Sunday, November 15, 2009

The Mist of Confusion

Can Anyone tell Why this Condition exists? Men are always at the forefront–in Construction, in Plant production, and in all Risk-taking activities. Read specifically the NYTimes link provided, especially Jan Hatzius et al, which exhibits the absolute proof that Orders are down, and not likely to revive anytime soon. Many forecasters are predicting that October will have been much better, but there is no real indication of such; remember that the horror of September came only with the revision of the numbers. Companies are slow to report disaster, as they know that the reality will depress potential Customers. Bad is bad, though, and the economy effectively sucks; perhaps the worst horror is that Everyone expects that the Christmas Season will be financed, with the Credit Card companies tightening their Credit restrictions. Remember that the Mortgage Crisis will not be improved with massive extension of Consumer Credit.

Can Anyone tell me What this Post has to do with the previous paragraph? Follow the embedded links to try to derive an Answer. Hint: Credit ratings and Credit extensions are based upon current employment values, all of which can change when the economy recovers from an overcharging of the economy. One of the greatest Means to control this excessive Funding of the economy lies in nominal income targeting. Why is this important? It is an effective Means to control Over-Employment–a Concept never utilized by economists because of the ugly connotations involved in the Concept. It has a still more disagreeable aspect where Credit is extended where it should not be. How? It insists that Production schedules must be based upon current Profits, not projected future Profits. This is also a Contention which will be criticized by economists, though it is true. The final result is an effective control over Credit extension.

You can find the real Truth about the economy here. We can see the outcome in the graphs and tables, but One has to ask What is the suppression behind all the Numbers? This is a most difficult Question to answer, but I will give it my best Shot. Take several lead-in years where central banks accommodated the easy expansion of Cash, within a reduced Tax structure. No nominal income suppression was utilized. Inflationary Profits were accrued and inefficiently taxed. This produced the natural Business reaction of financing by Credit, and assuring Profits by constant unregulated Price increases. These Profits, earned by Business personnel, were invested; not spent within the economy. There was a disconnect brought to the economic model, where Profits are independent of actual Production; this Production, though, must eventually pay for it all. Then the Consumer finds impediment to his future expenditure, whether it is loss of a Job, reduction of Hours, loss of Credit rating, inability to borrow greater amounts, etc. We have the resultant condition where a shrinking Production must finance Dividends to invested funds which had been artificially inflated. We reach a Condition, at least in the United States but reflected in the rest of the World, where about $3 trillion are searching for a Return which is actually undeserved; a drag to actual Production performance, where Labor expansion is retarded, labor hours are reduced, Wages are suppressed, and Consumer Demand evaporates. lgl

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