic practice which was the major cause of the financial crisis–Wall Street. Who was primarily responsible for the Sale of bad paper leading to the Crisis–Wall Street. Who forbade an early resolution of the Crisis by refusing to accept an reevaluation of the bad paper, which would have incurred Write Downs on which blame could be assigned–Wall Street. Who has been fired or Laid Off on Wall Street–Hundreds from the lower Ranks, Few of the major Movers. Who thinks that Wall Street should be paid more for the financial dislocation of the past months–only Wall Street. We should do something about this, but our new, modern News outlets owned by the major corporations rarely breathes a Word about the great hardship endured by the poor, underpaid Wall Street Kings. lgl

Much Ado about Nothing

Reiki and the Inquisition. The Nuns are in hot water, because of the ‘Laying on Hands’ business and their refusal to come out with a Public Statement opposing the ordination of women as Priests. It is a fight for the Ages, in a Time when religious orders find huge losses in their Ranks; all because of the rigidity of their structure, as ordered by a group of almost senile old White men. The last thing religious orders need is a public exhibition of the penal structure of the orders. The only good element in the entire Incident lay in the extreme Age of the Crusaders, who will lose power when the current Pope plays a Michael Jackson. My only sadness resides in the fact that I too loved the old traditionalism; fond memories of the old parochial school days, tempered by the fact that I switched to Public School because religion became too oppressive.

No one can smile over the Jobs Report. The markets are doing a dance, wondering just How to respond to this latest tidbit of information. It is a dry day on the market floor, with Most flying Paper airplanes instead of operating orders. So many Workers are traveling to their July 4th celebrations that one can imagine that the Jobs Report came from the market floor. It is the same throughout the U.S., and likely the World. No one plans any serious business, and that might be the best News for the release of the poor data. Cherish the small Boons, as now Everyone will mull over the information through the Weekend. A better Outcome could probably not be found.

Read this Post to realize the complete failure of any form of a Gas Tax. No one takes the Prius to the Ballpark, or on a long Trip. The real miles put on use the SUV, not the prison-like atmosphere of a compact car. What use is playing ‘King of the Road’ if you have the smallest vehicle on the Road? Nothing is going to switch Parents to the smaller vehicles, and such taxes will only further afflict honest Job-Holders who are trying to pay off the Mortgage. Why is it that only the Innocent get impacted by Taxes? I truly in a ‘Soak the Rich’ mood today. lgl

Recession on the Road

Don’t you wish that Someone would get it Right? Acetaminophen is bad for your liver, and the Patient can easily Overdose; in 2005, American Consumers were given almost 28 billion doses of the stuff. Now comes a Panel which suggests a ban on Percocet and Vicodin, without any proposed replacement for the Painkillers. I first ask why in God’s name are so many people taking Painkillers; and secondly, Why are Doctors not ranting against the Drug addiction prevalent in American society. I believe it is only like unto the Madoff victims’ suit against the SEC, establishing the grounds for future lawsuits. Doctors avoid personal responsibility by suggestion that the federal government should act, while there is no action to take. I ride the rugged saddle of advocating a federal commission to ban legal action where no effective Judicial action could be determined; which would preclude Transfers of Cash based upon failure of common Public beliefs.

Dinner Theater for the Insane? Iraq wants to recapitalize its Oil industry, and Oil companies are unwilling to play. First, they want $4 a barrel just to pump Oil, then they will take $2 a barrel, but only want to develop a field already in production. I am not quite sure, but estimate this would leave Iraq producing less Oil than currently being pumped. The Situation leaves Iraq in worse position economically, than it was in under Saddam. The Oil companies want to forget the Oil Embargo of 1973, at least in the case of Iraq. Isn’t it a wonder How a business-oriented Country like the United States can develop such good relations with a nation like Iraq?

Business America is not any more gentle with their fellow Americans; consider this AIG performance. There was not even the suggestion that Stockholders should receive anything, though credit swap defaults need be totally repaid; no one could advance such a radical idea that business should suffer some of the loss themselves. I would advance the concept that Stockholders be paid 17% of Investment value by Stockholders upon purchase of the Stock from federal funds, just to bolster Public confidence in Investment. Claimants against the Company would get 71% of the actual purchase price of the Swaps purchased–a normal Profit loss ballpark for poor Investment decisions. Company and federal government should tell All that individual business decisions must bear some responsibility for poor business performance. lgl